Universal Electronics Reports Second Quarter 2013 Financial Results

August 8, 2013

Contacts: Paul Arling (UEI) 714.918.9500
Becky Herrick (IR Agency) 415.433.3777

- Net sales increased 17% over second quarter 2012 -

- Operating income increased 46% over second quarter 2012 -

SANTA ANA, CA  – Universal Electronics Inc. (UEI), (NASDAQ: UEIC) reported financial results for the three and six months ended June 30, 2013.

Paul Arling, UEI's Chairman and CEO, stated: “We delivered better than expected second quarter 2013 results primarily due to strong sales in our subscription broadcasting business, especially in the U.S. and Latin America, as well as our consumer electronics OEM business. UEI is the market leader in wireless control technology for the connected home, but we are not stopping there; we are supplying the innovative solutions that address future evolutions in home entertainment. Our core business continues to grow as our customers are including more advanced technologies into their products, such as Bluetooth-enabled remote controls and onscreen navigation for televisions, which drives demand for a wide variety of UEI solutions. We continue to gain traction with our embedded app technologies such as UEI QuickSet and Control Plus as we work with some of the world's largest smart device companies. In fact, we expect to launch our embedded app technologies with mobile, IPTV and game console companies later in 2013 and into next year. With our market position, market approach and expanding market opportunity, we believe the future has never looked brighter.”

Adjusted Pro Forma Financial Results for the Three Months Ended June 30: 2013 Compared to 2012

•  Net sales were $136.1 million, compared to $116.7 million.

•  Business Category revenue was $124.2 million, compared to $103.9 million. The Business Category contributed 91% of total net sales, compared to 89%.

•  Consumer Category revenue was $11.9 million, compared to $12.8 million. The Consumer Category contributed 9% of total net sales, compared to 11%.

•  Gross margins were 28.0%, compared to 28.5%.

•  Operating expenses were $26.9 million, compared to $25.5 million.

•  Operating income was $11.2 million, compared to $7.7 million.

•  Net income was $7.2 million, or $0.47 per diluted share, compared to $6.2 million, or $0.41 per diluted share.

•  At June 30, 2013, cash and cash equivalents, net of debt, was $49.7 million, compared to $17.7 million at June 30, 2012.

Adjusted Pro Forma Financial Results for the Six Months Ended June 30: 2013 Compared to 2012

•  Net sales were $250.8 million, compared to $220.4 million.

•  Gross margins were 28.3%, compared to 28.1%.

•  Operating expenses were $54.6 million, compared to $50.3 million.

•  Operating income was $16.3 million, compared to $11.5 million.

•  Net income was $11.1 million, or $0.73 per diluted share, compared to $9.0 million, or $0.60 per diluted share.

Financial Outlook

For the third quarter of 2013, the company expects net sales to range between $136.0 million and $144.0 million, compared to $124.9 million in the third quarter of 2012. Adjusted pro forma earnings per diluted share for the third quarter of 2013 are expected to range from $0.48 to $0.58, compared to adjusted pro forma earnings per diluted share of $0.54 in the third quarter of 2012.

Conference Call Information

UEI’s management team will hold a conference call today, Thursday, August 8, 2013 at 4:30 p.m. ET / 1:30 p.m. PT, to discuss its second quarter 2013 earnings results, review recent 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 21167281. 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 21167281.

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 depreciation expense related to the increase in fixed assets from cost to fair market value resulting from acquisitions. Non-GAAP operating expenses are defined as operating expenses excluding amortization of intangibles acquired and other employee related restructuring costs resulting from acquisitions. Non-GAAP net income is defined as net income from operations excluding the aforementioned items and the related tax effects as well as additional reserves recorded resulting from a tax audit in Hong Kong for years preceding our acquisition of Enson Assets Limited.  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. More information is available at http://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 the continued strength of its core businesses; the continued innovation of products and technologies that will attract new customers in existing and new markets; the continued expansion of the Company's technologies into smart devices (such as smartphones, tablets, smart TVs, IPTV devices, game consoles and over-the-top-services); the continued global general economic conditions; the benefits the Company expects via the continued strength of its subscription broadcasting businesses in certain geographic areas including the U.S. and Latin America; and other factors described in the Company's filings with the U.S. Securities and Exchange Commission.  The actual results 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.

– Tables Follow –

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

UNIVERSAL ELECTRONICS INC.
      CONSOLIDATED BALANCE SHEETS
      (In thousands, except share-related data)
      (Unaudited)

 

 

June 30,
      2013

 

December 31,
      2012

ASSETS

Current assets:

Cash and cash equivalents

$

49,745

$

44,593

Accounts receivable, net

89,432

91,048

Inventories, net

100,050

84,381

Prepaid expenses and other current assets

3,654

3,661

Income tax receivable

6

270

Deferred income taxes

5,175

 

5,210

 

Total current assets

248,062

229,163

Property, plant, and equipment, net

76,337

77,706

Goodwill

30,876

30,890

Intangible assets, net

28,312

29,835

Other assets

5,195

5,361

Deferred income taxes

6,516

 

6,369

 

Total assets

$

395,298

 

$

379,324

 

LIABILITIES AND    STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

65,947

$

59,831

Line of credit

Accrued compensation

33,005

33,398

Accrued sales discounts, rebates and royalties

6,179

8,093

Accrued income taxes

3,253

3,668

Deferred income taxes

45

41

Other accrued expenses

9,758

 

10,644

 

Total current liabilities

118,187

115,675

Long-term liabilities:

Deferred income taxes

10,654

10,687

Income tax payable

525

525

Other long-term liabilities

2,055

 

1,787

 

Total liabilities

131,421

 

128,674

 

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; 21,839,302 and 21,491,398 shares issued on June 30, 2013    and December 31, 2012, respectively

218

215

Paid-in capital

187,744

180,607

Accumulated other comprehensive income (loss)

576

1,052

Retained earnings

179,356

 

170,569

 

367,894

352,443

Less cost of common stock in treasury,    6,619,048 and 6,516,382 shares on June 30, 2013 and December 31, 2012,    respectively

(104,017

)

(101,793

)

Total stockholders’ equity

263,877

 

250,650

 

Total liabilities and stockholders’ equity

$

395,298

 

$

379,324

 

 

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

UNIVERSAL ELECTRONICS INC.
      CONSOLIDATED INCOME STATEMENTS
      (In thousands, except per share amounts)
      (Unaudited)

 

 

Three Months Ended
      June 30,

 

Six Months Ended
      June 30,

2013

 

2012

 

2013

 

2012

Net sales

$

136,109

$

116,704

$

250,831

$

220,436

Cost of sales

98,273

 

83,734

 

180,446

 

159,139

 

Gross profit

37,836

32,970

70,385

61,297

Research and development expenses

4,040

3,424

8,281

6,887

Selling, general and administrative expenses

23,820

 

23,080

 

48,233

 

45,632

 

Operating income

9,976

6,466

13,871

8,778

Interest income (expense), net

4

(51

)

13

(88

)

Other expense, net

(1,630

)

(126

)

(2,180

)

(450

)

Income before provision for income taxes

8,350

6,289

11,704

8,240

Provision for income taxes

2,509

 

1,136

 

2,917

 

1,455

 

Net income

$

5,841

 

$

5,153

 

$

8,787

 

$

6,785

 

Earnings per share:

Basic

$

0.39

 

$

0.35

 

$

0.58

 

$

0.46

 

Diluted

$

0.38

 

$

0.34

 

$

0.57

 

$

0.45

 

Shares used in computing earnings per share:

Basic

15,098

 

14,933

 

15,032

 

14,904

 

Diluted

15,419

 

15,048

 

15,322

 

15,080

 

 

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

UNIVERSAL ELECTRONICS INC.
      CONSOLIDATED STATEMENTS OF CASH FLOWS
      (In thousands)
      (Unaudited)

 

 

Six Months Ended
      June 30,

2013

 

2012

Cash provided by (used for) operating    activities:

 

Net income

$

8,787

$

6,785

Adjustments to reconcile net income to net    cash provided by (used for) operating activities:

Depreciation and amortization

8,788

8,525

Provision for doubtful accounts

48

37

Provision for inventory write-downs

1,130

1,623

Deferred income taxes

(111

)

6

Tax benefit from exercise of stock options and    vested restricted stock

399

(72

)

Excess tax benefit from stock-based    compensation

(366

)

(30

)

Shares issued for employee benefit plan

446

468

Stock-based compensation

2,561

2,337

Changes in operating assets and liabilities:

Accounts receivable

638

(4,678

)

Inventories

(16,996

)

10,630

Prepaid expenses and other assets

143

(711

)

Accounts payable and accrued expenses

2,647

(13,523

)

Accrued income and other taxes

(168

)

(2,796

)

Net cash provided by (used for) operating    activities

7,946

 

8,601

 

Cash used for investing activities:

Acquisition of property, plant, and equipment

(4,655

)

(4,261

)

Acquisition of intangible assets

(654

)

(430

)

Net cash used for investing activities

(5,309

)

(4,691

)

Cash provided by (used for) financing    activities:

Issuance of debt

19,500

8,000

Payment of debt

(19,500

)

(11,400

)

Proceeds from stock options exercised

3,946

1,386

Treasury stock purchased

(2,435

)

(486

)

Excess tax benefit from stock-based    compensation

366

 

30

 

Net cash provided by (used for) financing    activities

1,877

(2,470

)

Effect of exchange rate changes on cash

638

 

(124

)

Net increase (decrease) in cash and cash    equivalents

5,152

1,316

Cash and cash equivalents at beginning of year

44,593

 

29,372

 

Cash and cash equivalents at end of year

$

49,745

 

$

30,688

 

 

Supplemental Cash Flow Information:

Income taxes paid

$

2,420

$

5,354

Interest payments

$

43

$

176

 

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

UNIVERSAL ELECTRONICS INC.
      RECONCILIATION OF ADJUSTED PRO FORMA FINANCIAL RESULTS
      (In thousands, except share-related data)
      (Unaudited)

 

 

Three Months Ended
      June 30, 2013

 

Three Months Ended
      June 30, 2012

GAAP

 

Adjustments

 

Adjusted
      Pro Forma

GAAP

 

Adjustments

 

Adjusted
      Pro Forma

Net sales

$

136,109

$

$

136,109

$

116,704

$

$

116,704

Cost of sales (1)

98,273

 

(277

)

97,996

 

83,734

 

(277

)

83,457

 

Gross profit

37,836

277

38,113

32,970

277

33,247

Research and development expenses

4,040

4,040

3,424

3,424

Selling, general and administrative expenses (2)

23,820

 

(966

)

22,854

 

23,080

 

(965

)

22,115

 

Operating income

9,976

1,243

11,219

6,466

1,242

7,708

Interest income (expense), net

4

4

(51

)

(51

)

Other income (expense), net

(1,630

)

 

(1,630

)

(126

)

 

(126

)

Income before provision for income taxes

8,350

1,243

9,593

6,289

1,242

7,531

Provision for income taxes (3)

2,509

 

(112

)

2,397

 

1,136

 

238

 

1,374

 

Net income

$

5,841

 

$

1,355

 

$

7,196

 

$

5,153

 

$

1,004

 

$

6,157

 

Earnings per share diluted

$

0.38

 

$

0.09

 

$

0.47

 

$

0.34

 

$

0.07

 

$

0.41

 

 

 

Six Months Ended
      June 30, 2013

Six Months Ended
      June 30, 2012

GAAP

Adjustments

Adjusted
      Pro Forma

GAAP

Adjustments

Adjusted
      Pro Forma

Net sales

250,831

$

$

250,831

$

220,436

$

$

220,436

Cost of sales (4)

180,446

 

(554

)

179,892

 

159,139

 

(554

)

158,585

 

Gross profit

70,385

554

70,939

61,297

554

61,851

Research and development expenses

8,281

8,281

6,887

6,887

Selling, general and administrative expenses (5)

48,233

 

(1,887

)

46,346

 

45,632

 

(2,197

)

43,435

 

Operating income

13,871

2,441

16,312

8,778

2,751

11,529

Interest income (expense), net

13

13

(88

)

(88

)

Other income (expense), net

(2,180

)

 

(2,180

)

(450

)

 

(450

)

Income before provision for income taxes

11,704

2,441

14,145

8,240

2,751

10,991

Provision for income taxes (6)

2,917

 

100

 

3,017

 

1,455

 

542

 

1,997

 

Net income

$

8,787

 

$

2,341

 

$

11,128

 

$

6,785

 

$

2,209

 

$

8,994

 

Earnings per share diluted

$

0.57

 

$

0.15

 

$

0.73

 

$

0.45

 

$

0.15

 

$

0.60

 

(1) To reflect  depreciation expense of $0.3 million for each of the three months ended  June 30, 2013 and 2012, related to the mark-up in fixed assets from cost  to fair value as a result of acquisitions.
  (2) To reflect  amortization expense of $0.7 million for each of the three months ended  June 30, 2013 and 2012, related to intangible assets acquired as part of  acquisitions. Also, in the second quarter of 2013 and 2012, there were  additional costs incurred relating primarily to other employee related restructuring  costs.
  (3) To reflect  the tax effect of the adjustments. In addition, the three months ended June 30,  2013 also includes $0.4 million of additional tax reserves recorded resulting  from a tax audit in Hong Kong for years preceding our acquisition of Enson  Assets Limited.
  (4) To reflect  depreciation expense of $0.6 million for each of the six months ended  June 30, 2013 and 2012, related to the mark-up in fixed assets from cost  to fair value as a result of acquisitions.
  (5) To reflect  amortization expense of $1.5 million for each of the six months ended June 30,  2013 and 2012, related to intangible assets acquired as part of acquisitions.  Also, in the first six months of 2013 and 2012, there were additional costs  incurred relating primarily to other employee related restructuring costs.

(6) To reflect the tax  effect of the adjustments. In addition, the six months ended June 30, 2013 also  includes $0.4 million of additional tax reserves recorded resulting from a tax  audit in Hong Kong for years preceding our acquisition of Enson Assets Limited.

 

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