Universal Electronics Reports Second Quarter 2011 Financial Results

Universal Electronics Inc. (UEI), (NASDAQ:UEIC) reported financial results for the three and six months ended June 30, 2011.

Paul Arling, UEI's Chairman and CEO, stated: “During the second quarter of 2011, UEI posted strong revenue of $121.7 million and delivered 35% growth in adjusted pro forma EPS compared to the same period last year. These results reflect our ability to gain share in a challenging market. However, forecasts have indicated a difficult environment is expected for the remainder of the year. We anticipate this will have an impact on consumer electronics spending, which affects both our Business and Consumer Categories.”

“Our leadership position in the global marketplace, our broad range of products and technologies that address multiple markets, and our solid financial foundation has served us well over our history. Even in the face of this turbulent economy, we expect to become stronger than ever. We will continue to invest in innovation to ensure we grow along with the many changing options and features in home entertainment devices and content, as well as invest in regions with promising market growth. There are significant market opportunities available to us, and today we are better positioned than ever to capitalize on them.”

Financial Results for the Three Months Ended June 30: 2011 Compared to 2010
  • Net sales were $121.7 million, compared to $78.9 million.
    • Business Category revenue was $111.1 million, compared to $67.3 million.The Business Category contributed 91% of total net sales, compared to 85%.
    • Consumer Category revenue was $10.6 million, compared to $11.6 million.The Consumer Category contributed 9% of total net sales, compared to 15%.
  • Adjusted pro forma gross margins were 28.9%, compared to gross margins of 34.8%.
  • Adjusted pro forma operating expenses were $25.6 million, compared to operating expenses of $20.1 million.
  • Adjusted pro forma operating income was $9.6 million, compared to operating income of $7.3 million.
  • Adjusted pro forma net income was $7.1 million, or $0.46 per diluted share, compared to net income of $4.8 million, or $0.34 per diluted share.
  • At June 30, 2011, cash and cash equivalents was $37.9 million.

Financial Results for the Six Months Ended June 30: 2011 Compared to 2010
  • Net sales were $227.5 million, compared to $150.3 million.
  • Adjusted pro forma gross margins were 27.7%, compared to gross margins of 32.9%.
  • Adjusted pro forma operating expenses were $50.0 million, compared to operating expenses of $39.5 million.
  • Adjusted pro forma net income was $9.7 million, or $0.63 per diluted share, compared to net income of $6.6 million, or $0.47 per diluted share.

Financial Outlook

For the third quarter of 2011, the company expects net sales to range between $121 million and $127 million, compared to $79.0 million in the third quarter of 2010. Adjusted pro forma earnings per diluted share for the third quarter of 2011 are expected to range from $0.47 to $0.57, compared to earnings per diluted share of $0.34 in the third quarter of 2010.

For the full 2011 year, the company expects net sales to range between $470 million and $490 million, compared to $331.8 million in 2010. Adjusted pro forma earnings per diluted share for 2011 are expected to range from $1.75 to $1.95, compared to adjusted pro forma earnings per diluted share of $1.27 in 2010.

Conference Call Information

UEI’s management team will hold a conference call today, Thursday, August 4, 2011 at 4:30 p.m. ET / 1:30 p.m. PT, to discuss its second quarter 2011 earnings results, review the quarterly activity and answer questions. To access the call in the U.S. please dial 877-655-6895 and for international calls dial 706-758-0299 approximately 10 minutes prior to the start of the conference. The conference ID is 83606169. The conference call will also be broadcast live over the Internet and available for replay for one year at www.uei.com. In addition, a replay of the call will be available via telephone for two business days, beginning two hours after the call. To listen to the replay, in the U.S., please dial 855-859-2056 and internationally, 404-537-3406. Enter access code 83606169.

Use of Non-GAAP Financial Metrics

Non-GAAP gross margins, Non-GAAP operating expenses, and Non-GAAP net income and earnings per share are supplemental measures of the company's performance that are not required by, and are not presented in accordance with GAAP. The non-GAAP information does not substitute for any performance measure derived in accordance with GAAP. Non-GAAP gross profit is defined as gross profit excluding charges related to the write-up of inventory and depreciation related to the acquisition. Non-GAAP operating expenses is defined as cash operating expenses excluding acquisition costs, amortization of intangibles and other employee related restructuring costs. Non-GAAP net income is net income from operations excluding the aforementioned items. A reconciliation of Non-GAAP financial results to GAAP results is included at the end of this press release.

About Universal Electronics Inc.

Founded in 1986, Universal Electronics Inc. (UEI) is the global leader in wireless control technology for the connected home. UEI designs, develops, and delivers innovative solutions that enable consumers to control entertainment devices, digital media, and home systems. The company’s broad portfolio of patented technologies and database of infrared control software have been adopted by many Fortune 500 companies in the consumer electronics, subscription broadcast, and computing industries. UEI sells and licenses wireless control products through distributors and retailers under the One For All® brand name. For additional information, please visit our website at www.uei.com.

Safe Harbor Statement

This press release contains forward-looking statements that are made pursuant to the Safe-Harbor provisions of the Private Securities Litigation Reform Act of 1995. Words and expressions reflecting something other than historical fact are intended to identify forward-looking statements. These forward-looking statements involve a number of risks and uncertainties, including the benefits anticipated by the Company due to continued innovation of products and technologies; new markets growth; the Company’s ability to gain market share; general economic conditions; and other factors described in the Company's filings with the U.S. Securities and Exchange Commission. The actual results that the Company achieves may differ materially from any forward looking statement due to such risks and uncertainties. The Company undertakes no obligations to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.

UNIVERSAL ELECTRONICS INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share-related data)

(Unaudited)
 

 
  June 30,

2011
  December 31,

2010
ASSETS
Current assets:
Cash and cash equivalents $ 37,900 $ 54,249
Accounts receivable, net 87,733 86,304
Inventories, net 76,497 65,402
Prepaid expenses and other current assets 2,855 2,582
Deferred income taxes   6,195   5,896
Total current assets 211,180 214,433
Property, plant, and equipment, net 78,395 78,097
Goodwill 31,033 30,877
Intangible assets, net 34,358 35,994
Other assets 5,365 5,464
Deferred income taxes   7,479   7,806
Total assets $ 367,810 $ 372,671
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 59,705 $ 56,086
Notes payable 20,600 35,000
Accrued sales discounts, rebates and royalties 6,135 7,942
Accrued income taxes 2,283 5,873
Accrued compensation 29,681 30,634
Deferred income taxes 49
Other accrued expenses   12,682   13,295
Total current liabilities 131,135 148,830
Long-term liabilities:
Deferred income taxes 11,547 11,369
Income tax payable 1,212 1,212
Other long-term liabilities   5   56
Total liabilities   143,899   161,467
 
Commitments and contingencies
 
Stockholders’ equity:
Preferred stock, $0.01 par value, 5,000,000 shares authorized; none issued or outstanding
Common stock, $0.01 par value, 50,000,000 shares authorized; 21,029,169 and 20,877,248 shares issued on June 30, 2011 and December 31, 2010, respectively 210 209
Paid-in capital 170,788 166,940
Accumulated other comprehensive income (loss) 3,704 (489)
Retained earnings   142,018   134,070
316,720 300,730
 
Less cost of common stock in treasury, 6,048,261 and 5,926,071 shares on June 30, 2011 and December 31, 2010, respectively   (92,809)   (89,526)
Total stockholders’ equity   223,911   211,204
Total liabilities and stockholders’ equity $ 367,810 $ 372,671

UNIVERSAL ELECTRONICS INC.

CONSOLIDATED INCOME STATEMENTS

(In thousands, except per share amounts)

(Unaudited)
 

 
  Three Months Ended

June 30,
  Six Months Ended

June 30,
  2011       2010     2011       2010  
Net sales $ 121,746 $ 78,892 $ 227,458 $ 150,268
Cost of sales   86,802     51,467     164,935     100,779  
Gross profit 34,944 27,425 62,523 49,489
 
Research and development expenses 3,157 2,488 6,414 5,257
Selling, general and administrative expenses   23,477     17,621     45,264     34,229  
 
Operating income 8,310 7,316 10,845 10,003
Interest (expense) income, net (69 ) 17 (154 ) 100
Other (expense) income, net   (384 )   (21 )   (418 )   22  
 
Income before provision for income taxes 7,857 7,312 10,273 10,125
Provision for income taxes   (1,736 )   (2,535 )   (2,325 )   (3,512 )
Net income $ 6,121   $ 4,777   $ 7,948   $ 6,613  
 
Earnings per share:
Basic $ 0.41   $ 0.35   $ 0.53   $ 0.48  
Diluted $ 0.40   $ 0.34   $ 0.52   $ 0.47  
 
Shares used in computing earnings per share:
Basic   15,025     13,601     15,000     13,650  
Diluted   15,407     13,929     15,395     14,011  

)

UNIVERSAL ELECTRONICS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited
 

 
  Six months Ended

June 30,
  2011       2010  
Cash provided by operating activities:
Net income $ 7,948 $ 6,613
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 8,588 3,079
Provision for doubtful accounts 237 747
Provision for inventory write-downs 2,099 1,450
Deferred income taxes 645 33
Tax benefit from exercise of stock options and vested restricted stock 374 109
Excess tax benefit from stock-based compensation (344 ) (103 )
Shares issued for employee benefit plan 396 375
Stock-based compensation 2,085 2,532
 
Changes in operating assets and liabilities:
Accounts receivable 262 3,872
Inventories (11,409 ) (6,368 )
Prepaid expenses and other assets (78 ) 307
Accounts payable and accrued expenses (2,514 ) 2,992
Accrued income taxes   (3,696 )   (1,909 )
Net cash provided by operating activities   4,593     13,729  
 
Cash (used for) provided by investing activities:
Term deposit 49,246
Acquisition of property, plant, and equipment (5,554 ) (3,041 )
Acquisition of intangible assets   (513 )   (749 )
Net cash (used for) provided by investing activities   (6,067 )   45,456  
 
Cash used for financing activities:
Payment of debt (14,400 )
Proceeds from stock options exercised 1,212 257
Treasury stock purchased (3,500 ) (7,308 )
Excess tax benefit from stock-based compensation   344     103  
Net cash used for financing activities   (16,344 )   (6,948 )
 
Effect of exchange rate changes on cash   1,469     (2,415 )
 
Net (decrease) increase in cash and cash equivalents (16,349 ) 49,822
 
Cash and cash equivalents at beginning of period   54,249     29,016  
 
Cash and cash equivalents at end of period $ 37,900   $ 78,838  

UNIVERSAL ELECTRONICS INC.

RECONCILIATION OF ADJUSTED PRO FORMA FINANCIAL RESULTS

(In thousands)

(Unaudited)
 
 

Three Months Ended

June 30, 2011
 

Three Months Ended

June 30, 2010
    Adjusted     Adjusted
GAAP

Adjustments

Pro Forma
GAAP

Adjustments

Pro Forma
 
Net sales $ 121,746 $ $ 121,746 $ 78,892 $ $ 78,892
Cost of sales (1)   86,802     (277 )   86,525     51,467       51,467  
Gross profit 34,944 277 35,221 27,425 27,425
 
Research and development expenses 3,157 3,157 2,488 2,488
Selling, general and administrative expenses (2)   23,477     (1,026 )   22,451     17,621       17,621  
 
Operating income 8,310 1,303 9,613 7,316 7,316
Interest (expense) income, net (69 ) (69 ) 17 17
Other (expense) income, net   (384 )       (384 )   (21 )     (21 )
 
Income before provision for income taxes 7,857 1,303 9,160 7,312 7,312
Provision for income taxes (3)   1,736     296     2,032     2,535       2,535  
Net income $ 6,121   $ 1,007   $ 7,128   $ 4,777   $ $ 4,777  
 
Earnings per share diluted $ 0.40   $ 0.06   $ 0.46   $ 0.34   $ $ 0.34  

Six Months Ended

June 30, 2011

Six Months Ended

June 30, 2010
Adjusted Adjusted
GAAP

Adjustments

Pro Forma
GAAP

Adjustments

Pro Forma
 
Net sales $ 227,458 $ $ 227,458 $ 150,268 $ $ 150,268
Cost of sales (1)   164,935     (554 )   164,381     100,779       100,779  
Gross profit 62,523 554 63,077 49,489 49,489
 
Research and development expenses 6,414 6,414 5,257 5,257
Selling, general and administrative expenses (2)   45,264     (1,659 )   43,605     34,229       34,229  
 
Operating income 10,845 2,213 13,058 10,003 10,003
Interest (expense) income, net (154 ) (154 ) 100 100
Other (expense) income, net   (418 )       (418 )   22       22  
 
Income before provision for income taxes 10,273 2,213 12,486 10,125 10,125
Provision for income taxes (3)   2,325     441     2,766     3,512       3,512  
Net income $ 7,948   $ 1,772   $ 9,720   $ 6,613   $ $ 6,613  
 
Earnings per share diluted $ 0.52   $ 0.11   $ 0.63   $ 0.47   $ $ 0.47  

____________

(1) To reflect depreciation expense of $0.3 million and $0.6 million for the three and six months ending June 30, 2011, respectively, relating to the mark-up in fixed assets from cost to fair value as part of the Enson Assets Limited acquisition.

(2) To reflect $0.6 million and $1.3 million of amortization expense for the three and six months ended June 30, 2011, respectively, relating to intangible assets acquired as part of the Enson Assets Limited acquisition. Also, in the second quarter 2011, an additional $0.4 million is reflected representing other employee related restructuring costs.

(3) To reflect the tax effect of the adjustments.

Copyright Business Wire 2010

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