<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended:
MARCH 31, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission File Number: 0-9463
ULTRAK, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2626358
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1301 Waters Ridge Drive,
Lewisville, Texas 75057
(Address of principal executive offices) (Zip Code)
(972) 353-6651
(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 (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 the number of shares outstanding of each of the issuer's classes of
common stock as of March 31, 1998: 14,502,868 shares of $.01 par value common
stock.
<PAGE> 2
ULTRAK, INC. AND SUBSIDIARIES
QUARTER ENDED MARCH 31, 1998
INDEX
<TABLE>
<CAPTION>
Part I: Financial Information Page No.
--------
<S> <C>
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II: Other Information 10
Signatures 11
</TABLE>
2
<PAGE> 3
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1998 1997
------------- -------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 11,903,950 14,101,684
Restricted Cash 3,899,791 3,949,690
Trade Accounts Receivable, less allowance for doubtful accounts 39,086,772 32,390,447
Notes Receivable 724,642 1,920,281
Inventories, net 53,183,749 45,390,195
Advances for Inventory Purchases 7,709,211 11,420,009
Prepaid Expenses and Other Current Assets 3,720,598 3,298,493
Deferred Income Taxes 3,330,875 3,354,246
------------- -------------
Total Current Assets 123,559,588 115,825,045
------------- -------------
Property, Plant and Equipment, at cost 13,470,832 9,390,213
Less accumulated depreciation and amortization (3,731,107) (3,443,044)
------------- -------------
9,739,725 5,947,169
------------- -------------
Goodwill, net of accumulated amortization 57,311,625 57,909,633
Other Assets 4,265,010 5,737,872
------------- -------------
Total Assets $ 194,875,948 185,419,719
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable-Trade $ 14,722,812 13,263,083
Note Payable to Bank 8,000,000 0
Accrued Expenses 4,737,069 3,808,330
Income Taxes Payable 336,496 43,698
Other Current Liabilities 5,157,199 5,106,204
------------- -------------
Total Current Liabilities 32,953,576 22,221,315
------------- -------------
Commitments and Contingencies
Equity Put Options on Common Stock 27,270,250 28,364,000
Stockholders' Equity:
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, $.01 par value; 20,000,000 shares authorized;
14,502,868 and 14,445,741 shares issued and outstanding at
March 31, 1998 and December 31, 1997, respectively 145,029 144,457
Additional Paid in Capital 127,510,396 126,414,835
Retained Earnings 14,243,767 13,692,732
Cumulative Translation Adjustment (2,089,132) (1,868,304)
Treasury Stock, at cost (606,850 and 432,850 common shares at
March 31, 1998 and December 31, 1997, respectively) (6,134,693) (4,526,071)
------------- -------------
Total Stockholders' Equity 134,652,122 134,834,404
------------- -------------
Total Liabilities and Stockholders' Equity $ 194,875,948 185,419,719
============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
3
<PAGE> 4
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
<S> <C> <C>
Net sales $ 47,748,359 40,572,193
Cost of sales 32,972,737 27,511,144
------------ ------------
Gross profit 14,775,622 13,061,049
Gross profit% 30.9% 32.2%
Other operating costs:
Marketing and sales 8,200,050 6,181,774
General and administrative 4,721,256 3,233,762
Depreciation and goodwill amortization 957,733 756,890
------------ ------------
13,879,039 10,172,426
------------ ------------
Operating profits 896,583 2,888,623
Other (expense) income:
Interest income 19,367 783,096
Costs of terminated merger 0 (697,055)
Other, net 51,279 187,246
------------ ------------
70,646 273,287
------------ ------------
Income before income taxes 967,229 3,161,910
Income taxes (386,892) (1,127,477)
------------ ------------
NET INCOME 580,337 2,034,433
Dividend requirements on
preferred stock (29,302) (29,302)
------------ ------------
Net income allocable to
common stockholders $ 551,035 2,005,131
============ ============
Income per share:
Basic $ 0.04 $ .14
============ ============
Diluted $ 0.04 $ .13
============ ============
Number of common shares used in computations:
Basic 13,977,702 13,931,050
============ ============
Diluted 15,177,115 15,123,011
============ ============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
4
<PAGE> 5
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 580,337 2,034,433
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 957,733 756,890
Provision for losses on accounts receivable 150,118 166,204
Provision for inventory obsolescence 16,935 48,950
Changes in operating assets and liabilities:
Accounts and notes receivable (5,650,804) 763,466
Inventories (7,810,489) (3,097,177)
Advances for inventory purchases 3,710,798 371,786
Prepaid expenses and other current assets (398,734) (1,055,354)
Noncurrent notes and other assets 1,434,501 338,432
Accounts and notes payable 1,459,729 2,372,774
Accrued and other current liabilities 1,372,709 (1,222,953)
------------ ------------
Net cash provided by (used in) operating activities (4,177,167) 1,477,451
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (4,207,963) (768,426)
Acquisitions, net of cash acquired 0 (25,359,160)
------------ ------------
Net cash provided by (used in) investing activities (4,207,963) (26,127,586)
------------ ------------
Cash flows from financing activities:
Net borrowings (repayments) on notes payable 8,000,000 0
Decrease in restricted cash 49,899 0
Issuance of common stock, net of issuance costs (3,751) 37,206
Purchase of treasury stock (1,608,622) 0
Payment of preferred stock dividends (29,302) (29,302)
------------ ------------
Net cash provided by financing activities 6,408,224 7,904
------------ ------------
Effect of exchange rate changes on cash (220,828) 0
Net decrease in cash and cash equivalents (2,197,734) (24,642,231)
------------ ------------
Cash and cash equivalents at beginning of the period 14,101,684 71,810,707
------------ ------------
Cash and cash equivalents at end of the period $ 11,903,950 47,168,476
============ ============
Supplemental schedule of noncash investing and financing:
Acquisition of businesses:
Assets acquired $ 0 37,054,407
Liabilities assumed 0 (4,295,100)
Common stock issued 0 (3,676,672)
------------ ------------
0 29,082,635
Less: cash acquired 0 3,723,475
------------ ------------
$ 0 25,359,160
============ ============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
5
<PAGE> 6
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation:
The accompanying unaudited interim consolidated financial statements include the
accounts of Ultrak, Inc. and its subsidiaries ("Ultrak" or "the Company"). All
significant intercompany balances and transactions have been eliminated in
consolidation.
The interim financial statements are prepared on an unaudited basis and do not
include all of the information and disclosures required by generally accepted
accounting principles for complete financial statements. All adjustments which
are, in the opinion of management, necessary for a fair presentation of the
results of operations for the interim periods have been made and are of a
recurring nature unless otherwise disclosed herein. The results of operations
for such interim periods are not necessarily indicative of results of operations
for a full year. For further information, refer to the consolidated financial
statements and notes to the consolidated financial statements for the year ended
December 31, 1997 included in the Ultrak Annual Report on Form 10-K.
2. Earnings Per Share:
In the fourth quarter of 1997, the Company adopted the provisions of Statement
of Financial Accounting Standard No. 128, "Earnings Per Share" (SFAS 128). In
accordance with SFAS 128, the Company computes basic earnings per share based on
the weighted average number of common shares outstanding. Diluted earnings per
share is computed based on the weighted average number of shares outstanding,
plus the number of additional common shares that would have been outstanding if
dilutive potential common shares had been issued. All prior period earnings per
share information have been restated to comply with the provisions of SFAS 128.
Following is a reconciliation of basic and diluted earnings per share:
<TABLE>
<CAPTION>
For the Quarter Ended March 31, 1998 For the Quarter Ended March 31, 1997
--------------------------------------- ---------------------------------------
Net Per Share Net Per Share
Income Shares Amount Income Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
Basis earnings per share:
<S> <C> <C> <C> <C> <C> <C>
Income allocable to common stockholders $ 551,035 13,977,702 $ 0.04 $ 2,005,131 13,931,050 $ 0.14
=========== ===========
Effect of Dilutive Securities:
Contingently issuable shares -- 386,707 252,778
Put options -- 443,450 --
Stock options -- 369,256 532,202
Convertible preferred stock -- -- 29,302 406,981
----------- ----------- ----------- ----------
Diluted earnings per share $ 551,035 15,177,115 $ 0.04 $ 2,034,433 15,123,011 $ 0.13
=========== =========== =========== =========== ========== ===========
</TABLE>
6
<PAGE> 7
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
3. Comprehensive Income:
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standard No. 130, "Reporting Comprehensive Income" (SFAS 130). The adoption of
this standard had no impact on net income or stockholders' equity, as reported.
SFAS 130 requires the reporting of comprehensive income, which includes net
income plus non-owner changes in equity including unrealized gains or losses on
investments, the minimum pension liability adjustment and foreign currency
translation. During the three months ended March 31, 1998 and 1997, non-owner
changes, comprised solely of changes in foreign currency translation, were
$220,828 and $306,567, respectively.
4. Note Payable to Bank:
On December 1, 1997, the Company entered into a three-year unsecured credit
facility with a bank. The credit facility provides up to $40.0 million in
revolving credit with interest at prime minus .50% or LIBOR plus .60%, payable
quarterly. At the maturity of the revolving credit agreement in the year 2000,
the principal balance converts to a fully amortizing four-year term loan. The
credit agreement contains certain restrictive covenants and conditions,
including maximum senior funded debt to cash flow and debt service coverage. The
Company is required to pay a quarterly commitment fee of .062% beginning June
30, 1998. As of March 31, 1998, the Company had borrowings in the amount of $8.0
million outstanding under this facility.
5. Equity Put Options on Common Stock:
In conjunction with a stock repurchase program, during 1997 the Company sold
equity put options covering 2,620,000 shares of its common stock for net
proceeds before taxes to the Company of $4.5 million. As of March 31, 1998,
2,495,000 options remain outstanding and the Company's potential repurchase
obligation under equity put options with net cash or physical settlement terms
totaled $27.2 million at exercise prices ranging from $8.75 to $12.51 per share.
The options are exercisable only at expiration and the remaining options expire
from April 1998 through January 1999.
7
<PAGE> 8
ULTRAK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For the Three Months ended March 31, 1998 compared to the
Three Months ended March 31, 1997
Results of Operations
For the three months ended March 31, 1998, net sales were $47,748,359, an
increase of $7,176,166 (18%) over the same period in 1997. This increase for the
three months ended March 31, 1998 was primarily due to the effect of the
acquisitions entered into during 1997, sales of new products introduced during
late 1997 and 1998 and increased volume of sales of existing CCTV products to
most of the markets served by the Company.
Cost of sales was $32,972,737, an increase of $5,461,593 (20%) over the same
period in 1997. Gross profit margins on net sales decreased to 30.9% for the
three months ended March 31, 1998 from 32.2% for the same period in 1997. This
decrease in gross profit margin was due to competitive price pressures and
delays in shipment of the Company's Windows NT version of its high end security
system.
Marketing and sales expenses were $8,200,050, an increase of $2,018,276 (33%)
over the same period in 1997. Marketing and sales expenses for the three months
ended March 31, 1998 were 17.2% of net sales, up from 15.2% for the same period
in 1997. This increase was due to the effect of acquisitions during 1997 and the
effect of hiring additional sales, sales support and marketing personnel in
anticipation of new product introductions and resulting sales activities, as
well as the increased travel, printing, product literature, advertising and
promotion costs associated with the introduction of new products.
General and administrative expenses were $4,721,256, an increase of $1,487,494
(46%) over the same period in 1997. General and administrative expenses for the
three months ended March 31, 1998 were 9.9% of net sales, up from 8.0% of net
sales for the same period in 1997. This increase was a result of (i) the
acquisitions during 1997, each of which maintain certain separate administrative
functions and have greater research and development costs, as a percentage of
net sales, than Ultrak's other existing operations, and (ii) the hiring of
additional research and development and administrative staff to support the
anticipated growth in sales.
Other income was $70,646, a decrease of $202,641 (74%) from the same period in
1997. This decrease was primarily because of the Company's shift during mid 1997
to invest excess funds in marketable equity securities instead of interest
bearing investments, the use of cash to fund the Company's stock repurchase
program and acquisitions during 1997 and the resulting interest expense on bank
borrowings during 1998.
8
<PAGE> 9
ULTRAK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
Liquidity and Capital Resources
The Company had a net decrease in cash and cash equivalents for the three months
ended March 31, 1998 of approximately $2.2 million. Net cash used in operating
activities for the period was approximately $4.2 million, primarily consisting
of increases in accounts and notes receivable and inventories and decreases in
advances for inventory, noncurrent notes and other assets, accounts and notes
payable and accrued and other current liabilities. Net cash used in investing
activities was approximately $4.2 million consisting of purchases of property
and equipment, primarily related to the SAP computer implementation. Cash
provided by financing activities was approximately $6.4 million, consisting of
borrowings on its note payable to bank, offset by purchases of treasury stock
and the payment of dividends on the Company's outstanding Series A Preferred
Stock.
As of March 31, 1998, the Company had unused available revolving lines of credit
under its bank facility totaling $32.0 million. The Company is in compliance
with all of its covenants with its lender as of the date of this report.
The Company believes that internally generated funds, available borrowings under
the bank credit facility and current amounts of cash and cash equivalents will
be sufficient to meet its presently anticipated needs for working capital,
capital expenditures and acquisitions, if any, for at least the next 12 months.
9
<PAGE> 10
ULTRAK, INC. AND SUBSIDIARIES
QUARTER ENDED MARCH 31, 1998
Part II: Other Information
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report:
Exhibit 27: Financial Data Schedule for the Period ended
March 31, 1998
Exhibit 27.1: Financial Data Schedule for the Period ended
June 30, 1997
Exhibit 27.2: Financial Data Schedule for the Period ended
September 30, 1997
Exhibit 27.3: Financial Data Schedule for the Period ended
March 31, 1998
(b) Reports on Form 8-K.
None filed during the quarter ended March 31, 1998.
10
<PAGE> 11
ULTRAK, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ULTRAK, INC.
(Registrant)
Date: May 12, 1998 By: /s/ Tim D. Torno
----------------------------------
Tim D. Torno
Principal Financial and
Accounting Officer
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
<S> <C>
27 Financial Data Schedule -- period ended March 31, 1997
27.1 Financial Data Schedule -- period ended June 30, 1997
27.2 Financial Data Schedule -- period ended September 30, 1997
27.3 Financial Data Schedule -- period ended March 31, 1998
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 47,168,476
<SECURITIES> 0
<RECEIVABLES> 29,989,462
<ALLOWANCES> 1,200,946
<INVENTORY> 35,035,228
<CURRENT-ASSETS> 121,333,877
<PP&E> 9,013,290
<DEPRECIATION> 3,000,119
<TOTAL-ASSETS> 183,742,045
<CURRENT-LIABILITIES> 22,368,444
<BONDS> 0
0
976,755
<COMMON> 140,836
<OTHER-SE> 160,255,960
<TOTAL-LIABILITY-AND-EQUITY> 161,373,551
<SALES> 40,572,193
<TOTAL-REVENUES> 40,572,193
<CGS> 27,511,144
<TOTAL-COSTS> 27,511,144
<OTHER-EXPENSES> 10,172,426
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (783,096)
<INCOME-PRETAX> 3,161,910
<INCOME-TAX> 1,127,477
<INCOME-CONTINUING> 2,034,433
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,034,433
<EPS-PRIMARY> .14
<EPS-DILUTED> .13
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 29,857,242
<SECURITIES> 0
<RECEIVABLES> 29,652,227
<ALLOWANCES> 1,375,965
<INVENTORY> 39,065,503
<CURRENT-ASSETS> 110,768,630
<PP&E> 10,153,891
<DEPRECIATION> 3,462,991
<TOTAL-ASSETS> 182,701,312
<CURRENT-LIABILITIES> 23,079,572
<BONDS> 0
0
976,755
<COMMON> 142,447
<OTHER-SE> 158,502,538
<TOTAL-LIABILITY-AND-EQUITY> 159,621,740
<SALES> 84,556,273
<TOTAL-REVENUES> 84,556,273
<CGS> 57,616,649
<TOTAL-COSTS> 57,616,649
<OTHER-EXPENSES> 23,308,491
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,231,880)
<INCOME-PRETAX> 4,558,631
<INCOME-TAX> 1,647,755
<INCOME-CONTINUING> 2,910,876
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,910,876
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 21,598,024
<SECURITIES> 0
<RECEIVABLES> 32,860,357
<ALLOWANCES> 1,584,715
<INVENTORY> 41,775,599
<CURRENT-ASSETS> 112,259,257
<PP&E> 10,902,929
<DEPRECIATION> 4,040,439
<TOTAL-ASSETS> 187,073,899
<CURRENT-LIABILITIES> 20,830,076
<BONDS> 0
0
976,755
<COMMON> 144,455
<OTHER-SE> 165,122,613
<TOTAL-LIABILITY-AND-EQUITY> 166,243,823
<SALES> 135,257,458
<TOTAL-REVENUES> 135,257,458
<CGS> 92,307,388
<TOTAL-COSTS> 92,307,388
<OTHER-EXPENSES> 36,985,909
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,647,058)
<INCOME-PRETAX> 7,846,310
<INCOME-TAX> 2,918,827
<INCOME-CONTINUING> 4,927,483
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,927,483
<EPS-PRIMARY> .34
<EPS-DILUTED> .33
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 15,803,741
<SECURITIES> 0
<RECEIVABLES> 41,071,091
<ALLOWANCES> 1,984,319
<INVENTORY> 53,183,749
<CURRENT-ASSETS> 123,559,588
<PP&E> 13,470,832
<DEPRECIATION> 3,731,107
<TOTAL-ASSETS> 194,875,948
<CURRENT-LIABILITIES> 32,953,148
<BONDS> 0
0
976,755
<COMMON> 145,029
<OTHER-SE> 133,530,338
<TOTAL-LIABILITY-AND-EQUITY> 134,652,122
<SALES> 47,748,359
<TOTAL-REVENUES> 47,748,359
<CGS> 32,972,737
<TOTAL-COSTS> 32,972,737
<OTHER-EXPENSES> 13,879,039
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (19,367)
<INCOME-PRETAX> 967,229
<INCOME-TAX> 386,892
<INCOME-CONTINUING> 580,337
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 580,337
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
