<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURIITES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
COMMISSION FILE NUMBER: 0-9463
ULTRAK, INC.
(Exact name of registrant as specified in its charter)
COLORADO 84-0819156
(State or other Jurisdiction of (I.R.S. Employer Indentification No.)
incorporation or organization
1220 CHAMPION CIRCLE, SUITE 100
CARROLLTON, TEXAS 75006
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 280-9675
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
The aggregate market value of the voting stock held by nonaffiliates
of the registrant as of February 28, 1995 was $26,015,421. As of that date,
there were 6,555,619 of the registrant's Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III is incorporated by reference
from the Registrant's definitive proxy statement to be filed with the
Securities and Exchange Commission pusuant to Regulation 14A not later than 120
days after the end of the fiscal year covered by this Report.
<PAGE> 2
ITEM 1. BUSINESS
GENERAL
Ultrak, Inc. (the "Company" or "Ultrak") designs, manufactures,
markets, and services video closed circuit television ("CCTV") products for
use in security applications, general observation, medical and dental equipment
and automated manufacturing systems. These products include a broad line of
cameras, lenses, monitors, switchers, time lapse recorders, multiplexers, and
wireless video transmission systems.
Prior to July 1993, Ultrak's Exxis Technologies, Inc. subsidiary marketed,
sold, and serviced personal computer products, including desktop and tower
computers, disk drives, CD-ROM drives, printers and monitors sold under its
private brand name [X] Smart Choice. Ultrak discontinued this business in July
1993. See "ULTRAK MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" and Note I of Notes to Consolidated Financial
Statements.
Ultrak is a Colorado corporation incorporated in 1980. Ultrak's
headquarters are located at 1220 Champion Circle, Suite 100, Carrollton, Texas
75006. Ultrak conducts its principal business operations at five locations:
Carrollton (Dallas), Texas; Broomfield (Denver), Colorado; Annapolis, Maryland;
southern California and Chicago, Illinois and has additional sales offices in
New York, southern Florida, Boston, Atlanta, and Los Angeles.
RECENT DEVELOPMENTS
Effective April 1, 1994, Ultrak acquired a 56% interest in JAK Pacific
Video Warranty and Repair Services, Inc., a California corporation ("JAK"), for
total cash consideration of $573,000. JAK is in the business of providing
warranty and repair services for CCTV equipment for a line of products
manufactured by a Korean based company. JAK also has exclusive marketing and
sales rights for certain products in the United States. The operations of JAK
were merged with the existing operations of Ultrak's facility in southern
California. The transaction was accounted for as a purchase. Ultrak has an
option to acquire the remaining 44% of JAK for cash consideration of $500,000,
which will expire on December 31, 1995.
In July 1994, Ultrak exercised its option, in accordance with the terms of
an Option Agreement, to acquire an additional 2.2% of the outstanding stock of
Dental Vision Direct, Inc. ("DVD") from the minority shareholders of DVD,
thereby increasing Ultrak's ownership in DVD from 80% to 82.2%. DVD is in the
business of manufacturing, marketing, and selling an intraoral video hand piece
(sold under the Ultracam trade name) and related accessories used by dentists in
their practices. Effective December 30, 1994, Ultrak acquired the remaining
17.8% interest in DVD from the minority owners for total cash consideration of
$5,000.
On October 31, 1994, Ultrak's revolving line of credit with NationsBank of
Texas, N.A. ("NationsBank") was increased from $12.0 million to $13.2 million.
The NationsBank revolving line of credit was further increased during February
1995 from $13.2 million to $15.0 million. On October 4, 1994, Petrus Fund,
L.P., of which Perot Investments, Inc. is the general partner, increased its
revolving line of credit to Ultrak from $6.0 million to $7.0 million and agreed
to further increase Ultrak's line of credit from $7.0 million to $8.0 million
upon Ultrak's achievement of certain net income requirements. In conjunction
with the amendments to both loan agreements, certain financial and operational
covenants were modified. All other terms and conditions of the loan agreements
were unchanged.
<PAGE> 3
CCTV PRODUCTS; INDUSTRY
Ultrak designs, manufactures, markets, and services video CCTV products for
use in security applications, general observation, medical and dental equipment,
and automated manufacturing systems. These products include a broad line of
cameras, lenses, monitors, switchers, time lapse recorders, multiplexers, and
wireless video transmission systems.
Ultrak's target markets are wholesale distributors, installing dealers,
large end-users, mass merchants (for resale), manufacturing companies, system
integrators, and dentists. Each target market is reached through a dedicated
group of telemarketing and regional sales professionals as well as through
catalogs, magazine advertising, and industry trade shows.
Approximately 70% of Ultrak's CCTV products sales carry its own brand names
(Ultrak, Exxis, [X] Smart Choice, Beck, Mobile Video Products, and Ultracam),
with the remainder having brands owned by others such as Mitsubishi, Sony,
Dedicated Micros, Panasonic, and others. Ultrak's own branded products are
manufactured to its design specifications by manufacturer suppliers located in
Korea, Japan, England, Hong Kong, Taiwan, China, and the United States.
According to a Smith Barney Shearson Electronic Security Industry Report,
dated January 25, 1994, by the year 2000, the CCTV industry is expected to be a
$755 million annual sales component of the expected $17 billion total U.S.
security industry. The CCTV segment of the security industry has experienced
rapid growth since the early 1980s. CCTV sales represent a significant portion
of the total security industry, trailing only intrusion detection devices and
fire detection apparatus in terms of sales. Included in the CCTV category are
CCTV cameras, lenses, monitors, switchers, time lapse recorders, multiplexers,
video transmission systems, and various types of peripheral equipment used for
CCTV installations. Ultrak's business is not generally seasonal in nature,
except that sales in December and January are typically 15-20% lower than other
months.
Ultrak believes that it is an important factor within the CCTV industry and
that it is one of the three largest in terms of CCTV sales in the United States.
However, many of its competitors are divisions of much larger companies.
Ultrak has trademark registration on its Ultrak, [X] Smart Choice, Beck,
Ultracam, the Witness, Video Butler, and BabyWatch trade names. In addition,
Ultrak has been issued a patent on its Ultracam intraoral hand piece and has
patents pending on a multiple operator dental system, the Witness, a security
observation system that records activity upon activation of an alarming input
signal, and several other devices.
<PAGE> 4
SUPPLIERS AND DISTRIBUTION
Ultrak's product development staff designs and then coordinates with its
non-affiliated suppliers to manufacture certain of its private branded products
as well as coordinates and supervises the assembly and packaging of certain
products by its own employees. Ultrak has been and will continue to be
substantially dependent upon its manufacturer suppliers. Ultrak has exclusive
and non-exclusive sales and marketing rights for certain of the CCTV products it
sells, including certain CCTV cameras and systems manufactured in Japan and
Korea. Ultrak has in the past experienced, and may in the future experience,
short-term difficulties in obtaining some products from some manufacturers. In
general, Ultrak's suppliers are constantly developing new products that advance
the state of technology in security products and offer improved value. Ultrak
has in the past issued letters of credit or placed funds on deposit with its
suppliers to attempt to insure itself a constant and consistent supply of
products.
Approximately 95% of Ultrak's purchases from its non-affiliated suppliers
are made in United States dollars with the remaining 5% purchased in Japanese
yen. To date, Ultrak has not been materially adversely affected by fluctuations
in the valuation of the Japanese yen. It is expected that the Company will
continue to purchase the vast majority of its products in United States dollars.
Ultrak believes that it has close relationships with its suppliers. In some
cases, Ultrak is the exclusive or semi-exclusive marketer of its suppliers'
products in the United States. Ultrak's trading agreements with its suppliers
are both written and oral. In most of these relationships, Ultrak believes that
the relationship is as important to the supplier as it is to Ultrak. Thus,
Ultrak believes that there is a strong, mutually advantageous basis for the
trading relationship to exist and grow.
Ultrak imports its private branded security products primarily from Korea,
Japan, England, Hong Kong, and Taiwan. Because of foreign production lead times,
Ultrak normally makes purchase commitments to these foreign suppliers three to
six months in advance. Products ordered by Ultrak and manufactured by others in
Asia are shipped to warehouses of Ultrak located in the United States for
subsequent delivery to customers of Ultrak.
Delivery times on these products to the United States vary from one week to
two months, depending on the mode of transportation used. Therefore, it is
necessary for Ultrak to commit to and carry larger levels of inventory than
would be necessary if it used strictly domestic suppliers.
The nature of Ultrak's business is to ship most orders within 24 hours of
receipt of the order. As of December 31, 1994 and 1993, Ultrak had approximately
$3,939,000 and $2,093,000, respectively, in backlog for its products which it
considers to be firm.
Ultrak can ship its CCTV products from one of five warehouse locations
operated by it: Carrollton, Texas; Broomfield, Colorado; Annapolis, Maryland;
southern California; or Chicago, Illinois. Currently over 90% of all shipments
are made from the Carrollton, Texas, centralized warehouse. Inventory, accounts
receivable, purchasing, payroll, and other corporate business functions are
controlled on Ultrak's integrated computer system located in its Carrollton
headquarters. All sales locations are linked real time through a nationwide
network which allows for orders to be entered and shipped from multiple
locations.
Approximately 21% of Ultrak's 1994 sales were to Walmart Stores, Inc. and
Sam's Wholesale Club, a division of Walmart Stores, Inc. No other single
customer accounted for more than 10% of total sales in 1994.
<PAGE> 5
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock (the "Ultrak Common Stock") became listed on
the National Market System of the National Association of Securities Dealers,
Inc. Automated Quotation System ("Nasdaq") on January 18, 1994. Prior to that
time, Ultrak Common Stock was traded in the over-the-counter market and price
quotations for the two-year period shown below were reported on Nasdaq under
the symbol "ULTK." The quotations shown below, which are the range of the high
and low bid prices for 1993 and high and low closing prices thereafter, were
compiled by Ultrak from Monthly Statistical Reports supplied by Nasdaq. All
quotes for 1993 represent inter-dealer quotations, without retail markup,
mark-down, or commission and may not necessarily represent actual transactions
in the Ultrak Common Stock. All prices in 1993 have been retroactively restated
to reflect the one-for-six reverse stock split, which was effected on December
28, 1993.
<TABLE>
<CAPTION>
HIGH BID LOW BID
---------- ---------
<S> <C> <C>
1993*
First quarter........................................ $ 7.50 $4.31
Second quarter....................................... 9.75 5.64
Third quarter........................................ 9.00 5.25
Fourth quarter....................................... 7.62 5.63
</TABLE>
<TABLE>
<CAPTION>
HIGH CLOSE LOW CLOSE
---------- ---------
<S> <C> <C>
1994
First quarter........................................ $ 8.63 $5.75
Second quarter....................................... 7.13 4.50
Third quarter........................................ 7.63 6.13
Fourth quarter....................................... 8.00 6.75
</TABLE>
- ---------------
* Retroactively restated to reflect the one-for-six reverse stock split, which
was effected on December 28, 1993.
The total number of holders of Ultrak Common Stock as of February 28,
1995, was approximately 3,200, comprised of approximately 1,500 shareholders of
record and approximately 1,700 not of record.
Ultrak has never paid any dividends to its common shareholders. Currently,
it is the intention of Ultrak not to pay any dividends to the holders of Ultrak
Common Stock in the foreseeable future. Management of Ultrak intends to
reinvest earnings available to common shareholders in the development and
expansion of Ultrak's business. The declaration in the future of any cash
dividends on Ultrak Common Stock will be at the discretion of the board of
directors and will depend upon the earnings, capital requirements and financial
position of Ultrak, general economic conditions, and other pertinent factors.
Ultrak's loan and security agreements with its financial institutions require
the lender's prior written consent to Ultrak's payment of cash dividends on
Ultrak Common Stock. To the extent allowed by Ultrak's loan agreements, Ultrak
does intend to pay dividends on its shares of Series A Preferred Stock, all of
which are owned by George K. Broady, the Chairman of the Board, Chief Executive
Officer, and President of Ultrak. Annual preferred stock dividends in the
amount of $117,210 were paid to Mr. Broady during each of 1994, 1993, and 1992.
<PAGE> 6
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth for the periods and the dates indicated,
selected financial and operating data for Ultrak. This information should be
read in conjunction with the financial statements of Ultrak and related notes
thereto and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" which are included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1994 1993 1992* 1991(1) 1990
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA
Net sales................ $78,793,711 $52,411,971 $28,864,478 $18,003,952 $9,765,978
----------- ----------- ----------- ----------- ----------
Gross profit............. $19,444,003 $12,858,457 $ 7,367,629 $ 4,613,904 $2,494,659
----------- ----------- ----------- ----------- ----------
Operating income
(loss)................. $ 5,109,687 $ 3,655,020 $ 1,278,618 $ 694,728 $ (318,905)
----------- ----------- ----------- ----------- ----------
Income from continuing
operations before
income taxes........... $ 4,302,532 $ 3,020,403 $ 569,843 $ 470,942 $ (775,196)
Income taxes............. 1,513,020 381,543 26,343 -- --
----------- ----------- ----------- ----------- ----------
Income (loss) from
continuing
operations............. 2,789,512 2,638,860 543,500 470,942 (775,196)
Discontinued
operations............. (190,000) (1,834,370) 294,255 -- --
----------- ----------- ----------- ----------- ----------
Net income (loss)...... 2,599,512 804,490 837,755 470,942 (775,196)
Dividend requirements on
preferred stock........ 117,210 117,210 117,210 117,210 --
----------- ----------- ----------- ----------- ----------
Net income (loss)
allocated to common
shareholders........... $ 2,482,302 $ 687,280 $ 720,545 $ 353,732 $ (775,196)
========== ========== ========== ========== =========
Income (loss) per common
share from continuing
operations............. $ .39 $ .37 $ .07 $ .06 $ (0.15)
========== ========== ========== ========== =========
Net income (loss) per
common share........... $ .36 $ .10 $ .11 $ .06 $ (0.15)
========== ========== ========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------------------------
1994 1993 1992 1991 1990
----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total assets...................................... $36,352,690 $25,384,794 $16,198,851 $8,054,270 $4,567,900
Short-term debt................................... 18,244,183 12,875,039 7,134,701 2,218,599 1,140,000
Long-term debt.................................... -- -- 285,000 285,000 --
Shareholder's equity.............................. 10,070,388 7,541,339 6,817,683 4,177,044 2,881,847
Cash dividends declared per common
share........................................... -- -- -- -- --
</TABLE>
- ---------------
* Reclassified to reflect discontinued operations; see Note I of Notes to
Consolidated Financial Statements.
(1) Effective January 1, 1991, Ultrak acquired all of the outstanding common
stock of CCTV Source, Inc. (CCTV). CCTV's sales and loss before income
taxes for the year ended December 31, 1991 were $5,716,000 and $38,000,
respectively.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Results of Operations -- Continuing Operations:
For the year ended December 31, 1994, sales from continuing operations were
$78,793,711, an increase of $26,381,740 (50%) over 1993. This growth was due
primarily (70%) to increased volume of sales of existing CCTV products to all of
the markets that Ultrak serves. New products introduced by Ultrak during 1994
contributed approximately 30% of the increase in sales.
In comparison, cost of sales were $59,349,708 for the year ended December
31, 1994, an increase of $19,796,194 (50%) over 1993. This increase was in a
virtual direct relationship to the overall CCTV increase in sales. Gross margins
on sales increased to 24.68% in 1994 from 24.53% in 1993, primarily because of
new product sales at higher margins, offset by competition in the CCTV market
and a strategic decision by Ultrak to be an industry value leader.
Marketing and sales expenses were $11,201,460 for the year ended December
31, 1994, an increase of $4,175,946 (59%) over 1993. This increase was due to
additional CCTV sales and sales support staff and related costs incurred to
support the increased level of CCTV sales, travel, and related costs and
increased marketing, advertising, and promotional costs.
General and administrative expenses were $3,132,857 for the year ended
December 31, 1994, an increase of $954,934 (44%) from 1993 due to additional
administrative staff and related costs necessary to support the increase in
sales.
Other expenses were $807,155 for the year ended December 31, 1994, an
increase of $172,538 (27%) over 1993. This increase was due primarily to
increased interest costs on borrowings offset by interest income on notes
receivable.
Results of Operations -- Discontinued Operations:
On July 22, 1993, Ultrak announced that it would discontinue its personal
computer ("PC") products business segment and concentrate its resources on the
CCTV business segment. As a result of this decision, the operations and net
assets of the PC business segment have been classified as discontinued
operations for all periods presented.
During the year ended December 31, 1994, Ultrak recorded an additional
provision of $190,000, net of income tax benefit, to reflect costs of
dissolution of the business as well as provision for expected settlement costs
of the remaining lawsuit relating to the discontinued operations.
Sales included in discontinued operations for the year ended December 31,
1994, 1993, and 1992 were $110,720, $19,232,836 and $9,677,585, respectively
(not included in net sales reported from continuing operations above).
Liquidity and Capital Resources:
Ultrak had a net increase in cash for the year ended December 31, 1994 of
approximately $142,000. Cash used in operating activities during 1994 was
approximately $3,517,000, primarily because of increases in accounts receivable,
inventory, and advances for inventory required by the significantly higher sales
volume. Cash used in investing activities was approximately $1,925,000 for
capital expenditures for furniture, fixtures, tooling, leasehold improvements,
and other fixed assets and acquisition of business. Cash provided by financing
activities was approximately $5,584,000, consisting of net borrowings from
Ultrak's bank and other lenders. It is expected that the Company should begin to
generate positive annual operating cash flows when its growth slows to a more
traditional level.
During 1994, Ultrak advanced a net total of $699,000 on notes receivable to
three parties. The largest advance ($500,000) was to Veravision, Inc., a
California corporation ("Veravision"), for a working capital line of credit in
consideration of interest on the borrowed funds and warrants to purchase
Veravision's capital stock. Veravision, formed in 1993, is a manufacturer of
dental camera products for which Ultrak has exclusive United States marketing
rights. All of the notes have varying repayment terms, interest rates and other
terms.
<PAGE> 7
See Note H to Notes to Consolidated Financial Statements for the years ended
December 31, 1994, 1993, and 1992.
As of December 31, 1994, Ultrak had unused available lines of credit
totaling approximately $1,956,000.
On October 31, 1994, Ultrak's revolving line of credit with NationsBank was
increased from $12.0 million to $13.2 million. The NationsBank revolving line of
credit was further increased during February 1995 from $13.2 million to $15.0
million. On October 4, 1994, Petrus Fund, L.P., of which Perot Investments,
Inc., is the general partner, increased its revolving line of credit to Ultrak
from $6.0 million to $7.0 million and provided for the further increase of the
line of credit from $7.0 million to $8.0 million upon Ultrak achieving certain
net income requirements. In conjunction with the amendments to both loan
agreements, certain financial and operational covenants were modified. All other
terms and conditions of the loan agreements were unchanged.
Concurrently with the amendment to the Petrus loan agreement, the warrant
issued to Petrus to acquire Ultrak Common Stock was amended to reflect that the
warrant exercise price was reduced from $9.00 per share to $8.00 per share, and
the number of Shares of Ultrak Common Stock subject to the warrant was increased
from 154,762 to 200,000.
Both of Ultrak's amended credit facilities contain financial covenants,
including leverage ratios, as defined, of not more than 2.75 to 1.0; current
ratios, as defined, of at least 1.20 to 1.0, working capital requirements,
limitations on capital expenditures and minimum net income requirements, among
others. Operational covenants contained in the credit agreements include
limitations on the sale of assets, prohibitions against liens on collateral,
limitations on indebtedness and contingent liabilities, prohibitions against
changes in management, payment of dividends and acquisitions of assets, among
others.
Ultrak will continue to be dependent upon its bank and other lender
financing to fund its operations. Ultrak anticipates that its current operations
and future growth will be financed primarily through increased lines of credit
and internally generated profits. Ultrak believes such sources of funds will be
adequate for its projected needs for the next twelve (12) months. Ultrak may
attempt to raise additional equity capital if sales increase faster than planned
or if it is otherwise deemed advantageous to do so.
YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED DECEMBER 31, 1992
Results of Operations -- Continuing Operations:
For the year ended December 31, 1993, sales from continuing operations were
$52,411,971, an increase of $23,547,493 (82%) over 1992. This growth was due to
increased sales of CCTV products to all of the markets that Ultrak serves.
In comparison, cost of sales were $39,553,514 for the year ended December
31, 1993, an increase of $18,056,665 (84%) over 1992. This increase was due to
overall CCTV sales increases, new product sales, and new mass retail outlet
sales. Gross margins on sales decreased to 24.5% in 1993 from 25.5% in 1992,
primarily because of competition in the CCTV market and a strategic decision by
Ultrak to be an industry value leader.
Marketing and sales expenses were $7,025,514 for the year ended December
31, 1993, an increase of $2,446,861 (53%) over 1992. This increase was due to
additional CCTV sales and sales support staff and related costs incurred to
support the increased level of CCTV sales, marketing costs to support sales, and
increased advertising and promotional costs.
General and administrative expenses were $2,177,923 for the year ended
December 31, 1993, an increase of $667,565 (44%) from 1992 due to additional
administrative staff and related costs necessary to support the increase in
sales.
Other expenses were $634,617 for the year ended December 31, 1993, a
decrease of $74,158 (10%) over 1992. This decrease was due primarily to interest
income on notes receivable offset by increased interest costs.
<PAGE> 8
During the fourth quarter of 1993, Ultrak determined it was more likely
than not that a portion of its deferred tax valuation allowance was realizable.
This determination was a result of the profits from continuing operations in
1993 and the forecasted profits for 1994. A deferred tax valuation allowance
still remains for deferred tax assets related to net operating loss
carryforwards, use of which are limited by Section 382 of the Internal Revenue
Code.
Liquidity and Capital Resources:
Ultrak had a net decrease in cash for the year ended December 31, 1993 of
approximately $323,000. Cash used in operating activities during 1993 was
approximately $4,394,000, primarily because of increases in accounts receivable,
inventory and advances for inventory required by the significantly higher sales
volume. Cash used in investing activities was approximately $1,309,000,
primarily for capital expenditures for furniture, fixtures and other fixed
assets and funding of notes receivable. Cash provided by financing activities
was approximately $5,380,000, consisting of net borrowings from Ultrak's bank
and other lenders.
As of December 31, 1993, Ultrak had unused available lines of credit
totaling approximately $5,410,000.
<PAGE> 9
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants -- as of and for the years
ended December 31, 1994, 1993 and 1992............................................. 12
Financial Statements:
Consolidated Balance Sheets, December 31, 1994 and 1993............................ 13
Consolidated Statements of Income, Years ended December 31, 1994, 1993, and 1992... 15
Consolidated Statements of Stockholders' Equity, Years ended December 31,
1994, 1993, and 1992............................................................ 16
Consolidated Statements of Cash Flows, Years ended December 31, 1994, 1993,
and 1992........................................................................ 17
Notes to Consolidated Financial Statements......................................... 18
Financial Statement Schedule:
Report of Independent Certified Public Accountants -- as of and for the years ended
December 31, 1994, 1993 and 1992................................................ 34
II -- Valuation and Qualifying Accounts......................................... 35
</TABLE>
All other schedules have been omitted as the required information is not
applicable, not required, or the information is included in the Consolidated
Financial Statements or Notes thereto.
<PAGE> 10
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have audited the accompanying consolidated balance sheets of Ultrak,
Inc. and Subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Ultrak, Inc.
and Subsidiaries as of December 31, 1994 and 1993, and the consolidated results
of their operations and their consolidated cash flows for each of the three
years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
GRANT THORNTON LLP
Dallas, Texas
February 17, 1995
12
<PAGE> 11
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
ASSETS
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Current Assets
Cash............................................................ $ 642,241 $ 500,106
Trade accounts receivable, less allowance for doubtful accounts
of $323,772 and $213,607 at December 31, 1994 and 1993,
respectively (Note C)........................................ 10,743,091 7,804,844
Notes receivable (Note C)....................................... 253,771 18,619
Inventories (Note C)............................................ 14,396,438 11,088,019
Advances for inventory purchases (Note C)....................... 5,381,437 2,510,096
Prepaid expenses and other current assets (Note C).............. 178,698 256,895
Deferred income taxes (Note G).................................. 362,988 434,000
Net assets of discontinued operations (Note I).................. -- 197,125
----------- -----------
Total current assets.................................... 31,958,664 22,809,704
----------- -----------
Furniture and Equipment, at cost (Note C)......................... 2,966,619 1,620,250
Less accumulated depreciation................................... (995,226) (591,675)
----------- -----------
1,971,393 1,028,575
Goodwill, net of accumulated amortization of $135,467 and $91,738
at December 31, 1994 and 1993, respectively (Note B)............ 1,259,969 669,503
Deferred Income Taxes (Note G).................................... -- 156,000
Notes Receivable (Note H)......................................... 984,208 520,000
Other Assets...................................................... 178,456 201,012
----------- -----------
$36,352,690 $25,384,794
========== ==========
</TABLE>
13
<PAGE> 12
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
DECEMBER 31,
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable -- trade....................................... $ 6,531,779 $ 4,407,294
Notes payable (Note C).......................................... 18,244,183 12,590,039
Current maturities of long-term debt (Note C)................... -- 285,000
Accrued liabilities............................................. 664,740 341,504
Other current liabilities....................................... 841,600 219,618
----------- -----------
Total current liabilities.................................... 26,282,302 17,843,455
----------- -----------
Commitments and Contingencies (Note F)............................ -- --
Stockholders' Equity (Note D)
Preferred stock, $5 par value, issuable in series; 2,000,000
shares authorized Series A, 12% cumulative convertible;
195,351 shares authorized, issued and outstanding............ 976,755 976,755
Common stock 20,000,000 shares authorized; 6,555,619 and
6,538,352 shares issued and outstanding at December 31, 1994
and 1993, respectively, at stated value...................... 73,254 72,489
Additional paid-in capital...................................... 7,213,747 7,167,765
Retained earnings (accumulated deficit)......................... 1,806,632 (675,670)
----------- -----------
Total stockholders' equity................................... 10,070,388 7,541,339
----------- -----------
$36,352,690 $25,384,794
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
14
<PAGE> 13
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Net sales (Note E).................................... $78,793,711 $52,411,971 $28,864,478
Cost of sales......................................... 59,349,708 39,553,514 21,496,849
---------- ---------- ----------
Gross profit..................................... 19,444,003 12,858,457 7,367,629
---------- ---------- ----------
Other operating costs
Marketing and sales................................. 11,201,460 7,025,514 4,578,653
General and administrative.......................... 3,132,857 2,177,923 1,510,358
---------- ---------- ----------
14,334,316 9,203,437 6,089,011
---------- ---------- ----------
Operating profit................................. 5,109,687 3,655,020 1,278,618
---------- ---------- ----------
Other expense (income)
Interest expense, net............................... 1,091,400 693,655 449,523
Other, net.......................................... (284,245) (59,038) 259,252
---------- ---------- ----------
807,155 634,617 708,775
---------- ---------- ----------
Income from continuing operations before income
taxes............................................... 4,302,532 3,020,403 569,843
Income taxes (Note G)................................. 1,513,020 381,543 26,343
---------- ---------- ----------
Income from continuing operations..................... 2,789,512 2,638,860 543,500
Discontinued operations, net of tax effects (Note I)
Income (loss) from operations....................... -- (289,489) 294,255
Provision for loss on disposal...................... (190,000) (1,544,881) --
---------- ---------- ----------
(190,000) (1,834,370) 294,255
---------- ---------- ----------
Net Income.................................. 2,599,512 804,490 837,755
Dividend requirements on preferred stock (Note D)..... (117,210) (117,210) (117,210)
---------- ---------- ----------
Net income allocable to common stockholders........... $2,482,302 $ 687,280 $ 720,545
========== ========== ==========
Income per common share
Continuing operations............................... $ .39 $ .37 $ .07
========== ========== ==========
Net income.......................................... $ .36 $ .10 $ .11
========== ========== ==========
Number of weighted average common and common
equivalent shares outstanding....................... 6,818,999 6,789,872 6,845,550
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
15
<PAGE> 14
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1994 1993 1992
--------- ---------- ----------
<S> <C> <C> <C>
Common Stock (Note D)
Beginning of year.................................... $ 72,489 $ 70,968 $ 40,654
Issuance of common stock in private placement
offering.......................................... -- -- 30,000
Exercise of stock options and warrants............... 765 1,521 314
---------- ----------- -----------
End of year.......................................... $ 73,254 $ 72,489 $ 70,968
========== =========== ===========
Additional Paid-In Capital (Note D)
Beginning of year.................................... $7,167,765 $ 7,132,910 $ 4,357,915
Issuance of common stock in private placement
offering,
net of costs...................................... -- -- 2,743,872
Exercise of stock options and warrants, net of
costs............................................. 45,982 34,855 31,123
---------- ----------- -----------
End of year.......................................... $7,213,747 $ 7,167,765 $ 7,132,910
========== =========== ===========
Common Stock Subscribed (Note D)
Beginning of year.................................... $ -- $ -- $ 885,215
Net proceeds of common stock subscribed.............. -- -- 1,888,657
Issuance of common stock in private placement
offering,
net of costs...................................... -- -- (2,773,872)
---------- ----------- -----------
End of year.......................................... $ -- $ -- $ --
========== =========== ===========
Retained Earnings (Accumulated Deficit) (Note D)
Beginning of year.................................... $ (675,670) $(1,362,950) $(2,083,495)
Preferred stock dividends............................ (117,210) (117,210) (117,210)
Net income........................................... 2,599,512 804,490 837,755
---------- ----------- -----------
End of year.......................................... $1,806,632 $ (675,670) $(1,362,950)
========== =========== ===========
Common Shares
Beginning of year.................................... 6,538,352 6,495,848 5,800,014
Issuance of common shares in private placement
offering.......................................... -- -- 666,667
Exercise of stock options and warrants............... 17,267 42,504 29,167
---------- ----------- -----------
6,555,619 6,538,352 6,495,848
========== =========== ===========
Preferred Shares
Beginning and end of year............................ 195,351 195,351 195,351
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
16
<PAGE> 15
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities
Net income.......................................... $2,599,512 $ 804,490 $ 837,755
Adjustments to reconcile net income to net cash used
in operating activities
Depreciation and amortization.................... 447,280 252,275 155,966
Provision for losses on accounts receivable...... 532,344 368,814 287,669
Provision (reduction) for inventory
obsolescence................................... 52,408 102,295 (6,252)
Deferred income taxes............................ -- (590,000) --
Changes in operating assets and liabilities
Increase in accounts and notes receivable...... (3,705,743) (3,753,654) (1,454,061)
Increase in inventories........................ (3,360,827) (5,216,355) (4,001,847)
Increase in advances for inventory purchases... (2,871,341) (182,169) (1,447,845)
Decrease in prepaid expenses and other current
assets...................................... 149,209 21,132 170,497
Increase in noncurrent notes and other
assets...................................... (341,532) (617,489) (27,420)
Increase in accounts payable................... 2,124,485 3,019,574 219,295
Decrease in other notes payable................ (285,000) (5,543) (24,356)
Increase (decrease) in accrued liabilities and
other current liabilities................... 945,218 (12,625) 368,545
Decrease (increase) in net assets of
discontinued operations..................... 197,125 642,103 (839,228)
---------- ---------- ----------
Net cash used in operating activities....... (3,516,862) (5,167,152) (5,761,282)
---------- ---------- ----------
Cash flows from investing activities
Purchases of furniture and equipment................ (1,346,369) (699,311) (254,747)
Acquisitions of businesses.......................... (578,315) -- --
(Increase) decrease in net assets of discontinued
operations....................................... -- 163,563 (163,563)
---------- ---------- ----------
Net cash used in investing activities....... (1,924,684) (535,748) (418,310)
---------- ---------- ----------
Cash flows from financing activities
Net borrowings on note payable to bank.............. 5,654,144 5,460,881 4,940,458
Net proceeds from sale or subscription of common
stock............................................ 46,747 36,376 1,920,094
Payment of preferred stock dividends................ (117,210) (117,210) (117,210)
---------- ---------- ----------
Net cash provided by financing activities... 5,583,681 5,380,047 6,743,342
---------- ---------- ----------
Net increase (decrease) in cash....................... 142,135 (322,853) 563,750
Cash at beginning of year............................. 500,106 822,959 259,209
---------- ---------- ----------
Cash at end of year................................... $ 642,241 $ 500,106 $ 822,959
========== ========== ==========
Supplemental cash flow information:
Cash paid during the year for:
Interest......................................... $1,109,361 $ 684,933 $ 450,541
========== ========== ==========
Income taxes..................................... $ 804,158 $ 91,269 $ 25,605
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
17
<PAGE> 16
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Consolidation
The accompanying consolidated financial statements include the accounts of
Ultrak, Inc. and its subsidiaries (the Company). All significant intercompany
balances and transactions have been eliminated in consolidation.
Inventories
Inventories are comprised of goods held for resale, which are valued at the
lower of cost (first-in, first-out) or market.
Advances for Inventory
Advances for inventory represents payments in advance for goods purchased
primarily from the Far East. Upon receipt, the advances are classified as
inventories.
Furniture and Equipment and Depreciation
Furniture and equipment are carried at cost. The provision for depreciation
is computed using the straight-line method over the estimated useful lives of
the assets ranging from three to ten years.
Goodwill and Amortization
Goodwill resulting from acquisitions is being amortized using the
straight-line method over periods ranging from twenty to forty years. On an
ongoing basis, management reviews the valuation and amortization of goodwill to
determine possible impairment by comparing the carrying value to the
undiscounted future cash flows of the related business unit.
Income Taxes
Deferred income taxes are determined using the liability method, under
which deferred tax assets and liabilities are determined based on differences
between financial accounting and tax bases of assets and liabilities.
Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with original maturities of three months or less
to be cash equivalents. As of December 31, 1994 and 1993, there were no cash
equivalents.
Income Per Common Share
Income per common share is computed by dividing net income by the weighted
average number of common and common equivalent shares outstanding during the
period. Common equivalent shares result from the assumed issuance of shares
under the Company's incentive stock option plan, warrants and convertible
preferred stock, if dilutive.
Reclassifications
Certain reclassifications have been made to prior years to conform with the
1994 presentation.
18
<PAGE> 17
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B -- ACQUISITION OF JAK PACIFIC VIDEO WARRANTY AND REPAIR SERVICES, INC.
Effective April 1, 1994, the Company acquired 56% of the outstanding common
stock of JAK Pacific Video Warranty and Repair Services, Inc. (JAK), a
California corporation, for total cash consideration of $573,000. At the time of
the acquisition, JAK's assets approximated $44,000 and liabilities approximated
$97,000. The transaction was accounted for as a purchase. The operations of JAK
have been included in the Company's statements of income beginning April 1,
1994. JAK is engaged in sales, service and warranty repairs of closed circuit
television products.
The purchase price was allocated to the acquired assets and assumed
liabilities based upon their respective fair values. The excess of cost over the
net tangible assets acquired of approximately $626,000 is included in the
accompanying balance sheet as goodwill and is being amortized over twenty years.
The Company has an option to acquire the remaining 44% of the common stock
of JAK in increments of a minimum of 4% per month over the period from January
17, 1995 to December 31, 1995.
The cash consideration for each 4% incremental interest is $45,455 (total
aggregate of $500,000). Amounts paid after January 17, 1995 increase at a rate
of 8% per annum.
During February, 1995, the Company exercised its option to acquire an
additional 4% of the common stock of JAK.
NOTE C -- NOTES PAYABLE AND LONG-TERM DEBT
Notes payable consist of the following notes:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1993
----------- -----------
<S> <C> <C>
$13.2 million revolving line of credit, due upon demand or
September 27, 1995; interest at floating prime (8.25% at
December 31, 1994) plus 1/2% payable monthly;
collateralized by substantially all assets.............. $11,735,392 $ 8,649,820
$7.0 million revolving line of credit, due upon demand or
April 4, 1996; interest at the greater of 8.5% or
floating prime plus 2.0% per annum payable monthly;
collateralized by inventory............................. 6,508,791 3,940,219
----------- -----------
$18,244,183 $12,590,039
========== ==========
</TABLE>
All of the credit facilities are guaranteed in part by the principal
stockholder of the Company. The credit agreements contain certain restrictive
covenants and conditions, including debt to tangible net worth ratios, current
ratios and working capital ratios. At December 31, 1994, the Company did not
meet certain of these covenants and has obtained waivers of the violations.
As of December 31, 1994, the Company had unused available lines of credit
totaling approximately $1,956,000.
Current maturities of long-term debt at December 31, 1993 consisted of a
promissory note due to the former majority stockholder of CCTV Source, Inc. for
repayment of cash advances subsequent to the effective date of the Company's
acquisition of CCTV Source, Inc. The note was paid in full during 1994.
Subsequent to December 31, 1994, the $13.2 million revolving line of credit
was increased to $15.0 million under essentially the same terms and conditions.
The weighted average interest rate for notes payable for the years ended
December 31, 1994 and 1993 was 8.16% and 6.19%, respectively.
19
<PAGE> 18
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE D -- STOCKHOLDERS' EQUITY
The stockholders of Ultrak, Inc., voting at a special meeting of
stockholders held December 17, 1993, approved, effective December 28, 1993, an
amendment to the Company's Articles of Incorporation and a concurrent
one-for-six reverse stock split of shares of the Company's common stock.
Accordingly, all share and per share amounts have been restated to reflect the
reverse stock split.
The amendment to the Company's Articles of Incorporation changed the number
of authorized shares of the Company's common stock from 50,000,000 shares
(before the reverse stock split) to 20,000,000 shares (after the reverse stock
split); eliminated the authorization of the Company's Class A Non-Voting Common
Stock, $.01 par value, Series A 8% Cumulative Convertible Preferred Stock and
Senior Series B 8% Cumulative Convertible Preferred Stock (none of which was
outstanding); amended the rights and preferences of the outstanding Series A
Preferred Stock to, among other things, increase the relative voting rights of
holders of that Series, and made other changes in the rights and preferences of
that Series to give effect to the reverse stock split.
Preferred Stock
The Company's Amended Articles of Incorporation authorize issuance in
series of up to 2,000,000 shares of $5 par value preferred stock, of which
195,351 shares have been designated as Series A, 12% cumulative convertible
preferred stock.
The Series A Preferred Stock earns dividends at the rate of 12% per annum,
beginning January 1, 1991, payable quarterly. All dividends accrue whether or
not such dividends have been declared and whether or not there are profits,
surplus, or other funds of the Company legally available for payment.
The Company may at any time redeem all or any portion of the Series A
Preferred Stock then outstanding at the liquidation value of $5 plus unpaid
dividends. A holder of Series A Preferred Stock may convert all or any of the
shares into shares of the Company's Common Stock at any time at a conversion
rate equal to the original purchase price of $5.00 plus any unpaid dividends
divided by $2.40.
Holders of Series A Preferred Stock are entitled to vote on all matters
submitted to a vote of stockholders. Each Series A Preferred Share is entitled
to voting rights equal to 16.667 shares of common stock.
Nonqualified Stock Option Plan
The 1988 Nonqualified Stock Option Plan provides for options to be granted
covering 833,334 shares of common stock. Shares under grant generally become
exercisable in five equal annual installments beginning one year after the date
of grant, and expire after ten years.
Option exercise prices are set by the Board of Directors on the date of
grant at the market price of the Company's common stock.
20
<PAGE> 19
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Details of stock options are as follows:
<TABLE>
<CAPTION>
NUMBER OF OPTION
SHARES PRICE
--------- -------------
<S> <C> <C>
Options outstanding -- December 31, 1992.................. 498,560 $ .60 -- $7.50
Granted................................................. 108,333 6.00
Forfeited............................................... (93,334) 2.40 -- 7.50
Exercised............................................... (13,333) .60 -- 7.50
--------- --------------
Options outstanding -- December 31, 1993.................. 500,226 1.20 -- 7.50
Granted................................................. 47,500 4.50 -- 6.88
Forfeited............................................... (14,167) 3.75 -- 6.00
Exercised............................................... (600) 2.40
--------- --------------
Options outstanding -- December 31, 1994.................. 532,959 $1.20 -- 7.50
======== ==============
Options exercisable -- December 31, 1994.................. 334,109 $1.20 -- 7.50
======== ==============
</TABLE>
Stock Warrants
In connection with the $7.0 million line of credit (Note C), the Company
granted to the lender warrants to purchase a total of 200,000 shares of
restricted common stock at a price of $8 per share, subject to certain
adjustments. The warrant agreement expires in April 1996 and no warrants have
been exercised to date.
NOTE E -- MAJOR CUSTOMERS AND SUPPLIERS
Revenue in excess of 10% of total sales was received from one customer in
each of the three years ended December 31, 1994 as follows:
<TABLE>
<S> <C>
1994........................................................... $16,279,000
1993........................................................... 9,596,000
1992........................................................... 5,633,000
</TABLE>
The Company's purchases from one vendor in Korea represented approximately
45% of total cost of goods sold in 1994.
NOTE F -- COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries have entered into operating leases for
office and warehouse space and data processing equipment.
Minimum future rental payments for all long-term, noncancelable operating
leases is presented below:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C> <C>
1995............................................................. $ 472,000
1996............................................................. 431,000
1997............................................................. 338,000
1998............................................................. 258,000
1999............................................................. 98,000
----------
$1,597,000
=========
</TABLE>
21
<PAGE> 20
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Total rent expense charged to operations is as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
1994............................................................. $ 473,502
=========
1993............................................................. $ 266,717
=========
1992............................................................. $ 235,501
=========
</TABLE>
The Company is a defendant in one lawsuit arising out of the ordinary
course of business. In the opinion of management, the lawsuit will not have a
material adverse effect upon the Company's business or financial position.
NOTE G -- INCOME TAXES
The provisions for taxes on income from continuing operations consists of
the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------------
1994 1993 1992
---------- --------- -------
<S> <C> <C> <C>
Federal
Current........................................ $1,081,435 $ 613,105 $11,979
Deferred....................................... 227,012 (266,892) --
State............................................ 204,573 35,330 14,364
---------- --------- -------
$1,513,020 $ 381,543 $26,343
========= ========= =======
</TABLE>
The Company's effective income tax rate from continuing operations differed
from the Federal statutory rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1994 1993 1992
---- ----- -----
<S> <C> <C> <C>
U.S. Federal statutory rate.................................. 34.0% 34.0% 34.0%
Reduction in deferred tax asset valuation allowance.......... (1.4) (4.5) --
Net operating loss carryforward.............................. -- (18.4) (33.5)
Other, net................................................... 2.6 1.6 4.1
---- ----- -----
35.2% 12.7% 4.6%
==== ===== =====
</TABLE>
22
<PAGE> 21
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1993
--------- ---------
<S> <C> <C>
Deferred tax assets
Inventory................................................. $ 156,854 $ 181,835
Bad debts................................................. 156,416 160,671
Accrual for estimated expenses............................ 98,489 103,869
Net operating loss carryforward........................... 177,026 398,123
--------- ---------
588,785 844,498
Deferred tax liabilities
Depreciation.............................................. (78,331) (47,664)
Other..................................................... (13,662) (12,240)
--------- ---------
(91,993) (59,904)
Valuation allowance......................................... (133,804) (194,594)
--------- ---------
$ 362,988 $ 590,000
========= =========
</TABLE>
As of December 31, 1994, the Company has available net operating loss
carryforwards of approximately $520,000 which are available to reduce future
taxable income by approximately $60,000 per year through 2002. A valuation
allowance of $133,804 has been recognized to offset a portion of the deferred
tax assets related to those carryforwards.
NOTE H -- NOTES RECEIVABLE
Notes receivable -- noncurrent consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
-------- --------
<S> <C> <C>
$750,000 notes receivable, principal payments due and payable
annually as follows:
July 1995, $300,000; July 1996, $100,000; July 1997, $100,000;
upon maturity July 1998, $200,000; interest payable monthly
at 10% per annum, collateralized by substantially all
assets of the maker........................................ $700,000 $420,000
$116,000 note receivable, due and payable on April 21, 1996;
interest payable quarterly at prime plus 4%, collateralized by
certain assets of the maker................................... 116,000 100,000
$200,000 note receivable, principal payments due and payable on
January 14, 1997, interest payable annually at 8%, partially
collateralized by certain assets of the maker................. 168,208 --
-------- --------
$984,208 $520,000
======== ========
</TABLE>
In connection with the $750,000 notes receivable, the Company has received
warrants to purchase up to 59% of the common stock of the maker. The Chairman of
the Board of the Company has guaranteed approximately $470,000 of the notes and
has received approximately 50% of the Company's warrants.
NOTE I -- DISCONTINUED OPERATIONS
On July 22, 1993, the Company announced that it would discontinue its
personal computers products (PC) business segment and concentrate its resources
on the CCTV business segment. As a result of this
23
<PAGE> 22
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
decision, the operations and net assets of the PC business segment are
classified as discontinued operations for all periods presented.
Sales included in discontinued operations for the years ended December 31,
1994, 1993 and 1992 were $110,720, $19,232,836 and $9,677,585, respectively. The
loss (income) from discontinued operations is net of tax benefits of $145,106 in
1993 and tax expense of $14,262 in 1992, and the provision for loss on disposal
in 1994 and 1993 is net of tax benefits of $98,000 and $774,368, respectively.
Net assets of discontinued operations is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
-------- ---------
<S> <C> <C>
Accounts receivable, net....................................... $ 30,000 $ 241,038
Inventories, net............................................... -- 117,293
Accounts payable............................................... -- (5,306)
Other liabilities and reserves, net............................ (30,000) (155,900)
-------- ---------
Net assets of discontinued operations................ $ -- $ 197,125
======== =========
</TABLE>
NOTE J -- UNAUDITED QUARTERLY OPERATING RESULTS AND UNUSUAL ITEMS
Unaudited quarterly operating results for the years ended December 31, 1994
and 1993 are as follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1994
Sales............................. $17,808,683 $19,032,217 $21,524,735 $20,428,076
Gross profit...................... 4,164,245 4,928,373 5,278,902 5,072,483
Income (loss) from Continuing
operations..................... 628,057 825,511 999,428 336,516
Discontinued operations........ -- -- (190,000) --
---------- ---------- ---------- ----------
Net income................ 628,057 825,511 809,428 336,516
========== ========== ========== ==========
Net income per share...... $ .09 $ .12 $ .11 $ .04
========== ========== ========== ==========
1993 (1)
Sales............................. $10,472,526 $12,242,154 $15,670,925 $14,217,644
Gross profit...................... 2,605,022 3,120,365 3,882,816 3,192,797
Income (loss) from Continuing
operations..................... 764,848 939,503 1,113,862 (179,353)
Discontinued operations........ (26,920) (707,674) (1,758,593) 658,817
---------- ---------- ---------- ----------
Net income (loss)......... 737,928 231,829 (644,731) 479,464
========== ========== ========== ==========
Net income (loss) per
share................... $ .10 $ .03 $ (.10) $ .07
========== ========== ========== ==========
</TABLE>
- ---------------
(1) Reclassified to reflect discontinued operations; see Note I of Notes to
Consolidated Financial Statements.
During the second, third and fourth quarters of 1993, the Company made
provisions for expected losses on liquidation of its PC business segment and
incurred operating losses in the amount of $2,464,000. Net assets of
discontinued operations as of December 31, 1993 were $197,125, consisting
primarily of collectible accounts receivable and saleable inventory.
During the fourth quarter of 1993, the Company reduced its deferred tax
valuation allowance by $590,000 and recorded a tax benefit in the amount of
$329,000 related to its discontinued PC business segment and
24
<PAGE> 23
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
additional tax expense related to its continuing operations of $290,000. The
Company incurred a loss during the fourth quarter of 1993 in its continuing
operations primarily because of approximately $577,000 in losses associated with
delays in production of its new dental product and advance marketing and
promotion costs associated with the new dental product.
NOTE K -- SUBSEQUENT EVENT
On February 9, 1995, the Company signed a letter of intent with Diamond
Electronics, Inc. (Diamond), an Ohio corporation, to purchase 100% of the
outstanding common stock of Diamond for consideration of 600,000 shares of
registered Ultrak common stock. Diamond had unaudited revenues of $11,775,000
and unaudited net income of approximately $328,000 in 1994. The letter of intent
specifies certain conditions under which up to 100,000 additional shares of
Ultrak stock could be issued. Diamond is a manufacturer of commercial video CCTV
security and surveillance systems used by large retailers and hazardous viewing
systems used by industry and municipalities. Diamond's products include a
patented high speed dome which permits manipulation of the camera and lens from
a remote location either automatically or with a joy stick. The transaction will
be accounted for as a purchase.
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Pursuant to the requirements of Section 13 or 15(d) 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.
Ultrak, Inc.
By:/s/ Tim D. Torno
----------------------------------------
Tim D. Torno
Vice President-Finance, Chief Financial
Officer, Secretary and Treasurer
Date: June 29, 1995
