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 | 281 | 49 | ||||
| Inventories | 164 | (130) | ||||
| Income taxes receivable/payable | 91 | 78 | ||||
| Prepaid expenses and other assets | (327) | (1,773) | ||||
| Accounts payable | 870 | 3,375 | ||||
| Accrued liabilities | 295 | (233) | ||||
| Settlement accrual | — | (241) | ||||
| Net cash used in operating activities | (1,437) | (1,141) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||
| Proceeds from sale of property and equipment | 3 | — | ||||
| Purchases of property and equipment | (168) | (17) | ||||
| Net cash used in investing activities | (165) | (17) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||
| Net activity on line of credit | 632 | 1,269 | ||||
| Payments on capital lease and note obligations | (119) | (38) | ||||
| Net cash provided by financing activities | 513 | 1,231 | ||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (1,089) | 73 | ||||
| Cash and cash equivalents at beginning of period | 2,069 | 283 | ||||
| Cash and cash equivalents at end of period | $ | 980 | $ | 356 | ||
| SUPPLEMENTAL DISCLOSURES | ||||||
| Income taxes paid | $ | 13 | $ | 7 | ||
| Interest paid | $ | 86 | $ | 144 | ||
| SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES | ||||||
| Acquisition of property and equipment through landlord incentives | $ | 896 | $ | — | ||
| Acquisition of property and equipment through capital lease | $ | 345 | $ | — | ||
Contacts:
Mimi Tan, SVP, 469-892-1122
tanm@upgi.com
or
Investor
Relations:
Lambert, Edwards & Associates
Jeff Tryka, CFA
or Bob Burton, 616-233-0500
jtryka@lambert-edwards.com
