Universal Power Group Reports Third Quarter 2012 Results

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Universal Power Group Reports Third Quarter 2012 Results

CARROLLTON, Texas--(BUSINESS WIRE)-- Universal Power Group, Inc. (NYSE Amex: UPG), a Texas-based distributor and supplier of batteries and related power accessories and a third-party logistics provider, today announced financial results for the third quarter and nine months ended Sept. 30, 2012. For the third quarter, UPG reported net income of $43,000, or $0.01 per diluted share, on net sales of $22.1 million, compared with net income of $183,000, or $0.04 per diluted share, on net sales of $24.7 million in the third quarter of 2011.

"Our results for the third quarter reflect the continued impact of a number of factors that have affected our results over the past year, including the supply disruptions with a number of our Chinese suppliers," stated Ian Edmonds, UPG's President and Chief Executive Officer. "During the third quarter, we saw growth in sales at PTI as well as sales to wholesale customers, but this growth was not sufficient to offset decreased sales to ADT and its authorized dealers as well as customers in the retail channel. With lower net sales, we saw reduced profitability in the quarter."


Third Quarter and Nine Month Results

Net sales for the third quarter fell 10.4 percent, to $22.1 million, from $24.7 million in the third quarter of 2011. The decrease in net sales in the quarter was primarily the result of a decrease in net sales to retail channels and ADT and its authorized dealers which was offset by an increase of PTI sales.

Gross profit decreased to $3.6 million in the quarter, compared with $4.8 million in the third quarter of 2011, due to the lower sales levels and increase in material and labor costs. Operating expenses decreased to $3.3 million in the third quarter of 2012, from $4.2 million in the third quarter of 2011. The decrease in operating expenses included decreased facilities costs, personnel expenses and legal expenses.

As a result of softer sales, UPG reported operating income of $263,000 and pre-tax income of $121,000, down from operating income of $515,000 and pre-tax income of $354,000 in the prior year. With lower income levels, income tax expense decreased to $78,000 from $197,000 in the third quarter of 2011. Net income from continuing operations was $43,000, or $0.01 per diluted share, compared to net income from continuing operations of $157,000, or $0.03 per diluted share in the prior year's quarter.

For the first nine months of 2012, net sales increased 6.3 percent to $72.0 million, from $67.8 million in the comparable period of 2011. The increase was attributable to an increase in sales to new and existing customers and sales by PTI which was offset by a decrease in sales to retail channels for the 2012 period compared to the 2011 period.

Gross profit decreased to $12.4 million, or 17.2 percent of net sales, compared to $13.4 million, or 19.8 percent of sales for the first nine months of 2011. Total operating expenses decreased $0.6 million, or 5.6 percent, to $10.9 million from $11.5 million in the prior year. Operating expenses for the first nine months of 2012 decreased as a result of personnel, facilities, marketing and insurance expenses.

For the first nine months of 2012, UPG reported operating income of $1.5 million and pre-tax income of $1.2 million, compared to operating income of $1.9 million and pre-tax income of $1.5 million in the comparable period of 2011. The decrease in operating income in 2012 was due primarily to decreases in net sales and associated gross profit compared to the prior year. Interest and other expense for the first nine months of 2012 fell to $0.3 million from $0.5 million in the first nine months of 2011. UPG reported net income from continuing operations for the first nine months of 2012 of $0.8 million, or $0.15 per diluted share, compared to net income from continuing operations of $0.8 million, or $0.17 per diluted share, in the first nine months of 2011.

In the second quarter of 2012, UPG sold its Monarch Outdoor Adventures, LLC (Monarch) subsidiary, and results from Monarch have been reported as discontinued operations. For the first nine months of 2012, UPG reported a loss on discontinued operations of $0.5 million, including a pre-tax loss on the sale of Monarch of $0.6 million. For the first nine months of 2011, the loss on discontinued operations was $126,000. As a result, UPG reported net income of $238,000, or $0.05 per diluted share in the first nine months of 2012 compared to net income of $0.7 million, or 0.14 per diluted share in the first nine months of 2011.

Balance Sheet and Financial Position

At Sept. 30, 2012 inventory increased by $10.0 million to $34.2 million, from $24.2 million at Dec. 31, 2011, as UPG rebuilt inventory with increased battery shipments from China. The inventory balance at the end of 2011 was much lower than historical levels as a result of the supply chain issues in China. As manufacturing delays and delivery lead times associated with the Chinese supply chain issues improved during the year, UPG was able to rebuild inventories to meet current business demand, including adequate safety stock. Compared to the second quarter of 2012, inventory levels were reduced by $4.6 million.

Accounts receivable decreased to $11.0 million, from $13.0 million at the end of 2011. Accounts payable decreased by $1.3 million, to $5.6 million during the period. Total working capital increased to $20.5 million, compared to $19.9 million at the end of the prior year. For the first nine months of 2012, UPG used net cash from operating activities of $7.9 million, compared to net cash provided from operating activities of $9.6 million during the same period in 2011. This change in working capital is attributable to the increase in inventory purchases to rebuild inventory levels to more historical levels following the factory closures in China that occurred in 2011, as well as, non-cash charges from loss on disposal of Monarch, and a decrease of accounts payable.

Edmonds concluded: "As we look forward, we will manage the growth of UPG's business based on the channels that we believe provide the greatest opportunities for improvement in net sales and overall profitability. We see considerable opportunities with wholesale distributors and retailers, as well as our OEM customers, but we also see exciting opportunities in new channels including custom battery packs at PTI. As we focus on these opportunities, we will be vigilant in controlling costs and maintaining operating efficiencies to improve our bottom line results over the long term."

Conference Call Information

Universal Power Group will host an investor conference call today, Thursday, Nov. 8, 2012 at 11:30 a.m. ET (10:30 a.m. CT) to discuss the Company's financial results for the quarter and nine months ended Sept. 30, 2012.

Interested parties may access the conference call by dialing 1.877.317.6789; passcode 10020800. The conference call will also be broadcast live at www.upgi.com and through the Thomson StreetEvents Network. Individual investors can listen to the call at www.earnings.com, Thomson's individual investor portal. Institutional investors can access a webcast of the call via Thomson StreetEvents (www.streetevents.com), a password-protected event management site.

A replay of the conference call will be available through Nov. 15, 2012 by calling 1.877.344.7529, passcode 10020800, and an archived webcast will be available at www.upgi.com.

About Universal Power Group, Inc.

Universal Power Group, Inc. (NYSE Amex: UPG) is a leading supplier and distributor of batteries and power accessories, and a provider of supply chain and other value-added services. UPG's product offerings include proprietary brands of industrial and consumer batteries of all chemistries, chargers, jump-starters, 12-volt accessories, and solar and security products. UPG's supply chain services include procurement, warehousing, inventory management, distribution, fulfillment and value-added services such as sourcing, battery pack assembly and coordinating battery recycling efforts, as well as product development. For more information, please visit the UPG website at www.upgi.com.

Forward-Looking Statements

Statements in this press release that are not statements of historical or current fact constitute "forward-looking statements." Such forward-looking statements involve known and unknown risks, uncertainties and other unknown factors that could cause the Company's actual operating results to be materially different from any historical results or from any future results expressed or implied by such forward-looking statements. In addition to statements that explicitly describe these risks and uncertainties, readers are urged to consider statements that contain terms such as "believes," "belief," "expects," "expect," "intends," "intend," "anticipate," "anticipates," "plans," "plan," to be uncertain and forward-looking. The forward-looking statements contained herein are also subject generally to other risks and uncertainties described from time to time in the Company's filings with the Securities and Exchange Commission. Historical financial results are not necessarily indicative of future performance.

  

UNIVERSAL POWER GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS


(Amounts in thousands except share data)

 

September 30,
2012

December 31,
2011

(unaudited)
 
CURRENT ASSETS
Cash and cash equivalents$987$283
Accounts receivable:
Trade, net of allowance for doubtful accounts of $343 (unaudited) and $38410,95112,972
Other454442
Inventories - finished goods, net of allowance for obsolescence of $785 (unaudited) and $83034,16124,174
Current deferred tax assets1,174972
Income tax receivable167721
Prepaid expenses and other current assets8731,426
Total current assets48,76740,990
 
PROPERTY AND EQUIPMENT
Logistics and distribution systems1,9081,871
Machinery and equipment7071,044
Furniture and fixtures519511
Leasehold improvements395389
Vehicles155171
Total property and equipment3,6843,986
Less accumulated depreciation and amortization(3,158)(3,128)
Net property and equipment526858
 
GOODWILL1,3871,387
INTANGIBLES, net390527
OTHER ASSETS98100
NON-CURRENT DEFERRED TAX ASSET351213
2,2262,227
 
TOTAL ASSETS$51,519$44,075
 
  

UNIVERSAL POWER GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

LIABILITIES AND SHAREHOLDERS' EQUITY


(Amounts in thousands except share data)

 

September 30,
2012

December 31,
2011

(unaudited)
 
CURRENT LIABILITIES
Line of credit$21,346$12,654
Accounts payable5,5836,845
Accrued liabilities1,2801,213
Current portion of settlement accrual241
Current portion of capital lease and note obligations100119
Current portion of deferred rent

14

Total current liabilities28,30921,086
 
LONG-TERM LIABILITIES
Capital lease and note obligations, less current portion156229
 
TOTAL LIABILITIES28,46521,315
 
COMMITMENTS AND CONTINGENCIES
 
SHAREHOLDERS' EQUITY
Common stock - $0.01 par value, 50,000,000 shares authorized, 5,020,000 shares issued and outstanding5050
Additional paid-in capital16,34716,339
Retained earnings6,6576,419
Accumulated other comprehensive loss(48)
Total shareholders' equity23,05422,760
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$51,519$44,075
 
  

UNIVERSAL POWER GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Amounts in thousands except per share data)

 
Three Months Ended September 30,Nine Months Ended September 30,
2012 2011 2012 2011
Net sales$22,114$24,676$72,035$67,785
Cost of sales18,53919,92059,61754,349
Gross profit3,5754,75612,41813,436
 
Operating expenses3,3124,24110,88311,524
 
Operating income2635151,5351,912
 
Interest expense(145)(161)(441)(452)
Other, net3129
Total other expense, net(142)(161)(312)(452)
 
Income from continuing operations before provision for income taxes1213541,2231,460
Provision for income taxes(78)(197)(439)(623)
Income from continuing operations43157784837
Discontinued operations:
Gain (loss) from operations of discontinued Monarch Outdoor Adventures, LLC (including loss on disposal of $616 in Q2 2012)40(707)(187)
Provision for income taxes(14)16161
Gain (loss) on discontinued operations26(546)(126)
Net income$43$183$238$711
Net income (loss) per share
Basic:
Income from continuing operations$0.01$0.03$0.16$0.17
Gain (loss) on discontinued operations$0.00$0.01$(0.11)$(0.03)
Net income$0.01$0.04$0.05$0.14
Diluted:
Income from continuing operations$0.01$0.03$0.15$0.17
Gain (loss) on discontinued operations$0.00$0.01$(0.10)$(0.03)
Net income$0.01$0.04$0.05$0.14
Weighted average shares outstanding
Basic5,0205,0205,0205,020
Diluted5,2445,0255,2155,029
 
 

UNIVERSAL POWER GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


(amounts in thousands)

 
Nine Months Ended September 30,
2012 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$238$711
Items not requiring (providing) cash
Depreciation and amortization338616
Provision for bad debts53139
Provision for obsolete inventory500540
Deferred income taxes(340)(63)
Loss on disposal of Monarch616
Gain on disposal of property7
Stock-based compensation822
Changes in operating assets and liabilities, net of effect of disposition and acquisition:
Accounts receivable - trade1,961(1,366)
Accounts receivable - other68(4)
Inventories(10,652)12,685
Income taxes receivable/payable554(284)
Prepaid expenses and other assets551(863)
Accounts payable(1,262)(2,479)
Accrued liabilities(207)521
Settlement accrual(241)(554)
Deferred rent(64)(53)
Net cash provided by (used in) operating activities(7,879)9,575
 
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash paid in ProTechnologies, Inc.

acquisition

(2,268)
Net cash received on Monarch Outdoor Adventures, LLC sale40
Purchases of property and equipment(59) Read Full Story

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