Delaware | 0-21044 | 33-0204817 | ||
(State or other jurisdiction | (Commission File No.) | (I.R.S. Employer | ||
of incorporation or organization) | Identification No.) |
(d) | Exhibits. The following exhibit is furnished with this Report. |
Universal Electronics Inc. | ||||||
Date: February 21, 2019 | By: | /s/ Bryan Hackworth | ||||
Bryan Hackworth | ||||||
Chief Financial Officer (Principal Financial Officer) |
Exhibit Number | Description | |
99.1 |
• | GAAP net sales were $170.3 million, compared to $181.2 million; Adjusted Non-GAAP net sales were $169.7 million, compared to $180.7 million. |
• | GAAP gross margins were 22.0%, compared to 20.9%; Adjusted Non-GAAP gross margins were 27.2%, compared to 23.6%. |
• | GAAP operating income was $2.6 million, compared to an operating loss of $0.5 million; Adjusted Non-GAAP operating income was $13.7 million, compared to $10.4 million. |
• | GAAP net loss was $11.1 million, or $0.80 per diluted share, compared to a GAAP net loss of $16.9 million or $1.19 per diluted share; Adjusted Non-GAAP net income was $9.7 million, or $0.70 per diluted share, compared to $8.7 million, or $0.60 per diluted share. |
• | At December 31, 2018, cash and cash equivalents were $53.2 million. |
• | GAAP net sales were $680.2 million, compared to $695.8 million; Adjusted Non-GAAP net sales were $679.9 million, compared to $696.5 million. |
• | GAAP net income was $11.9 million, or $0.85 per diluted share, compared to a GAAP net loss of $10.3 million or $0.72 per diluted share; Adjusted Non-GAAP net income was $33.6 million, or $2.39 per diluted share, compared to $41.1 million, or $2.81 per diluted share. |
December 31, 2018 | December 31, 2017 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 53,207 | $ | 62,438 | ||||
Restricted cash | — | 4,901 | ||||||
Accounts receivable, net | 144,689 | 151,578 | ||||||
Contract assets | 25,572 | — | ||||||
Inventories, net | 144,350 | 162,589 | ||||||
Prepaid expenses and other current assets | 11,638 | 11,687 | ||||||
Assets held for sale | — | 12,517 | ||||||
Income tax receivable | 997 | 1,587 | ||||||
Total current assets | 380,453 | 407,297 | ||||||
Property, plant and equipment, net | 95,840 | 110,962 | ||||||
Goodwill | 48,485 | 48,651 | ||||||
Intangible assets, net | 24,370 | 29,041 | ||||||
Deferred income taxes | 1,833 | 7,913 | ||||||
Other assets | 4,615 | 4,566 | ||||||
Total assets | $ | 555,596 | $ | 608,430 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 107,282 | $ | 119,165 | ||||
Line of credit | 101,500 | 138,000 | ||||||
Accrued compensation | 33,965 | 34,499 | ||||||
Accrued sales discounts, rebates and royalties | 9,574 | 8,882 | ||||||
Accrued income taxes | 3,524 | 3,670 | ||||||
Other accrued liabilities | 24,011 | 28,719 | ||||||
Total current liabilities | 279,856 | 332,935 | ||||||
Long-term liabilities: | ||||||||
Long-term contingent consideration | 8,435 | 13,400 | ||||||
Deferred income taxes | 930 | 4,423 | ||||||
Income tax payable | 1,647 | 2,520 | ||||||
Other long-term liabilities | 1,768 | 1,603 | ||||||
Total liabilities | 292,636 | 354,881 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.01 par value, 5,000,000 shares authorized; none issued or outstanding | — | — | ||||||
Common stock, $0.01 par value, 50,000,000 shares authorized; 23,932,703 and 23,760,434 shares issued on December 31, 2018 and 2017, respectively | 239 | 238 | ||||||
Paid-in capital | 276,103 | 265,195 | ||||||
Treasury stock, at cost, 10,116,459 and 9,702,874 shares on December 31, 2018 and 2017, respectively | (275,889 | ) | (262,065 | ) | ||||
Accumulated other comprehensive income (loss) | (20,281 | ) | (16,599 | ) | ||||
Retained earnings | 282,788 | 266,780 | ||||||
Total stockholders’ equity | 262,960 | 253,549 | ||||||
Total liabilities and stockholders’ equity | $ | 555,596 | $ | 608,430 |
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net sales | $ | 170,303 | $ | 181,152 | $ | 680,241 | $ | 695,790 | ||||||||
Cost of sales | 132,776 | 143,300 | 538,437 | 530,083 | ||||||||||||
Gross profit | 37,527 | 37,852 | 141,804 | 165,707 | ||||||||||||
Research and development expenses | 6,112 | 5,557 | 23,815 | 21,416 | ||||||||||||
Factory transition restructuring charges | — | — | — | 6,145 | ||||||||||||
Selling, general and administrative expenses | 28,843 | 32,775 | 119,654 | 127,476 | ||||||||||||
Operating income (loss) | 2,572 | (480 | ) | (1,665 | ) | 10,670 | ||||||||||
Interest income (expense), net | (1,164 | ) | (858 | ) | (4,690 | ) | (2,534 | ) | ||||||||
Gain on sale of Guangzhou factory | — | — | 36,978 | — | ||||||||||||
Other income (expense), net | (506 | ) | (850 | ) | (4,457 | ) | (848 | ) | ||||||||
Income (loss) before provision for income taxes | 902 | (2,188 | ) | 26,166 | 7,288 | |||||||||||
Provision for income taxes | 12,009 | 14,666 | 14,242 | 17,611 | ||||||||||||
Net income (loss) | $ | (11,107 | ) | $ | (16,854 | ) | $ | 11,924 | $ | (10,323 | ) | |||||
Earnings (loss) per share: | ||||||||||||||||
Basic | $ | (0.80 | ) | $ | (1.19 | ) | $ | 0.85 | $ | (0.72 | ) | |||||
Diluted | $ | (0.80 | ) | $ | (1.19 | ) | $ | 0.85 | $ | (0.72 | ) | |||||
Shares used in computing earnings (loss) per share: | ||||||||||||||||
Basic | 13,804 | 14,172 | 13,948 | 14,351 | ||||||||||||
Diluted | 13,804 | 14,172 | 14,060 | 14,351 |
Year Ended December 31, | ||||||||
2018 | 2017 | |||||||
Cash provided by (used for) operating activities: | ||||||||
Net income (loss) | $ | 11,924 | $ | (10,323 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 33,602 | 31,312 | ||||||
Provision for doubtful accounts | 305 | 166 | ||||||
Provision for inventory write-downs | 8,655 | 4,119 | ||||||
Gain on sale of Guangzhou factory | (36,978 | ) | — | |||||
Deferred income taxes | 3,967 | 7,597 | ||||||
Shares issued for employee benefit plan | 1,062 | 648 | ||||||
Employee and director stock-based compensation | 8,820 | 11,943 | ||||||
Performance-based common stock warrants | 163 | 683 | ||||||
Impairment of China factory equipment | 4,907 | 4,100 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable and contract assets | 5,455 | (22,192 | ) | |||||
Inventories | (19,870 | ) | (29,916 | ) | ||||
Prepaid expenses and other assets | (587 | ) | (4,477 | ) | ||||
Accounts payable and accrued liabilities | (7,386 | ) | 10,970 | |||||
Accrued income taxes | (1,184 | ) | 4,535 | |||||
Net cash provided by operating activities | 12,855 | 9,165 | ||||||
Cash provided by (used for) investing activities: | ||||||||
Proceeds from sale of Guangzhou factory | 51,291 | — | ||||||
Acquisitions of property, plant and equipment | (20,142 | ) | (40,384 | ) | ||||
Refund of deposit received toward sale of Guangzhou factory | (5,053 | ) | — | |||||
Acquisitions of intangible assets | (2,521 | ) | (1,949 | ) | ||||
Acquisition of net assets of Residential Control Systems, Inc. | — | (8,894 | ) | |||||
Net cash provided by (used for) investing activities | 23,575 | (51,227 | ) | |||||
Cash provided by (used for) financing activities: | ||||||||
Borrowings under line of credit | 68,000 | 157,000 | ||||||
Repayments on line of credit | (104,500 | ) | (68,987 | ) | ||||
Proceeds from stock options exercised | 864 | 1,442 | ||||||
Treasury stock purchased | (13,824 | ) | (39,085 | ) | ||||
Contingent consideration payments in connection with business combinations | (3,858 | ) | — | |||||
Net cash provided by (used for) financing activities | (53,318 | ) | 50,370 | |||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 2,756 | (803 | ) | |||||
Net increase (decrease) in cash, cash equivalents and restricted cash | (14,132 | ) | 7,505 | |||||
Cash, cash equivalents and restricted cash at beginning of year | 67,339 | 59,834 | ||||||
Cash, cash equivalents and restricted cash at end of period | $ | 53,207 | $ | 67,339 | ||||
Supplemental cash flow information: | ||||||||
Income taxes paid | $ | 7,658 | $ | 8,280 | ||||
Interest paid | $ | 4,981 | $ | 2,751 |
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net sales: | ||||||||||||||||
Net sales - GAAP | $ | 170,303 | $ | 181,152 | $ | 680,241 | $ | 695,790 | ||||||||
Stock-based compensation for performance-based warrants | (584 | ) | (439 | ) | 163 | 683 | ||||||||||
Adoption of ASC 606 (1) | 860 | — | 3,802 | — | ||||||||||||
U.S tariffs on goods imported from China (2) | (1,459 | ) | — | (1,858 | ) | — | ||||||||||
Constant currency adjustment (3) | 618 | — | (2,420 | ) | — | |||||||||||
Adjusted Non-GAAP net sales | $ | 169,738 | $ | 180,713 | $ | 679,928 | $ | 696,473 | ||||||||
Cost of sales: | ||||||||||||||||
Cost of sales - GAAP | $ | 132,776 | $ | 143,300 | $ | 538,437 | $ | 530,083 | ||||||||
Adjustments to acquired tangible assets (4) | (284 | ) | (162 | ) | (758 | ) | (1,185 | ) | ||||||||
Stock-based compensation expense | (22 | ) | (18 | ) | (85 | ) | (71 | ) | ||||||||
Excess manufacturing overhead and factory transition costs (5) | (3,979 | ) | (5,074 | ) | (17,904 | ) | (10,542 | ) | ||||||||
Amortization of acquired intangible assets | — | (38 | ) | (37 | ) | (113 | ) | |||||||||
Adoption of ASC 606 (1) | 527 | — | 3,294 | — | ||||||||||||
U.S tariffs on goods imported from China (2) | (8,570 | ) | — | (9,654 | ) | — | ||||||||||
Constant currency adjustment (3) | 3,136 | — | (5,409 | ) | — | |||||||||||
Adjusted Non-GAAP cost of sales | 123,584 | 138,008 | 507,884 | 518,172 | ||||||||||||
Adjusted Non-GAAP gross profit | $ | 46,154 | $ | 42,705 | $ | 172,044 | $ | 178,301 | ||||||||
Gross margin: | ||||||||||||||||
Gross margin - GAAP | 22.0 | % | 20.9 | % | 20.8 | % | 23.8 | % | ||||||||
Stock-based compensation for performance-based warrants | (0.3 | )% | (0.2 | )% | 0.0 | % | 0.1 | % | ||||||||
Adjustments to acquired tangible assets (4) | 0.2 | % | 0.1 | % | 0.1 | % | 0.2 | % | ||||||||
Stock-based compensation expense | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | ||||||||
Excess manufacturing overhead and factory transition costs (5) | 2.3 | % | 2.8 | % | 2.6 | % | 1.5 | % | ||||||||
Amortization of acquired intangible assets | — | % | 0.0 | % | 0.0 | % | 0.0 | % | ||||||||
Adoption of ASC 606 (1) | 0.1 | % | — | % | 0.0 | % | — | % | ||||||||
U.S tariffs on goods imported from China (2) | 4.4 | % | — | % | 1.2 | % | — | % | ||||||||
Constant currency adjustment (3) | (1.5 | )% | — | % | 0.6 | % | — | % | ||||||||
Adjusted Non-GAAP gross margin | 27.2 | % | 23.6 | % | 25.3 | % | 25.6 | % | ||||||||
Operating expenses: | ||||||||||||||||
Operating expenses - GAAP | $ | 34,955 | $ | 38,332 | $ | 143,469 | $ | 155,037 | ||||||||
Amortization of acquired intangible assets | (1,401 | ) | (1,401 | ) | (5,602 | ) | (5,472 | ) | ||||||||
Stock-based compensation expense | (1,990 | ) | (2,449 | ) | (8,736 | ) | (11,872 | ) | ||||||||
Employee related restructuring costs | (517 | ) | — | (901 | ) | (7,008 | ) | |||||||||
Change in contingent consideration | 1,275 | 200 | 717 | (3,000 | ) | |||||||||||
Adoption of ASC 606 (1) | (63 | ) | — | (8 | ) | — | ||||||||||
U.S tariffs on goods imported from China (2) | (150 | ) | — | (350 | ) | — | ||||||||||
Constant currency adjustment (3) | 596 | — | (955 | ) | — | |||||||||||
Transaction costs related to sale of Guangzhou factory | — | (1,912 | ) | — | (1,912 | ) | ||||||||||
Other | (251 | ) | (483 | ) | (1,025 | ) | (849 | ) | ||||||||
Adjusted Non-GAAP operating expenses | $ | 32,454 | $ | 32,287 | $ | 126,609 | $ | 124,924 |
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Operating income (loss): | ||||||||||||||||
Operating income (loss) - GAAP | $ | 2,572 | $ | (480 | ) | $ | (1,665 | ) | $ | 10,670 | ||||||
Stock-based compensation for performance-based warrants | (584 | ) | (439 | ) | 163 | 683 | ||||||||||
Adjustments to acquired tangible assets (4) | 284 | 162 | 758 | 1,185 | ||||||||||||
Excess manufacturing overhead and factory transition costs (5) | 3,979 | 5,074 | 17,904 | 10,542 | ||||||||||||
Amortization of acquired intangible assets | 1,401 | 1,439 | 5,639 | 5,585 | ||||||||||||
Stock-based compensation expense | 2,012 | 2,467 | 8,821 | 11,943 | ||||||||||||
Employee related restructuring costs | 517 | — | 901 | 7,008 | ||||||||||||
Change in contingent consideration | (1,275 | ) | (200 | ) | (717 | ) | 3,000 | |||||||||
Adoption of ASC 606 (1) | 396 | — | 516 | — | ||||||||||||
U.S tariffs on goods imported from China (2) | 7,261 | — | 8,146 | — | ||||||||||||
Constant currency adjustment (3) | (3,114 | ) | — | 3,944 | — | |||||||||||
Transaction costs related to sale of Guangzhou factory | — | 1,912 | — | 1,912 | ||||||||||||
Other | 251 | 483 | 1,025 | 849 | ||||||||||||
Adjusted Non-GAAP operating income | $ | 13,700 | $ | 10,418 | $ | 45,435 | $ | 53,377 | ||||||||
Adjusted Non-GAAP operating income as a percentage of net sales | 8.1 | % | 5.8 | % | 6.7 | % | 7.7 | % | ||||||||
Net income (loss): | ||||||||||||||||
Net income (loss) - GAAP | $ | (11,107 | ) | $ | (16,854 | ) | $ | 11,924 | $ | (10,323 | ) | |||||
Stock-based compensation for performance-based warrants | (584 | ) | (439 | ) | 163 | 683 | ||||||||||
Adjustments to acquired tangible assets (4) | 284 | 162 | 758 | 1,185 | ||||||||||||
Excess manufacturing overhead and factory transition costs (5) | 3,979 | 5,074 | 17,904 | 10,542 | ||||||||||||
Amortization of acquired intangible assets | 1,401 | 1,439 | 5,639 | 5,585 | ||||||||||||
Stock-based compensation expense | 2,012 | 2,467 | 8,821 | 11,943 | ||||||||||||
Employee related restructuring costs | 517 | — | 901 | 7,008 | ||||||||||||
Change in contingent consideration | (1,275 | ) | (200 | ) | (717 | ) | 3,000 | |||||||||
Adoption of ASC 606 (1) | 396 | — | 516 | — | ||||||||||||
U.S tariffs on goods imported from China (2) | 7,261 | — | 8,146 | — | ||||||||||||
Constant currency adjustment (3) | (3,114 | ) | — | 3,944 | — | |||||||||||
Transaction costs related to sale of Guangzhou factory | — | 1,912 | — | 1,912 | ||||||||||||
Foreign currency (gain) loss | 427 | 1,089 | 4,441 | 1,429 | ||||||||||||
Gain on sale of Guangzhou factory | — | — | (36,978 | ) | — | |||||||||||
Other | 251 | 483 | 1,025 | 849 | ||||||||||||
Income tax provision on adjustments | (1,955 | ) | (2,532 | ) | (3,616 | ) | (9,705 | ) | ||||||||
Other income tax adjustments (6) | 11,244 | 16,057 | 10,713 | 16,975 | ||||||||||||
Adjusted Non-GAAP net income | $ | 9,737 | $ | 8,658 | $ | 33,584 | $ | 41,083 | ||||||||
Diluted shares used in computing earnings (loss) per share: | ||||||||||||||||
GAAP | 13,804 | 14,172 | 14,060 | 14,351 | ||||||||||||
Adjusted Non-GAAP | 13,894 | 14,395 | 14,060 | 14,615 | ||||||||||||
Diluted earnings (loss) per share: | ||||||||||||||||
Diluted earnings (loss) per share - GAAP | $ | (0.80 | ) | $ | (1.19 | ) | $ | 0.85 | $ | (0.72 | ) | |||||
Total adjustments | $ | 1.50 | $ | 1.79 | $ | 1.54 | $ | 3.53 | ||||||||
Adjusted Non-GAAP diluted earnings per share | $ | 0.70 | $ | 0.60 | $ | 2.39 | $ | 2.81 |
(1) | Reflects the impact of adopting ASC 606, "Revenue from Contracts with Customers", which was adopted on a modified retrospective basis effective January 1, 2018. |
(2) | The three and twelve months ended December 31, 2018 include incremental revenues and costs directly attributable to the additional tariffs on goods manufactured in China and imported into the U.S. as well as costs incurred for the movement of factory equipment and materials, duplicative labor efforts and other costs of countermeasures undertaken by the company to modify its manufacturing operations and supply chain in response to these additional tariffs. |
(3) | Adjustment to remove the translation impact of fluctuations in foreign currency exchange rates in material jurisdictions on sales, cost of sales and operating expenses whereby the average exchange rates used in current periods are adjusted to be consistent with the average exchange rates in effect during the comparative prior period. |
(4) | Consists of depreciation related to the mark-up from cost to fair value of fixed assets acquired in business combinations as well as the effect of fair value adjustments to inventories acquired in business combinations that sold through during the period. |
(5) | The three and twelve months ended December 31, 2018 include $4.0 million and $7.3 million, respectively, of excess manufacturing overhead costs incurred as a result of expanding our manufacturing capacity in Mexico and transitioning certain of our manufacturing activities from China to Mexico. The twelve months ended December 31, 2018 also includes $5.8 million of costs incurred resulting from factory underutilization associated with ceasing manufacturing activities while transitioning our Asia operations onto our new global ERP system, which went live in Asia in April 2018, as well as $4.8 million of asset write-downs associated with the closure and sale of our Guangzhou, China factory. The three and twelve months ended December 31, 2017 include $4.1 million of asset impairment charges as a result of the transition of manufacturing activities from our Guangzhou factory to our other factories as well as $0.9 million of air freight incurred due to manufacturing delays caused by this factory transition. The twelve months ended December 31, 2017 also includes $5.5 million of excess manufacturing costs incurred resulting from the transition of manufacturing activities from our Guangzhou factory to our other China factories. |
(6) | The three and twelve months ended December 31, 2018 include $8.1 million of valuation allowance recorded against U.S. federal and state deferred tax assets, $1.5 million of income tax expense representing the estimated state and withholding tax liability related to foreign unrepatriated earnings, an adjustment of $1.2 million to bring the Non-GAAP effective tax rate for the three months ended December 31, 2018 in line with the full year effective tax rate, and $0.4 million of net other income tax expense. The twelve months ended December 31, 2018 also includes $0.7 million of net deferred tax asset adjustments resulting from a lower statutory tax rate due to tax incentives at one of our China factories. The three and twelve months ended December 31, 2017 include $16.6 million of income tax expense representing the estimated tax impact of the U.S. Tax Cuts and Jobs Act that was enacted in December 2017. Additionally, the three months ended December 31, 2017 includes $0.5 million of net other income tax benefits, and the twelve months ended December 31, 2017 includes $0.4 million of net other income tax expense. |