News Details


Universal Electronics Reports Second Quarter 2005 Financial Results; Net Sales Grew 30 Percent to a Second Quarter Record of $44.3 Million

Aug 2, 2005 |

CYPRESS, Calif.--(BUSINESS WIRE)--Aug. 2, 2005--Leading wireless control technology developer Universal Electronics Inc. (UEI) (NASDAQ:UEIC) today announced financial results for the second quarter and the six-month period ended June 30, 2005.

Net sales for the second quarter of 2005 were $44.3 million, marking the highest second quarter sales in the company's history. Compared to $34.0 million for the same quarter last year, net sales increased 30 percent, primarily due to the strong performance amongst subscription broadcasting customers in the Business Category. During the second quarter of 2005, the company recorded a one-time $1.6 million write down of a balance due from a former European distributor. Net income as determined under generally accepted accounting principles (GAAP) for the second quarter 2005 was $1.5 million, or $0.11 per diluted share. Pro forma net income for the second quarter 2005 was $2.8 million, or $0.20 per diluted share, compared to $1.7 million, or $0.12 per diluted share, for the second quarter 2004. Pro forma net income is included here as management believes it provides a more accurate measure of quarter-over-quarter and year-over-year financial performance as it excludes the effects of this unusual, one-time write down. A table reconciling the difference between GAAP and pro forma net income is included at the end of this press release.

"We continue to execute on our strategy to build our position as the leading provider of wireless control technology. Our strong second quarter sales and recently announced customer agreements with Consumer Electronics market leaders Panasonic and Pioneer illustrate our ability to execute on plan," stated Paul Arling, the company's chairman and chief executive officer. "During the second half of the year, we expect continued demand in subscription broadcasting and retail seasonality will further our growth."

"UEI delivered record second-quarter revenue with growth of 30 percent versus a year ago driven by strong demand for our core technology," said Rob Lilleness, UEI's president and chief operating officer. "Looking forward, we are also excited about bringing our technology to the Custom Installer/CEDIA channel. On July 25th, we commercially launched our NevoSL(TM) and announced a worldwide network of 16 distributors. To date, we have shipped units to Australia, Europe and the United States, and we anticipate solid future demand."

    Second quarter 2005 results include the following.

    --  Business Category contributed 73 percent of the total revenue
        and Consumer Category contributed 27 percent, compared to the
        second quarter 2004 when Business Category contributed 62
        percent of total revenue and Consumer Category contributed 38

    --  Gross margins were 35.5 percent, compared to 37.9 percent in
        last year's second quarter, reflecting the higher sales in the
        Business Category, which carries a lower margin than the
        Consumer Category, and the associated air shipments related to
        the unanticipated higher demand.

    --  Research and development was $1.6 million, representing a
        $500,000 increase over last year's second quarter.

Net sales for the six-month period ended June 30, 2005 were $85.8 million compared to $66.6 million for the first six months of 2004. GAAP net income for the first six months of 2005 was $3.4 million, or $0.24 per diluted share. Pro forma net income for the first six months of 2005 was $4.6 million, or $0.33 per diluted share, compared to $3.5 million, or $0.25 per diluted share, for the same period last year.

In the second half of the year, the company expects gross margin to return to the 38 percent plus or minus range for a number of reasons. First, UEI customers have a better understanding of the demand for new DVR and HDTV boxes. Second, UEI took actions to normalize its air/ocean freight mix by June to reduce costs. Third, the company anticipates the Consumer Category revenue contribution to increase as typically retail sales are seasonally high in the second half of the year.

    UEI's Recent Highlights:

    --  NevoSL, a universal controller that intuitively delivers
        complete audio/visual and digital media control for the
        networked home, began shipping in June and was officially
        launched on July 25th. NevoSL is now being distributed in 16
        countries worldwide including the United States, United
        Kingdom, Netherlands, South Africa, New Zealand, Australia,
        Germany, Belgium, Luxembourg, Finland, Switzerland, France,
        Spain, Portugal, Norway and Italy. In the United States, AVAD
        will distribute NevoSL.

    --  Pioneer Corporation and UEI entered into an agreement to
        extend the current license of proprietary connectivity
        software for use in several of Pioneer's Pure Vision plasma
        television products. Announced in mid-July, the extension
        details that Pioneer will utilize UEI's extensive database of
        infrared (IR) codes to ensure traditional home devices can be
        controlled by consumer plasma televisions.

    --  Panasonic and UEI signed a two-year agreement in June in which
        UEI will provide its world-class IR database and leading
        intellectual property portfolio for remote control devices
        Panasonic manufactures for its consumer electronics products.

    --  Building on UEI's expertise in developing innovative universal
        remote control products to meet the demands of today's
        consumer, UEI announced the addition of two new universal
        remote controls to its One For All Kameleon(R) family: The One
        For All Kameleon 6-Hybrid and One For All Kameleon 8-RF.

    Conference Call Information:

UEI's management team will hold a conference call today, Tuesday August 2, 2005 at 1:30 p.m. Pacific Time to review second quarter 2005 results and hold a question and answer session for callers. To access the call in the U.S. please dial 800-622-9917 and for international calls 706-645-0366, approximately 10 minutes prior to the start of the conference. The conference call will also be broadcast live over the Internet and available for replay for a year at 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 800-642-1687 and international the number is 706-645-9291. Enter access code 7836556.

About Universal Electronics

Universal Electronics Inc., based in Southern California, develops firmware and turnkey solutions as well as software designed to enable consumers to wirelessly connect, control and interact with an increasingly complex home environment. The company's primary markets include original equipment manufacturers (OEMs) in consumer electronics and personal computing, as well as multiple system operators in the cable and satellite subscription broadcasting markets. For nearly 20 years, the company has developed a broad portfolio of patented technologies and the industry's leading database of home connectivity software that it licenses to its customers, including many leading Fortune 500 companies. In addition, UEI sells its universal wireless control products and other audio/visual accessories through its European headquarters in The Netherlands, and to distributors and retailers in Europe, Asia, Latin America, South Africa and Australia/New Zealand under the One For All(R) brand name. More information about UEI can be obtained at

Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve a number of risks and uncertainties. Among the factors that could cause actual results to differ materially from those expressed herein are the following: the failure of the company's business lines to grow and expand in the manner anticipated by the company's management, including the Consumer Electronics, digital media and CEDIA markets; the growth of, acceptance of and the demand for the company's products and technologies, including new products such as NevoSL and the company's home connectivity line of products, in various markets and geographical regions, including the computing, subscription broadcasting cable, satellite, consumer electronics, OEM, retail and interactive TV and home automation industries, not materializing as believed by the company's management; the failure of the seasonal increase in retail sales to occur as expected by the company, the failure of the various markets and industries to grow or emerge as rapidly or as successfully as believed by the company's management; the effect the Euro and other foreign currencies has on the company's results; compared to the U.S. Dollar; the possible dilutive effect the company's stock option programs may have on the company's EPS and stock price; the inability of the company to deliver the NevoSL and the company's home connectivity line of products at the time and in the quantities anticipated by the company's management; and other factors listed from time to time in the company's press releases and SEC filings. The company undertakes no obligation to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.

                            (In thousands)

                                               June 30,   December 31,
                                                 2005        2004
                                               ---------  -----------
Current assets:
 Cash and cash equivalents                     $ 38,531     $ 42,472
 Accounts receivable, net                        32,673       38,433
 Inventories, net                                22,174       23,862
 Prepaid expenses and other current assets        4,076        2,237
 Income tax receivable                              423        1,158
 Deferred income taxes                            3,468        3,216
                                               ---------  -----------
    Total current assets                        101,345      111,378

Equipment, furniture and fixtures, net            4,115        3,732
Goodwill                                         10,508       10,655
Intangible assets, net                            6,295        6,550
Other assets                                        374        2,935
Deferred income taxes                             4,877        5,035
                                               ---------  -----------
    Total assets                               $127,514     $140,285
                                               =========  ===========

Current liabilities:
 Accounts payable                              $ 17,486     $ 17,559
 Accrued income taxes                             4,768        4,267
 Accrued compensation                             2,721        5,914
 Other accrued expenses                           6,071        8,557
                                               ---------  -----------
    Total current liabilities                    31,046       36,297
Deferred income taxes                               102          107
Deferred revenue                                    534            -
                                               ---------  -----------
       Total liabilities                         31,682       36,404

Stockholders' equity:
 Common stock                                       168          166
 Paid-in capital                                 80,752       78,872
 Accumulated other comprehensive (loss) income   (3,969)       3,571
 Retained earnings                               48,694       45,293
 Deferred stock-based compensation                    -         (168)
 Common stock held in treasury                  (29,813)     (23,853)
                                               ---------  -----------
    Total stockholders' equity                   95,832      103,881
                                               ---------  -----------
     Total liabilities and stockholders'
      equity                                   $127,514     $140,285
                                               =========  ===========

                      UNIVERSAL ELECTRONICS INC.
               (In thousands, except per share amounts)

                                Three Months Ended   Six Months Ended
                                     June 30,            June 30,
                                   2005     2004      2005     2004
                                  -------  -------   -------  -------

Net sales                        $44,322  $34,011   $85,824  $66,623
Cost of sales                     28,604   21,132    54,389   41,079
                                  -------  -------   -------  -------
Gross profit                      15,718   12,879    31,435   25,544
Research and development           1,570    1,078     3,170    2,208
Selling, general and
 administrative expenses          13,174    9,384    25,606   18,838
                                  -------  -------   -------  -------
Operating expenses                14,744   10,462    28,776   21,046
                                  -------  -------   -------  -------
Operating income                     974    2,417     2,659    4,498
Interest income, net                (135)    (150)     (352)    (264)
Other (income) expense, net       (1,296)       7    (2,249)    (493)
                                  -------  -------   -------  -------
Income before income taxes         2,405    2,560     5,260    5,255
Provision for income taxes          (860)    (872)   (1,859)  (1,789)
                                  -------  -------   -------  -------
Net income                       $ 1,545  $ 1,688   $ 3,401  $ 3,466
                                  =======  =======   =======  =======
Earnings per share:
     Basic                       $  0.11  $  0.13   $  0.25  $  0.25
                                  =======  =======   =======  =======
     Diluted                     $  0.11  $  0.12   $  0.24  $  0.25
                                  =======  =======   =======  =======
Shares used in computing
 earnings per share:
     Basic                        13,467   13,483    13,493   13,600
                                  =======  =======   =======  =======

     Diluted                      13,983   13,889    14,032   13,967
                                  =======  =======   =======  =======

                      UNIVERSAL ELECTRONICS INC.
     Reconciliation of Second Quarter 2005 Pro Forma, GAAP Results
               (In thousands, except per share amounts)

The following table reconciles UEI's pro forma financial results for
the second quarter of 2005 to its actual financial results in
accordance with generally accepted accounting principles.

                                Three Months Ended  Six Months Ended
                                      June 30,           June 30,
                                  2005      2004      2005     2004
                                 -------  -------- - -------  -------

Net income, as reported
   according to GAAP            $ 1,545  $  1,688   $ 3,401  $ 3,466
   Balance write down             1,592               1,592
   Tax effect of excluding the
    write down                     (355)        0      (355)       0
                                 -------  --------   -------  -------
Pro forma net income            $ 2,782  $  1,688   $ 4,638  $ 3,466
                                 =======  ========   =======  =======

GAAP earnings per share
   Diluted                      $  0.11  $   0.12   $  0.24  $  0.25
                                 =======  ========   =======  =======
Pro forma earnings per share:
   Diluted                      $  0.20  $   0.12   $  0.33  $  0.25
                                 =======  ========   =======  =======
Shares used in computing
 earnings per share:
   Diluted                       13,983    13,889    14,032   13,967
                                 =======  ========   =======  =======

CONTACT: Universal Electronics Inc.
Paul Arling, 714-820-1000
IR Agency Kirsten Chapman, 415-433-3777
SOURCE: Universal Electronics Inc.


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