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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
Commission File Number: 0-21044
UNIVERSAL ELECTRONICS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0204817
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1864 ENTERPRISE PARKWAY WEST, TWINSBURG, OHIO 44087
(Address of principal executive offices) (Zip Code)
216-487-1110
(Registrant's telephone number, including area code)
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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
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Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Number of shares of Common Stock, $.01
par value, outstanding at March 31, 1996 6,766,464
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THE INDEX OF EXHIBITS TO THIS QUARTERLY REPORT APPEARS ON PAGE 9
Page 1 of 12
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UNIVERSAL ELECTRONICS INC.
--------------------------
INDEX
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet 3
Consolidated Statement of Income 4
Consolidated Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
Page 2 of 12
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ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
UNIVERSAL ELECTRONICS INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
March 31, December 31, March 31,
1996 1995 1995
(Unaudited) (Audited) (Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 830 $ 872 $ 1,282
Accounts receivable 20,461 26,106 13,993
Inventories 30,319 30,278 39,782
Refundable income taxes 48 795 42
Prepaid expenses 2,251 2,110 2,260
Deferred income taxes 4,439 3,702 5,529
------------ ------------ ------------
Total current assets 58,348 63,863 62,888
Equipment, furniture, and
fixtures, net 7,327 5,187 3,953
Other assets 950 1,055 861
------------ ------------ ------------
Total assets $ 66,625 $ 70,105 $ 67,702
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving credit facility $ 4,569 $ 6,120 $ 12,137
Accounts payable 7,494 9,162 3,550
Accrued income taxes 350 307 355
Accrued compensation 261 756 223
Other accrued expenses 2,184 3,522 4,032
------------ ------------ ------------
Total current liabilities 14,858 19,867 20,297
------------ ------------ ------------
Long-term debt 2,000 -- --
Stockholders' equity:
Capital stock 68 68 67
Paid-in capital 53,743 53,623 53,496
Currency translation 4 25 92
Retain earnings (deficit) (4,048) (3,478) (6,250)
------------ ------------ ------------
Total stockholders'
equity 49,767 50,238 47,405
------------ ------------ ------------
Total liabilities and
stockholders' equity $ 66,625 $ 70,105 $ 67,702
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3 of 12
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UNIVERSAL ELECTRONICS INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
(Dollars and shares in thousands, 1996 1995
except per share amounts) ---------- ----------
<S> <C> <C>
Net Sales $ 21,905 $ 18,573
Cost of sales 16,063 13,935
---------- ----------
Gross profit 5,842 4,638
Selling, general and
administrative expenses 7,111 7,434
Restructuring expenses -- 977
---------- ----------
Operating loss (1,269) (3,773)
Interest expense 159 265
Interest income (9) (3)
Other (income) and expenses (140) (218)
---------- ----------
Loss before income taxes (1,279) (3,817)
Benefit for income taxes 709 1,364
---------- ----------
Net loss $ (570) $ (2,453)
========== ==========
Net loss per share $ (0.08) $ (0.36)
========== ==========
Weighted average common and
common stock equivalents
outstanding 6,758 6,741
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4 of 12
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UNIVERSAL ELECTRONICS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
(Dollars in thousands) 1996 1995
---------- ----------
<S> <C> <C>
Cash provided by (used for) operating activities:
Net loss $ (570) $ (2,453)
Adjustments to reconcile net loss
to net cash used for operating
activities:
Depreciation and amortization 372 338
Deferred income taxes (738) (1,905)
Changes in operating assets and liabilities:
Receivables 5,828 2,758
Inventories (59) 3,211
Other assets (20) 3,781
Payables and accruals (3,419) (5,757)
Accrued income taxes 537 (70)
---------- ----------
Net cash provided by (used for)
operating activities 1,931 (97)
---------- ----------
Cash used for investing activities:
Acquisition of fixed assets (2,489) (690)
Trademarks (44) (84)
---------- ----------
Net cash used for investing
activities: (2,533) (774)
---------- ----------
Cash provided by financing activities:
Short-term bank borrowings 13,814 20,901
Short-term bank payments (15,366) (20,244)
Long-term debt 2,000 --
Proceeds from stock options
exercised 120 --
---------- ----------
Net cash provided by financing
activities 568 657
---------- ----------
Effect of exchange rates on cash (8) 56
---------- ----------
Net decrease in cash and cash
equivalents (42) (158)
Cash and cash equivalents at
beginning of period 872 1,440
---------- ----------
Cash and cash equivalents at end of
period $ 830 $ 1,282
========== ==========
Supplemental Information to the
Consolidated Statement of Cash
Flows
Cash paid (received) during the
period for:
Interest $ 156 $ 269
========== ==========
Income taxes $ (752) $ 86
========== ==========
</TABLE>
Page 5 of 12
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UNIVERSAL ELECTRONICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Adjustments
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All adjustments, consisting of recurring adjustments necessary for a fair
presentation of financial position and results of operations of these unaudited
interim periods, have been included.
Inventories
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Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1996 1995 1995
------------ ------------ ------------
<S> <C> <C> <C>
Components $ 12,161 $ 14,127 $ 18,436
Finished goods 18,158 16,151 21,346
------------ ------------ ------------
Total inventories $ 30,319 $ 30,278 $ 39,782
============ ============ ============
</TABLE>
The Company provides certain components to its contract manufacturers for
inclusion in the Company's finished goods.
Net Income Per Share
- --------------------
Net income per share is computed by dividing net income by the weighted average
of common stock and common stock equivalents outstanding. Common stock
equivalents are computed using the treasury stock method based upon the weighted
average fair market value of common stock outstanding.
Reclassification
- ----------------
Certain prior year amounts have been reclassified to conform with the
presentation utilized in the quarter ended March 31, 1996.
Page 6 of 12
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net sales for the first quarter of 1996 were $21.9 million, a 17.9% increase
from $18.6 million for the same quarter of 1995. The Company experienced a loss
for the first quarter of $570,000, or $0.08 per share, compared to a loss of
$2.5 million, or $0.36 per share, in the first quarter of 1995. Included in the
1995 first quarter loss was a previously announced pre-tax charge of
approximately $977,000 ($0.09 per share) resulting from personnel severance and
facilities closure relating to the Company's restructuring.
Net sales in the Company's Technology Businesses (Cable, Cable OEM, OEM) were up
38.6% in the 1996 first quarter to $8.5 million, which compares with net sales
of $6.1 million for the same period of 1995. The increase in the Technology
Businesses were principally due to increased volume of chip sales to the OEM and
Cable OEM market segment. First quarter sales in the Company's Retail Businesses
were up 7.8%, from $12.5 million in 1995 to $13.4 million in 1996. The increase
in the Retail Businesses resulted primarily from improved International One For
All(R) sales.
Unit sales of remote control products, including sales of microprocessors,
increased 16.0% to approximately 3.0 million units during the first quarter of
1996 from 2.6 million units during the first quarter of 1995. This increase was
also primarily due to greater microprocessor sales to OEM customers and sales of
International One For All branded products.
Gross margins for the 1996 first quarter were 26.7% compared to 25.0% for the
same period in 1995. Although an improvement over 1995, the 1996 gross margins
continue to be negatively impacted by sell-through of quantities of existing
retail products at discounted prices. The Company has offered the lower prices
to continue to move the inventory in preparation for the introduction of its new
product lines in the second and third quarters of 1996. Gross profit margins
will fluctuate due to a variety of factors, including, among other things,
shifts in product mix, fluctuations in manufacturing and freight costs, and
changes in customer mix. The Company expects its gross profit margins to
improve throughout the balance of the year with the introduction of its new
product lines.
Selling, general and administrative expenses decreased by 4.5% to $7.1 million
in the first quarter of 1996 as compared to $7.4 million in the first quarter of
1995. As a percentage of sales, these expenses also decreased in the first
quarter of 1996 to 32.5% from 40.0% in the first quarter of 1995. The decrease
in S,G&A is due primarily to the decrease in professional legal fees and
personal property taxes resulting from the Company's lower inventory levels.
The Company recorded interest expense of approximately $159,000 related to
borrowings under its revolving credit line for the first quarter of 1996
compared to approximately $265,000 for the first quarter of 1995. The decrease
is the result of a lower average outstanding balance and reduced interest rate
in the first quarter of 1996 compared the same period in 1995.
The Company recorded an income tax benefit of approximately $709,000 for the
first quarter of 1996 as compared to a benefit of approximately $1.4 million for
the same quarter of 1995. The 1996 benefit includes the release of approximately
$174,000 in the valuation allowance created in 1994 due to uncertainties of the
recoverability of certain deferred tax assets. The continuing improvement and
return to profitable operations has permitted management to reevaluate the
Company's position and recognize the tax benefit
Page 7 of 12
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because management believes the related tax credits should be realized before
their statutory expiration.
Backlog
As of the end of the first quarter of 1996, the Company had backlog orders of
$9.6 million. This reflects a decrease in backlog orders of 56.4% as of the same
date in 1995 when the Company had backlog orders representing $22.0 million in
sales. Although the Company believes current orders to be firm and expects that
substantially all of the backlog will be shipped in 1996, there can be no
assurance that such orders will be shipped. The Company further believes that
backlog is not a meaningful indicator of its future performance.
Liquidity and Capital Resources
The Company's principal sources of funds are its operations and bank credit
facilities. Cash provided from operating activities was $1.9 million for the
first quarter of 1996 compared to $97,000 used for operating activities in 1995.
This improvement in cash flow is due primarily to efforts taken by management to
reduce costs and expenses and inventory balances.
The Company's bank credit facilities include a revolving credit line which is
available to fund the Company's seasonal working capital needs and for general
operating purposes. This revolving credit facility provides the Company with
borrowing availability of $22 million and bears interest equal to the bank's
prime rate minus one-half percent. The credit facility is secured by a first
priority security interest in the accounts receivable, inventory, equipment, and
general intangibles of the Company. At March 31, 1996, the interest rate charged
on the outstanding balance of this credit line was 7.75%. Under the terms of
this revolving credit facility, the Company's ability to pay cash dividends on
its common stock is restricted and amounts available for borrowing are reduced
by the outstanding balance of the Company's import letters of credit. As of
March 31, 1996, the Company had utilized approximately $4.6 million of the
credit facility for the acquisition of inventory to support future sales and for
other general operating purposes and had approximately $2.1 million of
outstanding import letters of credit. In addition, the Company had approximately
$2.0 million of the credit facility outstanding for the acquisition of the
Twinsburg, Ohio facility. This amount has been classified as long-term in the
accompanying balance sheet as it is the Company's intentions to secure a term
loan for this amount. The Company's borrowing under this revolving credit
facility and outstanding import letters of credit fluctuates due to, among other
things, seasonality of the business, the timing of supplier shipments, customer
orders and payments, and vendor payments.
Capital expenditures in the first quarters of 1996 and 1995 were approximately
$2.5 million and $690,000, respectively. Approximately $1.7 million of 1996
first quarter capital expenditures were for the acquisition of the Twinsburg,
Ohio facility. The balance of the 1996 and 1995 capital expenditures were
primarily for product tooling.
It is the Company's policy to carefully monitor the state of its business, cash
requirements and capital structure. The Company believes that funds generated
from operations and available from its borrowing capacity will be sufficient to
fund its currently anticipated cash needs, however, there can be no assurances
that this will occur.
Page 8 of 12
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits Page
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11.1 Statement re: Computation of Per 11
Share Earnings (filed herewith).
(B) Reports on Form 8-K
There were no reports on Forms 8-K filed during the
quarter ended March 31, 1996.
(C) Exhibit 27 Financial Data Schedule 12
Page 9 of 12
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
(Registrant) Universal Electronics Inc.
--------------------------
Date: May __, 1996 ______________________________________
David M. Gabrielsen
President and Chief Executive Officer
Date: May __, 1996 ______________________________________
Dennis P. Mansour
Corporate Controller
Page 10 of 11
<PAGE> 11
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
(Registrant) Universal Electronics Inc.
Date: May 15, 1996 /s/David M. Gabrielsen
-----------------------------------
David M. Gabrielsen
President and Chief Executive Officer
Date: May 15, 1996 /s/Dennis P. Mansour
-----------------------------------
Dennis P. Mansour
Corporate Controller
Page 10 of 12
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Exhibit 11.1
UNIVERSAL ELECTRONICS INC.
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
March 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Common stock
outstanding, beginning
of period 6,750,898 6,741,578
----------- -----------
Weighted average common
stock outstanding from
exercise of stock options 7,476 --
----------- -----------
Weighted average common
stock outstanding 6,758,374 6,741,578
=========== ===========
Net income (loss)
attributable to common
stockholders $ (570,152) $(2,453,163)
=========== ===========
Net income (loss) per
common and common stock
equivalents $ (0.08) $ (0.36)
=========== ===========
</TABLE>
Page 11 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 830
<SECURITIES> 0
<RECEIVABLES> 20,703
<ALLOWANCES> (242)
<INVENTORY> 30,319
<CURRENT-ASSETS> 58,348
<PP&E> 10,106
<DEPRECIATION> 2,778
<TOTAL-ASSETS> 66,624
<CURRENT-LIABILITIES> 14,858
<BONDS> 2,000
<COMMON> 68
0
0
<OTHER-SE> 49,699
<TOTAL-LIABILITY-AND-EQUITY> 66,624
<SALES> 21,905
<TOTAL-REVENUES> 0
<CGS> 16,063
<TOTAL-COSTS> 7,111
<OTHER-EXPENSES> 10
<LOSS-PROVISION> 63
<INTEREST-EXPENSE> 158
<INCOME-PRETAX> (1,279)
<INCOME-TAX> (709)
<INCOME-CONTINUING> (570)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (570)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> 0
</TABLE>
