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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, 1998
[ ] 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.
(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.)
6101 GATEWAY DRIVE, CYPRESS, CALIFORNIA 90630
(Address of principal executive offices) (Zip Code)
714-820-1000
(Registrant's telephone number, including area code)
--------------------------
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 - 6,351,389 shares of the
Company's Common Stock, $.01 par value, were outstanding at June 30, 1998.
- --------------------------------------------------------------------------------
EXHIBITS TO THIS QUARTERLY REPORT APPEAR ON PAGE 13
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UNIVERSAL ELECTRONICS INC.
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet 3
Consolidated Statement of Income and Comprehensive 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 1. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signature 14
</TABLE>
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ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
UNIVERSAL ELECTRONICS INC.
CONSOLIDATED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
1998 1997
-------- --------
(Unaudited) (Audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 665 $ 1,097
Accounts receivable, net 20,639 26,049
Inventories 15,538 16,639
Refundable income taxes 5 5
Prepaid expenses 3,027 1,055
Deferred income taxes 4,272 5,027
Assets held for sale 1,680 1,729
-------- --------
Total current assets 45,826 51,601
-------- --------
Equipment, furniture, and
fixtures, net 4,420 3,950
Patents and trademarks 517 460
Other assets 630 475
Deferred income taxes 4,652 4,652
-------- --------
Total assets $ 56,045 $ 61,138
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving credit facility $ 6,357 $ 7,237
Accounts payable 5,385 7,775
Accrued income taxes 117 101
Accrued compensation 863 714
Accrued discontinuation expenses 789 3,929
Other accrued expenses 2,037 2,495
-------- --------
Total current liabilities 15,548 22,251
-------- --------
Stockholders' equity:
Capital stock 69 68
Paid-in capital 54,936 54,454
Currency translation adjustment (118) (73)
Accumulated deficit (10,633) (12,291)
Cost of common stock held in treasury (3,757) (3,271)
-------- --------
Total stockholders' equity 40,497 38,887
======== ========
Total liabilities and stockholders' equity $ 56,045 $ 61,138
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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UNIVERSAL ELECTRONICS INC.
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except per share amounts) (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 22,273 $ 23,931 $ 40,849 $ 46,311
Cost of sales 13,200 16,648 24,526 32,271
-------- -------- -------- --------
Gross profit 9,073 7,283 16,323 14,040
Selling, general, & administrative expenses 6,956 6,735 13,560 13,806
-------- -------- -------- --------
Operating income 2,117 548 2,763 234
Interest expense 97 105 237 203
Interest income (1) (3) (1) (8)
Other (income) expenses, net 53 3 8 27
-------- -------- -------- --------
Income before income taxes 1,968 443 2,519 12
Income tax (expense) benefit (654) (155) (861) (4)
-------- -------- -------- --------
Net income 1,314 288 1,658 8
-------- -------- -------- --------
Other comprehensive income (loss):
Foreign currency translation adjustments (23) (37) (44) (36)
Tax benefit related to foreign currency
translation adjustments 8 13 15 12
-------- -------- -------- --------
Comprehensive net income (loss) $ 1,299 $ 264 $ 1,629 $ (16)
======== ======== ======== ========
Net income per share:
Basic $ 0.21 $ 0.05 $ 0.26 $ 0.00
======== ======== ======== ========
Diluted $ 0.20 $ 0.05 $ 0.25 $ 0.00
======== ======== ======== ========
Weighted average common stock outstanding:
Basic 6,366 6,265 6,332 6,285
======== ======== ======== ========
Diluted 6,723 6,299 6,668 6,316
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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\
UNIVERSAL ELECTRONICS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
-------- --------
<S> <C> <C>
Cash provided by (used for) operating activities:
Net income $ 1,658 $ 8
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 655 982
Deferred income taxes 755 (102)
Issuance of common stock for retirement plan 49 64
Provision for bad debts 580 --
Issuance of treasury shares to directors 12 34
Changes in operating assets and liabilities:
Receivables 4,830 267
Inventories 1,101 (2,141)
Other assets (2,125) (414)
Accrued discontinuation expense (3,140) --
Payables and accruals (2,981) 2,945
Accrued income taxes 298 (28)
-------- --------
Net cash provided by operating activities 1,692 1,615
-------- --------
Cash used for investing activities:
Acquisition of fixed assets (1,038) (1,370)
Trademarks (98) (90)
Loan repayments from employees for common stock purchases -- 109
-------- --------
Net cash used for investing activities: (1,136) (1,351)
-------- --------
Cash provided by (used for)financing activities:
Short-term debt borrowings 24,506 --
Short-term debt payments (25,385) --
Proceeds from stock options exercised 429 --
Long-term debt -- 303
Treasury stock purchased (493) (736)
-------- --------
Net cash provided by (used for) financing activities (943) (433)
-------- --------
Effect of exchange rates on cash (45) (43)
-------- --------
Net decrease in cash and cash equivalents (432) (212)
Cash and cash equivalents at beginning of period 1,097 510
-------- --------
Cash and cash equivalents at end of period $ 665 $ 298
======== ========
The accompanying notes are an integral part of these financial statements
</TABLE>
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UNIVERSAL ELECTRONICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Adjustments
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 in the accompanying financial statements.
Inventories
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------- -------
<S> <C> <C>
Components $ 5,450 $ 6,479
Finished goods 10,088 10,160
------- -------
Total inventories $15,538 $16,639
======= =======
</TABLE>
Net Income (Loss) Per Share
Basic net income (loss) per share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding. Diluted net income
(loss) per share is computed by dividing the net income (loss) by the weighted
average number of common shares and dilutive potential common shares
outstanding. Dilutive potential common shares for all periods presented are
computed utilizing the treasury stock method.
Comprehensive Income
Effective in the first quarter of fiscal 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
statement establishes standards for reporting and display of comprehensive
income and its components in the Company's consolidated financial statements.
Comprehensive income represents the change in equity (net assets) of a business
enterprise during a period from transactions and other events and circumstances
from nonowner sources. It includes all changes in equity during a period, except
those resulting from investments by owners and distributions to owners. Total
comprehensive income and its components are included in the accompanying
Consolidated Statement of Income and Comprehensive Income.
Reclassification
Certain prior year amounts have been reclassified to conform with the
presentation utilized in the three and six month periods ended June 30, 1998.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Second Quarter 1998 versus 1997
Net sales for the 1998 second quarter were $22.3 million, an increase of 29.7%
over the net sales of $17.2 million for the same quarter last year, after
excluding net sales of $7.0 million related to the Company's discontinued North
American retail business. Net income increased substantially in the second
quarter to $1,314,000 or $0.21 per share (basic) and $0.20 per share (diluted),
from $288,000 or $0.05 per share (basic and diluted) for the second quarter of
1997.
Net sales in the Company's Technology Businesses (subscription broadcasting, OEM
and private label) rose 32.5% in the second quarter of 1998 to $15.9 million
from $12.0 million for the same period last year. Net sales in the international
(R)One For All business increased by 24.4% in the second quarter of 1998 to $5.1
million from $4.1 million in the corresponding period last year.
Gross margins for the second quarter of 1998 were 40.7% compared to 30.4% for
the same period in 1997. This can be attributed to the discontinuation of the
Company's lower margin North American retail business and improved margins in
the subscription broadcasting and international One For All businesses.
Selling, general and administrative expenses increased to $7.0 million in the
second quarter of 1998, compared to $6.7 million in 1997 due primarily to
increased expenses associated with the settlement of a lawsuit filed by a former
customer.
The Company recorded interest expense of approximately $97,000 related to
borrowings under its revolving credit line for the second quarter of 1998
compared to approximately $105,000 for the second quarter of 1997.
The Company recorded income tax expense of $654,000 for the second quarter of
1998 compared to approximately $155,000 for the same quarter of 1997.
Six Months 1998 versus 1997
Net sales for the six months ended June 30, 1998 were $40.8 million, an increase
of 22.5% over the net sales of $33.3 million for the same period last year,
after excluding the net sales of $13.0 million related to the Company's
discontinued North American retail business. Net income increased substantially
in the six month period ended June 30, 1998 to $1,658,000 or $0.26 per share
(basic) and $0.25 per share (diluted), from $8,000 or break-even per share
(basic and diluted) for the same period in 1997.
Net sales in the Company's Technology Businesses (subscription broadcasting, OEM
and private label) for the first half of 1998 increased 27.0% to $30.4 million
from $23.9 million for the same period last year. The international One For All
business posted solid sales growth in the six months ended June 30, 1998 up
about 21.1% to $8.6 million from the $7.1 million for the corresponding period
in 1997.
Gross margins for the first six months of 1998 were 40.0% compared to 30.3% for
the same period in 1997. This can be attributed to the discontinuation of the
Company's lower margin North American retail business and improved margins in
the subscription broadcasting and international One For All businesses.
Selling, general and administrative expenses decreased slightly to $13.6 million
in the first half of 1998, compared to $13.8 million in the first half of 1997
due to lower
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overall expenses offset by relocation related expenses and the settlement of a
lawsuit by a former customer in the first half of 1998.
Interest expense related to borrowings under the Company's revolving credit line
for the first half of 1998 increased slightly to approximately $237,000 compared
to approximately $203,000 for the first half of 1997. This increase was a result
of a higher average outstanding balance during the six months ended June 30,
1998.
The Company recorded income tax expense of approximately $861,000 for the first
half of 1998 compared to $4,000 for the same period in 1997.
BACKLOG
As of the end of the first half of 1998, the Company had backlog orders of $12.5
million. This reflects a decrease in orders of 44.4% as of the same date in 1997
when the Company had backlog orders representing $22.5 million in sales.
Although the Company believes current orders to be firm and expects that
substantially all of the backlog will be shipped in 1998, 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 $1.7 million for the
first half of 1998 compared to $1.6 million for the same period in 1997. The
slight improvement in cash flow is due to efforts taken by management to reduce
inventory and accounts receivable balances offset by nonrecurring expenditures
of $3.1 million related to the Company's restructuring.
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, which was renewed on April
30, 1998, provides the Company with borrowing availability of $15 million and
bears interest equal to the bank's prime rate plus one-quarter 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
June 30, 1998, the interest rate charged on the outstanding balance of this
credit line was 8.25%. Under the terms of this revolving credit facility, the
Company's ability to pay cash dividends on its common stock and the acquisition
of treasury shares is generally restricted, however, the Company has authority
under this credit facility to acquire up to 1,000,000 shares of its common stock
in market purchases and, to date, the Company has acquired approximately 584,000
shares of stock which it holds as treasury shares and are available for reissue
by the Company. Presently, except for using a small number of these treasury
shares to compensate its outside board members, the Company has no plans to
distribute these shares.
Amounts available for borrowing are reduced by the outstanding balance of the
Company's import letters of credit. As of June 30, 1998, the Company had
utilized approximately $6.4 million of the credit facility for the acquisition
of its facility in Ohio, treasury stock purchases and other working capital
needs. The Company had no outstanding import letters of credit. 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 half of 1998 and 1997 were approximately
$1,038,000 and $1,370,000, respectively. The 1998 and 1997 capital expenditures
related primarily to product tooling and the relocation of the Company's
facilities from Ohio to California in 1998 and relocation of the California
facility in 1997.
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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.
RISK FACTORS AND SAFEHARBOR STATEMENT
The Company cautions that the following important factors, among others
(including but not limited to factors mentioned from time to time in the
Company's reports filed with the Securities and Exchange Commission), could
affect the Company's actual results and could cause the Company's actual
consolidated results to differ materially from those expressed in any
forward-looking statements of the Company made by or on behalf of the Company.
The factors included here are not exhaustive. Further, any forward-looking
statement speaks only as of the date on which such statement is made, and the
Company undertakes no obligation to update any forward-looking statement or
statements to reflect events or circumstances after the date on which such
statement is made or to reflect the occurrence of unanticipated events. New
factors emerge from time to time and it is not possible for management to
predict all of such factors, nor can it assess the impact of each such factor on
the business or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in any
forward-looking statements. Therefore, forward-looking statements should not be
relied upon as a prediction of actual future results.
Dependence Upon Key Suppliers
Most of the components used in the Company's products are available from
multiple sources; however, the Company has elected to purchase integrated
circuit components used in the Company's products, principally its remote
control products, and certain other components used in the Company's products,
from single sources. The Company has recently developed alternative sources of
supply for these integrated circuit components. However, there can be no
assurance that the Company will be able to continue to obtain these components
on a timely basis. The Company generally maintains inventories of its integrated
chips, which could be used in part to mitigate, but not eliminate, delays
resulting from supply interruptions. An extended interruption or termination in
the supply of any of the components used in the Company's products, or a
reduction in their quality or reliability, would have an adverse effect on the
Company's business and results of operations.
Dependence on Foreign Manufacturing
Third-party manufacturers located in foreign countries manufacture substantially
all of the Company's remote controls. The Company's arrangements with its
foreign manufacturers are subject to the risks of doing business abroad, such as
import duties, trade restrictions, work stoppages, political instability and
other factors which could have a material adverse effect on the Company's
business and results of operations. The Company believes that the loss of any
one or more of its manufacturers would not have a long-term material adverse
effect on the Company's business and results of operations because numerous
other manufacturers are available to fulfill the Company's requirements,
however, the loss of any of the Company's major manufacturers could adversely
affect the Company's business until alternative manufacturing arrangements are
secured.
Potential Fluctuations in Quarterly Results
The Company's quarterly financial results may vary significantly depending
primarily upon factors such as the timing of significant orders, the timing of
new product offerings by the Company and its competitors and product
presentations. In addition, the Company's business historically has been
seasonal, with the largest proportion of sales occurring in September, October
and November of each calendar year. Factors such as quarterly variations in
financial results could aversely affect the market price of the Common Stock
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and cause it to fluctuate substantially. In addition, the Company (i) may from
time to time increase its operating expenses to fund greater levels of research
and development, increase its sales and marketing activities, develop new
distribution channels, improve its operational and financial systems and broaden
its customer support capabilities and (ii) may incur significant operating
expenses associated with any new acquisitions. To the extent that such expenses
precede or are not subsequently followed by increased revenues, the Company's
business, operating results and financial condition will be materially adversely
affected.
The Company expects to experience significant fluctuations in future quarterly
operating results that may be caused by many factors, including demand for the
Company's products, introduction or enhancement of products by the Company and
its competitors, market acceptance of new products, price reductions by the
Company or its competitors, mix of distribution channels through which products
are sold, level of product returns, mix of products sold, component pricing, mix
of international and North American revenues, and general economic conditions.
In addition, as a strategic response to changes in the competitive environment,
the Company may from time to time make certain pricing or marketing decisions or
acquisitions that could have a material adverse effect on the Company's
business, results of operations or financial condition. As a result, the Company
believes that period-to-period comparisons of its results of operations are not
necessarily meaningful and should not be relied upon as any indication of future
performance. Due to all of the foregoing factors, it is likely that in some
future quarters the Company's operating results will be below the expectations
of public market analysts and investors. In such event, the price of the
Company's common stock would likely be materially adversely affected.
Dependence on Consumer Preference
The Company is susceptible to fluctuations in its business based upon consumer
demand for its products. The Company believes that its success depends in
substantial part on its ability to anticipate, gauge and respond to such
fluctuation in consumer demand. However, it is impossible to predict with
complete accuracy the occurrence and effect of any such event that will cause
such fluctuations in consumer demand for the Company's products.
Dependence Upon Timely Product Introduction
The Company's ability to remain competitive in the remote control products
market will depend in part upon its ability to successfully identify new product
opportunities and to develop and introduce new products and enhancements on a
timely and cost effective basis. There can be no assurance that the Company will
be successful in developing and marketing new products or in enhancing its
existing products, or that such new or enhanced products will achieve consumer
acceptance, and if acquired, will sustain that acceptance, that products
developed by others will not render the Company's products non-competitive or
obsolete or that the Company will be able to obtain or maintain the rights to
use proprietary technologies developed by others which are incorporated in the
Company's products. Any failure by the Company to anticipate or respond
adequately to technological developments and customer requirements, or any
significant delays in product development or introduction, could have a material
adverse effect on the Company's financial condition and results of operations.
In addition, the introduction of new products which the Company may introduce in
the future may require the expenditure of a significant amount of funds for
research and development, tooling, manufacturing processes, inventory and
marketing. In order to achieve high volume production of any new product, the
Company may have to make substantial investments in inventory and expand its
production capabilities.
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Dependence on Major Customers
The Company's performance is affected by the economic strength and weakness of
its worldwide customers. The Company sells its remote control products and
proprietary technologies to private label customers, original equipment
manufacturers ("OEMs"), and companies involved in the subscription broadcast
industry. The Company also supplies its products to its wholly-owned, non-U.S.
subsidiaries and to independent foreign distributors, who in turn distribute the
Company's products worldwide, with the United Kingdom, Europe, and Australia
currently representing the Company's principal foreign markets. The loss of any
one or more of the Company's key customers either in the United States or abroad
due to the financial weakness or bankruptcy of any such customer may have an
adverse affect on the Company's financial condition or results of operations.
Competition/Litigation
The remote control industry is characterized by intense competition based
primarily on product availability, price, speed of delivery, ability to tailor
specific solutions to customer needs, quality and depth of product lines. The
Company's competition is fragmented across its product lines, and accordingly,
the Company does not compete with any one company across all product lines. The
Company competes with a variety of entities, some of which have greater
financial and other resources than the Company. The Company's ability to remain
competitive in this industry depends in part on its ability to successfully
identify new product opportunities and develop and introduce new products and
enhancements on a timely and cost effective basis as well as its ability to
identify and enter into strategic alliances with entities doing business within
the industries the Company serves. There can be no assurances that the Company
and its product offerings will be and/or remain competitive or that any
strategic alliances, if any, which the Company enters into will achieve the
type, extent and amount of success or business that the Company expects or hopes
to achieve. In addition, as is typical in the Company's industry and the nature
and kind of business in which the Company is engaged, from time to time, various
claims, charges and litigation are asserted or commenced by third parties
against the Company or by the Company against third parties arising from or
related to product liability, infringement of patent or other intellectual
property rights, breach of warranty, contractual relations, or employee
relations. The amounts claimed may be substantial but may not bear any
reasonable relationship to the merits of the claims or the extent of any real
risk of court awards. While it is the opinion of management that the Company's
products do not infringe any third parties' patent or other intellectual
property rights, the costs associated with defending or pursuing any such claims
or litigation could be substantial and amounts awarded as final judgments, if
any, in any such potential or pending litigation, could have a significant and
material adverse effect on the Company's financial condition or results of
operations.
General Economic Conditions
General economic conditions, both domestic and foreign, have an impact on the
Company's business and financial results. From time to time the markets in which
the Company sells its products experience weak economic conditions that may
negatively affect the sales of the Company's products. To the extent that
general economic conditions affect the demand for products sold by the Company,
such conditions could have an adverse effect on the Company's business.
Moreover, operating its business in countries outside of the United States
exposes the Company to fluctuations in foreign currency exchange rates, exchange
ratios, nationalization or expropriation of assets, import/export controls,
political instability, variations in the protection of intellectual property
rights, limitations on foreign investments and restrictions on the ability to
convert currency are risks inherent in conducting operations in geographically
distant locations, with customers speaking different languages and having
different cultural approaches to the conduct of business, any one of which alone
or collectively, may have an adverse affect on the Company's international
operations, and consequently on the Company's business, operating results and
financial condition.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On June 16, 1998, the Company entered into a confidential Release and Settlement
Agreement with Jasco Products Co., Inc. in which the parties settled and
dismissed with prejudice their respective claims against each in consolidated
cases Jasco Products Co., Inc. v. Universal Electronics Inc., Case No.
CIV-95-1988T, consolidated with Universal Electronics Inc. v. Jasco Products
Co., Inc., Case No. CIV-96-700-R. The Release and Settlement Agreement and Joint
Stipulation for Dismissal was approved by Order of the Court on June 18, 1998.
On June 23, 1998, Circuit Solutions, Inc. filed a suit against the Company in
the Court of Common Pleas, Lorain County, Ohio, Circuit Solutions, Inc. v.
Universal Electronics Inc., Case No. 98CV121418 alleging breach of contract and
further alleging damages in the amount of $110,000. On July 20, 1998, due to a
motion by the Company, the suit was transferred to the United States District
Court for the Northern District of Ohio, Eastern Division, Circuit Solutions,
Inc. v. Universal Electronics Inc., Case No. 1:98 CV 1647. This case is in the
preliminary stages of pleading, with the Company filing its answer on July 24,
1998 denying plaintiff's allegations and claims and it intends to vigorously
defend this action.
On June 25, 1998, a former executive officer of the Company, Bruce V. Vereecken,
filed suit against the Company in the Court of Common Pleas, Summit County,
Ohio, Bruce V. Vereecken v. Universal Electronics Inc., Case No. CV 98 06 2506,
alleging the Company has breached its Separation Agreement and General Release
with the plaintiff and, in addition, claiming promissory estoppel, unjust
enrichment and bad faith. The plaintiff is seeking damages in excess of $25,000.
This case is in the preliminary stages of pleading, with the Company filing its
answer on August 13, 1998 denying plaintiff's allegations and claims and it
intends to vigorously defend this action.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders' was held on May 27, 1998. In
connection with the Annual Meeting of Stockholders, the following are the
results of the vote taken on the various matters presented to the Company's
stockholders.
Proposal One: The election of the Company's Board of Directors
<TABLE>
<CAPTION>
<S> <C> <C>
Nominee - Class I Directors In Favor Withheld
- --------------------------- -------- --------
Paul D. Arling 5,681,948 22,215
David M. Gabrielsen 5,681,948 22,215
Camille Jayne 5,632,464 22,615
Nominee - Class II Directors
- ----------------------------
Peter L. Gartman 5,681,948 22,215
Bruce A. Henderson 5,681,948 22,215
F. Rush McKnight 5,632,464 22,615
William C. Mulligan 5,681,948 22,215
</TABLE>
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Proposal Two: The ratification and approval of the Universal Electronics Inc.
1998 Stock Incentive Plan
<TABLE>
<CAPTION>
In Favor Opposed Abstained Broker Non-Vote
-------- ------- --------- ---------------
<S> <C> <C> <C>
5,249,398 425,260 29,505 0
</TABLE>
Proposal Three: The ratification of the approval of Price Waterhouse as the
Company's independent auditors for the year ending December 31, 1998
<TABLE>
<CAPTION>
In Favor Opposed Abstained Broker Non-Vote
-------- ------- --------- ---------------
<S> <C> <C> <C>
5,676,818 21,545 5,800 0
</TABLE>
ITEM 5. OTHER INFORMATION
On August 12, 1998, the Company announced that Camille Jayne, the Company's
President and Chief Operating Officer, assumed the additional responsibilities
of Chief Executive Officer, replacing David M. Gabrielsen who relinquished all
of his positions as an officer and employee of the Company. Mr. Gabrielsen will
continue as a member of the Company's Board of Directors as its Chairman. In
addition, also on August 12, 1998, the Company announced that Roger T. Monaco,
the Company's Vice President, assumed the responsibilities of Senior Vice
President and Chief Financial Officer, succeeding Paul D. Arling, who resigned
as the Company's Chief Financial Officer. Mr. Arling continues as the Company's
Senior Vice President until August 31, 1998 at which time he shall resign from
all officer positions and as an employee of the Company. Mr. Arling will
continue as a member of the Company's Board of Directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits Page
11.1 Statement re: Computation of Per Share
Earnings (filed herewith) 15
(B) Reports on Form 8-K
There were no reports on Forms 8-K filed
during the quarter ended June 30, 1998.
(C) Exhibit 27 Financial Data Schedule 16
Page 13
<PAGE> 14
SIGNATURE
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: August 14, 1998 /s/ ROGER MONACO
-----------------------------------------------------
Roger Monaco
Senior Vice President & Chief Financial Officer
(Assumed position of Senior Vice President and
Chief Financial Officer effective August 12, 1998)
/s/ PAUL ARLING
-----------------------------------------------------
Paul Arling
Senior Vice President
(Resigned as Chief Financial Officer on
August 12, 1998)
Page 14
<PAGE> 1
EXHIBIT 11.1
UNIVERSAL ELECTRONICS INC.
COMPUTATION OF PER SHARE EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Common stock outstanding
beginning of period 6,312,199 6,372,025 6,312,199 6,372,025
----------- ----------- ----------- -----------
Weighted average common
stock outstanding from
exercise of stock
options, treasury stock
purchases and employee
benefit plan 53,888 (106,417) 19,831 (86,890)
----------- ----------- ----------- -----------
Weighted average common
stock outstanding 6,366,087 6,265,608 6,332,030 6,285,135
=========== =========== =========== ===========
Stock options 357,100 33,590 336,232 30,782
=========== =========== =========== ===========
Weighted average common
and common stock
equivalents outstanding 6,723,187 6,299,198 6,668,262 6,315,917
=========== =========== =========== ===========
Net income attributable
to common stockholders $ 1,313,778 $ 288,488 $ 1,657,680 $ 7,703
=========== =========== =========== ===========
Net income per common and
common stock equivalents:
Basic $ 0.21 $ 0.05 $ 0.26 $ 0.00
=========== =========== =========== ===========
Diluted $ 0.20 $ 0.05 $ 0.25 $ 0.00
=========== =========== =========== ===========
</TABLE>
Page 15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 665
<SECURITIES> 0
<RECEIVABLES> 22,712
<ALLOWANCES> (2,073)
<INVENTORY> 15,538
<CURRENT-ASSETS> 45,826
<PP&E> 9,735
<DEPRECIATION> (3,635)
<TOTAL-ASSETS> 56,045
<CURRENT-LIABILITIES> 15,548
<BONDS> 0
0
0
<COMMON> 69
<OTHER-SE> 40,428
<TOTAL-LIABILITY-AND-EQUITY> 56,045
<SALES> 40,849
<TOTAL-REVENUES> 40,849
<CGS> 24,526
<TOTAL-COSTS> 13,560
<OTHER-EXPENSES> 8
<LOSS-PROVISION> 580
<INTEREST-EXPENSE> 237
<INCOME-PRETAX> 2,519
<INCOME-TAX> 861
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,658
<EPS-PRIMARY> .26
<EPS-DILUTED> .25
</TABLE>
