<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, 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 March 31, 1999: 11,865,188 shares of $.01 par value common
stock.
<PAGE> 2
ULTRAK, INC. AND SUBSIDIARIES
QUARTER ENDED MARCH 31, 1999
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 1999 1998
-------------- ---------------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 10,933,878 4,480,721
Investments 1,555,540 3,473,563
Trade Accounts Receivable, less Allowance for Doubtful Accounts 39,435,170 37,404,380
Inventories, net 42,191,995 46,021,960
Advances for Inventory Purchases 6,137,743 4,878,853
Prepaid Expenses and Other Current Assets 3,971,787 5,491,298
Deferred Income Taxes 2,956,259 2,956,259
Net Assets of Discontinued Operations 3,193,640 3,486,181
-------------- ---------------
Total Current Assets 110,376,012 108,193,215
-------------- ---------------
Property, Plant and Equipment, at cost 22,278,346 20,211,953
Less accumulated depreciation and amortization (6,294,381) (5,122,470)
-------------- ---------------
15,983,965 15,089,483
-------------- ---------------
Goodwill, net of Accumulated Amortization 55,969,417 54,861,332
Investment in Detection Systems, Inc. 13,472,007 12,702,909
Software Development Costs, net of Accumulated Amortization 1,825,524 1,457,266
Other Assets 2,204,388 4,321,790
-------------- ---------------
Total Assets $ 199,831,313 196,625,995
============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable-Trade $ 7,108,173 8,368,265
Accrued Expenses 5,347,035 5,791,205
Other Current Liabilities 2,900,465 3,842,050
-------------- ---------------
Total Current Liabilities 15,355,673 18,001,520
-------------- ---------------
Line of Credit 43,924,621 37,500,000
Deferred Income Taxes 1,094,065 1,094,065
Commitments and Contingencies --
Equity Put Options on Common Stock 0 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
March 31, 1999 and December 31, 1998, respectively 149,781 147,031
Additional Paid in Capital 156,648,686 153,333,593
Retained Earnings 17,439,262 17,130,398
Accumulated Other Comprehensive Loss (2,040,525) (967,488)
Treasury Stock, at cost (3,112,950 and 2,987,950 common shares at
March 31, 1999 and December 31, 1998, respectively) (33,717,005) (32,153,442)
-------------- ---------------
Total Stockholders' Equity 139,456,954 138,466,847
-------------- ---------------
Total Liabilities and Stockholders' Equity $ 199,831,313 196,625,995
============== ===============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
<PAGE> 4
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31,1999 MARCH 31,1998
------------- ---------------
(unaudited) (unaudited)
<S> <C> <C>
Net sales $ 48,668,384 44,259,934
Cost of sales 32,771,544 30,529,287
------------- ---------------
Gross profit 15,896,840 13,730,647
Gross profit % 32.7% 31.0%
Other operating costs:
Marketing and sales 8,200,442 7,026,660
General and administrative 4,957,350 4,721,256
Depreciation and goodwill amortization 1,353,028 902,166
Special charges 750,000 0
------------- ---------------
15,260,820 12,650,082
------------- ---------------
Operating profit 636,020 1,080,565
Other (expense) income:
Interest expense, net (716,038) 19,367
Equity in income of Detection Systems, Inc. 400,000 0
Other, net 273,294 49,810
------------- ---------------
(42,744) 69,177
------------- ---------------
INCOME FROM CONTINUING OPERATIONS 593,276 1,149,742
BEFORE INCOME TAXES
Income taxes (255,109) (463,547)
------------- ---------------
INCOME FROM CONTINUING OPERATIONS 338,167 686,195
Discontinued operations, net of tax effects:
Loss (income) from operations
-- 105,858
Gain on disposal -- --
------------- ---------------
-- 105,858
------------- ---------------
NET INCOME
338,167 580,337
Dividend requirements on
preferred stock (29,302) (29,302)
------------- ---------------
Net income allocable to
common stockholders $ 308,865 551,035
============= ===============
Income per share- Continuing Operations before
Special Charges:
Basic $ 0.06 $ 0.05
============= ===============
Diluted $ 0.06 $ 0.05
============= ===============
Income per share- Continuing Operations:
Basic $ 0.03 $ 0.05
============= ===============
Diluted $ 0.03 $ 0.05
============= ===============
Net income per share:
Basic $ 0.03 $ 0.04
============= ===============
Diluted $ 0.03 $ 0.04
============= ===============
Number of common shares used in computations:
Basic 11,655,637 13,977,702
============= ===============
Diluted 12,645,217 15,177,115
============= ===============
</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 31,1999 MARCH 31,1998
------------- -------------
(restated)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 338,167 580,337
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 1,353,028 902,166
Provision for losses on accounts receivable 139,138 138,589
Provision for inventory obsolescence (278,144) 16,935
Changes in operating assets and liabilities:
Accounts and notes receivable (2,169,928) (6,559,494)
Inventories 4,108,109 (9,017,082)
Advances for inventory purchases (1,258,890) 3,710,798
Prepaid expenses and other current assets 1,519,511 (259,185)
Noncurrent notes and other assets 1,117,397 1,445,270
Accounts and notes payable (1,260,092) 1,163,365
Accrued and other current liabilities (1,385,755) 1,281,854
Decrease in net assets of discontinued
operations 523,448 2,359,357
------------ ------------
Net cash provided by (used in) operating activities 2,745,989 (4,237,090)
------------ ------------
Cash flows from investing activities:
Proceeds of investments, net 1,918,023
Purchases of property and equipment (2,020,675) (4,149,261)
Acquisitions, net of cash acquired (1,703,179)
------------ ------------
Net cash used in investing activities (1,805,831) (4,149,261)
------------ ------------
Cash flows from financing activities:
Net borrowings on revolving line of credit 6,424,621 8,000,000
Decrease in restricted cash -- 49,899
Issuance of common stock, net of issuance costs 1,754,280 (3,751)
Purchase of treasury stock (1,563,563) (1,608,622)
Payment of preferred stock dividends (29,302) (29,302)
------------ ------------
Net cash provided by financing activities 6,586,036 6,408,224
------------ ------------
Effect of exchange rate changes on cash (1,073,037) (220,828)
Net increase (decrease) in cash and cash equivalents 6,453,157 (2,198,955)
------------ ------------
Cash and cash equivalents at beginning of the period 4,480,721 14,099,684
------------ ------------
Cash and cash equivalents at end of the period $ 10,933,878 11,900,729
============ ============
</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. Earnings 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 March 31, 1999 For the Quarter Ended March 31, 1998
---------------------------------------- ----------------------------------------
Net Per Share Net Per Share
Income Shares Amount Income Shares Amount
------------ -------------- ------------ -------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Basis earnings per share:
Income allocable to common stockholders $ 308,865 11,655,637 $0.03 $551,035 13,977,702 $.04
============ ==========
Effect of Dilutive Securities:
Contingently issuable shares 395,093 386,707
Put options 11,997 443,450
Stock options 175,509 369,256
Convertible preferred stock 29,302 406,981 -
------------ -------------- -------------- -------------
Diluted earnings per share $ 338,167 12,645,217 $0.03 $551,035 15,177,115 $.04
============ ============== ============ ============== ============= ==========
</TABLE>
6
<PAGE> 7
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
3. 1999 Business Combination:
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.
4. Note Payable to Bank:
On February 16, 1999, the Company entered into a new three-year credit
facility with two banks. The 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 or LIBOR plus a range of .75% to
1.25%, 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
.25%, depending on the leverage ratio for the quarter.
As of March 31,1999, the Company had borrowings in the amount of $43.9
million outstanding under this facility.
5. Special Charge:
The nonrecurring special charge includes 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.
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, 1999 compared to the
Three Months ended March 31, 1998
Results of Operations
For the three months ended March 31, 1999, net sales were $48,668,384, an
increase of $4,408,450 (10%) over the same period in 1998. This increase for the
three months ended March 31, 1999 was primarily due to internal growth from
sales of new products and systems and increased volume of sales of existing CCTV
products and systems to most of the markets served by the Company.
Cost of sales was $32,771,544, an increase of $2,242,257 (7%) over the same
period in 1998. Gross profit margins on net sales increased to 32.7% for the
three months ended March 31, 1999 from 31.0% 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 newly released
Windows NT version of SAFEnet, the MAX 1000 video management system, and the
newly released camera and monitor lines, as well as Smartscan III and
UltraSwitch.
Marketing and sales expenses were $8,200,442, an increase of $1,173,782 (17%)
over the same period in 1998. Marketing and sales expenses for the three months
ended March 31, 1999 were 16.8% of net sales, up from 15.9% for the same period
in 1998. This net increase was due to 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 $4,957,350, an increase of $236,094
(5%) over the same period in 1998. General and administrative expenses for the
three months ended March 31, 1999 were 10.2% of net sales, down from 10.7% of
net sales for the same period in 1998. This net decrease resulted from a
reduction in the number of new hires during the quarter and the Company's other
efforts to reduce its general and administrative costs as a percentage of net
sales.
Special charges totaled $750,000 for the three months ended March 31, 1999 for
severance obligations incurred by the Company related to the separation of two
former officers.
Other expense was $42,744, a net decrease of $111,921 (162%) from the same
period in 1998. This decrease resulted from the Company's decision 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; and the resulting interest expense on bank borrowings during 1999.
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 increase in cash and cash equivalents for the three months
ended March 31, 1999 of approximately $6.5 million. Net cash provided by
operating activities for the period was approximately $2.7 million, primarily
consisting of decreases in inventories, prepaid expenses and other current
assets, and noncurrent notes and other assets offset partially by increases in
accounts and notes receivable, in advances for inventory purchases, as well as
decreases in accounts and notes payable and accrued and other current
liabilities. Net cash used in investing activities was approximately $1.8
million consisting of purchases of property and equipment, primarily related to
the Company's worldwide computer implementation, and the acquisition of ABM Data
Systems, offset partially by proceeds from the sale of investments. Cash
provided by financing activities was approximately $6.6 million, consisting
primarily of borrowings on its bank credit facility, offset by purchases of
treasury stock and the payment of dividends on the Company's outstanding Series
A Preferred Stock.
As of March 31, 1999, the Company had unused available revolving lines of credit
under its bank facility totaling $6.1 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, 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
Not Applicable
Item 5. Other Information
On March 15, 1999, the Company acquired 100% of the common
stock of ABM Data Systems, Inc., an Austin, Texas software
developer for the alarm monitoring segment of the security
industry. Consideration was 250,000 shares of registered
Ultrak common stock valued at approximately $1.8 million.
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.
A Current Report on Form 8-K was filed with the Securities and
Exchange Commission on March 18, 1999 reporting the ABM Data
Systems, Inc. acquisition and the resignation of James D.
Pritchett, President, Chief Operating Officer and a director
of the Company.
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 7, 1999 By: /s/ Tim D. Torno
-------------------------------------
Tim D. Torno, Vice President-Finance
Principal Financial and
Accounting Officer
11
<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 10,933,878
<SECURITIES> 1,555,540
<RECEIVABLES> 40,527,020
<ALLOWANCES> (1,091,850)
<INVENTORY> 42,191,995
<CURRENT-ASSETS> 110,376,012
<PP&E> 22,278,346
<DEPRECIATION> (6,294,381)
<TOTAL-ASSETS> 199,831,313
<CURRENT-LIABILITIES> 15,355,673
<BONDS> 0
0
976,755
<COMMON> 149,781
<OTHER-SE> 138,330,418
<TOTAL-LIABILITY-AND-EQUITY> 199,831,313
<SALES> 48,668,384
<TOTAL-REVENUES> 48,668,384
<CGS> 32,771,544
<TOTAL-COSTS> 32,771,544
<OTHER-EXPENSES> 14,510,820
<LOSS-PROVISION> 750,000
<INTEREST-EXPENSE> 716,038
<INCOME-PRETAX> 593,276
<INCOME-TAX> 255,109
<INCOME-CONTINUING> 338,167
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 338,167
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
