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Universal Electronics Reports Third Quarter 2006 Financial Results

Net Sales of $59.6 Million Grew 29% Compared to Third Quarter 2005

CYPRESS, Calif.--(BUSINESS WIRE)--Nov. 2, 2006--Leading wireless technology developer Universal Electronics Inc. (UEI) (NASDAQ:UEIC) today announced financial results for the third quarter and the nine-month period ended September 30, 2006.

"New products and services, such as flat panel HDTVs and DVRs are currently experiencing broad based growth - and UEI is capitalizing on this trend," stated Paul Arling, the company's chairman and chief executive officer. "Our wireless control technologies that enable consumers to connect, control and interact with services and devices easily and quickly within their homes, have driven strong growth in our company's net sales. Broadband subscriptions, DVR and HDTV rollouts have continued to penetrate domestic and international markets, and we believe this positions UEI for solid growth for many years to come. Our net sales for the third quarter of 2006 were up 29 percent as compared to last year, and we expect annual 2006 net sales to increase at least 26 percent compared to 2005."

Financial Results: Third Quarter 2006 Compared to Third Quarter 2005

  • Net sales were $59.6 million, compared to $46.2 million.
  • The Business Category contributed 77 percent of the total revenue and the Consumer Category contributed 23 percent, compared to 68 percent and 32 percent.
  • Gross margins were 36.2 percent, compared to 36.8 percent reflecting mix shift and more dominant sales in the Business Category.
  • Operating income was $4.6 million, compared to operating income of $3.7 million.
  • Net income was $3.5 million, or $0.25 per diluted share, compared to $2.8 million, or $0.20 per diluted share.

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 principles (GAAP) amounts to adjusted figures are included at the end of this press release.

  • Adjusted operating income was $5.3 million in the current quarter, excluding $697,000 in stock based compensation expense, compared to adjusted operating income of $3.7 million for the same quarter last year.
  • Adjusted net income for the 2006 third quarter was $4.0 million, or $0.28 per diluted share, which excludes stock based compensation charges, compared to $2.9 million, or $0.21 per diluted share, for the same period last year.

Net sales for the nine-month period ended September 30, 2006 were $166.2 million compared to $132.0 million for the first nine months of 2005. Net income for the first nine months of 2006 was $8.1 million, or $0.56 per diluted share, compared to net income $6.2 million, or $0.44 per diluted share for the first nine months 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 principles (GAAP) amounts to adjusted figures are included at the end of this press release.

Adjusted net income for the first nine months of 2006 was $9.5 million, or $0.66 per diluted share, compared to $7.6 million, or $0.54 per diluted share, for the same period last year.

Financial Outlook

For the fourth quarter of 2006, revenue is expected to range between $62.5 million and $66.5 million, compared to $49.3 million in the fourth quarter of 2005. Gross margins for the fourth quarter of 2006 are expected to be approximately 37.5 percent of sales plus or minus one point. GAAP earnings per diluted share, including approximately $619,000 in stock-based compensation, are expected to range from $0.29 to $0.33. This compares to $0.25 per diluted share in the fourth quarter of 2005. Adjusted EPS, which does not include the effect of stock based compensation charges, is expected to range from $0.32 per diluted share to $0.36 per diluted share.

For the full year 2006, total revenue is expected to range between $228.7 million and $232.7 million, reflecting growth of 26 percent to 28 percent over last year. GAAP EPS is expected to be between $0.85 per diluted share and $0.89 per diluted share. Adjusted EPS is expected to be in the range of $0.98 and $1.02 per diluted share, compared to $0.81 adjusted earnings per diluted share for the full year 2005.

UEI's Recent Highlights:

  • Highlighted the availability of SimpleCenter(TM)4.1 for free download in October, as announced on October 2nd.
  • Introduced a new limited-edition high gloss black version of the award-winning NevoSL(TM) controller and NevoStudio 2.0 software at the Custom Electronic Design & Installation Association (CEDIA) Expo.
  • Began a development relationship with SIRIUS Satellite Radio to provide a custom solution that would allow SIRIUS subscribers to access comprehensive information directly from the handheld media controller, utilizing Z-Wave technology, as announced on September 14th.
  • Implemented management changes, including hiring Mark Kopaskie as Senior Vice President and General Manager, U.S. Operations, and promoting Bryan Hackworth to Vice President and Chief Financial Officer, as announced on August 22nd.
  • Named to Forbes 200 Best Small Companies List in America published in the October 30, 2006 issue of Forbes.
Conference Call Information:

UEI's management team will hold a conference call today, Thursday November 2, 2006 at 1:30 p.m. Pacific Time to review the third 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 8625552. 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 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), as well as software solutions for digital media control and enjoyment in the consumer and OEM markets under the brand SimpleCenter(TM).

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 continue experiencing the increased demand for our products in connection with the Broadband subscription, DVR and HDTV rollouts 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, including the SimpleCenter(TM) software, the new version of the NevoSL(TM) controller and NevoStudio 2.0 software, and the SIRIUS satellite radio project in the various markets and geographical regions we serve 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)


                                           September 30, December 31,
                                                2006          2005
                                           ------------- -------------
                  ASSETS
------------------------------------------
Current assets:
  Cash and cash equivalents                     $57,334       $43,641
  Accounts receivable, net                       44,833        41,861
  Inventories, net                               34,812        26,708
  Prepaid expenses and other current
   assets                                         2,814         3,841
  Income tax receivable                             903           903
  Deferred income taxes                           2,982         2,971
                                           ------------- -------------
      Total current assets                      143,678       119,925

Equipment, furniture and fixtures, net            5,518         4,352
Goodwill                                         10,564        10,431
Intangible assets, net                            5,795         6,007
Other assets                                        716           403
Deferred income taxes                             5,787         5,201
                                           ------------- -------------
      Total assets                              172,058       146,319
                                           ============= =============

   LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------------
Current liabilities:
  Accounts payable                              $23,645       $22,731
  Accrued income taxes                           10,565         7,551
  Accrued compensation                            3,676         2,766
  Other accrued expenses                         11,471         9,676
                                           ------------- -------------
      Total current liabilities                  49,357        42,724
Deferred income taxes                                94            74
Deferred Revenue                                      -           229
                                           ------------- -------------
      Total liabilities                          49,451        43,027
Stockholders' equity:
  Common stock                                      173           169
  Paid-in capital                                89,938        83,220
   Accumulated other comprehensive loss            (314)       (5,265)
   Retained earnings                             63,082        54,994
   Deferred stock-based compensation               (272)         (163)
   Common stock held in treasury                (30,000)      (29,663)
                                           ------------- -------------
      Total stockholders' equity                122,607       103,292
                                           ------------- -------------
      Total liabilities and stockholders'
       equity                                   172,058       146,319
                                           ============= =============
                      UNIVERSAL ELECTRONICS INC.
                    CONSOLIDATED INCOME STATEMENTS
               (In thousands, except per share amounts)
                             (Unaudited)


                               Three Months Ended   Nine Months Ended
                                  September 30,       September 30,
                                 2006      2005      2006      2005
                               --------- --------- --------- ---------

Net sales                       $59,612   $46,206  $166,155  $132,030
Cost of sales                    38,033    29,212   106,506    83,601
                               --------- --------- --------- ---------
Gross profit                     21,579    16,994    59,649    48,429
Research and development          1,809     1,782     5,574     4,952
Selling, general and
administrative expenses          15,142    11,541    42,274    37,147
                               --------- --------- --------- ---------
Operating expenses               16,951    13,323    47,848    42,099
                               --------- --------- --------- ---------
Operating income                  4,628     3,671    11,801     6,330
Interest income, net               (437)     (287)   (1,058)     (639)
Other expense (income), net          30       118       602    (2,131)
                               --------- --------- --------- ---------

Income before income taxes        5,035     3,840    12,257     9,100
Provision for income taxes       (1,502)   (1,063)   (4,169)   (2,922)
                               --------- --------- --------- ---------
Net income                       $3,533    $2,777    $8,088    $6,178
                               ========= ========= ========= =========
Earnings per share:

    Basic                        $ 0.26    $ 0.21    $ 0.59    $ 0.46
                               ========= ========= ========= =========
    Diluted                       $0.25     $0.20     $0.56     $0.44
                               ========= ========= ========= =========
Shares used in computing
 earnings per share:

    Basic                        13,845    13,391    13,763    13,459
                               ========= ========= ========= =========
    Diluted                      14,415    13,918    14,336    13,995
                               ========= ========= ========= =========

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
                                     September 30,
                    2006     2006    2006     2005     2005    2005
                    GAAP     Adj.   Non-GAAP   GAAP    Adj.   Non-GAAP
                              (1)      (4)              (3)      (4)

Net sales           59,612       -   59,612   46,206       -   46,206
Cost of sales       38,033      (6)  38,027   29,212       -   29,212
Gross profit        21,579       6   21,585   16,994       -   16,994
Research and
 development         1,809     (92)   1,717    1,782       -    1,782
Selling, general
 and
 administrative
 expenses           15,142    (599)  14,543   11,541       -   11,541
Operating expenses  16,951    (691)  16,260   13,323       -   13,323
Operating income     4,628     697    5,325    3,671       -    3,671
Interest income,
 net                  (437)      -     (437)    (287)      -     (287)
Other expense
 (income), net          30       -       30      118       -      118
Income before
 income taxes        5,035     697    5,732    3,840       -    3,840
Provision for
 income taxes       (1,502)   (236)  (1,738)  (1,063)    154     (909)
Net income           3,533     461    3,994    2,777     154    2,931

Earnings per share
 diluted             $0.25   $0.03    $0.28    $0.20   $0.01    $0.21

                                   Nine Months Ended
                                     September 30,
                    2006     2006    2006     2005     2005    2005
                    GAAP     Adj.   Non-GAAP   GAAP    Adj.   Non-GAAP
                              (1)      (4)              (2)      (4)

Net sales          166,155       -  166,155  132,030       -  132,030
Cost of sales      106,506     (19) 106,487   83,601       -   83,601
Gross profit        59,649      19   59,668   48,429       -   48,429
Research and
 development         5,574    (291)   5,283    4,952       -    4,952
Selling, general
 and
 administrative
 expenses           42,274  (1,828)  40,446   37,147  (1,592)  35,555
Operating expenses  47,848  (2,119)  45,729   42,099  (1,592)  40,507
Operating income    11,801   2,138   13,939    6,330   1,592    7,922
Interest income,
 net                (1,058)      -   (1,058)    (639)      -     (639)
Other expense
 (income), net         602       -      602   (2,131)      -   (2,131)
Income before
 income taxes       12,257   2,138   14,395    9,100   1,592   10,692
Provision for
 income taxes       (4,169)   (725)  (4,894)  (2,922)   (201)  (3,123)
Net income           8,088   1,413    9,501    6,178   1,391    7,569

Earnings per share
 diluted             $0.56   $0.10    $0.66    $0.44   $0.10    $0.54

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

(3) The adjustment between the GAAP and non-GAAP consolidated
 statements of income for the three months ended September 30, 2005
 includes the tax effect of the second quarter 2005 write down of a
 receivable due from a former European distributor.

(4) 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
IR Agency for UEI
Kirsten Chapman, 415-433-3777

SOURCE: Universal Electronics Inc.