Universal Electronics Reports Third Quarter 2010 Financial Results
Nov 4, 2010
CYPRESS, Calif., Nov 04, 2010 (BUSINESS WIRE) --
Universal Electronics Inc. (UEI), (NASDAQ: UEIC) reported financial results for the third quarter ended September 30, 2010.
"We are pleased to report our third quarter results were generally in line with our expectations," stated Paul Arling, UEI's Chairman and CEO. "Our business faced some headwinds in the developed markets, most specifically in North American consumer electronics, but fared particularly well in developing economies. Looking forward, we couldn't be more excited about the future of our company, due in large part to the acquisition of Enson Assets Limited, including its subsidiaries C.G. Development Limited and C.G. Technology Limited, which we also announced this afternoon."
Arling added, "We expect this acquisition to place us squarely in the lead as the provider of wireless control devices into the consumer electronics market. Additionally, this acquisition significantly expands our product range, which will enable us to further penetrate the growing Asian and Latin American subscription broadcast markets. Further, we have over six years of experience working with the C.G. companies and know them well. They have consistently been a top supplier to UEI, due to its top-notch management team and experienced engineering group, whom we welcome to the UEI team."
Financial Results for the Quarter Ended September 30: 2010 Compared to 2009
Net sales were $79.0 million, compared to $83.2 million.
- Business Category revenue was $66.2 million, compared to $67.0 million. The Business Category contributed 84% of total net sales, compared to 81%.
- Consumer Category revenue was $12.8 million, compared to $16.2 million. The Consumer Category contributed 16% of total net sales, compared to 19%.
- Gross margins were 32.6%, compared to 31.3%.
- Total operating expenses were $19.2 million, compared to $19.4 million.
- Operating income was $6.6 million, compared to $6.6 million.
- Interest expense was $1,000, compared to interest income of $110,000.
- Net income was $4.7 million, or $0.34 per diluted share, compared to $4.2 million, or $0.30 per diluted share.
- At September 30, 2010, cash and cash equivalents was $73.0 million.
Bryan Hackworth, UEI's CFO, said: "While third quarter 2010 sales were down slightly relative to the third quarter of 2009, we improved gross margins to 32.6% of sales and lowered our operating expenses. As a result, we delivered operating margin improvement, increasing from 8.0% in the third quarter of 2009 to 8.3% in the third quarter of 2010."
Nine-month Period Ended September 30: 2010 Compared to 2009
- Net sales were $229.3 million, compared to $232.6 million.
- Gross margins were 32.8%, compared to 31.4%.
- Total operating expenses were $58.6 million, compared to $59.1 million.
- Net income was $11.3 million, or $0.81 per diluted share, compared to $ 8.8 million, or $0.63 per diluted share.
Today, it is expected the C.G. companies will add at least $140 million in annual revenue, primarily in the OEM channel, to UEI's business in 2011, and at least $20 million in operating income. The acquisition is expected to decrease the consolidated gross margin percentage by approximately 2 percentage points; however, the consolidated operating margin percentage is expected to increase by 2 percentage points. Overall, the acquisition is expected to result in at least $1.00 in EPS accretion in 2011. The company expects to provide greater detail to its overall forecast when it discloses its fourth quarter 2010 results in February 2011.
Including the C.G. acquisition in the forecast and based on historical results, fourth quarter of 2010 net sales are expected to range between $102.0 million and $108.0 million, compared to $84.9 million contributed from UEI in the fourth quarter of 2009 and approximately $13.9 million in sales from C.G. for the comparable period corresponding to the acquisition. The comparable period for C.G. is defined as sales from November 4th to December 31st, net of sales to UEI.
The company anticipates gross margins for the fourth quarter of 2010 to be approximately 31.0% of sales, plus or minus one point. For the fourth quarter of 2010, operating expenses are expected to range from $23.6 million to $24.4 million, including approximately $1 million expenses related to the acquisition. Earnings per diluted share for the fourth quarter of 2010 are expected to range from $0.43 to $0.49. Earnings per diluted share were $0.42 in the fourth quarter of 2009.
Full year 2010 net sales including the C.G. acquisition are expected to range between $331.3 million and $337.3 million, compared to $317.6 million from UEI in 2009 and approximately $13.9 million from C.G. for the aforementioned comparable period. Earnings per diluted share for 2010 are expected to range from $1.24 to $1.30. Earnings per diluted share were $1.05 in 2009.
Conference Call Information
UEI's management team will hold a conference call today, Thursday, November 4, 2010 at 4:30 p.m. ET / 1:30 p.m. PT, to discuss its third quarter 2010 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 18361101. 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 800-642-1687 and internationally, 706-645-9291. Enter access code 18361101.
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(R) brand name. UEI also delivers complete home control solutions in the professional custom installation market under the brand name Nevo(R). For additional information, please visit our website at www.uei.com.
About Enson Assets Limited
Enson Assets Limited, through its wholly-owned subsidiaries C.G. Development Limited and C.G. Technology Limited is principally engaged in the design, development, manufacture and sale of remote control units. The manufacturing business commenced with the establishment of the Panyu Plant in 1992. C.G. is a global market leader in the manufacturing of remote control units with a renowned global customer base, which is comprised of industry leading brands of home appliance and consumer electronics companies.
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 ability of the Company to successfully integrate the operations of Enson and its subsidiaries into our operations, the failure of Enson to perform in accordance with our expectations; the continued development ofinnovative control solutions and technologies that are accepted by our customers and consumers; the continued leveraging of the Company's fixed cost structure resulting in increased profitability and cash flow; 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)
|Cash and cash equivalents||$||23,447||$||29,016|
|Accounts receivable, net||57,990||64,392|
|Prepaid expenses and other current assets||1,594||2,423|
|Income tax receivable||480||--|
|Deferred income taxes||2,938||3,016|
|Total current assets||180,600||189,040|
|Equipment, furniture and fixtures, net||10,913||9,990|
|Intangible assets, net||11,323||11,572|
|Deferred income taxes||7,853||7,837|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Accrued sales discounts, rebates and royalties||6,692||6,028|
|Accrued income taxes||--||3,254|
|Other accrued expenses||6,088||8,539|
|Total current liabilities||49,399||61,954|
|Deferred income taxes||159||153|
|Income tax payable||1,348||1,348|
|Other long-term liabilities||78||122|
|Commitments and contingencies|
|Preferred stock, $0.01 par value, 5,000,000 shares authorized; none issued or outstanding||--||--|
|Common stock, $0.01 par value, 50,000,000 shares authorized; 19,270,607 and 19,140,232 shares issued on September 30, 2010 and December 31, 2009, respectively||193||191|
|Accumulated other comprehensive (loss) income||(168||)||1,463|
|Less cost of common stock in treasury, 5,921,136 and 5,449,962 shares on September 30, 2010 and December 31, 2009, respectively||(89,336||)||(79,826||)|
|Total stockholders' equity||174,071||169,730|
|Total liabilities and stockholders' equity||$||225,055||$||233,307|
UNIVERSAL ELECTRONICS INC.
CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share amounts)
|Three Months Ended
|Nine Months Ended
|Cost of sales||53,289||57,112||154,068||159,609|
|Research and development expenses||2,687||2,251||7,944||6,411|
|Selling, general and administrative expenses||16,465||17,175||50,694||52,724|
|Interest (expense) income, net||(1||)||110||99||376|
|Other income (expense), net||40||25||62||(161||)|
|Income before provision for income taxes||6,605||6,779||16,730||14,082|
|Provision for income taxes||(1,903||)||(2,556||)||(5,415||)||(5,247||)|
|Earnings per share:|
|Shares used in computing earnings per share:|
UNIVERSAL ELECTRONICS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|Nine Months Ended
|Cash provided by operating activities:|
|Adjustments to reconcile net income to net cash provided by operating activities:|
|Depreciation and amortization||4,660||5,019|
|Provision for doubtful accounts||661||181|
|Provision for inventory write-downs||1,914||2,861|
|Deferred income taxes||17||(297||)|
|Tax benefit from exercise of stock options||102||374|
|Excess tax benefit from stock-based compensation||(131||)||(198||)|
|Shares issued for employee benefit plan||375||530|
|Changes in operating assets and liabilities:|
|Prepaid expenses and other assets||1,158||883|
|Accounts payable and accrued expenses||(8,229||)||(3,241||)|
|Accrued income taxes||(3,407||)||202|
|Net cash provided by operating activities||10,631||20,876|
|Cash used for investing activities:|
|Acquisition of equipment, furniture and fixtures||(4,449||)||(4,142||)|
|Acquisition of intangible assets||(1,061||)||(988||)|
|Acquisition of assets from Zilog, Inc.||--||(9,502||)|
|Net cash used for investing activities||(5,800||)||(63,757||)|
|Cash used for financing activities:|
|Proceeds from stock options exercised||257||2,412|
|Treasury stock purchased||(9,835||)||(5,242||)|
|Excess tax benefit from stock-based compensation||131||198|
|Net cash used for financing activities||(9,447||)||(2,632||)|
|Effect of exchange rate changes on cash||(953||)||374|
|Net decrease in cash and cash equivalents||(5,569||)||(45,139||)|
|Cash and cash equivalents at beginning of period||29,016||75,238|
|Cash and cash equivalents at end of period||$||23,447||$||30,099|
SOURCE: Universal Electronics Inc.
Universal Electronics Inc.
Paul Arling, 714-820-1000
Kirsten Chapman, 415-433-3777