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Universal Electronics Reports Second Quarter 2006 Financial Results; Net Sales of $52.4 Million Grew 18% Compared to Second Quarter 2005

CYPRESS, Calif.--(BUSINESS WIRE)--Aug. 3, 2006--Leading wireless technology developer Universal Electronics Inc. (UEI) (NASDAQ:UEIC) today announced financial results for the second quarter and the six-month period ended June 30, 2006.

"Solid demand from our Business Category customers, in particular our subscription broadcasting and original equipment manufacturer (OEM) customers, drove our net sales for the second quarter of 2006 to $52.4 million, up 18 percent as compared to last year's quarter," stated Paul Arling, the company's chairman and chief executive officer. "We have built a leadership role in wireless control technology, resulting from our continued efforts to work with our customers to provide them with simple, affordable, highly functional and technically advanced control technology. In the next year, we will build further upon this idea of advanced, yet simple and affordable solutions by rolling out new products that meet the consumer's need for control of devices and media within their home."

Second Quarter 2006 Financial Results

  • Net sales for the second quarter of 2006 were $52.4 million, compared to $44.3 million for the same quarter last year.
  • The Business Category contributed 77 percent of the total revenue and the Consumer Category contributed 23 percent, compared to 73 percent and 27 percent, respectively in the second quarter of 2005.
  • Gross margins were 37.4 percent, compared to 35.5 percent in last year's second quarter, reflecting additional sales in higher margin product lines and cost containment, primarily lower freight costs.
  • Operating income was $4.0 million, compared to operating income of $974,000 for the same quarter last year.
  • Net income for the 2006 second quarter was $2.4 million, or $0.17 per diluted share, compared to $1.5 million, or $0.11 per diluted share, for the second quarter of 2005.

The following adjusted figures are included as management believes they provide a more meaningful measure of quarter-over-quarter and year-over-year financial performance. A formal definition of adjusted figures and table reconciling generally accepted accounting principals (GAAP) to adjusted figures are included at the end of this press release.

  • Adjusted operating income was $4.7 million, excluding $671,000 in stock based compensation expense, compared to adjusted operating income of $2.6 million for the same quarter last year, excluding the $1.6 million write down of a balance due from a former European distributor.
  • Adjusted net income for the 2006 second quarter was $2.9 million, or $0.20 per diluted share, which excludes stock based compensation charges, compared to $2.8 million, or $0.20 per diluted share, for the same period last year, which excluded the $1.6 million write down of a balance due from a former European distributor.

Net sales for the six-month period ended June 30, 2006 were $106.5 million compared to $85.8 million for the first six months of 2005. Net income for the first six months of 2006 was $4.6 million, or $0.32 per diluted share. Adjusted net income for the first six months of 2006 was $5.5 million, or $0.39 per diluted share, compared to $4.6 million, or $0.33 per diluted share, for the same period last year.

"Leveraging our technology and bringing to market new solutions that simplify connectivity is satisfying customers and driving strong net sales growth," said Rob Lilleness, the company's president and chief operating officer. "We continue to increase the breadth of our technology portfolio. Examples of our progress can be seen in our new types of offerings with LodgeNet and Crestron Electronics, expanded relationships with Comcast Corporation and DirecTV, and innovations in new media applications with our Pace Micro Technology relationship."

UEI's Recent Highlights:

  • Partnered with Crestron Electronics, Inc. to develop the TPMC-4X handheld touchpanel controller, as announced on July 31st. Based on the award-winning UEI NevoSL(TM) and Crestron automation and control technology, the TPMC-4X delivers true 2-way WiFi communication for seamless system integration in modern homes.
  • Signed a definitive agreement with the Canadian Cable Systems Alliance to supply DVR-enabled universal remote controls to its 94 independent member companies, as announced on June 21st.
  • Selected by LodgeNet Entertainment Corporation to develop SIGNETURE HDTV(SM) Remote Controls for guests to access to a wide variety of guest services at properties served by LodgeNet, as announced on June 20th.
  • Showcased new and expanded control solutions at the annual SCTE Cable-Tec Expo in Denver, CO, as announced on June 19th. Products included Polaris(TM), Atlas DVR(TM), urcsupport.com and ActiveSupport(TM), customer interaction management services from service and support to retention.
  • Formed a joint development relationship with Pace Micro Technology plc, for Pace Micro to utilize its flagship Tahoe Dual Tuner HD DVR set-top box in conjunction with UEI's My Channel(TM), enabling the set-top box to be the true center of the connected home, also announced on June 19th.
Conference Call Information:

UEI's management team will hold a conference call today, Thursday August 3, 2006 at 1:30 p.m. Pacific Time to review the second quarter 2006 results and hold a question and answer session for callers. To participate call 1-800-622-9917 ten minutes prior to start time. International dialers call 1-706-645-0366. The live call can also be accessed via the Internet through Universal's Web site at www.uei.com. If you are unable to participate, a replay will be available for two business days following the call. To access, please dial 1-800-642-1687 and international 706-645-9291, reservation number 7904235. The webcast replay will be available at www.uei.com.

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 has been adopted by many Fortune 500 companies in the consumer electronics, subscription broadcast, and computing industries. In addition, the company sells wireless control products to distributors and retailers under the One For All(R) brand name. More information about UEI can be obtained at http://www.uei.com.

Safe Harbor Statement

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 to experience the increased demand from our Business Category customers as we anticipate; the failure of the retail season to be as strong as we anticipate; the growth of, acceptance of, and the demand for our products and technologies, including new products and our home connectivity line of products and software, in the various markets and geographical regions we serve, including the subscription broadcasting cable, satellite, consumer electronics, retail, home automation, automotive, and cellular industries, not materializing as we believe; the possible dilutive effect our stock based compensation programs may have on our EPS and stock price; our inability to deliver the new products and our home connectivity line of products and software at the time and in the quantities we anticipate; the relationships with our customers not expanding as we anticipate; and other factors listed from time to time in our press releases and SEC filings. All forward looking statements included in this release are based upon information we have as of the date of this release and we undertake 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.


                      UNIVERSAL ELECTRONICS INC.
                      CONSOLIDATED BALANCE SHEETS
                            (In thousands)
                              (Unaudited)

                                                June 30,  December 31,
                                                  2006        2005
                                               ---------- ------------
                    ASSETS
                    ------
Current assets:
 Cash and cash equivalents                     $  58,776  $    43,641
 Accounts receivable, net                         42,397       41,861
 Inventories, net                                 29,146       26,708
 Prepaid expenses and other current assets         3,157        3,841
 Income tax receivable                               903          903
 Deferred income taxes                             2,993        2,971
                                               ---------- ------------
   Total current assets                          137,372      119,925

Equipment, furniture and fixtures, net             5,389        4,352
Goodwill                                          10,578       10,431
Intangible assets, net                             5,924        6,007
Other assets                                         714          403
Deferred income taxes                              5,565        5,201
                                               ---------- ------------
   Total assets                                  165,542      146,319

     LIABILITIES AND STOCKHOLDERS' EQUITY
     ------------------------------------
Current liabilities:
 Accounts payable                              $  24,210  $    22,731
 Accrued income taxes                              9,876        7,551
 Accrued compensation                              3,469        2,766
 Other accrued expenses                            9,411        9,676
                                               ---------- ------------
   Total current liabilities                      46,966       42,724

Deferred income taxes                                 90           74
Deferred Revenue                                       -          229
                                               ---------- ------------
      Total liabilities                           47,056       43,027

Stockholders' equity:
 Common stock                                        173          169
 Paid-in capital                                  88,360       83,220
 Accumulated other comprehensive income (loss)       140       (5,265)
 Retained earnings                                59,549       54,994
 Deferred stock-based compensation                     -         (163)
 Common stock held in treasury                   (29,736)     (29,663)
                                               ---------- ------------
   Total stockholders' equity                    118,486      103,292
                                               ---------- ------------
   Total liabilities and stockholders' equity    165,542      146,319
                                               ========== ============


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

                                 Three Months Ended  Six Months Ended
                                      June 30,           June 30,

                                   2006      2005     2006      2005
                                 --------  -------- --------- --------

Net sales                        $52,370   $44,322  $106,543  $85,824

Cost of sales                     32,788    28,604    68,473   54,389
                                 --------  -------- --------- --------

Gross profit                      19,582    15,718    38,070   31,435

Research and development           1,919     1,570     3,765    3,170

Selling, general and
 administrative expenses          13,620    13,174    27,132   25,606
                                 --------  -------- --------- --------

Operating expenses                15,539    14,744    30,897   28,776
                                 --------  -------- --------- --------

Operating income                   4,043       974     7,173    2,659

Interest income, net                (349)     (135)     (621)    (352)

Other expense (income), net          411    (1,296)      572   (2,249)
                                 --------  -------- --------- --------

Income before income taxes         3,981     2,405     7,222    5,260

Provision for income taxes        (1,562)     (860)   (2,667)  (1,859)
                                 --------  -------- --------- --------

Net income                       $ 2,419   $ 1,545  $  4,555  $ 3,401
                                 ========  ======== ========= ========

Earnings per share:
     Basic                       $  0.18   $  0.11  $   0.33  $  0.25
                                 ========  ======== ========= ========
     Diluted                     $  0.17   $  0.11  $   0.32  $  0.24
                                 ========  ======== ========= ========
Shares used in computing earnings
 per share:
     Basic                        13,802    13,467    13,722   13,493
                                 ========  ======== ========= ========
     Diluted                      14,356    13,983    14,297   14,032
                                 ========  ======== ========= ========

To supplement UEI's consolidated financial statements presented in accordance with GAAP, UEI uses non-GAAP net income and non-GAAP EPS financial measures internally. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. UEI's management believes these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenses that may not be indicative of our core business operating results. UEI believes both management and investors benefit from referring to these non-GAAP financial measures in assessing UEI's performance and when planning, forecasting and analyzing historical and future periods. These non-GAAP financial measures also facilitate management's internal comparisons to UEI's historical performance. UEI believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making.


                        Universal Electronics
                GAAP to Non-GAAP Reconciliation Tables

                                 Three Months Ended
                                      June 30,

                                     2006                      2005
                 2006      2006      Non-     2005     2005    Non-
                 GAAP     Adj.(1)   GAAP(3)   GAAP    Adj.(2) GAAP(3)

Net sales        52,370             52,370   44,322           44,322
Cost of sales    32,788       (6)   32,782   28,604           28,604
Gross profit     19,582        6    19,588   15,718           15,718
Research and
 development      1,919      (94)    1,825    1,570            1,570
Selling,
 general and
 administrative
 expenses        13,620     (571)   13,049   13,174   (1,592) 11,582
Operating
 expenses        15,539     (665)   14,874   14,744   (1,592) 13,152
Operating
 income           4,043      671     4,714      974    1,592   2,566
Interest
 income, net       (349)              (349)    (135)            (135)
Other expense
 (income), net      411                411   (1,296)          (1,296)
Income before
 income taxes     3,981      671     4,652    2,405    1,592   3,997
Provision for
 income taxes    (1,562)    (225)   (1,787)    (860)    (355) (1,215)
Net income        2,419      446     2,865    1,545    1,237   2,782

Earnings per
 share diluted $   0.17  $  0.03  $   0.20  $  0.11  $  0.09 $  0.20


                                  Six Months Ended
                                      June 30,

                                     2006                       2005
                 2006      2006      Non-     2005     2005     Non-
                 GAAP     Adj.(1)   GAAP(3)   GAAP    Adj.(2)  GAAP(3)

Net sales       106,543            106,543   85,824           85,824
Cost of sales    68,473      (13)   68,460   54,389           54,389
Gross profit     38,070       13    38,083   31,435           31,435
Research and
 development      3,765     (199)    3,566    3,170            3,170
Selling,
 general and
 administrative
 expenses        27,132   (1,229)   25,903   25,606   (1,592) 24,014
Operating
 expenses        30,897   (1,428)   29,469   28,776   (1,592) 27,184
Operating
 income           7,173    1,441     8,614    2,659    1,592   4,251
Interest
 income, net       (621)              (621)    (352)            (352)
Other expense
 (income), net      572               572    (2,249)          (2,249)
Income before
 income taxes     7,222    1,441     8,663    5,260    1,592   6,852
Provision for
 income taxes    (2,667)    (484)   (3,151)  (1,859)    (355) (2,214)
Net income        4,555      957     5,512    3,401    1,237   4,638

Earnings per
 share diluted $   0.32  $  0.07  $   0.39  $  0.24  $  0.09 $  0.33

(1) The adjustments between the GAAP and non-GAAP consolidated
    statements of income for the three and six months ended June 30,
    2006 consist of share-based compensation expense for employee
    stock options and the related income tax effect, as recognized in
    accordance with SFAS 123R. The consolidated statements of income
    for the three and six months ended June 30, 2005 do not include
    the effect of share-based compensation expense, because UEI
    implemented SFAS 123R effective January 1, 2006.

(2) The adjustments between the GAAP and non-GAAP consolidated
    statements of income for the three and six months ended June 30,
    2005 exclude the write down of a receivable from a former European
    distributor, as well as the related tax effect.

(3) The non-GAAP consolidated statement of income is not in accordance
    with, or an alternative for, generally accepted accounting
    principles and may be different from non-GAAP measures used by
    other companies. UEI's management believes these non-GAAP
    measures, when shown in conjunction with the corresponding GAAP
    measures, facilitate the comparison of results for current periods
    with past periods.

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

SOURCE: Universal Electronics Inc.