UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(mark one)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the Quarterly Period ended June 30, 2002 | ||
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from ________________ to _________________ |
Commission File Number: 0-21044
UNIVERSAL ELECTRONICS INC.
| Delaware | 33-0204817 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 6101 Gateway Drive Cypress, California |
90630 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (714) 820-1000
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date — 14,032,610 shares of Common Stock, par value $.01 per share, of the Registrant were outstanding at June 30, 2002.
UNIVERSAL ELECTRONICS INC.
INDEX
| Page | |||||||||
| PART I. |
FINANCIAL INFORMATION |
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| Item 1. |
Consolidated Financial Statements |
||||||||
Consolidated Balance Sheets |
3 | ||||||||
Consolidated Income Statements |
4 | ||||||||
Consolidated Statements of Cash Flows |
5 | ||||||||
Notes to Consolidated Financial Statements |
6 | ||||||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
12 | |||||||
| Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
21 | |||||||
| PART II. |
OTHER INFORMATION |
||||||||
| Item 6. |
Exhibits and Reports on Form 8-K |
22 | |||||||
| Signature | 23 | ||||||||
2
Item 1. Consolidated Financial Statements
UNIVERSAL ELECTRONICS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share-related data)
(Unaudited)
| June 30, | December 31, | |||||||||||
| 2002 | 2001 | |||||||||||
ASSETS |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 36,987 | $ | 34,270 | ||||||||
Accounts receivable, net |
23,122 | 28,209 | ||||||||||
Inventories |
18,645 | 16,700 | ||||||||||
Prepaid expenses and other current assets |
1,405 | 829 | ||||||||||
Deferred income taxes |
1,925 | 1,925 | ||||||||||
Income tax receivable |
871 | 387 | ||||||||||
Total current assets |
82,955 | 82,320 | ||||||||||
Equipment, furniture and fixtures, net |
3,712 | 3,828 | ||||||||||
Goodwill, net |
2,961 | 2,961 | ||||||||||
Intangible assets, net |
4,163 | 3,133 | ||||||||||
Other assets |
747 | 713 | ||||||||||
Deferred income taxes |
1,750 | 1,750 | ||||||||||
Total assets |
$ | 96,288 | $ | 94,705 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||||||
Current liabilities: |
||||||||||||
Accounts payable |
$ | 8,851 | $ | 9,383 | ||||||||
Accrued income taxes |
134 | 842 | ||||||||||
Accrued compensation |
1,000 | 861 | ||||||||||
Other accrued expenses |
3,343 | 3,812 | ||||||||||
Total current liabilities |
13,328 | 14,898 | ||||||||||
Notes payable |
75 | 104 | ||||||||||
Total liabilities |
13,403 | 15,002 | ||||||||||
Commitments and contingencies |
||||||||||||
Stockholders’ equity: |
||||||||||||
Preferred stock, $.01 par value, 5,000,000 shares
authorized; none issued or outstanding |
— | — | ||||||||||
Common stock, $.01 par value, 50,000,000 shares
authorized; 15,971,910 and 15,729,928 shares issued at
June 30, 2002 and December 31, 2001, respectively |
160 | 157 | ||||||||||
Paid-in capital |
70,021 | 68,657 | ||||||||||
Accumulated other comprehensive loss |
(2,161 | ) | (1,804 | ) | ||||||||
Retained earnings |
26,051 | 23,973 | ||||||||||
Deferred stock-based compensation |
(189 | ) | (308 | ) | ||||||||
Common stock in treasury, 1,939,300 and 1,943,304 shares at
June 30, 2002 and December 31, 2001, respectively |
(10,997 | ) | (10,972 | ) | ||||||||
Total stockholders’ equity |
82,885 | 79,703 | ||||||||||
Total liabilities and stockholders’ equity |
$ | 96,288 | $ | 94,705 | ||||||||
The accompanying notes are an integral part of these financial statements.
3
UNIVERSAL ELECTRONICS INC.
CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | ||||||||||||||
Net sales |
$ | 24,590 | $ | 29,107 | $ | 48,001 | $ | 60,130 | |||||||||
Cost of sales |
13,733 | 16,974 | 27,728 | 34,687 | |||||||||||||
Gross profit |
10,857 | 12,133 | 20,273 | 25,443 | |||||||||||||
Selling, general and
administrative
expenses |
9,046 | 8,438 | 17,571 | 17,745 | |||||||||||||
Operating income |
1,811 | 3,695 | 2,702 | 7,698 | |||||||||||||
Interest income, net |
(155 | ) | (334 | ) | (272 | ) | (608 | ) | |||||||||
Other expense (income), net |
(192 | ) | 168 | (223 | ) | 210 | |||||||||||
Income before income taxes |
2,158 | 3,861 | 3,197 | 8,096 | |||||||||||||
Provision for income taxes |
755 | 1,544 | 1,119 | 3,238 | |||||||||||||
Net income |
$ | 1,403 | $ | 2,317 | $ | 2,078 | $ | 4,858 | |||||||||
Net income per share: |
|||||||||||||||||
Basic |
$ | 0.10 | $ | 0.17 | $ | 0.15 | $ | 0.35 | |||||||||
Diluted |
$ | 0.10 | $ | 0.16 | $ | 0.14 | $ | 0.33 | |||||||||
Weighted average common stock
outstanding: |
|||||||||||||||||
Basic |
13,959 | 13,926 | 13,879 | 13,872 | |||||||||||||
Diluted |
14,515 | 14,705 | 14,443 | 14,646 | |||||||||||||
The accompanying notes are an integral part of these financial statements.
4
UNIVERSAL ELECTRONICS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Six Months Ended June 30, | |||||||||||
| 2002 | 2001 | ||||||||||
Cash provided by operating activities: |
|||||||||||
Net income |
$ | 2,078 | $ | 4,858 | |||||||
Adjustments to reconcile net income to net
cash provided by operating activities: |
|||||||||||
Depreciation and amortization |
1,799 | 2,108 | |||||||||
Other |
|||||||||||
Changes in operating assets and liabilities: |
224 | 249 | |||||||||
Accounts receivable |
6,563 | 9,059 | |||||||||
Inventory |
(1,946 | ) | (2,117 | ) | |||||||
Prepaid expenses and other assets |
(990 | ) | (231 | ) | |||||||
Accounts payable and accrued expenses |
(734 | ) | (5,643 | ) | |||||||
Accrued income and other taxes |
(1,092 | ) | (1,361 | ) | |||||||
Net cash provided by operating activities |
5,902 | 6,922 | |||||||||
Cash used for investing activities: |
|||||||||||
Acquisition of fixed assets |
(1,264 | ) | (1,708 | ) | |||||||
Payments for businesses acquired |
(793 | ) | (66 | ) | |||||||
Acquisition of intangible assets |
(745 | ) | (52 | ) | |||||||
Net cash used for investing activities |
(2,802 | ) | (1,826 | ) | |||||||
Cash provided by financing activities: |
|||||||||||
Proceeds from stock options exercised |
1,245 | 1,224 | |||||||||
Payments on note payable |
(39 | ) | (25 | ) | |||||||
Net cash provided by financing activities |
1,206 | 1,199 | |||||||||
Effect of exchange rate changes on cash |
(1,589 | ) | 673 | ||||||||
Net increase in cash and cash equivalents |
2,717 | 6,968 | |||||||||
Cash and cash equivalents at beginning of period |
34,270 | 20,809 | |||||||||
Cash and cash equivalents at end of period |
$ | 36,987 | $ | 27,777 | |||||||
The accompanying notes are an integral part of these financial statements.
5
UNIVERSAL ELECTRONICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Adjustments
The accompanying consolidated financial statements include the accounts of the Company and all subsidiaries after elimination of all material intercompany accounts and transactions. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s 2001 Form 10-K. The financial information presented in the accompanying statements reflects all adjustments that are, in the opinion of management, necessary for a fair presentation of the periods indicated. All such adjustments are of a normal recurring nature.
Inventories
Inventories consist of the following (in thousands):
| June 30, | December 31, | ||||||||
| 2002 | 2001 | ||||||||
Components |
$ | 7,580 | $ | 8,526 | |||||
Finished goods |
11,065 | 8,174 | |||||||
Total inventories |
$ | 18,645 | $ | 16,700 | |||||
Earnings Per Share
Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares outstanding and dilutive potential common shares, which includes the dilutive effect of stock options and restricted stock grants. Dilutive potential common shares for all periods presented are computed utilizing the treasury stock method. In the computation of diluted earnings per common share for the six-month period ended June 30, 2002, approximately 609,000 stock options with exercise prices greater than the average market price of the underlying common stock were excluded because their inclusion would have been antidilutive.
6
Earnings per share for the three and six months ended June 30, 2002 and 2001 are calculated as follows:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| 2002 | 2001 | 2002 | 2001 | |||||||||||||
| (in 000's, except per share data) | ||||||||||||||||
BASIC |
||||||||||||||||
Net Income |
$ | 1,403 | $ | 2,317 | $ | 2,078 | $ | 4,858 | ||||||||
Weighted-average common
shares outstanding |
13,959 | 13,926 | 13,879 | 13,872 | ||||||||||||
Basic earnings per share |
$ | 0.10 | $ | 0.17 | $ | 0.15 | $ | 0.35 | ||||||||
DILUTED |
||||||||||||||||
Net Income |
$ | 1,403 | $ | 2,317 | $ | 2,078 | $ | 4,858 | ||||||||
Weighted-average common
shares outstanding for basic |
13,959 | 13,926 | 13,879 | 13,872 | ||||||||||||
Dilutive effect of stock options and
restricted stock |
556 | 779 | 564 | 774 | ||||||||||||
Weighted-average common
shares outstanding on a
diluted basis |
14,515 | 14,705 | 14,443 | 14,646 | ||||||||||||
Diluted earnings per share |
$ | 0.10 | $ | 0.16 | $ | 0.14 | $ | 0.33 | ||||||||
Comprehensive Income (Loss)
The components of comprehensive income (loss), net of tax, are listed below:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | ||||||||||||||
| (in thousands) | |||||||||||||||||
Net Income |
$ | 1,403 | $ | 2,317 | $ | 2,078 | $ | 4,858 | |||||||||
Other comprehensive income (loss): |
|||||||||||||||||
Foreign currency translations |
463 | (142 | ) | (357 | ) | (321 | ) | ||||||||||
Comprehensive income (loss): |
$ | 1,866 | $ | 2,175 | $ | 1,721 | $ | 4,537 | |||||||||