<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:
SEPTEMBER 30, 2000
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 September 30, 2000: 11,710,755 shares of $.01 par value
common stock.
<PAGE> 2
ULTRAK, INC. AND SUBSIDIARIES
QUARTER ENDED SEPTEMBER 30, 2000
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 12
Part II: Other Information 17
Signatures 19
</TABLE>
2
<PAGE> 3
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 2000 1999
------------- ------------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 2,272,295 4,757,512
Investments 643,500 600,033
Trade Accounts Receivable, less allowance for doubtful accounts 36,517,281 41,337,442
Inventories, net 45,232,938 49,097,433
Advances for Inventory Purchases 19,451 1,943,617
Prepaid Expenses and Other Current Assets 6,555,949 4,230,732
Deferred Income Taxes 3,892,322 3,959,604
Net Assets of Discontinued Operations 1,704,594 1,905,831
------------- ------------
Total Current Assets 96,838,330 107,832,204
------------- ------------
Property, Plant and Equipment, at cost 29,345,021 26,879,627
Less accumulated depreciation and amortization (12,142,270) (9,016,169)
------------- ------------
17,202,751 17,863,458
------------- ------------
Goodwill, net of accumulated amortization 53,679,150 56,337,690
Investment in Detection Systems, Inc., at equity 13,904,510 13,354,019
Software Development Costs, net of accumulated amortization 3,809,502 2,973,764
Other Assets 2,086,920 1,989,373
------------- ------------
Total Assets $ 187,521,163 200,350,508
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable-Trade $ 12,395,988 15,739,200
Accrued Expenses 6,179,194 5,916,432
Accrued Restructuring Costs 316,200 1,749,073
Other Current Liabilities 3,702,799 4,713,081
------------- ------------
Total Current Liabilities 22,594,181 28,117,786
------------- ------------
Line of Credit 36,567,863 37,000,000
Deferred Income Taxes 2,584,649 2,569,870
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;
15,153,005 and 14,981,471 shares issued and outstanding at
September 30, 2000 and December 31, 1999, respectively 151,530 149,815
Additional Paid in Capital 158,178,457 156,708,110
Retained Earnings 13,328,921 17,578,720
Accumulated Other Comprehensive Loss (8,178,082) (4,067,437)
Treasury Stock, at cost (3,442,250 common shares at
September 30, 2000 and December 31, 1999, respectively) (38,683,111) (38,683,111)
------------- ------------
Total Stockholders' Equity 125,774,470 132,662,852
------------- ------------
Total Liabilities and Stockholders' Equity $ 187,521,163 200,350,508
============= ============
</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 NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEP. 30, 2000 SEP. 30, 1999 SEP 30, 2000 SEP. 30, 1999
------------- ------------- ------------- -------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $ 47,265,151 51,281,007 153,318,092 152,273,218
Cost of sales 33,240,800 34,411,019 106,437,978 102,380,523
------------- ------------- ------------- -------------
Gross profit 14,024,351 16,869,988 46,880,114 49,892,695
Gross profit % 29.7% 32.9% 30.6% 32.8%
Other operating costs:
Marketing and sales 8,909,798 8,339,484 26,727,700 25,001,207
General and administrative 5,705,912 5,564,164 16,693,767 16,109,128
Depreciation and goodwill amortization 1,687,100 1,568,516 4,911,927 4,457,409
Special charges 1,361,241 -- 1,361,241 3,875,000
------------- ------------- ------------- -------------
17,664,051 15,472,164 49,694,635 49,442,744
------------- ------------- ------------- -------------
Operating profit (loss) (3,639,700) 1,397,824 (2,814,521) 449,951
Other (expense) income:
Interest expense, net (1,035,776) (710,641) (2,817,097) (2,141,309)
Equity in income of Detection Systems, Inc. 230,000 450,000 554,000 1,300,000
Other, net (144,284) 399,238 (124,746) 1,229,977
------------- ------------- ------------- -------------
(950,060) 138,597 (2,387,843) 388,668
------------- ------------- ------------- -------------
INCOME (LOSS) BEFORE INCOME TAXES (4,589,760) 1,536,421 (5,202,364) 838,619
Income tax benefit (expense) 786,737 (660,661) 1,040,473 (360,606)
------------- ------------- ------------- -------------
NET INCOME (LOSS) (3,803,023) 875,760 (4,161,891) 478,013
Dividend requirements on
preferred stock (29,302) (29,302) (87,908) (87,908)
------------- ------------- ------------- -------------
Net income (loss) allocable to
common stockholders $ (3,832,325) 846,458 (4,249,799) 390,105
============= ============= ============= =============
Net income (loss) per share:
Basic $ (0.33) $ 0.07 $ (0.36) $ 0.03
============= ============= ============= =============
Diluted $ (0.33) $ 0.07 $ (0.36) $ 0.03
============= ============= ============= =============
Number of common shares used in computations:
Basic 11,709,514 11,646,944 11,676,559 11,672,288
============= ============= ============= =============
Diluted 11,709,514 12,226,365 11,676,559 12,371,622
============= ============= ============= =============
</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>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (4,161,891) 478,013
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 4,911,925 4,457,409
Provision for losses on accounts receivable 388,426 497,509
Provision for inventory obsolescence 646,789 (26,119)
Deferred income taxes 82,061 --
Non-cash special charges 1,361,241 --
Changes in operating assets and liabilities, net of effects of
acquisitions and divestitures:
Accounts receivable 4,609,689 (1,733,983)
Inventories 3,217,706 (4,170,254)
Advances for inventory purchases 1,924,166 2,680,454
Prepaid expenses and other assets (1,000,341) 287,562
Other assets (497,494) 1,971,376
Accounts payable (3,343,212) 3,010,755
Accrued and other current liabilities (3,541,634) 5,955,729
Decrease in net assets of discontinued operations 201,237 1,914,339
------------------ ------------------
Net cash provided by operating activities 4,798,668 15,322,790
------------------ ------------------
Cash flows from investing activities:
Proceeds (purchases) of investments, net (593,958) 444,450
Purchases of property and equipment (4,418,938) (6,522,197)
Acquisitions, net of cash acquired -- (679,878)
------------------ ------------------
Net cash used in investing activities (5,012,896) (6,757,625)
------------------ ------------------
Cash flows from financing activities:
Net borrowings on revolving line of credit (432,137) 635,030
Issuance of common stock, net of issuance costs 1,472,062 56,250
Purchase of treasury stock -- (6,171,165)
Payment of preferred stock dividends (87,908) (87,908)
------------------ ------------------
Net cash provided by (used in) financing activities 952,017 (5,567,793)
------------------ ------------------
Effect of exchange rate changes on cash (3,223,006) (689,318)
Net increase (decrease) in cash and cash equivalents (2,485,217) 2,308,054
------------------ ------------------
Cash and cash equivalents at beginning of the period 4,757,512 4,480,721
------------------ ------------------
Cash and cash equivalents at end of the period $ 2,272,295 6,788,775
================== ==================
Supplemental schedule of noncash investing and financing:
Acquisition of businesses
Assets acquired $ -- 3,609,767
Liabilities assumed -- (1,435,000)
Common stock issued -- (1,494,889)
------------------ ------------------
Net cash paid for acquisitions $ -- 679,878
=================== ==================
</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 in
accordance with accounting principles for interim reporting 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,
1999 included in the Ultrak Annual Report on Form 10-K.
2. Earnings Per Share:
The Company computes basic earnings (loss) 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 (loss) per share:
<TABLE>
<CAPTION>
Quarter Ended Sep. 30, 2000 Quarter Ended Sep. 30, 1999
-------------------------------------- --------------------------------------
Net Per Share Net Per Share
Loss Shares Amount Income Shares Amount
------------ ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Basic income (loss) per share:
Income (loss) allocable to common stockholders $ (3,832,325) 11,709,514 $(.33) $ 846,458 11,646,944 $.07
============ ============
Effect of Dilutive Securities:
Stock options -- -- -- 172,440
Convertible preferred stock -- -- 29,302 406,981
------------ ----------- ----------- ------------
Diluted income (loss) per share $ (3,832,325) 11,709,514 $(.33) $ 875,760 12,226,365 $.07
============ =========== ============ =========== ============ ============
</TABLE>
6
<PAGE> 7
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
2. Earnings per Share, continued:
<TABLE>
<CAPTION>
Nine Months Ended Nine Months
September 30, 2000 Ended September 30, 1999
-------------------------------------- --------------------------------------
Net Per Share Net Per Share
Loss Shares Amount Income Shares Amount
------------ ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Basic income (loss) per share:
Income (loss) allocable to common stockholders $ (4,249,799) 11,676,559 $(.36) $ 390,105 11,672,288 $.03
============ ============
Effect of Dilutive Securities:
Contingently issuable shares -- -- -- 131,698
Stock options -- -- -- 160,655
Convertible preferred stock -- -- 87,908 406,981
------------ ----------- ----------- ------------
Diluted income (loss) per share $ (4,249,799) 11,676,559 $ (.23) $ 478,013 12,371,622 $ .03
============ =========== ============ =========== ============ ============
</TABLE>
For the three and nine months ended September 30, 2000, options to purchase
579,123 and 535,078 shares, respectively, were not included in the computation
of dilutive income per share because their effect would be anti-dilutive.
3. Note Payable to Bank:
The Company is currently in violation of its financial covenants, but has
obtained the necessary waivers from its lenders.
7
<PAGE> 8
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
4. Segment Disclosure and Foreign Operations:
The Company has four business segments: United States-Professional Security
Group (US-PSG), United States-Diversified Sales Group (US-DSG),
International-Professional Security Group (Int'l-PSG), and Supply. 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
consumers in the United States.
International-PSG
This segment sells to professional security dealers, distributors,
installers and certain large- end users of professional security products
outside the United States.
Supply
This segment sells products and systems manufactured by the Company's
Ohio and California facilities to the US-PSG and International-PSG
segments.
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 operations before income
taxes and other income and expense. The Corporate column includes corporate
overhead-related items.
8
<PAGE> 9
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
4. Segment Disclosure and Foreign Operations, continued:
The following tables provide financial data by segment for the periods noted:
<TABLE>
<CAPTION>
Three months ended Sep. 30, 2000: US-PSG US-DSG Int'l-PSG Supply Corporate Total
----------- ----------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Total revenue $20,760,385 $15,191,178 $16,715,353 $ 6,960,673 -- $ 59,627,589
Intersegment revenue (152,766) -- (6,311,201) (5,898,471) -- (12,362,438)
----------- ----------- ----------- ----------- ----------- ------------
Revenue from external customers $20,607,619 $15,191,178 $10,404,152 $ 1,062,202 -- $ 47,265,151
=========== =========== =========== =========== =========== ============
Operating profit (loss), including special
charges $ 909,129 $ 2,209,538 $(1,089,973) $ 46,851 $(5,715,245) $ (3,639,700)
Depreciation and amortization expense 171,191 55,859 197,743 31,401 1,230,906 1,687,100
</TABLE>
<TABLE>
<CAPTION>
Three months ended Sep. 30, 2000: US-PSG US-DSG Int'l-PSG Supply Corporate Total
----------- ----------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Total revenue $21,933,508 $13,535,498 $21,172,297 $ 5,125,997 -- $ 61,767,300
Intersegment revenue (391,519) -- (4,968,777) (5,125,997) -- (10,486,293)
----------- ----------- ----------- ----------- ------------ ------------
Revenue from external customers $21,541,989 $13,535,498 $16,203,520 -- -- $ 51,281,007
=========== =========== =========== =========== ============ ============
Operating profit (loss) $ 2,231,854 $ 2,416,861 $ 623,421 $ (245,682) $ (3,628,630) $ 1,397,824
Depreciation and amortization expense 176,647 54,368 199,324 15,215 1,122,962 1,568,516
</TABLE>
<TABLE>
<CAPTION>
Nine months ended Sep. 30, 2000: US-PSG US-DSG Int'l-PSG Supply Corporate Total
----------- ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Total revenue $68,125,206 $46,562,520 $ 61,043,396 $ 18,267,626 $ 6,122 $194,004,870
Intersegment revenue (529,275) -- (23,040,893) (17,116,610) -- (40,686,778)
----------- ----------- ------------ ------------ ------------ ------------
Revenue from external customers $67,595,931 $46,562,520 $ 38,002,503 $ 1,151,016 $ 6,122 $153,318,092
=========== =========== ============ ============ ============ ============
Operating profit (loss), including
special charges $ 5,787,832 $ 7,706,347 $ (1,890,942) $ (656,887) $(13,760,871) $ (2,814,521)
Depreciation and amortization expense 495,985 174,006 622,637 86,812 3,532,487 4,911,927
</TABLE>
<TABLE>
<CAPTION>
Nine months ended Sep. 30, 2000: US-PSG US-DSG Int'l-PSG Supply Corporate Total
----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Total revenue $63,494,901 $44,001,123 $ 54,384,187 $ 15,648,359 -- $177,528,570
Intersegment revenue (1,209,855) -- (8,397,138) (15,648,359) -- (25,255,352)
----------- ----------- ------------ ------------ ------------ ------------
Revenue from external customers $62,285,046 $44,001,123 $ 45,987,049 -- -- $152,273,218
=========== =========== ============ ============ ============ ============
Operating profit (loss) $ 5,877,177 $ 9,280,065 $ 759,202 $ (484,191) $(14,982,302) $ 449,951
Depreciation and amortization expense 473,246 180,573 568,553 45,644 3,189,393 4,457,409
</TABLE>
Financial information relating to the Company's Corporate segment is as follows:
<TABLE>
<CAPTION>
Three months ended Sep. 30, Nine months ended Sep. 30,
---------------------------------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Engineering and other corporate expenses $ 1,450,016 $ 1,102,019 $ 4,086,641 $ 3,593,607
General and administrative 1,656,602 1,403,649 5,353,300 4,324,302
Depreciation and amortization 1,230,906 1,122,962 3,532,487 3,189,393
Special charges 1,361,241 -- 1,361,241 3,875,000
------------ ------------ ------------ ------------
Operating Expenses $ 5,698,765 $ 3,628,630 $ 14,333,669 $ 14,982,302
============ ============ ============ ============
</TABLE>
Sales by geographic area were as follows:
<TABLE>
<CAPTION>
Three months ended Sep. 30, Nine months ended Sep. 30,
---------------------------------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
United States $ 36,860,999 $ 35,077,487 $115,315,589 $106,286,169
Europe 8,671,893 14,120,351 32,773,447 41,667,396
Other 1,732,259 2,083,169 5,229,056 4,319,653
------------ ------------ ------------ ------------
Total Revenues $ 47,265,151 $ 51,281,007 $153,318,092 $152,273,218
============ ============ ============ ============
</TABLE>
9
<PAGE> 10
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
5. Comprehensive Income (Loss):
Total comprehensive income (loss) is as follows:
<TABLE>
<CAPTION>
Three months ended Sep. 30, Nine months ended Sep. 30,
---------------------------------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Income (Loss) $ (3,803,023) $ 875,760 $ (4,161,891) $ 478,013
Other Comprehensive Income (Expense):
Currency Translation Adjustment (2,177,009) 646,044 (4,139,332) (961,192)
Unrealized Gain (Loss) on Investments
(116,161) -- 28,687 171,874
------------ ------------ ------------ ------------
(2,293,170) 646,004 (4,110,645) (789,318)
------------ ------------ ------------ ------------
Comprehensive income (loss) $ (6,096,193) $ 1,521,804 $ (8,272,536) $ (311,305)
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Foreign Unrealized Accumul. Other
Currency Gain (Loss) On Comprehensive
The activity for the three months ended Sep. 30, 2000 Items Investments Loss
related to the following: ----------- -------------- --------------
<S> <C> <C> <C>
Balance as of June 30, 2000 $(5,461,886) $ (423,026) $(5,884,912)
Current Period Change (2,177,009) (116,161) (2,293,170)
----------- ---------- -----------
Balance as of September 30, 2000 $(7,638,895) $ (539,187) $(8,178,082)
=========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
Foreign Unrealized Accumul. Other
Currency Gain (Loss) On Comprehensive
The activity for the three months ended Sep. 30, 2000 Items Investments Loss
related to the following: ----------- -------------- --------------
<S> <C> <C> <C>
Balance as of June 30, 1999 $(2,402,850) -- $(2,402,850)
Current Period Change 646,044 -- 646,044
----------- ---------- -----------
Balance as of September 30, 1999 $(1,756,806) -- $(1,756,806)
=========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
Foreign Unrealized Accumul. Other
Currency Gain (Loss) On Comprehensive
The activity for the three months ended Sep. 30, 2000 Items Investments Loss
related to the following: ----------- -------------- --------------
<S> <C> <C> <C>
Balance as of December 31, 1999 $(3,499,563) $ (567,874) $(4,067,437)
Current Period Change (4,139,332) 28,687 (4,110,645)
----------- ---------- -----------
Balance as of September 30, 2000 $(7,638,895) $ (539,187) $(8,178,082)
=========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
Foreign Unrealized Accumul. Other
Currency Gain (Loss) On Comprehensive
The activity for the three months ended Sep. 30, 2000 Items Investments Loss
related to the following: ----------- -------------- --------------
<S> <C> <C> <C>
Balance as of December 31, 1998 $ (795,614) $ (171,874) $ (967,488)
Current Period Change (961,192) 171,874 (789,318)
----------- ---------- -----------
Balance as of September 30, 1999 $(1,756,806) -- $(1,756,806)
=========== ========== ===========
</TABLE>
10
<PAGE> 11
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
6. Special Charges
Special charges totaled $1,361,241 for the quarter ended September 30, 2000.
These charges were incurred for severance obligations of the company related to
the separation of three former executives, severance obligations related to the
outsourcing of manufacturing operations in California and Australia, and the
proxy contest with Detection Systems, Inc., a company of which Ultrak, Inc. is a
21% stockholder. The detail of these charges is as follows:
<TABLE>
<CAPTION>
Special Charge
--------------
<S> <C>
Severance $ 584,067
California Outsourcing $ 84,465
Australia Outsourcing $ 75,000
Detection Systems, Inc. Proxy Contest $ 617,709
--------------
$ 1,361,241
==============
</TABLE>
The Company incurred $3,875,000 of non-recurring special charges in 1999 related
to a restructuring plan that commenced in June 1999. The Company expects the
restructuring to be complete by the end of 2000. The current year activity is
summarized as follows:
Total 1999 restructuring plan for the nine months ended September 30, 2000 is
summarized as follows:
<TABLE>
<CAPTION>
Accrued at Accrued at
December 31, 1999 Settled September 30, 2000
----------------- ----------- ------------------
<S> <C> <C> <C>
Severance and other related employee costs $ 918,807 918,807 --
Leased facilities and other termination costs 830,266 514,066 316,200
----------------- ----------- ------------------
$ 1,749,073 1,432,873 316,200
================= =========== ==================
</TABLE>
7. Intervision Sale
On July 1, 2000, the Company sold certain assets of its UK-based business,
Intervision Express Ltd. ("Intervision"), to Norbain SD, Ltd. ("Norbain"), a
UK-based distributor of CCTV and access control equipment. The Company received
approximately $2.1 million in cash for inventory and certain other assets
including use of the Intervision tradename. Ultrak retained the right to sell
Ultrak branded products directly to systems integrators and installers in
Intervision's previous market in the UK and Ireland.
In addition, the Company granted Norbain distribution exclusivity for its
Diamond-series dome product line and its CCTV products in the UK. To maintain
its exclusivity, Norbain must purchase at least $6 million of Ultrak-branded
CCTV products and dome systems through the end of 2002.
11
<PAGE> 12
ULTRAK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For the Three Months ended September 30, 2000 compared to the
Three Months ended September 30, 1999
Results of Operations
For the three months ended September 30, 2000, net sales were $47,265,151, a
decrease of $4,015,856 (8%) over the same period in 1999. This was primarily due
to the sale of Intervision, as well as adverse impacts of the Euro decline.
Gross profit margins on net sales decreased to 29.7% for the three months ended
September 30, 2000 from 32.9% for the same period in 1999. This decrease in
gross profit margin was due to lower worldwide systems sales.
Marketing and sales expenses were $8,909,798, an increase of $570,314 (6%) over
the same period in 1999. Marketing and sales expenses for the three months ended
September 30, 2000 were 18.8% of net sales, up from 16.3% for the same period in
1999. 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. There were increased
advertising, promotion, and freight costs associated with the sales and shipment
of new standard products. Part of these increases were offset by decreases due
to a reduction in field sales and support personnel in our International PSG
segment and the sale of Intervision.
General and administrative expenses were $5,705,912 for the three months ended
September 30, 2000, an increase of $141,748 (3%) over the same period in 1999.
General and administrative expenses for the three months ended September 30,
2000 were 12.0% of net sales, up from 10.9% of net sales for the same period in
1999. This increase represents the outsourcing of SAP basis support and an
increase in hiring costs and service contracts. This increase is partially
offset by a reduction in expenses due to the outsourcing of manufacturing
operations in Australia and California, as well as the sale of Intervision.
Special charges totaled $1,361,241 for the three months ended September 30,
2000. These charges were incurred for severance obligations of the company
related to the separation of three former executives, severance obligations
related to the outsourcing of manufacturing operations in California and
Australia, and the proxy contest with Detection Systems, Inc., a company of
which Ultrak, Inc. is a 21% stockholder.
12
<PAGE> 13
ULTRAK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
For the Three Months ended September 30, 2000 compared to the
Three Months ended September 30, 1999
Results of Operations, continued
Other expense was $950,060 for the three months ended September 30, 2000, an
increase of $1,088,657 (785%) from the same period in 1999. This net increase in
other expenses resulted primarily from a $389,493 reduction in income on the
sale of investments from the same period in 1999 and an increase in interest
rates paid by the Company on its credit facility due to an increase in net
borrowings of approximately $2.4 million over the same period in 1999. A
decrease in the Company's equity in the income of Detection Systems, Inc.
("DETC") of $220,000 over the same period in 1999 also contributed to the
increase in other expense.
13
<PAGE> 14
ULTRAK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
For the Nine Months ended September 30, 2000 compared to the
Nine Months ended September 30, 1999
Results of Operations
For the nine months ended September 30, 2000, net sales were $153,318,092, an
increase of $1,044,874 (1%) over the same period in 1999. This was primarily due
to increases in sales of standard products and observation systems. The increase
can also be attributed to an increase in sales of consumer/do-it-yourself
products by the Company's e-commerce site: SecurityandMore.com, which began
operating in September 1999. These increases were partially offset by a loss in
sales due to the sale of Intervision, as well as adverse impacts of the Euro
decline.
Gross profit margins on net sales decreased to 30.6% for the nine months ended
September 30, 2000 from 32.8% for the same period in 1999. This decrease in
gross profit margin was due to lower systems sales in the International segment.
Marketing and sales expenses were $26,727,700, an increase of $1,726,493 (6%)
over the same period in 1999. Marketing and sales expenses for the nine months
ended September 30, 2000 were 17.4% of net sales, up from 16.4% for the same
period in 1999. 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. Part
of these increases were offset by decreases due to a reduction in field sales
and support personnel in our International PSG segment and the sale of
Intervision.
General and administrative expenses were $16,693,767, an increase of $548,639
(4%) over the same period in 1999. General and administrative expenses for the
nine months ended September 30, 2000 were 10.8% of net sales, up from 10.6% for
the same period in 1999. This increase represents the outsourcing of SAP basis
support and an increase in hiring costs and service contracts. This increase is
partially offset by a reduction in expenses due to the outsourcing of
manufacturing operations in Australia and California, as well as the sale of
Intervision.
14
<PAGE> 15
ULTRAK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
For the Nine Months ended September 30, 2000 compared to the
Nine Months ended September 30, 1999
Special charges were $1,361,241, compared with $3,875,000 for the nine months
ended September 30, 1999. The charges incurred in the nine months ended
September 30, 2000 were for severance obligations related to the separation of
three former executives, severance obligations related to the outsourcing of
manufacturing operations in California and Australia, and the proxy contest with
Detection Systems, Inc., a company of which Ultrak, Inc. is a 21% stockholder.
The special charges recorded in the nine months ended September 30, 1999 were
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 expense was $2,387,843 for the nine months ended September 30, 2000, an
increase of $2,776,511 (714%) from the same period in 1999. This net increase in
other expenses resulted primarily from a $1,194,876 reduction in income on the
sale of investments from the same period in 1999 and an increase in interest
rates paid by the Company on its credit facility as a result of the two-year
agreement signed on March 22, 2000. A decrease of the Company's equity in the
income of Detection Systems, Inc. ("DETC") by $746,000 over the same period in
1999 also contributed to the increase in other expense.
15
<PAGE> 16
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 nine months
ended September 30, 2000 of approximately $2,485,000. Net cash provided by
operating activities for the period was approximately $4.8 million versus $15.3
million for the comparable period. The most significant differences from 1999 to
2000 are the net losses in 2000, payment of accrued restructuring costs and a
net reduction in past due European payables to bring accounts with major
suppliers to current status. Net cash used in investing activities was
approximately $5.0 million consisting of purchases of property and equipment,
primarily related to the worldwide computer software implementation, and
purchases of investments. Net cash provided by financing activities was
approximately $950,000, consisting primarily of issuance of common stock, offset
by net repayments on the revolving line of credit and by the payment of
dividends on the Company's outstanding Series A Preferred Stock.
As of September 30, 2000, the Company had unused available revolving lines of
credit under its bank facility totaling $4.6 million. The Company had obtained
waivers from its lenders for all of its covenants as of the date of this report.
Fees for these waivers will be approximately $175,000.
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 twelve
months.
Quantitative and Qualitative Disclosures about Market Risk
There has been no material change in the Company's market risk exposure since
the filing of the 1999 Annual Report on Form 10-K.
16
<PAGE> 17
ULTRAK, INC. AND SUBSIDIARIES
QUARTER ENDED SEPTEMBER 30, 2000
Part II: Other Information
Item 1. Legal Proceedings
Ultrak previously commenced litigation seeking to invalidate
the golden parachute agreements between Detection Systems, Inc.
("DETC") and each of Karl K Kostusiak, its Chairman and Chief
Executive Officer, and David B. Lederer, currently its
Executive Vice President and to preliminarily and permanently
enjoin the making of any payments under them, as well as for
other relief, by filing a shareholder derivative complaint on
June 30, 2000 in the United States District Court for the
Western District of New York (the "Court") against DETC's five
current directors, including Messrs. Kostusiak and Lederer.
On September 27, 2000 Detection Systems announced that the
golden parachute agreements with Messrs. Kostusiak and Lederer
had been modified and amended and sent a letter to the Court
arguing as a result of this action that Ultrak's lawsuit was
rendered moot. Upon determining that these new agreements
significantly reduced the potential cost to Detection Systems
shareholders in the event of a change of control, and because
the goal of Ultrak's lawsuit had been achieved, on October 2,
2000, Ultrak informed the federal court that it intended to
submit papers to the court for a voluntary dismissal of the
case. On October 24, 2000, the Court approved Ultrak's
voluntary dismissal of the lawsuit, without prejudice, and
ordered that the Court will consider, when submitted, an
application by Ultrak to recover fees paid by it in connection
with the lawsuit. There can be no assurance that Ultrak will
prevail in recovering these fees or as to the amount of fees it
may recover.
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
17
<PAGE> 18
ULTRAK, INC. AND SUBSIDIARIES
QUARTER ENDED SEPTEMBER 30, 2000
Part II: Other Information, Continued
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report:
Exhibit 10.27: Amendment No. 5 to Ultrak, Inc 1988
Non-Qualified Stock Option Plan, adopted by the Board as of
January 24, 2000.
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 October 24, 2000 reporting the
resignation of Tim Torno, Vice President Finance and Chief
Financial Officer and the appointment of Chris Sharng as Senior
Vice President and Chief Financial Officer of the Company.
18
<PAGE> 19
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: November 14, 2000 By: /s/ Chris Sharng
---------------------------------------
Chris Sharng, Senior Vice President and
Chief Financial Officer
19
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.27 Amendment No. 5 to Ultrak, Inc 1988 Non-Qualified Stock Option
Plan, adopted by the Board as of January 24, 2000.
27 Financial Data Schedule
</TABLE>
