Universal Electronics Reports First Quarter 2014 Financial Results

  Universal Electronics Reports First Quarter 2014 Financial Results     – Increases Net Sales 13% and Operating Income 38% Compared to the First                               Quarter of 2013 –  Business Wire  SANTA ANA, Calif. -- May 1, 2014  Universal Electronics Inc. (UEI), (NASDAQ: UEIC) reported financial results for the three months ended March31, 2014.  “Our first quarter results reflect the continued strong performance across all areas of our business,” stated Paul Arling, UEI's Chairman and CEO. “Many of the innovations we developed and patented over the last decade provide us with multiple applications for the advanced technologies of today and tomorrow. UEI QuickSet™ is deployed in over 70 million devices around the world, and our Control Plus technology is being rolled out by a major player in the home entertainment space later this year. We were recently selected by Samsung to deliver the control intelligence that powers its WatchON application in Samsung’s Galaxy S® 5 smartphone. In addition, UEI’s technology is pre-installed into Samsung’s Gear 2, and Gear 2 Neo smartwatches. Wearables are a growing segment within consumer electronics devices, and the smartwatch market in particular is expected to grow at a compound annual growth rate of over 70%, from 15 million units in 2014 to nearly 400 million units by 2020, according to Next Market Insights. These are just a few examples of how UEI is expanding into new applications. As increasingly intelligent devices hit the market, UEI’s advanced control technologies position us squarely in the middle of emerging trends in the connected home.”  Adjusted Pro Forma Financial Results for the Three Months Ended March 31: 2014 Compared to 2013    *Net sales were $129.8 million, compared to $114.7 million.         *Business Category revenue was $118.4 million, compared to $104.6          million. The Business Category contributed 91.2% of total net sales          in both periods.        *Consumer Category revenue was $11.4 million, compared to $10.1          million. The Consumer Category contributed 8.8% of total net sales in          both periods.    *Gross margins were 28.3%, compared to 28.6%.   *Operating expenses were $28.0 million, compared to $26.5 million.   *Operating income was $8.8 million, compared to $6.4 million.   *Net income was $6.4 million, or $0.40 per diluted share, compared to $4.8     million, or $0.32 per diluted share.   *At March31, 2014, cash and cash equivalents was $90.4 million.  Bryan Hackworth, UEI’s CFO, stated: “We have generated a significant amount of cash during the past 12 months as our cash balance has increased to $90.4 million at March 31, 2014 compared to $28.7 million a year prior. We continue to evaluate the potential uses of our cash including internal investments as well as mergers and acquisitions. However, at this time we believe repurchasing our shares is the best alternative given our bright future and our recent trading price. As a result, our Board of Directors has authorized us to purchase up to one million shares. Purchases may be made in open-market transactions, block transactions on or off an exchange, or in privately negotiated transactions.”  Financial Outlook  For the second quarter of 2014, the company expects net sales to range between $141 million and $149 million, compared to $136.1 million in the second quarter of 2013. Adjusted pro forma earnings per diluted share for the second quarter of 2014 are expected to range from $0.56 to $0.66, compared to adjusted pro forma earnings per diluted share of $0.53 in the second quarter of 2013, which has been adjusted to reflect the exclusion of stock-based compensation expense.  Conference Call Information  UEI’s management team will hold a conference call today, Thursday, May1, 2014 at 4:30 p.m. ET / 1:30 p.m. PT, to discuss its first quarter 2014 earnings results, review recent activity and answer questions. To access the call in the U.S. please dial 877-843-0414 and for international calls dial 315-625-3071 approximately 10 minutes prior to the start of the conference. The conference ID is 28618053. The conference call will also be broadcast live over the Internet and available for replay for one year at www.uei.com. In addition, a replay of the call will be available via telephone for two business days, beginning two hours after the call. To listen to the replay, in the U.S., please dial 855-859-2056 and internationally, 404-537-3406. Enter access code 28618053.  Use of Non-GAAP Financial Metrics  Non-GAAP gross margins, Non-GAAP operating expenses, and Non-GAAP net income and earnings per share are supplemental measures of the company's performance that are not required by, and are not presented in accordance with GAAP. The non-GAAP information does not substitute for any performance measure derived in accordance with GAAP. Non-GAAP gross profit is defined as gross profit excluding depreciation expense related to the increase in fixed assets from cost to fair market value resulting from acquisitions. Non-GAAP operating expenses are defined as operating expenses excluding amortization of intangibles acquired, employee related restructuring costs and stock-based compensation expense. Non-GAAP net income is defined as net income from operations excluding the aforementioned items and the related tax effects. A reconciliation of non-GAAP financial results to GAAP results is included at the end of this press release.  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® brand name. For additional information, visit our website at www.uei.com.  Safe Harbor Statement  This press release contains forward-looking statements that are made pursuant to the Safe-Harbor provisions of the Private Securities Litigation Reform Act of 1995. Words and expressions reflecting something other than historical fact are intended to identify forward-looking statements. These forward-looking statements involve a number of risks and uncertainties, including the benefits anticipated by the company due to the continued strength across its entire business; the continued innovation of products and advanced technologies, such as the company’s QuickSet™ and Control Plus technologies, that will attract new customers in existing and new markets; the continued expansion of the company's technologies into smart devices (such as smartphones, tablets, smart TVs, IPTV devices, game consoles, smartwatches and over-the-top-services), including the benefits anticipated by management due to Samsung selecting the company to embed its technology into the Samsung WatchON application found in Samsung’s Galaxy S® 5 smartphone, and the Gear 2 and Gear 2 Neo; the successes anticipated by management from the growth expected in consumer electronics, particularly in the Wearables segment; and the other factors described in the company's filings with the U.S. Securities and Exchange Commission. The actual results the company achieves may differ materially from any forward-looking statement due to such risks and uncertainties. The company undertakes no obligations 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, except share-related data)  (Unaudited)                                                                                                             March 31,   December 31,                                               2014                                                                                            2013 ASSETS Current assets: Cash and cash equivalents                     $   90,400        $   76,174 Accounts receivable, net                      84,762            95,408 Inventories, net                              90,172            96,309 Prepaid expenses and other current assets     4,491             4,395 Income tax receivable                         201               13 Deferred income taxes                         6,157            6,167         Total current assets                          276,183           278,466 Property, plant, and equipment, net           73,516            75,570 Goodwill                                      30,992            31,000 Intangible assets, net                        26,136            26,963 Deferred income taxes                         5,423             6,455 Other assets                                  5,162            5,279         Total assets                                  $   417,412      $   423,733   LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable                              $   54,257        $   58,498 Line of credit                                —                 — Accrued compensation                          33,834            38,317 Accrued sales discounts, rebates and          6,255             8,539 royalties Accrued income taxes                          704               3,032 Deferred income taxes                         302               303 Other accrued expenses                        10,388           11,229        Total current liabilities                     105,740           119,918 Long-term liabilities: Deferred income taxes                         9,985             9,887 Income tax payable                            607               606 Other long-term liabilities                   2,025            2,052         Total liabilities                             118,357          132,463       Commitments and contingencies Stockholders’ equity: Preferred stock, $0.01 par value, 5,000,000 shares authorized; none issued or             —                 — outstanding Common stock, $0.01 par value, 50,000,000 shares authorized; 22,550,142 and             226               223 22,344,121 shares issued on March 31, 2014 and December 31, 2013, respectively Paid-in capital                               205,434           199,513 Accumulated other comprehensive income        871               2,982 (loss) Retained earnings                             197,805          193,532                                                     404,336           396,250 Less cost of common stock in treasury, 6,643,109 and 6,639,497 shares on March 31,   (105,281     )    (104,980     ) 2014 and December 31, 2013, respectively Total stockholders’ equity                    299,055          291,270       Total liabilities and stockholders’ equity    $   417,412      $   423,733                                                                                  UNIVERSAL ELECTRONICS INC.  CONSOLIDATED INCOME STATEMENTS  (In thousands, except per share amounts)  (Unaudited)                                                                                              Three Months Ended March 31,                                                2014           2013       Net sales                                      $  129,845       $ 114,722 Cost of sales                                  93,299          82,173     Gross profit                                   36,546           32,549 Research and development expenses              4,277            4,241 Selling, general and administrative expenses   26,279          24,413     Operating income                               5,990            3,895 Interest income (expense), net                 (16         )    9 Other income (expense), net                    (349        )    (550      ) Income before provision for income taxes       5,625            3,354 Provision for income taxes                     1,352           408        Net income                                     $  4,273        $ 2,946    Earnings per share: Basic                                          $  0.27         $ 0.20     Diluted                                        $  0.26         $ 0.19     Shares used in computing earnings per share: Basic                                          15,787          14,965     Diluted                                        16,163          15,225                                                                                 UNIVERSAL ELECTRONICS INC.  CONSOLIDATED STATEMENTS OF CASH FLOWS  (In thousands)  (Unaudited)                                                                                                    Three Months Ended March 31,                                                   2014           2013       Cash provided by (used for) operating                            activities: Net income                                        $  4,273         $  2,946 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization                     4,260            4,374 Provision for doubtful accounts                   61               24 Provision for inventory write-downs               596              573 Deferred income taxes                             948              (954      ) Tax benefit from exercise of stock options and    731              2 vested restricted stock Excess tax benefit from stock-based               (723)            (37       ) compensation Shares issued for employee benefit plan           347              255 Stock-based compensation                          1,678            1,261 Changes in operating assets and liabilities: Accounts receivable                               9,967            1,669 Inventories                                       4,756            (6,066    ) Prepaid expenses and other assets                 (15        )     (268      ) Accounts payable and accrued expenses             (10,489    )     (14,345   ) Accrued income and other taxes                    (2,484     )     (731      ) Net cash provided by (used for) operating         13,906          (11,297   ) activities Cash used for investing activities: Acquisition of property, plant, and equipment     (2,396     )     (3,058    ) Acquisition of intangible assets                  (204       )     (291      ) Net cash used for investing activities            (2,600     )     (3,349    ) Cash provided by (used for) financing activities: Issuance of debt                                  —                13,500 Payment of debt                                   —                (13,500   ) Proceeds from stock options exercised             3,272            593 Treasury stock purchased                          (405       )     (1,558    ) Excess tax benefit from stock-based               723             37         compensation Net cash provided by (used for) financing         3,590            (928      ) activities Effect of exchange rate changes on cash           (670       )     (295      ) Net increase (decrease) in cash and cash          14,226           (15,869   ) equivalents Cash and cash equivalents at beginning of year    76,174          44,593     Cash and cash equivalents at end of period        $  90,400       $  28,724                                                                                Supplemental Cash Flow Information: Income taxes paid                                 $  1,601         $  1,682 Interest payments                                 $  —             $  22                                                                                UNIVERSAL ELECTRONICS INC.  RECONCILIATION OF ADJUSTED PRO FORMA FINANCIAL RESULTS  (In thousands, except share-related data)  (Unaudited)                                                                           Three Months Ended                        Three Months Ended                   March 31, 2014                            March 31, 2013                  GAAP         Adjustments  Adjusted      GAAP         Adjustments  Adjusted                                              Pro Forma                                 Pro Forma Net sales        $ 129,845     $  —          $ 129,845     $ 114,722     $  —          $ 114,722 Cost of sales    93,299       (235      )   93,064       82,173       (277      )   81,896     ^(1) Gross profit     36,546        235           36,781        32,549        277           32,826 Research and development      4,277         —             4,277         4,241         —             4,241 expenses Selling, general and      26,279       (2,562    )   23,717       24,413       (2,182    )   22,231     administrative expenses ^(2) Operating        5,990         2,797         8,787         3,895         2,459         6,354 income Interest income           (16       )   —             (16       )   9             —             9 (expense), net Other income     (349      )   —            (349      )   (550      )   —            (550      ) (expense), net Income before provision for    5,625         2,797         8,422         3,354         2,459         5,813 income taxes Provision for income taxes     1,352        676          2,028        408          571          979        ^(3) Net income       $ 4,273      $  2,121     $ 6,394      $ 2,946      $  1,888     $ 4,834    Earnings per     $ 0.26       $  0.13      $ 0.40       $ 0.19       $  0.12      $ 0.32     share diluted         To reflect depreciation expense of $0.2 million and $0.3 million for ^(1)  the three months ended March 31, 2014 and 2013, respectively, related        to the mark-up in fixed assets from cost to fair value as a result of        acquisitions.        To reflect amortization expense of $0.7 million for each of the three        months ended March 31, 2014 and 2013 related to intangible assets        acquired as part of acquisitions. In addition, to reflect stock-based ^(2)   compensation expense of $1.7 million and $1.3 million for the three        months ended March 31, 2014 and 2013, respectively. Also, to reflect        other employee related restructuring costs of $0.1 million and $0.2        million for the three months ended March 31, 2014 and 2013,        respectively. ^(3)   To reflect the tax effect of the adjustments.  Contact:  UEI Paul Arling, 714-918-9500 or IR Agency Becky Herrick, 415-433-3777  
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