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Universal Electronics Reports Fourth Quarter and Year-End 2014 Financial Results

- Increased Q4 2014 Net Income 29% Compared to Q4 2013 –

- Grew Full Year 2014 Net Income 27% Compared to Full Year 2013 -

- Increased Cash and Cash Equivalents to $112.5 Million at December 31, 2014 -

SANTA ANA, Calif.--(BUSINESS WIRE)--Feb. 19, 2015-- Universal Electronics Inc. (UEI), (NASDAQ:UEIC) reported financial results for the three and twelve months ended December 31, 2014.

Paul Arling, UEI's Chairman and CEO, stated: “Our fourth quarter financial results reflect the strong performance across our entire business and closes out the most successful year in our history. Our innovative products and technologies continue to be adopted by industry-leading companies around the world. In subscription broadcasting, customers including Comcast, Cox, Charter, Cablevision and AT&T all introduced new products into the market featuring UEI solutions. We also gained traction with our embedded software solutions for smart devices as our technology was included in a breadth of products including TVs, set-top boxes, game consoles, smartphones and tablets.

“At the International Consumer Electronics Show in January, we demonstrated the next step in smart device integration as we introduced QuickSet 3.0 with Control Plus. This innovation enables the automation of set up for all home entertainment control devices and complete integration with compatible second screen apps. This latest innovation gets us even closer to the day where home entertainment control is completely automated and intuitive. Our solutions re-define exactly what a 'remote control' is and what a remote control is able to do – a competitive differentiator that we believe will ensure our leadership position in the industry for years to come,” concluded Arling.

Adjusted Pro Forma Financial Results for the Three Months Ended December 31: 2014 Compared to 2013

  • Net sales were $138.4 million, compared to $136.1 million.
    • Business Category revenue was $120.7 million, compared to $117.2 million. The Business Category contributed 87.2% of total net sales, compared to 86.1%.
    • Consumer Category revenue was $17.7 million, compared to $18.9 million. The Consumer Category contributed 12.8% of total net sales, compared to 13.9%.
  • Gross margins were 30.3%, compared to 30.0%.
  • Operating expenses were $29.1 million in both periods.
  • Operating income was $12.8 million, compared to $11.8 million.
  • Net income was $11.3 million, or $0.70 per diluted share, compared to $8.8 million, or $0.55 per diluted share.
  • At December 31, 2014, cash and cash equivalents was $112.5 million.

Adjusted Pro Forma Financial Results for the Twelve Months Ended December 31: 2014 Compared to 2013

  • Net sales were $562.3 million, compared to $529.4 million.
  • Gross margins were 29.8%, compared to 28.8%.
  • Operating expenses were $115.3 million, compared to $108.7 million.
  • Operating income was $52.5 million, compared to $43.9 million.
  • Net income was $41.1 million, or $2.55 per diluted share, compared to $32.4 million, or $2.08 per diluted share.

Financial Outlook

For the first quarter of 2015, the company expects net sales to range between $133.0 million and $141.0 million, compared to $129.8 million in the first quarter of 2014. Adjusted pro forma earnings per diluted share for the first quarter of 2015 are expected to range from $0.41 to $0.51, compared to adjusted pro forma earnings per diluted share of $0.40 in the first quarter of 2014. The company continues to expect the long-term financial profile of its business will reflect average annual sales growth of approximately 5% to 10%, and average annual earnings growth of approximately 10% to 20%.

Conference Call Information

UEI’s management team will hold a conference call today, Thursday, February 19, 2015 at 4:30 p.m. ET / 1:30 p.m. PT, to discuss its fourth quarter and year-end 2014 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 77974818. 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 77974818.

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, employee related restructuring costs, stock-based compensation expense and certain costs incurred for years preceding the acquisition of Enson Assets Limited. 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 and adjustments to certain deferred tax assets and liabilities resulting from tax law changes. A reconciliation of Non-GAAP financial results to GAAP results is included at the end of this press release.

About Universal Electronics

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, 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 the continued strength across its entire business and expansion of its share of the markets it serves, including its subscription broadcast business and smart device channel; the continued innovation of next-generation solutions (such as QuickSet 3.0 with Control Plus) that are accepted by its customers and end users; management’s ability to manage its business to achieve its revenue and earnings as guided; and the 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.

 
UNIVERSAL ELECTRONICS INC.
CONSOLIDATED BALANCE SHEETS

(In thousands, except share-related data)

 
  December 31, 2014   December 31, 2013
ASSETS
Current assets:
Cash and cash equivalents $ 112,521 $ 76,174
Accounts receivable, net 97,989 95,408
Inventories, net 97,474 96,309
Prepaid expenses and other current assets 6,856 4,395
Income tax receivable 77 13
Deferred income taxes 5,048   6,167  
Total current assets 319,965 278,466
Property, plant, and equipment, net 76,135 75,570
Goodwill 30,739 31,000
Intangible assets, net 24,614 26,963
Deferred income taxes 6,146 6,455
Other assets 5,471   5,279  
Total assets $ 463,070   $ 423,733  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 69,991 $ 58,498
Line of credit
Accrued compensation 40,656 38,317
Accrued sales discounts, rebates and royalties 8,097 8,539
Accrued income taxes 4,263 3,032
Deferred income taxes 303
Other accrued expenses 13,358   11,229  
Total current liabilities 136,365 119,918
Long-term liabilities:
Deferred income taxes 8,456 9,887
Income tax payable 566 606
Other long-term liabilities 2,062   2,052  
Total liabilities 147,449   132,463  
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; 22,909,884 and 22,344,121 shares issued on December 31, 2014 and December 31, 2013, respectively 229 223
Paid-in capital 214,710 199,513
Accumulated other comprehensive income (loss) (4,446 ) 2,982
Retained earnings 226,066   193,532  
436,559 396,250

Less cost of common stock in treasury, 7,008,475 and 6,639,497 shares on December 31, 2014 and December 31, 2013, respectively

(120,938 ) (104,980 )
Total stockholders’ equity 315,621   291,270  
Total liabilities and stockholders’ equity $ 463,070   $ 423,733  
 
UNIVERSAL ELECTRONICS INC.
CONSOLIDATED INCOME STATEMENTS

(In thousands, except per share amounts)

 
  Three Months Ended December 31,   Twelve Months Ended December 31,
2014   2013 2014   2013
Net sales $ 138,389 $ 136,134 $ 562,329 $ 529,354
Cost of sales 96,708   95,506   395,429   377,892  
Gross profit 41,681 40,628 166,900 151,462
Research and development expenses 4,369 3,984 16,975 16,447
Selling, general and administrative expenses 27,481   28,832   108,645   102,861  
Operating income 9,831 7,812 41,280 32,154
Interest income (expense), net 32 (9 ) 11 51
Other income (expense), net 498   (272 ) (840 )   (3,169 )
Income before provision for income taxes 10,361 7,531 40,451 29,036
Provision for income taxes 1,459   1,978   7,917   6,073  
Net income $ 8,902   $ 5,553   $ 32,534   $ 22,963  
Earnings per share:
Basic $ 0.56   $ 0.36   $ 2.06   $ 1.51  
Diluted $ 0.55   $ 0.35   $ 2.01   $ 1.47  
Shares used in computing earnings per share:
Basic 15,831   15,602   15,781   15,248  
Diluted 16,204   16,011   16,152   15,601  
 
UNIVERSAL ELECTRONICS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 
  Year Ended December 31,
2014   2013
Cash provided by operating activities:
Net income $ 32,534 $ 22,963
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 18,244 18,363
Provision for doubtful accounts 249 190
Provision for inventory write-downs 3,473 3,680
Deferred income taxes (538 ) (1,617 )
Tax benefit from exercise of stock options and vested restricted stock 874
Excess tax benefit from stock-based compensation (1,274 )
Shares issued for employee benefit plan 847 747
Stock-based compensation 6,444 5,342
Changes in operating assets and liabilities:
Accounts receivable (7,966 ) (4,509 )
Inventories (8,161 ) (15,353 )
Prepaid expenses and other assets (2,803 ) (633 )
Accounts payable and accrued expenses 19,964 2,285
Accrued income taxes 1,186   (364 )
Net cash provided by operating activities 63,473   30,694  
Cash used for investing activities:
Acquisition of property, plant, and equipment (16,566 ) (10,355 )
Acquisition of intangible assets (1,853 ) (1,319 )
Net cash used for investing activities (18,419 ) (11,674 )
Cash provided by (used for) financing activities:
Issuance of debt 19,500
Payment of debt (19,500 )
Proceeds from stock options exercised 8,122 12,371
Treasury stock purchased (16,168 ) (3,607 )
Excess tax benefit from stock-based compensation   1,274  
Net cash provided by (used for) financing activities (8,046 ) 10,038
Effect of exchange rate changes on cash (661 ) 2,523  
Net increase (decrease) in cash and cash equivalents 36,347 31,581
Cash and cash equivalents at beginning of year 76,174   44,593  
Cash and cash equivalents at end of period $ 112,521   $ 76,174  
 
Supplemental Cash Flow Information:
Income taxes paid $ 7,178 $ 6,068
Interest paid $ $ 44
 
UNIVERSAL ELECTRONICS INC.

RECONCILIATION OF ADJUSTED PRO FORMA FINANCIAL RESULTS

(In thousands, except share-related data)

(Unaudited)

 
 

Three Months Ended
December 31, 2014

 

Three Months Ended
December 31, 2013

GAAP   Adjustments  

Adjusted
Pro Forma

GAAP   Adjustments   Adjusted
Pro Forma
Net sales $ 138,389 $ $ 138,389 $ 136,134 $ $ 136,134
Cost of sales (1) 96,708   (239 ) 96,469   95,506   (278 ) 95,228  
Gross profit 41,681 239 41,920 40,628 278 40,906
Research and development expenses (2) 4,369 (62 ) 4,307 3,984 (60 ) 3,924
Selling, general and administrative expenses (3) 27,481   (2,715 ) 24,766   28,832   (3,659 ) 25,173  
Operating income 9,831 3,016 12,847 7,812 3,997 11,809
Interest income (expense), net 32 32 (9 ) (9 )
Other income (expense), net 498     498   (272 )   (272 )
Income before provision for income taxes 10,361 3,016 13,377 7,531 3,997 11,528
Provision for income taxes (4) 1,459   626   2,085   1,978   771   2,749  
Net income $ 8,902   $ 2,390   $ 11,292   $ 5,553   $ 3,226   $ 8,779  
Earnings per share diluted $ 0.55   $ 0.15   $ 0.70   $ 0.35   $ 0.20   $ 0.55  
 
 

Twelve Months Ended
December 31, 2014

Twelve Months Ended
December 31, 2013

GAAP Adjustments Adjusted
Pro Forma
GAAP Adjustments Adjusted
Pro Forma
Net sales $ 562,329 $ $ 562,329 $ 529,354 $ $ 529,354
Cost of sales (5) 395,429   (946 ) 394,483   377,892   (1,109 ) 376,783  
Gross profit 166,900 946 167,846 151,462 1,109 152,571
Research and development expenses (6) 16,975 (323 ) 16,652 16,447 (226 ) 16,221
Selling, general and administrative expenses (7) 108,645   (9,949 ) 98,696   102,861   (10,363 ) 92,498  
Operating income 41,280 11,218 52,498 32,154 11,698 43,852
Interest income (expense), net 11 11 51 51
Other income (expense), net (840 )   (840 ) (3,169 )   (3,169 )
Income before provision for income taxes 40,451 11,218 51,669 29,036 11,698 40,734
Provision for income taxes (8) 7,917   2,621   10,538   6,073   2,244   8,317  
Net income $ 32,534   $ 8,597   $ 41,131   $ 22,963   $ 9,454   $ 32,417  
Earnings per share diluted $ 2.01   $ 0.53   $ 2.55   $ 1.47   $ 0.61   $ 2.08  
 

(1)

To reflect depreciation expense of $0.2 million and $0.3 million for the three months ended December 31, 2014 and 2013, respectively, related to the mark-up in fixed assets from cost to fair value as a result of acquisitions.

 

(2)

To reflect stock-based compensation expense for the three months ended December 31, 2014 and 2013.

 

(3)

To reflect amortization expense of $0.7 million for each of the three months ended December 31, 2014 and 2013 related to intangible assets acquired as part of acquisitions. In addition, to reflect stock-based compensation expense of $1.5 million and $1.3 million for the three months ended December 31, 2014 and 2013, respectively. Also, to reflect employee related restructuring costs, primarily severance, of $0.4 million and $1.6 million for the three months ended December 31, 2014 and 2013, respectively.

 

(4)

To reflect the tax effect of the adjustments. In addition, the three months ended December 31, 2014 and 2013 include adjustments of $0.7 million and $0.2 million, respectively, related to the write-off of acquisition-related deferred tax assets resulting from a tax law change in China. Partially offsetting this adjustment for the three months ended December 31, 2014 is an adjustment to net deferred tax assets of $0.6 million resulting from the expiration of a tax holiday at one of our factories in China.

 

(5)

To reflect depreciation expense of $0.9 million and $1.1 million for the twelve months ended December 31, 2014 and 2013, respectively, related to the mark-up in fixed assets from cost to fair value as a result of acquisitions.

 

(6)

To reflect stock-based compensation expense for the twelve months ended December 31, 2014 and 2013.

 

(7)

To reflect amortization expense of $3.0 million for each of the twelve months ended December 31, 2014 and 2013 related to intangible assets acquired as part of acquisitions. In addition, to reflect stock-based compensation expense of $6.1 million and $5.1 million for the twelve months ended December 31, 2014 and 2013, respectively. Also, to reflect employee related restructuring costs, primarily severance, of $0.9 million and $2.0 million for the twelve months ended December 31, 2014 and 2013, respectively. For the twelve months ended December 31, 2013, there were $0.3 million of additional costs incurred relating to the settlement of a software audit for infringements that occurred prior to the acquisition of Enson Assets Limited.

 

(8)

To reflect the tax effect of the adjustments. In addition, the twelve months ended December 31, 2014 and 2013 include adjustments of $0.7 million and $0.2 million, respectively, related to the write-off of acquisition-related deferred tax assets resulting from a tax law change in China. Partially offsetting this adjustment for the twelve months ended December 31, 2014 is an adjustment to net deferred tax assets of $0.6 million resulting from the expiration of a tax holiday at one of our factories in China. The twelve months ended December 31, 2013 also includes an adjustment of $0.4 million related to additional tax reserves recorded as a result of a tax audit of pre-acquisition periods of an acquired entity.

Source: Universal Electronics Inc.

UEI
Paul Arling, 714-918-9500
or
LHA IR
Becky Herrick, 415-433-3777