Universal Electronics Reports Third Quarter 2006 Financial Results
Nov 2, 2006
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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.
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.