<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, 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 June 30, 2000: 11,707,855 shares of $.01 par value common
stock.
<PAGE> 2
ULTRAK, INC. AND SUBSIDIARIES
QUARTER ENDED JUNE 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 16
-----------------
Signatures 18
</TABLE>
2
<PAGE> 3
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 2000 1999
------------- -------------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 4,128,271 4,757,512
Investments 819,500 600,033
Trade Accounts Receivable, less allowance for doubtful accounts 42,223,954 41,337,442
Inventories, net 46,993,202 49,097,433
Advances for Inventory Purchases 208,073 1,943,617
Prepaid Expenses and Other Current Assets 5,356,023 4,230,732
Deferred Income Taxes 3,959,604 3,959,604
Net Assets of Discontinued Operations 1,783,090 1,905,831
------------- -------------
Total Current Assets 105,471,717 107,832,204
------------- -------------
Property, Plant and Equipment, at cost 28,860,669 26,879,627
Less accumulated depreciation and amortization (11,126,027) (9,016,169)
------------- -------------
17,734,642 17,863,458
------------- -------------
Goodwill, net of accumulated amortization 55,334,822 56,337,690
Investment in Detection Systems, Inc., at equity 13,756,640 13,354,019
Software Development Costs, net of accumulated amortization 3,718,714 2,973,764
Other Assets 2,119,620 1,989,373
------------- -------------
Total Assets $ 198,136,155 200,350,508
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable-Trade $ 14,627,145 15,739,200
Accrued Expenses 5,526,001 5,916,432
Accrued Restructuring Costs 480,800 1,749,073
Other Current Liabilities 5,420,304 4,713,081
------------- -------------
Total Current Liabilities 26,054,250 28,117,786
------------- -------------
Line of Credit 37,534,698 37,000,000
Deferred Income Taxes 2,644,489 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;
15,150,105 and 14,981,471 shares issued and outstanding at
June 30, 2000 and December 31, 1999, respectively 151,501 149,815
Additional Paid in Capital 158,181,237 156,708,110
Retained Earnings 17,161,248 17,578,720
Accumulated Other Comprehensive Loss (5,884,912) (4,067,437)
Treasury Stock, at cost (3,442,250 common shares at
June 30, 2000 and December 31, 1999, respectively) (38,683,111) (38,683,111)
------------- -------------
Total Stockholders' Equity 131,902,718 132,662,852
------------- -------------
Total Liabilities and Stockholders' Equity $ 198,136,155 200,350,508
============= =============
</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 SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 2000 JUNE 30, 1999
-------------- -------------- -------------- --------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $ 53,918,600 52,323,827 106,052,941 100,992,211
Cost of sales 37,249,765 35,197,960 73,197,178 67,969,504
-------------- -------------- -------------- --------------
Gross profit 16,668,835 17,125,867 32,855,763 33,022,707
Gross profit % 30.9% 32.7% 31.0% 32.7%
Other operating costs:
Marketing and sales 8,931,748 8,461,281 17,817,902 16,661,723
General and administrative 5,440,307 5,587,614 10,987,855 10,544,964
Depreciation and goodwill amortization 1,621,176 1,535,865 3,224,827 2,888,893
Special charges -- 3,125,000 -- 3,875,000
-------------- -------------- -------------- --------------
15,993,231 18,709,760 32,030,584 33,970,580
-------------- -------------- -------------- --------------
Operating profit (loss) 675,604 (1,583,893) 825,179 (947,873)
Other (expense) income:
Interest expense, net (924,825) (714,630) (1,781,321) (1,430,668)
Equity in income of Detection Systems, Inc. 324,000 450,000 324,000 850,000
Other, net 63,553 557,445 19,538 830,739
-------------- -------------- -------------- --------------
(537,272) 292,815 (1,437,783) 250,071
-------------- -------------- -------------- --------------
INCOME (LOSS) FROM CONTINUING OPERATIONS 138,332 (1,291,078) (612,604) (697,802)
BEFORE INCOME TAXES
Income tax benefit (expense) (69,166) 555,164 253,736 300,055
-------------- -------------- -------------- --------------
NET INCOME (LOSS) 69,166 (735,914) (358,868) (397,747)
Dividend requirements on
preferred stock (29,302) (29,302) (58,604) (58,604)
-------------- -------------- -------------- --------------
Net income (loss) allocable to
common stockholders $ 39,864 (765,216) (417,472) (456,351)
============== ============== ============== ==============
Net income per share:
Basic $ 0.00 $ (0.07) $ (0.04) $ (0.04)
============== ============== ============== ==============
Diluted $ 0.00 $ (0.07) $ (0.04) $ (0.04)
============== ============== ============== ==============
Number of common shares used in computations:
Basic 11,701,262 11,712,028 11,659,817 11,684,997
============== ============== ============== ==============
Diluted 11,952,905 11,712,028 11,659,817 12,043,305
============== ============== ============== ==============
</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, 2000 JUNE 30, 1999
------------------- ------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (358,868) (397,747)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,224,827 2,888,893
Provision for losses on accounts receivable 265,053 368,838
Provision for inventory obsolescence 504,123 (38,314)
Changes in operating assets and liabilities:
Accounts and notes receivable (824,997) (1,614,178)
Inventories 1,788,880 3,662,885
Advances for inventory purchases 1,735,544 (1,812,290)
Prepaid expenses and other current assets (1,255,538) 1,038,722
Noncurrent notes and other assets -- 2,008,911
Accounts and notes payable (1,112,055) 340,348
Accrued and other current liabilities (951,481) 4,694,124
Decrease in net assets of discontinued
operations -- 922,038
-------------- --------------
Net cash provided by (used in) operating activities 3,015,488 12,062,230
-------------- --------------
Cash flows from investing activities:
Proceeds (purchases) of investments, net (618,313) 894,450
Purchases of property and equipment (3,158,510) (3,814,277)
Acquisitions, net of cash acquired -- (404,878)
-------------- --------------
Net cash used in investing activities (3,776,823) (3,324,705)
-------------- --------------
Cash flows from financing activities:
Net borrowings on revolving line of credit 534,698 2,311,750
Issuance of common stock, net of issuance costs 1,474,813 56,250
Purchase of treasury stock -- (5,645,025)
Payment of preferred stock dividends (58,604) (58,604)
-------------- --------------
Net cash provided by (used in) financing activities 1,950,907 (3,335,629)
-------------- --------------
Effect of exchange rate changes on cash (1,818,813) (1,435,362)
Net increase (decrease) in cash and cash equivalents (629,241) 3,966,534
-------------- --------------
Cash and cash equivalents at beginning of the period 4,757,512 4,480,721
-------------- --------------
Cash and cash equivalents at end of the period $ 4,128,271 8,447,255
============== ==============
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, 1999 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 June 30, 2000 For the Quarter Ended June 30, 1999
------------------------------------ -------------------------------------
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 $ 39,864 11,701,262 $ .00 $ (765,216) 11,712,028 $ (.07)
stockholders ========== ==========
Effect of Dilutive Securities:
Stock options -- 251,643 -- --
---------- ---------- ---------- ---------- ---------- ----------
Diluted net income (loss) per share $ 39,864 11,952,905 $ .00 $ (765,216) 11,712,028 $ (.07)
========== ========== ========== ========== ========== ==========
</TABLE>
6
<PAGE> 7
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
<TABLE>
<CAPTION>
2. Earnings per Share, continued:
For the Six Months Ended For the Six Months
June 30, 2000 Ended June 30, 1999
-------------------------------------- --------------------------------------
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 $ (417,472) 11,659,817 $(.04) $ (456,351) 11,684,997 $(.04)
====== ======
Effect of Dilutive Securities:
Contingently issuable shares - - - 197,546
Put options - - - 5,999
Stock options - - - 154,763
------------ ------------ ------------- ------------
Diluted net income (loss) per share $ (417,472) 11,659,817 $ (.04) $ (456,351) 12,043,305 $ (.04)
============ ============ =========== ============= ============ ==========
</TABLE>
For the three and six months ended June 30, 2000, options to purchase 251,643
and 300,720 shares, respectively, were not included in the computation of
dilutive income per share because it would be anti-dilutive to do so.
3. Note Payable to Bank:
On March 22, 2000 (and as amended May 17, 2000) the Company entered into a
two-year credit facility. The credit facility provides for combined borrowings
of up to $45.0 million under a revolving line of credit based upon available
collateral. Interest for the credit facility is payable quarterly at prime plus
a range of 0% to .25% or LIBOR plus a range of 2.25% to 2.75%, depending on the
leverage ratio, as defined, for the quarter. The 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 .375% per annum.
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 June 30, 2000: US-PSG US-DSG Int'l-PSG Supply Corporate Total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Total revenue $ 24,681,870 $ 16,069,597 $ 21,218,161 $ 5,865,612 $ 557 $ 67,835,797
Intersegment revenue (263,030) -- (7,877,369) (5,776,798) -- (13,917,197)
------------ ------------ ------------ ------------ ------------ ------------
Revenue from external customers $ 24,418,840 $ 16,069,597 $ 13,340,792 $ 88,814 $ 557 $ 53,918,600
============ ============ ============ ============ ============ ============
Operating profit (loss), including
special charges $ 2,978,176 $ 2,734,459 ($ 656,459) ($ 316,758) ($ 4,063,814) $ 675,604
Depreciation and amortization expense 155,653 58,977 212,211 30,121 1,164,214 1,621,176
Three months ended June 30, 1999: US-PSG US-DSG Int'l-PSG Supply Corporate Total
------------ ------------ ------------ ------------ ------------ ------------
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 -- -- $ 52,323,827
============ ============ ============ ============ ============ ============
Operating profit (loss) $ 2,417,569 $ 3,203,537 ($ 3,829) ($ 163,474) ($ 7,037,696) ($ 1,583,893)
Depreciation and amortization expense 182,326 62,346 176,990 28,471 1,085,732 1,535,865
Six months ended June 30, 2000: US-PSG US-DSG Int'l-PSG Supply Corporate Total
------------ ------------ ------------ ------------ ------------ ------------
Total revenue $ 47,364,821 $ 31,371,342 $ 44,328,043 $ 11,306,953 $ 6,122 $134,377,281
Intersegment revenue (376,509) -- (16,729,692) (11,218,139) -- (28,324,340)
------------ ------------ ------------ ------------ ------------ ------------
Revenue from external customers $ 46,988,312 $ 31,371,342 $ 27,598,351 $ 88,814 $ 6,122 $106,052,941
============ ============ ============ ============ ============ ============
Operating profit (loss), including
special charges $ 4,878,703 $ 5,496,809 ($ 800,969) ($ 703,738) ($ 8,045,626) $ 825,179
Depreciation and amortization expense 324,794 118,147 424,894 55,411 2,301,581 3,224,827
Six months ended June 30, 1999: US-PSG US-DSG Int'l-PSG Supply Corporate Total
------------ ------------ ------------ ------------ ------------ ------------
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 -- -- $100,992,211
============ ============ ============ ============ ============ ============
Operating profit (loss) $ 3,645,323 $ 6,863,204 $ 135,781 ($ 238,509) ($11,353,672) ($ 947,873)
Depreciation and amortization expense 296,599 126,205 369,229 30,429 2,066,431 2,888,893
</TABLE>
Financial information relating to the Company's Corporate segment is as follows:
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
----------------------------- -----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Engineering and other corporate expenses $ 721,460 $ 1,421,917 $ 2,053,469 $ 2,491,588
General and administrative 2,178,697 1,405,047 3,696,698 2,920,653
Depreciation and amortization 1,164,214 1,085,732 2,301,581 2,066,431
Special charges -- 3,125,000 -- 3,875,000
----------- ----------- ----------- -----------
Operating loss $ 4,064,371 $ 7,037,696 $ 8,051,748 $11,353,672
=========== =========== =========== ===========
</TABLE>
Sales by geographic area were as follows:
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
------------------------------- -------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
United States $ 40,577,808 $ 36,982,834 $ 78,454,590 $ 71,208,682
Europe 11,569,737 13,926,621 24,101,554 27,547,045
Other 1,771,055 1,414,372 3,496,797 2,236,484
------------ ------------ ------------ ------------
Total Revenues $ 53,918,600 $ 52,323,827 $106,052,941 $100,992,211
============ ============ ============ ============
</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 June 30, Six months ended June 30,
------------------------------- -------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Income (Loss) $ 69,166 $ (735,914) $ (358,868) $ (397,747)
Other Comprehensive Income (Expense):
Currency Translation Adjustment (605,717) (449,297) (1,962,322) (1,607,236)
Unrealized Gain (Loss) on Investments (261,724) - 144,847 171,874
------------ ------------ ------------ ------------
Comprehensive loss $ (798,275) $(1,185,211) $(2,176,343) $(1,833,109)
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Foreign Unrealized Accumul. Other
The activity for the three months ended June 30, Currency Gain (Loss) On Comprehensive
2000 related to the following: Items Investments Loss
-------------- -------------- --------------
<S> <C> <C> <C>
Balance as of March 31, 2000 $ (4,856,169) $ (161,302) $ (5,017,471)
Current Period Change (605,717) (261,724) (867,441)
-------------- -------------- --------------
Balance as of June 30, 2000 $ (5,461,886) $ (423,026) $ (5,884,912)
============== ============== ==============
Foreign Unrealized Accumul. Other
The activity for the three months ended June 30, Currency Gain (Loss) On Comprehensive
1999 related to the following: Items Investments Loss
-------------- -------------- --------------
Balance as of March 31, 1999 $ (1,244,911) $ 171,874 $ (1,073,037)
Current Period Change (1,157,939) (171,874) (1,329,813)
-------------- -------------- --------------
Balance as of June 30, 1999 $ (2,402,850) -- $ (2,402,850)
============== ============== ==============
Foreign Unrealized Accumul. Other
The activity for the six months ended June 30, Currency Gain (Loss) On Comprehensive
2000 related to the following: Items Investments Loss
-------------- -------------- --------------
Balance as of December 31, 1999 $ (3,499,563) $ (567,874) $ (4,067,437)
Current Period Change (1,962,322) 144,847 (1,817,475)
-------------- -------------- --------------
Balance as of June 30, 2000 $ (5,461,885) $ (423,027) $ (5,884,912)
============== ============== ==============
Foreign Unrealized Accumul. Other
The activity for the six months ended June 30, Currency Gain (Loss) On Comprehensive
1999 related to the following: Items Investments Loss
------------- -------------- --------------
Balance as of December 31, 1998 $ (795,614) $ (171,874) $ (967,488)
Current Period Change (1,607,236) 171,874 (1,435,362)
------------ ------------- -------------
Balance as of June 30, 1999 $ (2,402,850) -- $ (2,402,850)
============ ============= =============
</TABLE>
10
<PAGE> 11
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
6. Subsequent Event
On July 1, 2000, the Company sold certain assets of its UK-based business,
Intervision Express Ltd., to Norbain SD, Ltd., 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 of the UK
and Ireland. The total consideration also includes approximately $1.0 million in
excess of the carrying value of the tangible assets on Ultrak's books.
Additionally, Norbain entered into a distribution and OEM purchase agreement
whereby Norbain will buy at least $6.0 million of Ultrak branded CCTV products
and dome systems through the end of 2002. In return, Ultrak has agreed to grant
Norbain distribution exclusivity for its Diamond series dome product line and
its CCTV products in the UK and Ireland as long as the above minimum purchase
commitments are met.
11
<PAGE> 12
ULTRAK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For the Three Months ended June 30, 2000 compared to the
Three Months ended June 30, 1999
Results of Operations
For the three months ended June 30, 2000, net sales were $53,918,600, an
increase of $1,594,773 (3%) over the same period in 1999. This was primarily due
to internal growth from domestic sales of standard products and the effect of
acquisitions completed during the second quarter of 1999, offset by lower
international sales of standard products, adverse impacts of the Euro decline,
and lower sales of systems due to delays in release of the new Enterprise
Security Solutions ("ESS") hardware platform.
Cost of sales was $37,249,765, an increase of $2,051,805 (6%) over the same
period in 1999. Gross profit margins on net sales decreased to 30.9% for the
three months ended June 30, 2000 from 32.7% for the same period in 1999. This
decrease in gross profit margin was due primarily to lower systems sales due to
delays in the release of the ESS hardware platform and, accordingly, increased
manufacturing costs at the Company's California facility due to overhead
allocations resulting from lower systems volume.
Marketing and sales expenses were $8,931,748, an increase of $470,467 (6%) over
the same period in 1999. Marketing and sales expenses for the three months ended
June 30, 2000 were 16.6% of net sales, up from 16.2% 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, 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 $5,440,307 for the three months ended
June 30, 2000, a decrease of $147,307 (3%) over the same period in 1999. General
and administrative expenses for the three months ended June 30, 2000 were 10.1%
of net sales, down from 10.7% of net sales for the same period in 1999. This
slight net decrease represents the net impact of overhead cost reductions
resulting from the restructuring program which was announced in June 1999.
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.
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 June 30, 2000 compared to the
Three Months ended June 30, 1999
Results of Operations, continued
Other expense was $537,272 for the three months ended June 30, 2000, an increase
of $830,087 (283%) from the same period in 1999. This net increase in other
expenses resulted primarily from a $453,000 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. A decrease of the Company's investment
earnings in Detection Systems, Inc. ("DETC") by $126,000 over the same period in
1999 also contributed to the increase in other expense due to DETC's financial
results.
13
<PAGE> 14
ULTRAK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
For the Six Months ended June 30, 2000 compared to the
Six Months ended June 30, 1999
Results of Operations
For the six months ended June 30, 2000, net sales were $106,052,941, an increase
of $5,060,730 (5%) over the same period in 1999. This was primarily due to
internal growth from sales of standard products and the effect of acquisitions
completed during the second quarter of 1999, offset by lower European sales of
standard products, adverse impacts of the Euro decline, and lower sales of
systems due to delays in release of the new Enterprise Security Solutions
("ESS") hardware platform.
Cost of sales was $73,197,178, an increase of $5,227,674 (8%) over the same
period in 1999. Gross profit margins on net sales decreased to 31.0% for the six
months ended June 30, 2000 from 32.7% for the same period in 1999. This decrease
in gross profit margin was due primarily to lower systems sales due to delays in
the release of the ESS hardware platform and, accordingly, increased
manufacturing costs at the Company's California facility due to overhead
allocations resulting from lower systems volume.
Marketing and sales expenses were $17,817,902, an increase of $1,156,179 (7%)
over the same period in 1999. Marketing and sales expenses for the six months
ended June 30, 2000 were 16.8% of net sales, up from 16.5% for the same period
in 1999. 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 $10,987,855, an increase of $442,891
(4%) over the same period in 1999. General and administrative expenses for the
six months ended June 30, 2000 were 10.4% of net sales, consistent with the same
period in 1999. This lack of change was due to the net effect of acquisitions in
1999 and costs related to the establishment of the Company's European
headquarters in Antwerp, Belgium, 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.
14
<PAGE> 15
ULTRAK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
For the Six Months ended June 30, 2000 compared to the
Six Months ended June 30, 1999
Results of Operations, continued
Other expense was $1,437,783 for the six months ended June 30, 2000, an increase
of $1,687,854 (675%) from the same period in 1999. This net increase in other
expenses resulted primarily from a $805,000 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. A decrease of the Company's investment
earnings in Detection Systems, Inc. ("DETC") by $526,000 over the same period in
1999 also contributed to the increase in other expense due to DETC financial
results.
Liquidity and Capital Resources
The Company had a net decrease in cash and cash equivalents for the six months
ended June 30, 2000 of approximately $629,000. Net cash provided by operating
activities for the period was approximately $3.0 million. The cash provided by
operating activities consisted of decreases in inventories and advances for
inventory purchases, offset by increases in accounts and notes receivable and
prepaid expenses and other current assets, and decreases in accounts and notes
payable and accrued and other current liabilities. Net cash used in investing
activities was approximately $3.8 million consisting of purchases of property
and equipment, primarily related to the worldwide computer software
implementation. Net cash provided by financing activities was approximately $2.0
million, consisting primarily of issuance of common stock and net borrowings on
the revolving line of credit, offset by the payment of dividends on the
Company's outstanding Series A Preferred Stock.
As of June 30, 2000, the Company had unused available revolving lines of credit
under its bank facility totaling $4.4 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 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.
15
<PAGE> 16
ULTRAK, INC. AND SUBSIDIARIES
QUARTER ENDED JUNE 30, 2000
Part II: Other Information
Item 1. Legal Proceedings
Ultrak has 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.
Ultrak is seeking to replace a majority of the board of
directors of Detection Systems, Inc., a company of which Ultrak
is a 21% stockholder. Ultrak accounts for its investment in
Detection Systems under the equity method of accounting. If
Ultrak is successful in replacing at least 35% of Detection
Systems' directors, these golden parachute agreements will
permit Messrs. Kostusiak and Lederer to quit from Detection
Systems for any reason and receive payments that could exceed
$8 million.
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, 2000.
During the meeting, the holders of a majority of the Company's
outstanding shares elected five directors until the next annual
meeting of shareholders and 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.
16
<PAGE> 17
ULTRAK, INC. AND SUBSIDIARIES
QUARTER ENDED JUNE 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 10.26: First Amended and Restated Credit Agreement
among Ultrak Operating, L.P., American National Bank and Trust
Company of Chicago and Harris Trust Savings Bank, dated May
17, 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 August 4, 2000 reporting the resignation
of Ted Wlazlowski and the election of Peter Beare as President
and Chief Operating Officer of the Company.
17
<PAGE> 18
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 14, 2000 By: /s/ Tim D. Torno
------------------------------------------
Tim D. Torno, Vice President-Finance
Principal Financial and Accounting Officer
18
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
---------- -----------
<S> <C>
10.26 First Amended and Restated Credit Agreement among
Ultrak Operating, L.P., American National Bank and
Trust Company of Chicago and Harris Trust Savings
Bank, dated May 17, 2000.
27 Financial Data Schedule
</TABLE>
