UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): August 4, 2016
UNIVERSAL ELECTRONICS INC.
(Exact name of Registrant as specified in its charter)
Delaware | 0-21044 | 33-0204817 | ||
(State or other jurisdiction | (Commission File No.) | (I.R.S. Employer | ||
of incorporation or organization) | Identification No.) | |||
201 E. Sandpointe Avenue, 8th Floor
Santa Ana, CA 92707
(Address of principal executive offices, with Zip Code)
(714) 918-9500
(Registrant’s telephone number, including area code):
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
TABLE OF CONTENTS
Item 2.02 Results of Operations and Financial Condition
On August 4, 2016, Universal Electronics Inc. is issuing a press release and holding a conference call regarding its financial results for the second quarter ended June 30, 2016. A copy of this press release is furnished with this Report as Exhibit 99.1 and is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
(d) | Exhibits. The following exhibit is furnished with this Report. |
99.1 Press Release of Universal Electronics Inc. dated August 4, 2016.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Universal Electronics Inc. | ||||||
Date: August 4, 2016 | By: | /s/ Bryan Hackworth | ||||
Bryan Hackworth | ||||||
Chief Financial Officer (Principal Financial Officer) | ||||||
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INDEX TO EXHIBITS
Exhibit Number | Description | |
99.1 | Press Release Dated August 4, 2016 | |
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Exhibit 99.1
Contacts: Paul Arling (UEI) 714.918.9500
Becky Herrick (IR Agency) 415.433.3777
UNIVERSAL ELECTRONICS REPORTS SECOND QUARTER 2016 FINANCIAL RESULTS
SANTA ANA, CA – August 4, 2016 – Universal Electronics Inc. (UEI), (NASDAQ: UEIC) reported financial results for the three and six months ended June 30, 2016.
Paul Arling, UEI's Chairman and CEO, stated, “Our second quarter results reflect strong year-over-year growth in Adjusted Pro Forma sales and earnings. We are at various stages of new product introductions within our core subscription broadcast market as additional customers continue to adopt the higher end platforms. The emergence of the smart home, which reflects the convergence of home entertainment and home security devices and technologies, is also an exciting development for UEI. We have a significant opportunity to leverage our customer base, our world’s largest device code database and our expertise in wireless control and sensing technology to capture a significant share of this emerging market.”
Financial Results for the Three Months Ended June 30: 2016 Compared to 2015
• | GAAP net sales were $171.0 million, compared to $147.6 million; Adjusted Pro Forma net sales were $172.2 million, compared to $147.6 million. |
• | GAAP gross margins were 25.4%, compared to 27.3%; Adjusted Pro Forma gross margins were 26.1%, compared to 27.5%. |
• | GAAP operating income was $8.0 million, compared to $10.4 million; Adjusted Pro Forma operating income was $14.7 million, compared to $13.5 million. |
• | GAAP net income was $6.6 million, or $0.45 per diluted share, compared to $8.4 million or $0.52 per diluted share; Adjusted Pro Forma net income was $11.3 million, or $0.77 per diluted share, compared to $10.7 million, or $0.67 per diluted share. |
• | At June 30, 2016, cash and cash equivalents were $49.4 million. |
Financial Results for the Six Months Ended June 30: 2016 Compared to 2015
• | GAAP net sales were $321.6 million, compared to $280.3 million; Adjusted Pro Forma net sales were $323.7 million, compared to $280.3 million. |
• | GAAP gross margins were 25.2%, compared to 27.7%; Adjusted Pro Forma gross margins were 25.9%, compared to 27.9%. |
• | GAAP operating income was $11.0 million, compared to $16.5 million; Adjusted Pro Forma operating income was $24.0 million, compared to $22.6 million. |
• | GAAP net income was $9.3 million, or $0.63 per diluted share, compared to $13.6 million or $0.84 per diluted share; Adjusted Pro Forma net income was $18.5 million, or $1.26 per diluted share, compared to $18.2 million, or $1.13 per diluted share. |
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Financial Outlook
For the third quarter of 2016, the company expects GAAP net sales to range between $168 million and $176 million, compared to $160.5 million in the third quarter of 2015. GAAP earnings per diluted share for the third quarter of 2016 are expected to range from $0.61 to $0.71, compared to GAAP earnings per diluted share of $0.41 in the third quarter of 2015.
For the third quarter of 2016, the company expects Adjusted Pro Forma net sales to range between $169 million and $177 million, compared to $160.5 million in the third quarter of 2015. Adjusted Pro Forma earnings per diluted share are expected to range from $0.87 to $0.97, compared to Adjusted Pro Forma earnings per diluted share of $0.78 in the third quarter of 2015. The third quarter Adjusted Pro Forma earnings per diluted share estimate excludes $0.26 per share related to stock-based compensation, amortization of acquired intangibles and changes in contingent consideration relating to the acquisition of Ecolink Intelligent Technology, Inc.
Conference Call Information
UEI’s management team will hold a conference call today, Thursday, August 4, 2016 at 4:30 p.m. ET / 1:30 p.m. PT, to discuss its second quarter 2016 earnings results, review recent activity and answer questions. To access the call in the U.S. please dial 877-843-0414 and for international calls dial 315-625-3071 approximately 10 minutes prior to the start of the conference. The conference ID is 49078120. 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 49078120.
Use of Non-GAAP Financial Metrics
In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, UEI provides Adjusted Pro Forma information as additional information for its operating results. References to Adjusted Pro Forma information are to non-GAAP financial measures. These measures are not required by, in accordance with, or an alternative for, GAAP and may be different from non-GAAP financial measures used by other companies. UEI’s management uses these measures for reviewing the financial results of UEI, for budget planning purposes, and for making operational and financial decisions and believes that providing these non-GAAP financial measures to investors, as a supplement to GAAP financial measures, helps investors evaluate UEI’s core operating and financial performance and business trends consistent with how management evaluates such performance and trends. Additionally, management believes these measures facilitate comparisons with the core operating and financial results and business trends of competitors and other companies.
Adjusted Pro Forma net sales is defined as net sales excluding the impact of stock-based compensation for performance-based warrants. Adjusted Pro Forma gross profit is defined as gross profit excluding stock-based compensation expense and cost of goods sold and depreciation expense related to the increase in inventories and fixed assets from cost to fair market value resulting from acquisitions. Adjusted Pro Forma operating expenses are defined as operating expenses excluding amortization of intangibles acquired, stock-based compensation expense, employee related restructuring costs, litigation settlement costs, and changes in contingent consideration related to the acquisition of the net assets of Ecolink Intelligent Technology, Inc. Adjusted Pro Forma net income is defined as net income excluding the aforementioned items and the related tax effects. Adjusted Pro Forma diluted earnings per share attributable to Universal Electronics Inc. is calculated using Adjusted Pro Forma net income. A reconciliation of these financial measures to the most directly comparable GAAP financial measures is included at the end of this press release.
About Universal Electronics
Universal Electronics Inc. is the worldwide leader in universal control and sensing technologies for the smart home. For more information, please visit www.uei.com/about.
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Note on Forward-looking Statements
This press release and accompanying schedules contain "forward-looking statements" within the meaning of federal securities laws, including net sales, profit margin and earnings trends, estimates and assumptions; our expectations about new product introductions; and similar statements concerning anticipated future events and expectations that are not historical facts. We caution you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including those we identify below and other risk factors that we identify in our most recent annual report on Form 10-K and the periodic reports filed thereafter. Risks that could affect forward-looking statements in this press release include changes in market conditions; the convergence of smart home devices and technologies as anticipated by management, the pace of the economy; competitive conditions in the industries we serve, including the smart home and residential and commercial security industries; and relationships with our customers. Any of these factors could cause actual results to differ materially from the expectations we express or imply in this press release. We make these forward-looking statements as of August 4, 2016. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
– Tables Follow –
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UNIVERSAL ELECTRONICS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share-related data)
(Unaudited)
June 30, 2016 | December 31, 2015 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 49,445 | $ | 52,966 | ||||
Restricted cash | 4,623 | 4,623 | ||||||
Accounts receivable, net | 132,125 | 121,801 | ||||||
Inventories, net | 119,141 | 122,366 | ||||||
Prepaid expenses and other current assets | 6,553 | 6,217 | ||||||
Income tax receivable | 296 | 55 | ||||||
Deferred income taxes | 7,248 | 7,296 | ||||||
Total current assets | 319,431 | 315,324 | ||||||
Property, plant, and equipment, net | 98,130 | 90,015 | ||||||
Goodwill | 43,131 | 43,116 | ||||||
Intangible assets, net | 30,800 | 32,926 | ||||||
Deferred income taxes | 10,030 | 8,474 | ||||||
Other assets | 5,170 | 5,365 | ||||||
Total assets | $ | 506,692 | $ | 495,220 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 99,030 | $ | 93,843 | ||||
Line of credit | 42,987 | 50,000 | ||||||
Accrued compensation | 33,881 | 37,452 | ||||||
Accrued sales discounts, rebates and royalties | 8,271 | 7,618 | ||||||
Accrued income taxes | 1,702 | 4,745 | ||||||
Other accrued expenses | 22,937 | 21,466 | ||||||
Total current liabilities | 208,808 | 215,124 | ||||||
Long-term liabilities: | ||||||||
Long-term contingent consideration | 11,000 | 11,751 | ||||||
Deferred income taxes | 9,643 | 7,891 | ||||||
Income tax payable | 629 | 629 | ||||||
Other long-term liabilities | 1,847 | 1,917 | ||||||
Total liabilities | 231,927 | 237,312 | ||||||
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; 23,331,278 and 23,176,277 shares issued on June 30, 2016 and December 31, 2015, respectively | 233 | 232 | ||||||
Paid-in capital | 239,375 | 228,269 | ||||||
Treasury stock, at cost, 8,861,097 and 8,824,768 shares on June 30, 2016 and December 31, 2015, respectively | (212,277 | ) | (210,333 | ) | ||||
Accumulated other comprehensive income (loss) | (17,117 | ) | (15,799 | ) | ||||
Retained earnings | 264,551 | 255,240 | ||||||
Universal Electronics Inc. stockholders' equity | 274,765 | 257,609 | ||||||
Noncontrolling interest | — | 299 | ||||||
Total stockholders’ equity | 274,765 | 257,908 | ||||||
Total liabilities and stockholders’ equity | $ | 506,692 | $ | 495,220 | ||||
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UNIVERSAL ELECTRONICS INC.
CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net sales | $ | 170,986 | $ | 147,551 | $ | 321,644 | $ | 280,256 | ||||||||
Cost of sales | 127,530 | 107,271 | 240,541 | 202,567 | ||||||||||||
Gross profit | 43,456 | 40,280 | 81,103 | 77,689 | ||||||||||||
Research and development expenses | 5,151 | 4,096 | 10,337 | 8,530 | ||||||||||||
Selling, general and administrative expenses | 30,336 | 25,784 | 59,756 | 52,656 | ||||||||||||
Operating income | 7,969 | 10,400 | 11,010 | 16,503 | ||||||||||||
Interest income (expense), net | (258 | ) | 104 | (525 | ) | 214 | ||||||||||
Other income (expense), net | 671 | 56 | 1,391 | 286 | ||||||||||||
Income before provision for income taxes | 8,382 | 10,560 | 11,876 | 17,003 | ||||||||||||
Provision for income taxes | 1,784 | 2,185 | 2,535 | 3,439 | ||||||||||||
Net income | 6,598 | 8,375 | 9,341 | 13,564 | ||||||||||||
Net income (loss) attributable to noncontrolling interest | 8 | — | 30 | — | ||||||||||||
Net income attributable to Universal Electronics Inc. | $ | 6,590 | $ | 8,375 | $ | 9,311 | $ | 13,564 | ||||||||
Earnings per share attributable to Universal Electronics Inc.: | ||||||||||||||||
Basic | $ | 0.46 | $ | 0.53 | $ | 0.65 | $ | 0.86 | ||||||||
Diluted | $ | 0.45 | $ | 0.52 | $ | 0.63 | $ | 0.84 | ||||||||
Shares used in computing earnings per share: | ||||||||||||||||
Basic | 14,440 | 15,732 | 14,406 | 15,819 | ||||||||||||
Diluted | 14,735 | 16,029 | 14,686 | 16,136 | ||||||||||||
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UNIVERSAL ELECTRONICS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30, | ||||||||
2016 | 2015 | |||||||
Cash provided by operating activities: | ||||||||
Net income | $ | 9,341 | $ | 13,564 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 12,032 | 9,412 | ||||||
Provision for doubtful accounts | 116 | 138 | ||||||
Provision for inventory write-downs | 1,705 | 1,617 | ||||||
Deferred income taxes | 165 | (655 | ) | |||||
Tax benefit from exercise of stock options and vested restricted stock | 992 | 689 | ||||||
Excess tax benefit from stock-based compensation | (1,047 | ) | (713 | ) | ||||
Shares issued for employee benefit plan | 551 | 593 | ||||||
Employee and director stock-based compensation | 4,970 | 3,983 | ||||||
Performance-based warrant stock-based compensation | 2,058 | — | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (9,599 | ) | (8,741 | ) | ||||
Inventories | 982 | (14,994 | ) | |||||
Prepaid expenses and other assets | (243 | ) | (378 | ) | ||||
Accounts payable and accrued expenses | 4,488 | 1,395 | ||||||
Accrued income taxes | (3,260 | ) | 32 | |||||
Net cash provided by operating activities | 23,251 | 5,942 | ||||||
Cash used for investing activities: | ||||||||
Acquisition of property, plant, and equipment | (17,989 | ) | (15,655 | ) | ||||
Acquisition of intangible assets | (993 | ) | (1,252 | ) | ||||
Deconsolidation of Encore Controls LLC | 48 | — | ||||||
Net cash used for investing activities | (18,934 | ) | (16,907 | ) | ||||
Cash provided by (used for) financing activities: | ||||||||
Borrowings under line of credit | 57,987 | 19,500 | ||||||
Repayments on line of credit | (65,000 | ) | (7,500 | ) | ||||
Proceeds from stock options exercised | 2,536 | 1,648 | ||||||
Treasury stock purchased | (1,944 | ) | (34,297 | ) | ||||
Excess tax benefit from stock-based compensation | 1,047 | 713 | ||||||
Net cash provided by (used for) financing activities | (5,374 | ) | (19,936 | ) | ||||
Effect of exchange rate changes on cash | (2,464 | ) | 542 | |||||
Net increase (decrease) in cash and cash equivalents | (3,521 | ) | (30,359 | ) | ||||
Cash and cash equivalents at beginning of year | 52,966 | 112,521 | ||||||
Cash and cash equivalents at end of period | $ | 49,445 | $ | 82,162 | ||||
Supplemental cash flow information: | ||||||||
Income taxes paid | $ | 4,647 | $ | 2,979 | ||||
Interest paid | $ | 609 | $ | — | ||||
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UNIVERSAL ELECTRONICS INC.
RECONCILIATION OF ADJUSTED PRO FORMA FINANCIAL RESULTS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net sales: | ||||||||||||||||
Net sales - GAAP | $ | 170,986 | $ | 147,551 | $ | 321,644 | $ | 280,256 | ||||||||
Stock-based compensation for performance-based warrants | 1,193 | — | 2,059 | — | ||||||||||||
Adjusted Pro Forma net sales | $ | 172,179 | $ | 147,551 | $ | 323,703 | $ | 280,256 | ||||||||
Cost of sales: | ||||||||||||||||
Cost of sales - GAAP | $ | 127,530 | $ | 107,271 | $ | 240,541 | $ | 202,567 | ||||||||
Depreciation of acquired fixed assets (1) | (258 | ) | (240 | ) | (517 | ) | (482 | ) | ||||||||
Fair value adjustments to acquired inventories (2) | (43 | ) | — | (115 | ) | — | ||||||||||
Stock-based compensation expense | (15 | ) | (10 | ) | (29 | ) | (19 | ) | ||||||||
Adjusted Pro Forma cost of sales | 127,214 | 107,021 | 239,880 | 202,066 | ||||||||||||
Adjusted Pro Forma gross profit | $ | 44,965 | $ | 40,530 | $ | 83,823 | $ | 78,190 | ||||||||
Adjusted Pro Forma gross margin | 26.1 | % | 27.5 | % | 25.9 | % | 27.9 | % | ||||||||
Operating expenses: | ||||||||||||||||
Operating expenses - GAAP | $ | 35,487 | $ | 29,880 | $ | 70,093 | $ | 61,186 | ||||||||
Amortization of acquired intangible assets | (1,233 | ) | (744 | ) | (2,462 | ) | (1,488 | ) | ||||||||
Stock-based compensation expense | (2,463 | ) | (2,014 | ) | (4,941 | ) | (3,964 | ) | ||||||||
Employee related restructuring costs | (228 | ) | (73 | ) | (1,661 | ) | (126 | ) | ||||||||
Litigation settlement costs | (1,988 | ) | — | (2,000 | ) | — | ||||||||||
Change in contingent consideration | 718 | — | 751 | — | ||||||||||||
Adjusted Pro Forma operating expenses | $ | 30,293 | $ | 27,049 | $ | 59,780 | $ | 55,608 | ||||||||
Operating income: | ||||||||||||||||
Operating income - GAAP | $ | 7,969 | $ | 10,400 | $ | 11,010 | $ | 16,503 | ||||||||
Stock-based compensation for performance-based warrants | 1,193 | — | 2,059 | — | ||||||||||||
Depreciation of acquired fixed assets (1) | 258 | 240 | 517 | 482 | ||||||||||||
Fair value adjustments to acquired inventories (2) | 43 | — | 115 | — | ||||||||||||
Amortization of acquired intangible assets | 1,233 | 744 | 2,462 | 1,488 | ||||||||||||
Stock-based compensation expense | 2,478 | 2,024 | 4,970 | 3,983 | ||||||||||||
Employee related restructuring costs | 228 | 73 | 1,661 | 126 | ||||||||||||
Litigation settlement costs | 1,988 | — | 2,000 | — | ||||||||||||
Change in contingent consideration | (718 | ) | — | (751 | ) | — | ||||||||||
Adjusted Pro Forma operating income | $ | 14,672 | $ | 13,481 | $ | 24,043 | $ | 22,582 | ||||||||
Adjusted Pro Forma operating income as a percentage of net sales | 8.5 | % | 9.1 | % | 7.4 | % | 8.1 | % | ||||||||
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UNIVERSAL ELECTRONICS INC.
RECONCILIATION OF ADJUSTED PRO FORMA FINANCIAL RESULTS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income attributable to Universal Electronics Inc.: | ||||||||||||||||
Net income attributable to Universal Electronics Inc. - GAAP | $ | 6,590 | $ | 8,375 | $ | 9,311 | $ | 13,564 | ||||||||
Stock-based compensation for performance-based warrants | 1,193 | — | 2,059 | — | ||||||||||||
Depreciation of acquired fixed assets (1) | 258 | 240 | 517 | 482 | ||||||||||||
Fair value adjustments to acquired inventories (2) | 43 | — | 115 | — | ||||||||||||
Amortization of acquired intangible assets | 1,233 | 744 | 2,462 | 1,488 | ||||||||||||
Stock-based compensation expense | 2,478 | 2,024 | 4,970 | 3,983 | ||||||||||||
Employee related restructuring costs | 228 | 73 | 1,661 | 126 | ||||||||||||
Litigation settlement costs | 1,988 | — | 2,000 | — | ||||||||||||
Change in contingent consideration | (718 | ) | — | (751 | ) | — | ||||||||||
Income tax provision on pro forma adjustments | (2,014 | ) | (743 | ) | (3,789 | ) | (1,483 | ) | ||||||||
Pro forma adjustments attributable to noncontrolling interest | (1 | ) | — | (11 | ) | — | ||||||||||
Adjusted Pro Forma net income attributable to Universal Electronics Inc. | $ | 11,278 | $ | 10,713 | $ | 18,544 | $ | 18,160 | ||||||||
Diluted earnings per share attributable to Universal Electronics Inc.: | ||||||||||||||||
Diluted earnings per share attributable to Universal Electronics Inc. - GAAP | $ | 0.45 | $ | 0.52 | $ | 0.63 | $ | 0.84 | ||||||||
Total pro forma adjustments | $ | 0.32 | $ | 0.15 | $ | 0.63 | $ | 0.28 | ||||||||
Adjusted Pro Forma diluted earnings per share attributable to Universal Electronics Inc. | $ | 0.77 | $ | 0.67 | $ | 1.26 | $ | 1.13 | ||||||||
(1) | Depreciation related to the mark-up from cost to fair value of fixed assets acquired in business combinations. |
(2) | Effect of fair value adjustments to inventories acquired as a part of the Ecolink Intelligent Technology, Inc. business combination and sold through during the period. |
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