DENVER, April 8 /PRNewswire-FirstCall/ -- Ultimate Electronics, Inc.
(Nasdaq: ULTE) announced today its operating results for the fourth quarter
and year ended January 31, 2004.
For the fourth quarter ended January 31, 2004, the company reported a net
loss of $6,320,000 or $.43 per share on a diluted basis, compared to net
income of $5,554,000 or $.38 per share on a diluted basis for the same quarter
of the prior year. Sales for the fourth quarter were $243,248,000, compared
to sales of $242,454,000 for the same quarter of the prior year. Comparable
store sales were down 9% for the quarter. Gross profit margin for the fourth
quarter was 30.1% compared to 31.0% for the same quarter of the prior year.
Gross profit margins were negatively impacted by write-downs associated with
the company's exit from the computer category, Playstation and PDA's (50 basis
points), and higher inventory shrink associated with integration issues
experienced with the company's new management information system (55 basis
points). This was slightly offset by higher sales of customer services such
as repair and installation. Selling, general and administrative expenses for
the fourth quarter increased as a percentage of sales to 34.1% from 27.3% for
the same quarter of the prior year. Net advertising expense increased as a
percentage of sales by 3.7% compared to the fourth quarter of the prior year
due to lower cooperative advertising credits earned from vendors for the
quarter and the full year and increased advertising expenditures in the fourth
quarter. Fixed general and administrative expenses such as occupancy,
depreciation and payroll increased as a percentage of sales by 3.0% compared
to the fourth quarter of the prior year due to lower than anticipated sales
for the quarter, costs associated with new stores and store impairment
charges. In January 2004, the company recognized a $3.1 million asset
impairment charge on two of its store locations. In addition, the company
incurred severance and relocation expenses of $600,000 (25 basis points)
associated with the reorganization of certain non-sales positions.
For the year ended January 31, 2004, the company reported a net loss of
$15,779,000 or $1.08 per share on a diluted basis, compared to net income of
$4,706,000 or $.34 per share on a diluted basis for the same period of the
prior year. Net income for the year ended January 31, 2003 includes a charge
of $1,587,000 or $.12 per share for the cumulative effect of EITF No. 02-16,
Accounting by a Customer (Including a Reseller) for Certain Consideration
Received from a Vendor. Sales for the year ended January 31, 2004 were
$712,855,000, a 1% increase from sales of $704,427,000 for the prior year.
Comparable store sales were down 9% for the year ended January 31, 2004.
Gross profit margin for the year ended January 31, 2004 was 32.2%, compared to
32.7% for the prior year. Gross profit margins were negatively impacted by
write-downs associated with the company's exit from the computer category,
Playstation and PDA's (approximately 25 basis points), and higher inventory
shrink associated with integration issues experienced with the company's new
management information system (19 basis points). Selling, general and
administrative expenses for the year increased as a percentage of sales to
35.7% from 31.2% for the prior year. Fixed general and administrative
expenses such as occupancy, depreciation and payroll increased as a percentage
of sales by 2.9% compared to the prior year, due to lower than anticipated
sales for the year, costs associated with new stores and charges for store
impairments discussed previously. Net advertising expense increased as a
percentage of sales by 1.3% compared to the prior year due to lower
cooperative advertising credits earned from vendors for the year and increased
advertising spending for the fourth quarter. For the year ended January 31,
2004, insurance costs increased 26 basis points as a percentage of sales,
primarily due to rising costs of healthcare. The above increases in expenses
as a percentage of sales for the year were partially offset by a decrease in
preopening expense of 33 basis points due to fewer store openings this year.
Fourth quarter and annual sales by category were as follows:
Fourth Quarter Ended Year Ended
Category 1/31/2004 1/31/2003 1/31/2004 1/31/2003
Television/DBS 48% 43% 45% 41%
Audio 18% 19% 17% 19%
Video/DVD 14% 17% 14% 15%
Mobile 7% 6% 9% 9%
Home Office 1% 3% 2% 3%
Other 12% 12% 13% 13%
The company's inventory finished the year at $113.9 million, up 7%
compared to inventory levels at the end of last year, due to the shortfall in
sales during the fourth quarter. Borrowings under the company's revolving
line of credit were $63.2 million at the end of fiscal 2004, due to the
shortfall in its sales, the increase in its inventory levels and capital
expenditures for the construction of the seven new stores opened during the
second half of the year.
On April 2, 2004, the company entered into a third amended and restated
credit and security agreement with Wells Fargo Retail Finance, LLC. The
credit agreement provides for an increase in the borrowing capacity under the
revolving credit facility from $80 million to $100 million, with an option for
the company to increase the facility to $125 million, subject to certain
conditions. The amended and restated credit facility expires in April 2008.
Borrowings under the revolving line of credit are secured by the company's
inventory and receivables, its Thornton, Colorado, facility, and other assets.
The facility includes standard and customary covenants, including covenants
regarding the company's maximum capital expenditures and minimum EBITDA (i.e.
earnings before interest, taxes, depreciation and amortization).
Dave Workman, President and Chief Executive Officer, stated, "We are
extremely disappointed with our sales, profit and operating results from last
year. This has been one of the most challenging periods for our company in
recent history. We struggled in the first part of the year with the
ineffectiveness of our television advertising campaign, price compression in
key products categories, slowing demand in established categories, low
consumer confidence, competitive pressures and a dilution of skilled personnel
resulting from our recent expansion. In the third and fourth quarters, these
issues were compounded by the unexpected problems we experienced following our
September conversion to a new management information system. We experienced
problems with inventory visibility, product distribution, commission
calculations, reporting and processing of service repairs.
"Total sales for the first two months of our first quarter of fiscal 2005
were down approximately 6% over the same period in the prior year. Comparable
store sales were down approximately 15% for the first two months of the fiscal
year. Total sales are up approximately 9% and comparable store sales are
approximately flat for the first six days of April. While we anticipate
comparable store sales to remain negative during the first part of fiscal
2005, we expect the company-wide sales and customer service initiatives we are
implementing to improve our sales in the latter part of the year.
"We view fiscal 2005 as a turnaround year for our company. While we
believe it will take time to re-establish our market position with customers
and regain sales momentum lost during the previous year, we expect our new,
four-year, $100 million credit facility with our existing lender, coupled with
our current cost structure, will provide our company with the additional time
needed. Although we have corrected most of our system issues, we continue to
encounter problems with our management information system related to inventory
and distribution and are working on resolving these issues. Through staff
reductions and marketing efficiencies implemented in January 2004, and our
continued efforts to contain or reduce costs, we plan to reduce our selling,
general and administrative expenses as a percentage of sales. In March 2004,
we changed our store management structure and compensation program to focus
store management on supporting product sales and improving customer service.
We have also identified other sales, operational and cost initiatives and plan
to implement these in the coming months.
"In addition, we have engaged Peter G. Hanelt as a consultant and advisor
to assist in our return to profitability. Mr. Hanelt has had extensive
experience in both transition and turnaround situations at numerous companies
and within a number of industries, primarily retail. Most recently, he
assisted Good Guys, Inc., a specialty retailer in consumer electronics, with
its return to profitability after seven consecutive years of losses."
Ultimate Electronics quarterly earnings conference call (April 8, 2004 at
11:00 a.m. Eastern Time) will be broadcast live on the Internet. Please visit
the Company's Web site at http://www.ultimateelectronics.com and click on the
Street Events icon on the Investor Relations page.
The statements made in this news release, other than those concerning
historical financial information, are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are made based upon management's current
expectations and beliefs concerning future developments and their potential
effects upon the company. These forward-looking statements include statements
regarding: (i) comparable store sales during the first part of fiscal 2005;
(ii) improvement of sales in the latter part of fiscal 2005 through
company-wide sales and customer service initiatives; (iii) the time required
and the company's ability to re-establish its market position and regain sales
momentum; (iv) flexibility provided by the company's new credit facility and
cost structure; (v) the DVD selection in the company's stores; (vi) the
expected reduction of the company's selling, general and administrative
expenses as a percentage of sales; and (vii) statements regarding the
company's return to profitability. Actual results may differ materially from
those included in the forward-looking statements due to a number of factors,
including, but not limited to: changes in general economic conditions; success
of sales promotions and marketing efforts; activities of competitors;
terrorism and acts of war; consumer acceptance of new technologies; risks
associated with the operation of our new management information system; and
other risk factors identified in the company's Annual Report on Form 10-K for
the fiscal year ended January 31, 2003, filed with the Securities and Exchange
Commission. There can be no assurance that future developments affecting the
company will be those anticipated by management. The company disclaims any
obligation to update or revise any of the forward-looking statements that are
in this news release.
About Ultimate Electronics, Inc. (Nasdaq: ULTE)
Ultimate Electronics is a leading specialty retailer of home entertainment
and consumer electronics products in 14 states. The company operates
65 stores, including 54 stores in Arizona, Idaho, Illinois, Iowa, Kansas,
Minnesota, Missouri, Nevada, New Mexico, Oklahoma, South Dakota, Texas and
Utah under the trade name Ultimate Electronics(R) and 11 stores in Colorado
under the trade name SoundTrack(R). In addition, the company operates Fast
Trak Inc., an independent electronics repair company and a wholly owned
subsidiary of Ultimate Electronics. During the past two years, the company
received numerous industry awards including Audio Video International's 2003
"Top 10 Audio/Video Retailer of the Year."
Ultimate Electronics news releases, quarterly sales and operating results
can be found on the Internet on the Company's Web site at
http://www.ultimateelectronics.com or accessed via PR Newswire's Web site at
http://www.prnewswire.com.
Contact: Alan E. Kessock, Chief Financial Officer, Ultimate Electronics,
Inc., 303-801-4000
SELECTED FINANCIAL INFORMATION
(amounts in thousands except share and per share data)
Quarter ended Quarter ended
January 31, January 31,
2004 2003
(unaudited) % of Sales (unaudited) % of Sales
Sales $243,248 $242,454
Cost of goods sold 169,965 69.9% 167,193 69.0%
Gross profit 73,283 30.1% 75,261 31.0%
Selling, general &
administrative
expenses 82,961 34.1% 66,266 27.3%
Income (loss) from
operations (9,678) (4.0)% 8,995 3.7%
Interest expense, net 515 0.2% 39 --
Income (loss)
before taxes (10,193) (4.2)% 8,956 3.7%
Income tax expense
(benefit) (3,873) (1.6)% 3,402 1.4%
Net income (loss) $(6,320) (2.6)% $5,554 2.3%
Earnings (loss)
per share - basic $(0.43) $0.38
Earnings (loss)
per share - diluted $(0.43) $0.38
Shares outstanding
- basic 14,721,537 14,565,145
Shares outstanding
- diluted 14,721,537 14,714,729
Year ended Year ended
January 31, January 31,
2004 % of Sales 2003 % of Sales
Sales $712,855 $704,427
Cost of goods sold 483,463 67.8% 473,930 67.3%
Gross profit 229,392 32.2% 230,497 32.7%
Selling, general &
administrative
expenses 254,132 35.7% 220,139 31.2%
Income (loss) from
operations (24,740) (3.5)% 10,358 1.5%
Interest expense, net 709 0.1% 208 --
Income (loss)
before taxes and
cumulative effect
of change in
accounting principle (25,449) (3.6)% 10,150 1.5%
Income tax expense
(benefit) (9,670) (1.4)% 3,857 0.6%
Income (loss)
before cumulative
effect of change in
accounting principle (15,779) (2.2)% 6,293 0.9%
Cumulative effect of
change in accounting
principle,
net of tax -- -- (1,587) (0.2)%
Net loss $(15,779) (2.2)% $4,706 0.7%
Earnings (loss)
per share before
cumulative effect
of change in
accounting principle
- basic $(1.08) $0.46
Earnings (loss)
per share before
cumulative effect
of change in
accounting principle
- diluted $(1.08) $0.45
Earnings (loss)
per share - basic $(1.08) $0.34
Earnings (loss)
per share - diluted $(1.08) $0.34
Shares outstanding
- basic 14,650,303 13,671,171
Shares outstanding
- diluted 14,650,303 13,921,235
SUMMARY BALANCE SHEETS
(amounts in thousands)
January 31, January 31,
2004 2003
Assets:
Current assets:
Cash and cash equivalents $4,413 $2,659
Accounts receivable, net 44,306 36,184
Income tax receivable 7,975 --
Merchandise inventories, net 113,875 106,754
Prepaids and other assets 2,857 4,808
Total current assets 173,426 150,405
Property and equipment, net 158,247 141,387
Property under capital leases, net 931 1,066
Deferred tax asset 5,257 --
Other assets 1,874 1,741
Total assets $339,735 $294,599
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable $35,330 $36,525
Accrued liabilities 34,949 31,047
Deferred revenue 353 918
Other current liabilities 141 126
Total current liabilities 70,773 68,616
Revolving line of credit 63,186 8,320
Other long term liabilities 6,571 3,996
Stockholders' equity 199,205 213,667
Total liabilities and stockholders' equity $339,735 $294,599
SOURCE Ultimate Electronics, Inc.
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http://www.ultimateelectronics.com
Company News On-Call:
http://www.prnewswire.com/comp/877054.html
CONTACT:
Alan E. Kessock, Chief Financial Officer of
Ultimate Electronics, Inc., +1-303-801-4000
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