<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:
JUNE 30, 1999
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 June 30, 1999: 11,690,988 shares of $.01 par value common
stock.
<PAGE> 2
ULTRAK, INC. AND SUBSIDIARIES
QUARTER ENDED JUNE 30, 1999
INDEX
<TABLE>
<CAPTION>
Part I: Financial Information Page No.
--------
<S> <C>
Consolidated Balance Sheets 3
Consolidated Statements of Operations 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 11
Part II: Other Information 14
Signatures 15
</TABLE>
2
<PAGE> 3
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31,
ASSETS 1999 1998
-------------- --------------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 8,447,255 4,480,721
Investments 1,200,033 3,473,563
Trade Accounts Receivable, less allowance for doubtful accounts 38,649,720 37,404,380
Inventories, net 42,397,389 46,021,960
Advances for Inventory Purchases 6,691,143 4,878,853
Prepaid Expenses and Other Current Assets 4,715,975 5,491,298
Deferred Income Taxes 2,956,259 2,956,259
Net Assets of Discontinued Operations 2,875,193 3,486,181
-------------- --------------
Total Current Assets 107,932,967 108,193,215
-------------- --------------
Property, Plant and Equipment, at cost 23,630,043 20,211,953
Less accumulated depreciation and amortization (7,264,793) (5,122,470)
-------------- --------------
16,365,250 15,089,483
-------------- --------------
Goodwill, net of accumulated amortization 56,332,628 54,861,332
Investment in Detection Systems, Inc. 14,081,989 12,702,909
Software Development Costs, net of accumulated amortization 2,206,955 1,457,266
Other Assets 2,001,829 4,321,790
-------------- --------------
Total Assets $ 198,921,618 196,625,995
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable-Trade $ 8,703,555 8,368,265
Accrued Expenses 10,570,329 5,791,205
Current Maturities of Long-term Debt 833,333 --
Other Current Liabilities 3,863,775 3,842,050
-------------- --------------
Total Current Liabilities 23,970,992 18,001,520
-------------- --------------
Line of Credit, excluding current maturities 39,811,751 37,500,000
Deferred Income Taxes 1,094,065 1,094,065
Commitments and Contingencies
Equity Put Options on Common Stock -- 1,563,563
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;
14,978,138 and 14,703,138 shares issued and outstanding at
June 30, 1999 and December 31, 1998, respectively 149,781 147,031
Additional Paid in Capital 156,445,545 153,333,593
Retained Earnings 16,674,047 17,130,398
Accumulated Other Comprehensive Loss (2,402,851) (967,488)
Treasury Stock, at cost (3,287,150 and 2,987,950 common shares at
June 30, 1999 and December 31, 1998, respectively) (37,798,467) (32,153,442)
-------------- --------------
Total Stockholders' Equity 134,044,810 138,466,847
-------------- --------------
Total Liabilities and Stockholders' Equity $ 198,921,618 196,625,995
============== ==============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30,1999 JUNE 30,1998 JUNE 30,1999 JUNE 30,1998
-------------- -------------- -------------- --------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $ 52,323,827 48,518,345 100,992,211 92,778,279
Cost of sales 35,197,960 32,988,962 67,969,504 63,518,249
-------------- -------------- -------------- --------------
Gross profit 17,125,867 15,529,383 33,022,707 29,260,030
Gross profit % 32.7% 32.0% 32.7% 31.5%
Other operating costs:
Marketing and sales 8,461,281 7,565,195 16,661,723 14,591,855
General and administrative 5,587,614 4,911,276 10,544,964 9,632,532
Depreciation and goodwill amortization 1,535,865 1,132,596 2,888,893 2,034,762
Special charges 3,125,000 -- 3,875,000 --
-------------- -------------- -------------- --------------
18,709,760 13,609,067 33,970,580 26,259,149
-------------- -------------- -------------- --------------
Operating profit (loss) (1,583,893) 1,920,316 (947,873) 3,000,881
Other (expense) income:
Interest expense, net (714,630) (105,476) (1,430,668) (86,109)
Equity in income of Detection Systems, Inc. 450,000 -- 850,000 --
Other, net 557,445 297,089 830,739 346,899
-------------- -------------- -------------- --------------
292,815 191,613 250,071 260,790
-------------- -------------- -------------- --------------
INCOME (LOSS) FROM CONTINUING OPERATIONS (1,291,078) 2,111,929 (697,802) 3,261,671
BEFORE INCOME TAXES
Income tax benefit (expense) 555,164 (846,621) 300,055 (1,310,168)
-------------- -------------- -------------- --------------
INCOME (LOSS) FROM CONTINUING OPERATIONS (735,914) 1,265,308 (397,747) 1,951,503
Discontinued operations, net of tax effects:
Loss from operations -- 53,635 -- 159,493
Gain on disposal -- -- -- --
-------------- -------------- -------------- --------------
-- 53,635 -- 159,493
-------------- -------------- -------------- --------------
NET INCOME (LOSS)
(735,914) 1,211,673 (397,747) 1,792,010
Dividend requirements on
preferred stock (29,302) (29,302) (58,604) (58,604)
-------------- -------------- -------------- --------------
Net income (loss) allocable to
common stockholders $ (765,216) 1,182,371 (456,351) 1,733,406
============== ============== ============== ==============
Income per share- Continuing Operations before
Special Charges:
Basic $ .09 $ .09 $ .15 $ .14
============== ============== ============== ==============
Diluted $ .09 $ .09 $ .15 $ .13
============== ============== ============== ==============
Income per share- Continuing Operations:
Basic $ (0.07) $ 0.09 $ (0.04) $ 0.14
============== ============== ============== ==============
Diluted $ (0.07) $ 0.09 $ (0.04) $ 0.13
============== ============== ============== ==============
Net income per share:
Basic $ (0.07) $ 0.09 $ (0.04) $ 0.13
============== ============== ============== ==============
Diluted $ (0.07) $ 0.08 $ (0.04) $ 0.12
============== ============== ============== ==============
Number of common shares used in computations:
Basic 11,712,028 13,676,476 11,684,997 13,826,635
============== ============== ============== ==============
Diluted 11,712,028 14,766,397 12,043,305 14,967,415
============== ============== ============== ==============
</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>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30,1999 JUNE 30,1998
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (397,747) 1,792,010
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 2,888,893 2,034,763
Provision for losses on accounts receivable 368,838 279,979
Provision for inventory obsolescence (38,314) 309,707
Changes in operating assets and liabilities:
Accounts and notes receivable (1,614,178) (11,623,450)
Inventories 3,662,885 (7,824,090)
Advances for inventory purchases (1,812,290) 8,000,298
Prepaid expenses and other current assets 1,038,722 (2,598,464)
Noncurrent notes and other assets 2,008,911 1,137,857
Accounts and notes payable 340,348 (776,054)
Accrued and other current liabilities 4,694,124 2,097,089
Decrease in net assets of discontinued
operations 922,038 2,008,529
-------------- --------------
Net cash provided by (used in) operating activities 12,062,230 (5,161,826)
-------------- --------------
Cash flows from investing activities:
Proceeds/purchases of investments, net 894,450 --
Purchases of property and equipment (3,814,277) (6,183,144)
Acquisitions, net of cash acquired (404,878) --
-------------- --------------
Net cash used in investing activities (3,324,705) (6,183,144)
-------------- --------------
Cash flows from financing activities:
Net borrowings (repayments) on revolving line of credit 2,311,750 19,000,000
Decrease in restricted cash -- (4,540)
Issuance of common stock, net of issuance costs 56,250 (10,951)
Purchase of treasury stock (5,645,025) (7,016,209)
Payment of preferred stock dividends (58,604) (58,604)
-------------- --------------
Net cash provided by (used in) financing activities (3,335,629) 11,909,696
-------------- --------------
Effect of exchange rate changes on cash (1,435,362) (26,676)
Net increase (decrease) in cash and cash equivalents 3,966,534 538,050
-------------- --------------
Cash and cash equivalents at beginning of the period 4,480,721 14,101,684
-------------- --------------
Cash and cash equivalents at end of the period $ 8,447,255 14,639,734
============== ==============
Supplemental schedule of noncash investing and financing:
Acquisition of businesses
Assets acquired $ 2,834,767 $ --
Liabilities assumed (935,000) --
Common stock issued (1,494,889) --
-------------- --------------
Net cash paid for acquisitions $ 404,878 $ --
============== ==============
</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, 1998 included in the Ultrak Annual Report on Form 10-K.
2. Net Income per Share:
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.
Following is a reconciliation of basic and diluted earnings per share:
<TABLE>
<CAPTION>
For the Quarter Ended June 30, 1999 For the Quarter Ended June 30, 1998
---------------------------------------- ---------------------------------------
Net Per Share Net Per Share
Income Shares Amount Income Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Basic net income (loss) per share:
Income (loss) allocable to common stockholders $ (765,216) 11,712,028 $ (.07) $ 1,182,371 13,676,476 $ .09
=========== ===========
Effect of Dilutive Securities:
Contingently issuable shares -- -- -- 332,618
Put options -- -- -- 392,065
Stock options -- -- -- 365,238
Convertible preferred stock -- -- -- --
----------- ----------- ----------- -----------
Diluted net income (loss) per share $ (765,216) 11,712,028 $ (.07) $ 1,182,371 14,766,397 $ .08
=========== =========== =========== =========== =========== ===========
</TABLE>
6
<PAGE> 7
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
2. Net Income per Share, continued:
<TABLE>
<CAPTION>
For the Six Months Ended June 30, For the Six Months Ended June 30,
1999 1998
---------------------------------------- ---------------------------------------
Net Per Share Net Per Share
Income Shares Amount Income Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Basic net income (loss) per share:
Income (loss) allocable to common stockholders $ (456,351) 11,684,997 $ (.04) $ 1,733,406 13,826,635 $ .13
=========== ===========
Effect of Dilutive Securities:
Contingently issuable shares -- 197,546 -- 359,663
Put options -- 5,999 -- 417,757
Stock options -- 154,763 -- 363,360
Convertible preferred stock -- -- -- --
----------- ----------- ----------- -----------
Diluted net income (loss) per share $ (456,351) 12,043,305 $ (.04) $ 1,733,406 14,967,415 $ .12
=========== =========== =========== =========== =========== ===========
</TABLE>
3. 1999 Business Combinations:
On March 15, 1999, the Company acquired 100% of the common stock of ABM Data
Systems, Inc., ("ABM") an Austin, Texas software developer for the
alarm-monitoring segment of the security industry. Total consideration was
250,000 shares of registered Ultrak common stock valued at approximately $1.8
million. ABM develops, sells, and services computer software for the alarm
monitoring security industry, governmental agencies, and proprietary customers
and offers support for computer software targeted for automated security
monitoring markets.
The transaction has been accounted for as a purchase and the operations of ABM
have been included in the Company's statement of income since the date of
acquisition. Goodwill is being amortized over 25 years using the straight-line
method.
On April 26, 1999, the Company acquired 100% of the stock of Multi Concepts
Systems, SA ("MCS"), a Switzerland based systems integrator of electronic
security systems. Total consideration included an initial payment of $405,000 in
cash and future contingent payments estimated at $850,000 in cash over a three
year period based upon a percentage of audited annual operating income. MCS has
been the largest European reseller and integrator of Ultrak's SAFEnet access
control system over the past ten years.
The transaction has been accounted for as a purchase and the operations of MCS
have been included in the Company's statement of income since the date of
acquisition. Goodwill is being amortized over 30 years using the straight-line
method.
7
<PAGE> 8
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
3. 1999 Business Combinations, continued:
On July 12, 1999, the Company acquired 100% of the stock of MACH Security
Sp.z.o.o ("Mach"), based in Szczecin, Poland. Mach is one of the largest
distributors of CCTV products in the country of Poland. Total consideration
included an initial payment of $275,000 in cash and future consideration
estimated at $400,000 in cash over a three year period based upon a percentage
of audited annual operating income.
The transaction will be accounted for as a purchase and the operations of Mach
will be included in the Company's statement of income since the date of
acquisition. Goodwill will be amortized over 30 years using the straight-line
method.
4. Note Payable to Bank:
On February 16, 1999, the Company entered into a new three-year credit facility
with two banks. The facility was amended on August 12, 1999. The amended credit
facility provides for combined borrowings of up to $50.0 million, comprised of a
$20.0 million term facility and a $30.0 million revolving line of credit
facility. Interest for the combined facility is payable quarterly at prime,
LIBOR or EuroLibor plus a range of .75% to 2.75%, depending on the leverage
ratio, as defined, for the quarter. Principal payments on the $20.0 million term
facility in the quarterly amount of $833,333 commence in April 2000. The
combined credit facility contains certain restrictive financial and operational
covenants and conditions, including a maximum leverage ratio, a maximum debt
service and minimum net worth amounts. The Company pays a quarterly unused
facility fee of .125% to .50%, depending on the leverage ratio for the quarter.
As of June 30,1999, the Company had borrowings in the amount of $40.6 million
outstanding under this facility.
5. Segment Disclosure and Foreign Operations:
Effective March 31, 1998, the Company adopted SFAS No. 131 Disclosures about
Segments of an Enterprise and Related Information which changes the way the
company reports information about its operating segments.
The Company has three business segments: United States-Professional Security
Group (US-PSG), United States-Diversified Sales Group (US-DSG), and
International-Professional Security Group (Int'l-PSG). The segments are
differentiated by the customers serviced as follows:
US-PSG: This segment consists of sales in the United States to
professional security dealers, distributors, installers and certain large
end users of professional security products.
US-DSG: This segment sells video and security products to industrial
markets and to consumers in the United States.
8
<PAGE> 9
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
5. Segment Disclosure and Foreign Operations, continued:
International-PSG: This segment consists of sales to professional
security dealers, distributors, installers and certain large end users of
professional security products outside the United States.
Supply: This segment consists of sales to the US-PSG and
International-PSG segments of products and systems manufactured by the
Company's Ohio and California facilities.
The Company's underlying accounting records are maintained on a legal entity
basis for government and public reporting requirements. Segment disclosures are
on a performance basis consistent with internal management reporting. The
Company evaluates performance based on earnings from continuing operations
before income taxes and other income and expense. The Corporate column includes
corporate overhead-related items.
The following tables provide financial data by segment for the periods noted:
<TABLE>
<CAPTION>
Three months ended June 30, 1999 US-PSG US-DSG Int'l-PSG Supply Corporate Total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Total revenue $ 22,498,914 $ 14,959,068 $ 17,196,771 $ 5,637,600 $ 60,292,353
Intersegment revenue (475,148) (1,855,778) (5,637,600) (7,968,526)
------------ ------------ ------------ ------------ ------------ ------------
Revenue from external customers $ 22,023,766 $ 14,959,068 $ 15,340,993 $ 0 $ 0 $ 52,323,827
============ ============ ============ ============ ============ ============
Operating profit (loss), including $ 2,417,569 $ 3,203,537 $ (3,829) $ (163,474) $ (7,037,696) $ (1,583,893)
special charges
Depreciation and amortization expense 182,326 62,346 176,990 28,471 1,085,732 1,535,865
</TABLE>
<TABLE>
<CAPTION>
Three months ended June 30, 1998 US-PSG US-DSG Int'l-PSG Supply Corporate Total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Total revenue $ 16,701,883 $ 12,365,760 $ 17,041,351 $ 6,534,248 $ 52,643,242
Intersegment revenue (947,239) (1,146,932) (2,030,726) (4,124,897)
------------ ------------ ------------ ------------ ------------ ------------
Revenue from external customers $ 15,754,644 $ 12,365,760 $ 15,894,419 $ 4,503,522 $ 0 $ 48,518,345
============ ============ ============ ============ ============ ============
Operating profit (loss) $ 1,773,751 $ 2,485,474 $ 1,059,758 $ 486,228 $ (3,884,895) $ 1,920,316
Depreciation and amortization expense 78,446 44,972 110,712 62,647 835,819 1,132,596
</TABLE>
<TABLE>
<CAPTION>
Six months ended June 30, 1999 US-PSG US-DSG Int'l-PSG Supply Corporate Total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Total revenue $ 41,561,393 $ 30,465,625 $ 33,211,890 $ 10,522,362 $115,761,270
Intersegment revenue (818,336) (3,428,361) (10,522,362) (14,769,059)
------------ ------------ ------------ ------------ ------------ ------------
Revenue from external customers $ 40,743,057 $ 30,465,625 $ 29,783,529 $ 0 $ 0 $100,992,211
============ ============ ============ ============ ============ ============
Operating profit (loss), including $ 3,645,323 $ 6,863,204 $ 135,781 $ (238,509) $(11,353,672) $ (947,873)
special charges
Depreciation and amortization expense 296,599 126,205 369,229 30,429 2,066,431 2,888,893
</TABLE>
<TABLE>
<CAPTION>
Six months ended June 30, 1998 US-PSG US-DSG Int'l-PSG Supply Corporate Total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Total revenue $ 31,196,566 $ 25,206,524 $ 32,068,249 $ 11,393,797 $ 99,865,136
Intersegment revenue (1,701,974) (2,412,962) (2,971,921) (7,086,857)
------------ ------------ ------------ ------------ ------------ ------------
Revenue from external customers $ 29,494,592 $ 25,206,524 $ 29,655,287 $ 8,421,876 $ 0 $ 92,778,279
============ ============ ============ ============ ============ ============
Operating profit (loss) $ 3,142,738 $ 5,014,718 $ 1,124,807 $ 217,900 $ (6,499,282) $ 3,000,881
Depreciation and amortization expense 153,672 84,290 170,574 129,536 1,496,690 2,034,762
</TABLE>
9
<PAGE> 10
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
5. Segment Disclosure and Foreign Operations, continued:
Financial information relating to the Company's Corporate segment is as follows:
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
------------- ------------- ------------- -------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Engineering and other corporate expenses 1,421,917 1,612,200 2,491,588 2,406,887
General and administrative 1,405,047 1,436,876 2,920,653 2,595,705
Depreciation and amortization 1,085,732 835,819 2,066,431 1,496,690
Special charges 3,125,000 -- 3,875,000 --
------------- ------------- ------------- -------------
Operating loss $ 7,037,696 $ 3,884,895 $ 11,353,672 $ 6,499,282
============= ============= ============= =============
</TABLE>
Sales by geographic area were as follows:
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
----------------------------- -----------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
United States $ 36,982,834 $ 32,623,926 $ 71,208,682 $ 63,122,992
Europe 13,926,621 13,810,906 27,547,045 25,722,648
Other 1,414,372 2,083,513 2,236,484 3,932,639
------------- ------------- ------------- -------------
Total revenues $ 52,323,827 $ 48,518,345 $ 100,992,211 $ 92,778,279
============= ============= ============= =============
</TABLE>
6. Special Charges:
Nonrecurring special charges totaling $750,000 were recorded in the quarter
ended March 31, 1999 include severance obligations incurred by the Company, one
of which was James D. Pritchett, who resigned as the President, Chief Operating
Officer and director of the Company effective March 5, 1999. Nonrecurring
special charges totaling $3,125,000 were recorded in the quarter ended June 30,
1999 pertaining to European restructuring costs such as employee severance,
terminating leases, and consolidation of all purchasing, shipping, and billing
activity to Antwerp, Belgium, closing costs of three sales and distribution
offices in the US, and centralization of accounting and finance functions at the
U.S. headquarters in Lewisville, Texas.
7. Comprehensive Income (Loss):
Total comprehensive loss, consisting of net earnings (loss), unrealized gain
(loss) on investments and foreign currency translation adjustments, amounted to
$896,732 and $1,601,892 in the three months and six months ended June 30, 1999,
respectively. For the respective 1998 periods, total comprehensive income
amounted to $1,232,416 and $1,800,037.
10
<PAGE> 11
ULTRAK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For the Three Months ended June 30, 1999 compared to the
Three Months ended June 30, 1998
Results of Operations
For the three months ended June 30, 1999, net sales were $52,323,827, an
increase of $3,805,482 (8%) over the same period in 1998. This increase for the
three months ended June 30, 1999 was primarily due to internal growth from sales
of new products and systems introduced during late 1998 and 1999, increased
volume of sales of existing CCTV products and systems to the consumer/do it
yourself market and other markets served by the Company, and acquisitions
completed during 1999.
Cost of sales was $35,197,960, an increase of $2,208,998 (7%) over the same
period in 1998. Gross profit margins on net sales increased to 32.7% for the
three months ended June 30, 1999 from 32.0% for the same period in 1998. This
increase in gross profit margin was due primarily to increased sales during the
quarter of Enterprise Security Solutions ("ESS"), including the Windows NT
version of SAFEnet and the MAX 1000 video management system and of the release
of new standard products.
Marketing and sales expenses were $8,461,281, an increase of $896,086 (12%) over
the same period in 1998. Marketing and sales expenses for the three months ended
June 30, 1999 were 16.2% of net sales, up from 15.6% for the same period in
1998. This net increase was due to the effect of acquisitions completed during
1999, the effect of hiring additional field sales personnel, and the effect of
hiring additional 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 $5,587,614, an increase of $676,338
(14%) over the same period in 1998. General and administrative expenses for the
three months ended June 30, 1999 were 10.7% of net sales, up from 10.1% of net
sales for the same period in 1998. This net increase was the net effect of
acquisitions in 1999, costs related to the establishment of the Company's
European headquarters in Antwerp, Belgium offset somewhat by reduced hiring and
selective employee terminations during the quarter.
Special charges totaled $3,125,000 for the three months ended June 30, 1999 for
European restructuring expenses such as employee severance, terminating leases,
and consolidation of all purchasing, shipping, and billing activities to
Antwerp, Belgium, estimated closing costs of three sales and distribution
offices in the U.S., and costs to centralize the accounting and finance
functions to the U.S. headquarters.
Other income was $292,815, an increase of $101,202 (53%) from the same period in
1998. This net increase primarily resulted from the net effects of the Company's
investment earnings in Detection Systems, Inc. offset by increased interest
expense due to the use of cash to fund the Company's stock repurchase program
and acquisitions.
11
<PAGE> 12
ULTRAK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
For the Six Months ended June 30, 1999 compared to the
Six Months ended June 30, 1998
Results of Operations
For the six months ended June 30, 1999, net sales were $100,992,211 an increase
of $8,213,932 (9%) over the same period in 1998. This increase for the six
months ended June 30, 1999 was primarily due to the internal growth from sales
of new products and systems introduced in late 1998 and early 1999, increased
volume of sales of existing CCTV products and systems to the consumer/do it
yourself market and most of the other markets served by the Company, and
acquisitions completed during 1999.
Cost of sales was $67,969,504 an increase of $4,451,255 (7%) over the same
period in 1998. Gross profit margins on net sales increased to 32.7% for the six
months ended June 30, 1999 from 31.5% for the same period in 1998. This increase
in gross profit margin was due to increased sales during the quarter of ESS,
including the Windows NT version of SAFEnet and the MAX 1000 video management
system, and the newly released camera and monitor lines, the SmartScan III and
UltraSwitch products.
Marketing and sales expenses were $16,661,723, an increase of $2,069,868 (14%)
over the same period in 1998. Marketing and sales expenses for the six months
ended June 30, 1999 were 16.5% of net sales, up from 15.7% for the same period
in 1998. This net increase was due to the effect of acquisitions completed
during 1999 and the effect of hiring additional field sales personnel, 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 $10,544,964, an increase of $912,432
(9.5%) over the same period in 1998. General and administrative expenses for the
six months ended June 30, 1999 were 10.4% of net sales, and remained flat at
10.4% of net sales for the same period in 1998. This lack of change was due to
the net effect of acquisitions in 1999 offset by the Company's other efforts to
reduce its general and administrative costs as a percentage of net sales.
Special charges totaled $3,875,000 for the six months ended June 30, 1999 for
severance obligations incurred by the Company related to the separation of two
former officers, European restructuring expenses such as employee severance,
terminating leases, and consolidation of all purchasing, shipping, and billing
activities to Antwerp, Belgium, estimated closing costs of three sales and
distribution offices in the U.S., and costs to centralize the accounting and
finance functions to the U.S. headquarters.
Other income was $250,071, a net decrease of $10,719 (4%) from the same period
in 1998. This decrease was primarily resulted from the net effects of the
Company's investment earnings in Detection Systems, Inc. offset substantially by
increased interest expense due to the use of cash to fund the Company's stock
repurchase program and acquisitions.
12
<PAGE> 13
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 increase in cash and cash equivalents for the six months
ended June 30, 1999 of approximately $3,967,000. Net cash provided by operating
activities for the period was approximately $12.1 million, primarily consisting
of increases in accrued and other current liabilities, and decreases in
inventories, noncurrent notes and other assets, prepaid expenses and other
current assets offset partially by increases in advances for inventory and
accounts and notes receivables. Net cash used in investing activities was
approximately $3.3 million consisting of purchases of property and equipment,
primarily related to the worldwide computer software implementation and net cash
paid for acquisitions offset by increases in investment earnings in Detection
Systems, Inc. Net cash used by financing activities was approximately $3.3
million, consisting primarily of purchases of treasury stock and the payment of
dividends on the Company's outstanding Series A Preferred Stock offset by net
borrowings on its bank credit facility.
As of June 30, 1999, the Company had unused available revolving lines of credit
under its bank facility totaling $9.4 million. The Company is in compliance with
or had obtained waivers for 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.
13
<PAGE> 14
ULTRAK, INC. AND SUBSIDIARIES
QUARTER ENDED JUNE 30, 1999
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
The annual meeting of shareholders was held on June 2, 1999.
During the meeting, the holders of a majority of the Company's
outstanding shares elected six directors until the next annual
meeting of shareholders, approved and ratified the selection of
Grant Thornton LLP as the firm of independent certified public
accountants to audit the accounts of the Company for the fiscal
year ending December 31, 2000 and approved an amendment to the
Ultrak, Inc. 1988 Non-Qualified Stock Option Plan to increase
the number of shares available under the plan from 1,000,000 to
1,200,000.
Item 5. Other Information
On April 26, 1999, the Company acquired 100% of the stock of
Multi Concepts Systems, SA ("MCS"), a Switzerland based
systems integrator of electronic security systems. Total
consideration included an initial payment of $405,000 in cash
and future contingent payments estimated at $850,000 in cash
over a three-year period based upon a percentage of audited
annual operating income.
On July 12, 1999, the Company acquired 100% of the stock of
MACH Security Sp.z.o.o ("Mach"), based in Szczecin, Poland.
Mach is one of the largest distributors of CCTV products in
the country of Poland. Total consideration included an initial
payment of $275,000 in cash and future consideration estimated
at $400,000 in cash over a three year period based upon a
percentage of audited annual operating income.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report:
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K.
None filed during the quarter ended June 30, 1999.
14
<PAGE> 15
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: August 12, 1999 By: /s/ Tim D. Torno
--------------------------------------
Tim D. Torno, Vice President-Finance
Principal Financial and
Accounting Officer
15
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 8,447,255
<SECURITIES> 1,200,033
<RECEIVABLES> 40,937,540
<ALLOWANCES> (2,287,820)
<INVENTORY> 42,397,389
<CURRENT-ASSETS> 107,932,967
<PP&E> 23,630,043
<DEPRECIATION> (7,264,793)
<TOTAL-ASSETS> 198,921,618
<CURRENT-LIABILITIES> 23,970,992
<BONDS> 0
0
976,755
<COMMON> 149,781
<OTHER-SE> 132,918,274
<TOTAL-LIABILITY-AND-EQUITY> 198,921,618
<SALES> 100,992,211
<TOTAL-REVENUES> 100,992,211
<CGS> 67,969,504
<TOTAL-COSTS> 67,969,504
<OTHER-EXPENSES> 30,095,580
<LOSS-PROVISION> 3,875,000
<INTEREST-EXPENSE> 1,430,668
<INCOME-PRETAX> (697,802)
<INCOME-TAX> 300,055
<INCOME-CONTINUING> (397,747)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (397,747)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
