Universal Power Group Reports First Quarter 2013 Results

Universal Power Group Reports First Quarter 2013 Results

COPPELL, Texas--(BUSINESS WIRE)-- Universal Power Group, Inc. (NYSE MKT: 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 first quarter ended March 31, 2013.

For the first quarter, UPG reported net income from continuing operations of $211,000, or $0.04 per diluted share, on net sales of $20.5 million, compared with net income from continuing operations of $336,000, or $0.06 per diluted share, on net sales of $26.4 million in the first quarter of 2012.


"In the first quarter, UPG saw softer sales of security products given the decrease in sales to ADT and its authorized dealers from the prior year. This decrease in security sales was partially offset by steady growth in sales of our core batteries and power accessories," stated Ian Edmonds, UPG's President and Chief Executive Officer. "With a shift in the mix of our product sales, UPG generated strong improvement in gross margins while ongoing cost control resulted in continued profitability in the first quarter. As we complete the transition to our new corporate offices and distribution center in Coppell, we are well positioned to support the growth of our core business as well as new products and solutions to meet emerging demand from our customers."

First Quarter Results

Net sales for the first quarter decreased 22.3%, to $20.5 million, from $26.4 million in the first quarter of 2012. The decrease in net sales in the 2013 first quarter was primarily driven by a decrease in sales to ADT and its authorized dealers as well as a reduction in sales to retail customers, which were partially offset by increased sales of core batteries and related power accessories.

Gross profit decreased to $4.4 million in the quarter, compared with $4.7 million in the first quarter of 2012, due mainly to lower sales levels. As a percent of sales, gross margin increased to 21.7% in the first quarter of 2013, from 17.7% in the prior year as a result of a shift in product mix toward higher margin products. Operating expenses decreased to $3.9 million in the first quarter of 2013, from $4.1 million in the first quarter of 2012. The decrease in operating expenses was primarily the result of lower legal and professional fees, including litigation expenses on matters that were settled in the first quarter of 2012, as well as lower facilities costs, marketing and trade show expenses. These cost reductions were partially offset by increases in bad debt expense and insurance expense.

Reflecting lower sales volumes partially offset by improvements in gross margin, operating income fell 11.4% to $503,000 for the current quarter, compared with operating income of $568,000 in the first quarter 2012. Interest expense was $85,000 in the first quarter, which was less than the prior year of $143,000, reflecting the refinancing of UPG's borrowings under its new credit agreement and term loan. Other expenses were higher than the first quarter of 2012, which included a cash payment from a legal settlement that offset other expenses. As a result, UPG generated pre-tax income from continuing operations of $368,000 for the first quarter of 2013 compared to pre-tax income of $552,000 in the prior year. The Company reported net income from continuing operations of $211,000, or $0.04 per diluted share, compared to net income from continuing operations of $336,000, or $0.06 per diluted share in the first quarter of 2012.

Balance Sheet and Financial Position

At March 31, 2013, inventory was $30.1 million, which was down slightly from December 31, 2012 levels. Accounts receivable increased to $12.2 million, from $8.8 million at the end of 2012 reflecting the timing of sales near the end of the quarter. Accounts payable increased by $870,000 to $8.1 million during the period. Total working capital remained constant at $23.7 million for both periods.

For the first three months of 2013, net cash used in operations was $1.4 million compared to $1.1 million in the first three months of 2012. Operating cash flow for the first quarter of 2013 reflects a $3.4 million increase in accounts receivable, which was partially offset by a $1.2 million increase in accounts payable and accrued liabilities. The outstanding balance on UPG's line of credit increased slightly to $12.8 million, compared to $12.2 million at the end of 2012.

Edmonds concluded: "We have remained focused on executing upon our long-term strategic plan to penetrate new markets, develop new higher-margin products and diversifying to minimize our exposure to the broader economy. So far in 2013, we have moved our operations into our new corporate headquarters and distribution center in Coppell, offering ample room for expansion to support our current business and our growth initiatives. We have continued to develop new products and services, such as our recent purchase of the Kinetik brand, which we believe will enhance our net sales and margins in the future. While we have been through some challenges, we believe that UPG is operating from a position of strength from which to drive improved results over the long term."

Conference Call Information

Universal Power Group will host an investor conference call today, Friday, May 10, 2013 at 11:30 a.m. ET (10:30 a.m. CT) to discuss the Company's financial results for the first quarter ended March 31, 2013.

Interested parties may access the conference call by dialing 1.800.299.9086; passcode 74636384. 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 made available through May 17, 2013 by calling 1.888.286.8010, passcode 29301320, 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 amounts)

March 31,

2013

December 31,

2012

(unaudited)

CURRENT ASSETS

Cash and cash equivalents

$

980

$

2,069

Accounts receivable:

Trade, net of allowance for doubtful accounts of $137 (unaudited) and $324

12,161

8,847

Other

174

455

Inventories - finished goods, net of allowance for obsolescence of $485 (unaudited) and $423

30,130

30,396

Current deferred tax asset

880

838

Income tax receivable

421

512

Prepaid expenses and other current assets

1,291

970

Total current assets

46,037

44,087

PROPERTY AND EQUIPMENT

Logistics and distribution systems

1,877

1,908

Machinery and equipment

484

709

Furniture and fixtures

881

518

Leasehold improvements

918

395

Vehicles

40

111

Total property and equipment

4,200

3,641

Less accumulated depreciation and amortization

(2,467)

(3,173)

Net property and equipment

1,733

468

GOODWILL

1,387

1,387

INTANGIBLES, net

548

593

OTHER ASSETS

161

155

NON-CURRENT DEFERRED TAX ASSET

274

357

2,370

2,492

TOTAL ASSETS

$

50,140

$

47,047

UNIVERSAL POWER GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)


LIABILITIES AND SHAREHOLDERS' EQUITY

(Amounts in thousands except share amounts)

March 31,

2013

December 31,

2012

(unaudited)

CURRENT LIABILITIES

Line of credit

$

12,820

$

12,188

Accounts payable

8,101

7,231

Accrued liabilities

681

386

Current portion of capital lease and note obligations

682

620

Deferred landlord improvements

84

Total current liabilities

22,368

20,425

LONG-TERM LIABILITIES

Capital lease and note obligations, less current portion

3,732

3,608

Deferred landlord improvements

812

Total long-term liabilities

4,544

3,608

TOTAL LIABILITIES

26,912

24,033

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY

Common stock - $0.01 par value, 50,000,000 shares authorized, 5,020,000 shares issued and outstanding

50

50

Additional paid-in capital

16,393

16,390

Retained earnings

6,785

6,574

Total shareholders' equity

23,228

23,014

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

50,140

$

47,047

UNIVERSAL POWER GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


(Amounts in thousands except per share data)

Three Months Ended March 31,

2013

2012

Net sales

$

20,458

$

26,338

Cost of sales

16,024

21,685

Gross profit

4,434

4,653

Operating expenses

3,931

4,085

Operating income

503

568

Other income (expense)

Interest expense

(85)

(143)

Other, net

(50)

127

Total other expense, net

(135)

(16)

Income from continuing operations before provision for income taxes

368

552

Provision for income taxes

(157)

(216)

Income from continuing operations

211

336

Discontinued operations:

Loss from operations of discontinued Monarch Outdoor Adventures, LLC

(61)

Provision for income taxes

17

Loss on discontinued operations

(44)

Net income

$

211

$

292

Net income per share

Basic:

Income from continuing operations

$

0.04

$

0.07

Gain (loss) on discontinued operations

$

$

(0.01)

Net income

$

0.04

$

0.06

Diluted:

Income from continuing operations

$

0.04

$

0.06

Gain (loss) on discontinued operations

$

$

(0.01)

Net income

$

0.04

$

0.05

Weighted average shares outstanding

Basic

5,020

5,020

Diluted

5,133

5,202

UNIVERSAL POWER GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


(Amounts in thousands)

Three Months Ended March 31,

2013

2012

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

211

$

292

Items not requiring (providing) cash:

Depreciation and amortization

96

135

Provision for bad debts

78

23

Provision for obsolete inventory

102

140

Loss on disposal of property and equipment

50

Deferred income taxes

41

129

Stock-based compensation

3

3

Changes in operating assets and liabilities

Accounts receivable - trade

(3,392)

(2,988)

Accounts receivable - other