DENVER, May 19 /PRNewswire-FirstCall/ --
Ultimate Electronics, Inc. (Nasdaq: ULTE) today reported that it had elected
to early adopt a new method of accounting for vendor allowances retroactive to
the first quarter of fiscal 2003 (the quarter ended April 30, 2002). The new
method is consistent with final guidance issued by the Financial Accounting
Standards Board's Emerging Issues Task Force in March 2003 regarding
accounting for vendor allowances (EITF No. 02-16), Accounting by a Customer
(Including a Reseller) for Certain Consideration Received from a Vendor. In
adopting the new guidance, Ultimate Electronics changed its previous method of
accounting, which was consistent with generally accepted accounting
principles. This new method will not affect the amount of vendor allowances
Ultimate Electronics will receive but will change the timing of recognizing
allowances and their classification in the income statement.
EITF No. 02-16 addresses the accounting for cash consideration received
from a vendor by a reseller for various vendor-funded allowances, including
cooperative advertising support. EITF No. 02-16 provides that cash
consideration received from a vendor should be presumed to be a reduction of
the prices of the vendor's products and should therefore be reported as a
reduction in the cost of goods sold when recognized in the reseller's income
statements. The exceptions to this rule are if the vendor receives an
identifiable benefit or if the reimbursement is for specific, incremental,
identifiable costs. If the amount of cash consideration received from a
vendor exceeds the cost being reimbursed, EITF No. 02-16 requires that the
excess amount be shown as a reduction of cost of goods sold when recognized in
the reseller's income statements. EITF No. 02-16 is effective for new
arrangements or modifications of existing arrangements entered into after
December 31, 2002, with early adoption permitted. Final guidance issued in
March 2003 provides that a reseller that has not issued financial statements
is permitted to report this change in accounting as a cumulative-effect
adjustment.
Following receipt of the final guidance, Ultimate Electronics elected to
early adopt the new guidance on a retroactive basis to the beginning of fiscal
2003 and to report the change as a cumulative effect of change in accounting
principle. This change in accounting principle had the following impact on
the company's reported results for fiscal 2003:
* A portion of vendor allowances is deferred and remains in inventory
until the product is sold. As of January 31, 2003, $3.3 million of
vendor allowances has been recorded as a reduction of inventory and
will be recognized in cost of goods sold as the inventory is sold.
* Ultimate Electronics recorded a one-time, non-cash, after-tax charge
of $1.6 million, which was classified as a "cumulative effect of
change in accounting principle."
* The fiscal 2003 impact of adoption on income before cumulative effect
of change in accounting principle was $0.4 million, net of tax (or
$.03 per share).
* This change in accounting principle required the reclassification of
$14.8 million of Ultimate Electronics' vendor allowances earned in
fiscal 2003 from selling, general and administrative expenses to cost
of goods sold.
On an ongoing basis, a portion of vendor allowances received by the
company will continue to reduce inventory and cost of goods sold and increase
selling, general and administrative expenses, as required by EITF No. 02-16.
The company expects earnings per share for each of the first three quarters to
be reduced between $.01 and $.03 and to be increased in the fourth quarter by
any reductions recognized in the first three quarters.
The changes and related reclassification for each quarter in fiscal 2003
are summarized in the table below:
Financial Impact as a Result of Adopting New
Accounting Guidance for Vendor Allowances (EITF No. 02-16)
Increase (decrease)
$'s in thousands
Selling, Diluted
general & Income (loss) earnings
For the Cost of administrative from per
quarter ended goods sold expenses operations share
April 30, 2002 $(2,860) $3,595 $(735) $(.04)
July 31, 2002 (2,835) 5,707 (2,872) (.13)
October 31, 2002 (3,527) 5,589 (2,062) (.09)
January 31, 2003 (4,988) 14 4,974 .21
Fiscal 2003 $(14,210) $14,905 $(695) $(.03)
To help investors understand how the change affects Ultimate Electronics'
financial statements, comparative financial statements for the company's 2003
fiscal quarters and 2003 fiscal year follow:
Three Three Three Three Fiscal
Months Months Months Months Year
Ended Ended Ended Ended Ended
April 30, July 31, October 31, January 31, January 31,
(in thousands, except per share data)
FISCAL 2003
As restated:
Sales $142,173 $142,022 $177,778 $242,454 $704,427
Gross
profit 46,674 48,074 60,488 75,261 230,497
Income
(loss)
from
operations 2,202 (1,535) 696 8,995 10,358
Income
(loss)
before
cumulative
effect of
change in
accounting
principle 1,246 (929) 422 5,554 6,293
Cumulative
effect of
change in
accounting
principle,
net of tax 1,587 -- -- -- 1,587
Net income
(loss) (341) (929) 422 5,554 4,706
Earnings
(loss)
per share
before
cumulative
effect of
change in
accounting
principle-
basic .11 (.07) .03 .38 .46
Earnings
(loss)
per share
before
cumulative
effect of
change in
accounting
principle-
diluted .11 (.07) .03 .38 .45
Earnings
(loss)
per share-
basic (.03) (.07) .03 .38 .34
Earnings
(loss)
per share-
diluted (.03) (.07) .03 .38 .34
As previously
reported:
Sales $142,173 $142,022 $177,778 $242,454 $704,427
Gross
profit 43,814 45,239 56,961 70,273 216,287
Income
from
operations 2,937 1,337 2,758 4,021 11,053
Net income 1,701 853 1,701 2,469 6,724
Earnings
per share-
basic .15 .06 .12 .17 .49
Earnings
per share-
diluted .15 .06 .12 .17 .48
Ultimate Electronics is a leading specialty retailer of home entertainment
and consumer electronics products in 13 states. The company operates
58 stores, including 40 stores in Arizona, Idaho, Illinois, Iowa, Minnesota,
Missouri, Nevada, New Mexico, Oklahoma, South Dakota, Texas and Utah under the
trade name Ultimate Electronics(R), 11 stores in Colorado under the trade name
SoundTrack(R) and seven stores in Minnesota under the trade name Audio
King(R). In addition, the company operates Fast Trak, Inc., an independent
electronics repair company based in Minnesota and a wholly owned subsidiary of
Ultimate Electronics. During the past two years, the company received
numerous industry awards including Audio Video International's 2002 "Top 10
Audio/Video Retailer of the Year."
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 the impact of EITF No. 02-16. Actual results may differ materially
from those included in the forward-looking statement due to a number of
factors, including, but not limited to: the success of sales initiatives;
inventory levels; changes in general economic conditions; shifts in
merchandise mix; activities of competitors; terrorism and acts of war; 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.
Ultimate Electronics is expected to release its first quarter earnings
results on the morning of May 29, 2003 and to hold its conference call at
11:00 a.m. Eastern Time on the day of the release, which 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 to access the live broadcast. 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.
Contact: Alan E. Kessock, Chief Financial Officer, Ultimate Electronics,
Inc., 303-801-4000 or e-mail alan.kessock@ulte.com.
SOURCE Ultimate Electronics, Inc.
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Related links:
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,
alan.kessock@ulte.com
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