Attached files
Exhibit 99.1
COMPANY CONTACT: INVESTOR RELATIONS:
Universal Power Group, Inc. Lambert, Edwards & Associates
469-892-1122 616-233-0500
Mimi Tan, SVP Jeff Tryka, CFA or Karen Keller
tanm@upgi.com jtryka@lambert-edwards.com
UNIVERSAL POWER GROUP REPORTS IMPROVED 2010 EARNINGS
NET INCOME OF $2.9 MILLION, EPS OF $0.58
CARROLLTON, TEXAS, MARCH 29, 2011 -- Universal Power Group, Inc. (NYSE Amex:
UPG), a Texas-based distributor and supplier of batteries and related power
accessories and a third-party logistics provider, today announced improved
earnings for the fourth quarter and full year ended Dec. 31, 2010.
For the fourth quarter, UPG reported net income of $634,000, or $0.13 per share,
on net sales of $24.5 million, compared with net income of $387,000, or $0.08
per share, on net sales of $28.0 million in the fourth quarter of 2009. For the
year, UPG reported net income of $2.9 million, or $0.58 per share, on net sales
of $107.3 million, versus a net loss of $135,000, or ($0.03) per share, on net
sales of $111.2 million in 2009.
"Overall, 2010 was a good year of progress as our continued efforts to grow
UPG's core business over the past two years began to bear fruit," stated UPG's
President and Chief Executive Officer Ian Edmonds. "Over the past year, UPG has
achieved a number of important milestones, from new product introductions and
strategic alliances to expansion into new geographic markets. We stayed true to
our strategic plan last year, and our combined achievements set the stage for
broad-based revenue and earnings growth in the coming years."
FOURTH QUARTER
Net sales for the fourth quarter fell 12.5 percent to $24.5 million, from $28.0
million in the fourth quarter of 2009. Net sales of batteries and related power
accessories to customers excluding ADT Security Services (formerly Broadview
Security) and its authorized dealers grew 20.9 percent to $19.7 million in the
fourth quarter of 2010, compared to $16.3 million for the fourth quarter of
2009. Net sales to ADT Security Services and its authorized dealers in the
fourth quarter of 2010 were $4.8 million, a decrease of 59.0 percent from $11.7
million in the same quarter of 2009. Net sales to ADT Security Services and its
authorized dealers accounted for 19.2 percent of net sales in the fourth quarter
of 2010, compared to 41.8 percent of net sales in the fourth quarter of 2009.
The shift in sales mix was the result of UPG's continued focus on growing its
battery and related power accessories business, while sales to ADT Security
Services and its authorized dealers decreased during the integration of the
acquisition of Broadview Security. The Company continues to work closely with
ADT Security Services and its authorized dealers to maintain the level of
quality and service they have come to expect from UPG.
Gross profit was flat at $4.9 million in the quarter compared with the fourth
quarter of 2009. An increase in sales of higher-margin product lines combined
with ongoing efforts to reduce cost and increase efficiency resulted in gross
margins of 20.1 percent for the fourth quarter of 2010, compared to 17.5 percent
for the fourth quarter of 2009. Operating expenses decreased by $0.2 million, or
4.4 percent, to $3.8 million in the fourth quarter of 2010, compared to $4.0
million in the fourth quarter of 2009. This decrease was attributable to a
decline in accounting and professional fees, lower insurance costs and reduced
bad debt expense, partially offset by increased personnel-related expenses and
higher property taxes.
For the quarter, UPG reported a 20.4 percent increase in operating income, to
$1.1 million, and a 26.3 percent increase in pre-tax income to $0.9 million.
This compares to operating income of $0.9 million and pre-tax income of $0.7
million in the fourth quarter of 2009. The improved results were driven by
improved gross margins and reduced operating expenses during the quarter. On the
bottom line, UPG reported net income of $0.6 million, or $0.13 per share,
compared to net income of $0.4 million, or $0.08 per share in the prior year.
FULL YEAR OVERVIEW
For full year 2010, net sales decreased 3.5%, to $107.3 million, from $111.2
million in 2009. Net sales of batteries and related power accessories to
customers excluding ADT Security Services and its authorized dealers grew 19.4
percent, to $72.8 million in 2010, compared to $61.0 million in 2009. Offsetting
this increase was a decline in net sales to ADT Security Services and its
authorized dealers to $34.4 million, a decrease of 31.4 percent from $50.2
million in 2009. Net sales to ADT Security Services and its authorized dealers
accounted for 28 percent of total net sales in 2010, compared to 36 percent of
total net sales in 2009.
Despite the modest decrease in net sales, gross profit for the year increased
modestly to $19.9 million, or 18.5 percent of net sales, compared to $19.4
million, or 17.4 percent of net sales, for 2009. Total operating expenses
decreased by $2.5 million, or 14.4 percent, to $14.8 million, from $17.2 million
in the prior year. Operating expenses in the prior year included $2.5 million of
settlement costs. Excluding the impact of these costs, operating expenses would
have increased by approximately $0.1 million due to increases in personnel and
related costs, marketing and trade show expenses, and facilities costs, which
were partially offset by reductions in insurance costs, bad debt expense, and
accounting and other professional fees.
For the full year 2010, UPG reported operating income of $5.1 million and
pre-tax income of $4.5 million, compared to operating income of $2.1 million and
pre-tax income of $1.2 million in 2009. Provision for income taxes for the year
was $1.6 million, reflecting an effective tax rate of 35.1 percent compared to a
provision for income taxes of $1.3 million for 2009, which reflected an
effective tax rate of 111.5 percent. During 2009, UPG recorded a valuation
allowance of $0.8 million on a portion of its deferred tax asset related to
stock-based compensation, which resulted in a higher effective tax rate for the
period. On the bottom line, UPG reported net income of $2.9 million, or $0.58
per diluted share, for the full year 2010 compared to a net loss of $135,000, or
($0.03) per diluted share, for 2009.
BALANCE SHEET AND FINANCIAL POSITION
At Dec. 31, 2010, inventory increased by $1.9 million, to $32.9 million, from
$31.0 million at the end of 2009. The increase was primarily attributable to the
stocking of certain products in anticipation of peak seasonal sales in early
2011. Accounts receivable decreased to $10.2 million, from $11.4 million at the
end of 2009, while accounts payable decreased by $4.4 million, to $7.6 million
during the period. The decrease in accounts receivable was the result of the
lower sales levels in the fourth quarter as well as the Company's efforts to
increase the speed of collections. The outstanding balance on UPG's line of
credit rose to $16.3 million, compared to $15.2 million at the end of 2009
reflecting the increased investment in working capital over the period.
UPG had net cash used in operating activities of $2.9 million in 2010, compared
to net cash provided by operating activities of $5.9 million in 2009. The
decrease in operating cash flow for 2010 reflects an increase in net income, and
a decrease in accounts receivable that was more than offset by decreased levels
of accounts payable and non-cash expenses, and increases in inventory. Total
working capital increased to $20.9 million at the end of 2010, from $17.7
million at the end of 2009. Given the increased investment in working capital
during 2010, UPG ended the year with $215,000 in cash and cash equivalents, down
from $2.1 million at the end of 2009.
Edmonds concluded: "We made significant progress in improving our operating
results and growing our battery and related power accessory business during
2010, and we plan to continue this momentum in 2011. We recently highlighted a
number of new products at the 2011 Consumer Electronics Show, and we are working
on the launch of more new products later this year. We announced our initial
expansion into new markets in Latin America last quarter, and we will pursue
additional international growth where it makes the most sense for UPG. Our sales
team made significant strides in increasing sales and identifying new potential
avenues for future business growth, resulting in core battery revenue growth of
nearly 20 percent for the year. Looking ahead to the rest of 2011, we remain
focused on growing our entire business and continuing to meet the needs of all
of our customers."
RECONCILIATION OF GAAP OPERATING INCOME AND INCOME BEFORE PROVISION FOR
INCOME TAXES TO NON-GAAP OPERATING INCOME AND INCOME BEFORE PROVISION FOR INCOME
TAXES (UNAUDITED)
The following table reconciles operating income and income before
provision for income taxes, as reported in accordance with U.S. Generally
Accepted Accounting Principals ("GAAP"), to non-GAAP operating income and income
before provision for income taxes. We believe that non-GAAP operating income,
which is generally operating income less costs related to settlement agreements,
more accurately reflects our operating efficiency. Non-GAAP operating income and
income before provision for income taxes are non-GAAP financial measures and
should not be considered an alternative to, or more meaningful than, net income
prepared on a GAAP basis. Additionally, non-GAAP operating income and income
before provision for income taxes may not be comparable to similar metrics used
by others in our industry.
FINANCIAL SUMMARY (NON-GAAP)
(UNAUDITED)
DECEMBER 31,
----------------------------
2010 2009
----------------------------
(DOLLARS IN THOUSANDS)
----------------------------
Operating income and income before provision for income taxes as reported:
Operating expenses ........................................................... $ 14,769 $ 14,715
Settlement expenses .......................................................... -- 2,529
------------ ------------
Total operating expenses ..................................................... 14,769 17,244
Operating income ............................................................. 5,131 2,129
Other expense, net ........................................................... (679) (956)
------------ ------------
Income before provision for income taxes ..................................... 4,452 1,173
Non-GAAP measures to exclude settlement expenses from operating expenses:
Settlement expenses .......................................................... -- 2,529
------------ ------------
Non-GAAP operating income .................................................... $ 5,131 $ 4,658
============ ============
Non-GAAP income before provision for income taxes ............................ $ 4,452 $ 3,702
============ ============
CONFERENCE CALL INFORMATION
Universal Power Group will host an investor conference call today, Tuesday,
March 29, 2011 at 11:30 a.m. ET (10:30 a.m. CT) to discuss the Company's
financial results for the quarter and full year ended Dec. 31, 2010.
Interested parties may access the conference call by dialing 1.800.299.6183,
passcode 41707071. The conference call will also be broadcast live on
www.upgi.com and through the Thomson StreetEvents Network. Individual investors
can listen to the call at www.earnings.com, Thomson's individual investor
portal. Institutional investors can access a webcast of the call via Thomson
StreetEvents (www.streetevents.com), a password-protected event management site.
A replay of the conference call will be made available through April 5, 2011 by
calling 1.888.286.8010, passcode 44168762, and an archived webcast will be
available at www.upgi.com.
ABOUT UNIVERSAL POWER GROUP, INC.
Universal Power Group, Inc. (NYSE Amex: UPG) is a leading supplier and
distributor of batteries and power accessories, and a provider of supply chain
and other value-added services. UPG's product offerings include proprietary
brands of industrial and consumer batteries of all chemistries, chargers,
jump-starters, 12-volt accessories, and solar and security products. UPG's
supply chain services include procurement, warehousing, inventory management,
distribution, fulfillment and value-added services such as sourcing, battery
pack assembly and coordinating battery recycling efforts, as well as product
development. For more information, please visit the UPG website at WWW.UPGI.COM.
FORWARD-LOOKING STATEMENTS
Statements in this press release that are not statements of historical or
current fact constitute "forward-looking statements." Such forward-looking
statements involve known and unknown risks, uncertainties and other unknown
factors that could cause the Company's actual operating results to be materially
different from any historical results or from any future results expressed or
implied by such forward-looking statements. In addition to statements that
explicitly describe these risks and uncertainties, readers are urged to consider
statements that contain terms such as "believes," "belief," "expects," "expect,"
"intends," "intend," "anticipate," "anticipates," "plans," "plan," to be
uncertain and forward-looking. The forward-looking statements contained herein
are also subject generally to other risks and uncertainties that are described
from time to time in the Company's filings with the Securities and Exchange
Commission. Historical financial results are not necessarily indicative of
future performance.
###
UNIVERSAL POWER GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
DECEMBER 31, DECEMBER 31,
2010 2009
------------- ------------
CURRENT ASSETS
Cash and cash equivalents .................................. $ 215,375 $ 2,059,475
Accounts receivable:
Trade, net of allowance for doubtful accounts of
$656,989 and $452,200 ................................ 10,189,716 11,440,179
Other ................................................... 25,607 13,561
Inventories - finished goods, net of allowance for
obsolescence of $1,155,852 and $756,671 ................. 32,893,837 30,977,213
Current deferred tax asset ................................. 1,564,433 1,475,157
Prepaid expenses and other current assets .................. 1,237,047 1,064,152
------------- -------------
Total current assets ................................. 46,126,015 47,029,737
PROPERTY AND EQUIPMENT
Logistics and distribution systems ......................... 1,834,124 1,807,069
Machinery and equipment .................................... 991,260 984,918
Furniture and fixtures ..................................... 467,632 385,940
Leasehold improvements ..................................... 408,128 388,334
Vehicles ................................................... 199,992 222,549
------------- -------------
Total property and equipment ......................... 3,901,136 3,788,810
Less accumulated depreciation and amortization ............. (2,561,314) (1,940,715)
------------- -------------
Net property and equipment ........................... 1,339,822 1,848,095
OTHER ASSETS .................................................. 127,018 313,754
NON-CURRENT DEFERRED TAX ASSET ................................ 17,784 214,314
------------- -------------
TOTAL ASSETS .................................................. $ 47,610,639 $ 49,405,900
============= =============
UNIVERSAL POWER GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
DECEMBER 31, DECEMBER 31,
2010 2009
------------ ------------
CURRENT LIABILITIES
Line of credit ................................................ $ 16,323,528 $ 15,174,305
Accounts payable .............................................. 7,559,445 11,971,502
Income taxes payable .......................................... 25,588 698,654
Accrued liabilities ........................................... 456,418 384,976
Current portion of accrued settlement accrual ................. 733,540 955,730
Current portion of capital lease and note obligations ......... 25,906 25,535
Current portion of deferred rent .............................. 52,672 92,040
------------ ------------
Total current liabilities .................................. 25,177,097 29,302,742
LONG-TERM LIABILITIES
Accrued settlement accrual, less current portion .............. 241,490 985,027
Capital lease and note obligations, less current portion ...... 25,183 50,606
Deferred rent, less current portion ........................... -- 36,103
------------ ------------
Total long term liabilities ................................ 266,673 1,071,736
------------ ------------
TOTAL LIABILITIES ................................................ 25,443,770 30,374,478
COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY
Common stock - $0.01 par value, 50,000,000
shares authorized, 5,020,000 and 5,000,000
shares issued and outstanding, respectively ................ 50,200 50,000
Additional paid-in capital .................................... 16,075,771 15,951,626
Retained earnings ............................................. 6,205,127 3,314,887
Accumulated other comprehensive loss .......................... (164,229) (285,091)
------------ ------------
Total shareholders' equity ................................. 22,166,869 19,031,422
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ....................... $ 47,610,639 $ 49,405,900
============ ============
UNIVERSAL POWER GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, YEAR ENDING DECEMBER 31,
------------------------------- -----------------------------
2010 2009 2010 2009
-------------- -------------- ------------- -------------
(unaudited)
Net sales .................................... $ 24,523,388 $ 28,038,385 $ 107,256,461 $ 111,170,726
Cost of sales ................................ 19,587,558 23,115,980 87,355,871 91,797,823
-------------- -------------- ------------- -------------
Gross profit ................................. 4,935,830 4,922,405 19,900,590 19,372,903
Operating expenses ........................... 3,810,476 3,987,824 14,769,442 14,714,680
Settlement expenses .......................... -- -- -- 2,529,345
-------------- -------------- ------------- -------------
Total operating expenses ..................... 3,810,476 3,987,824 14,769,442 17,244,025
Operating income ............................. 1,125,354 934,581 5,131,148 2,128,878
Other income (expense)
Interest expense (including $0,
$50,907, $0 and $310,000 to
Zunicom, Inc.) ......................... (244,276) (237,083) (681,213) (953,251)
Other, net ................................ -- -- 2,187 (2,623)
-------------- -------------- ------------- -------------
Total other expense, net ............ (244,276) (237,083) (679,026) (955,874)
Income before provision for
income taxes ............................. 881,078 637,498 4,452,122 1,173,004
Provision for income taxes ................... (247,555) (310,431) (1,561,882) (1,308,193)
-------------- -------------- ------------- -------------
Net income (loss) ............................ $ 633,523 $ 387,067 $ 2,890,240 $ (135,189)
============== ============== ============= =============
Net income (loss) per share
Basic .................................. $ 0.13 $ 0.08 $ 0.58 $ (0.03)
Diluted ................................ $ 0.13 $ 0.08 $ 0.58 $ (0.03)
Weighted average shares outstanding
Basic .................................. 5,006,957 5,000,000 5,001,753 5,000,000
Diluted ................................ 5,021,560 5,009,575 5,016,816 5,000,000
UNIVERSAL POWER GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
-------------------------
2010 2009
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) .......................................... $ 2,890,240 $ (135,189)
Items not requiring (providing) cash
Depreciation and amortization ........................... 809,317 802,454
Provision for doubtful accounts ......................... 228,361 415,808
Provision for obsolete inventory ........................ 770,000 599,145
Deferred income taxes ................................... 107,254 (196,857)
Loss (gain) on disposal of property and equipment ....... (2,000) 2,623
Stock-based compensation ................................ 84,945 36,969
Changes in operating assets and liabilities, net off
effect of acquisition:
Accounts receivable - trade ............................. 1,022,102 592,626
Accounts receivable - other ............................. (12,046) 36,742
Inventories ............................................. (2,686,624) 5,945,535
Income taxes receivable/payable ......................... (673,066) 867,328
Prepaid expenses and other current assets ............... (172,895) (183,624)
Other assets ............................................ -- (60,716)
Accounts payable ........................................ (4,412,057) (4,448,443)
Accrued liabilities .................................. 192,304 (222,367)
Settlement accrual ................................... (965,728) 1,940,758
Deferred rent ........................................ (75,470) (98,159)
----------- -----------
Net cash provided by (used in) operating activities ........ (2,856,362) 5,894,633
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment ................... (134,884) (56,761)
Proceeds from sale of equipment ...................... 2,000 1,000
Escrow deposit ....................................... -- 900,000
Net cash paid in Monarch acquisition ................. -- (892,000)
----------- -----------
Net cash used in investing activities ...................... (132,884) (47,761)
CASH FLOWS FROM FINANCING ACTIVITIES
Net activity on line of credit ....................... 1,149,223 822,530
Exercise of stock options ............................ 39,400 --
Payments on capital lease and note obligations ....... (4,476) (16,454)
Payment on notes to Zunicom, Inc. .................... -- (4,919,667)
----------- -----------
Net cash provided by (used in) financing activities ........ 1,184,147 (4,113,591)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ....... (1,844,100) 1,733,281
Cash and cash equivalents at beginning of year ............. 2,059,475 326,194
----------- -----------
Cash and cash equivalents at end of year ................... $ 215,375 $ 2,059,475
=========== ===========
SUPPLEMENTAL DISCLOSURES
Income taxes paid .......................................... $ 2,103,659 $ 871,052
=========== ===========
Interest paid .............................................. $ 436,522 $ 972,784
=========== ===========
UNIVERSAL POWER GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
NONCASH FINANCING AND INVESTING ACTIVITIES:
Property and equipment acquired through capital
leases or notes payable ............................... $ -- $ 86,066
======== ========
Cumulative tax effect of Unicap adjustment treated
as a capital contribution from Zunicom, Inc. .......... $ -- $185,791
======== ========
Gain on settlement with Zunicom, Inc. .................... $ -- $301,641
======== =======
