DENVER, May 29 /PRNewswire-FirstCall/ -- Ultimate Electronics, Inc.
(Nasdaq: ULTE) announced today its operating results for the first quarter
ended April 30, 2003.
For the first quarter ended April 30, 2003, the company reported a net
loss of $1,424,000 or $.10 per share on a diluted basis, compared to a net
loss of $341,000, or $.03 per share on a diluted basis for the same quarter of
the prior year. Sales for the quarter were $155,685,000, a 10% increase from
sales of $142,173,000 for the same period of the prior year. Comparable store
sales were down 8% for the quarter. Gross profit margin for the quarter was
32.7% compared to 32.8% for the first quarter of the prior year. Selling,
general and administrative expenses for the quarter increased as a percentage
of sales to 34.2% from 31.3% for the same quarter of the prior year. Fixed
expenses such as occupancy, depreciation and salaries increased by
approximately 190 basis points as a percentage of sales over the first quarter
of the prior year due to lower than anticipated sales for the quarter and
increased costs associated with the 12 new stores opened in the latter half of
last year. Insurance costs for the first quarter increased 60 basis points as
a percentage of sales due to rising costs of healthcare.
First quarter sales by category were as follows:
First Quarter Ended
Category 4/30/2003 4/30/2002
Television/DBS 42% 38%
Audio 18% 19%
Video/DVD 15% 16%
Mobile 10% 10%
Home Office 3% 4%
Other 12% 13%
Dave Workman, President and Chief Operating Officer, stated, "Obviously,
the impact of the war in Iraq had an effect on our quarter. Our largest sales
promotion during the quarter coincided with the beginning of the conflict in
early March. We experienced significant comparable store sales declines
during this time. The bright spots during the quarter were in large format
and flat panel televisions, the sales of which continue to increase at a
significant rate. We were, however, disappointed in our home audio, video and
home office business. We anticipate increased consumer interest in the audio
and video categories following future acceptance of digital radio, server
technology and recordable and multi-channel DVD. In light of the technologies
that have developed around the home audio/video server products, we have
decided to focus on these products and to fully support these new
technologies. As a result, we plan to eliminate core computer products from
our product offerings during the second and third quarters of fiscal 2004.
Sales of core computer products currently represent only two to three percent
of our total sales. We anticipate the cost to discontinue this product
category to be between $400,000 and $700,000. After the phase-out is
complete, we expect this change to have no significant impact on our
earnings."
Alan Kessock, Senior Vice President of Finance and Chief Financial
Officer, stated, "Our inventory finished the first quarter of fiscal 2003 up
23% over the first fiscal quarter of last year and was over our plan by
approximately $8 million (approximately one week of sales) due to the
shortfall in our sales during the quarter. We purchased a significant portion
of our inventory for the first quarter in early March and paid for these
purchases prior to the end of the quarter. As a result, accounts payable was
less than expected at the end of the quarter, and our revolving line of credit
increased to $28.9 million. Our outstanding balance on our revolving line of
credit as of this press release is under $15 million."
Ed McEntire, Chief Executive Officer, stated, "We plan to open seven new
stores in the second half of 2003 -- one store in the Minneapolis/St. Paul
metropolitan area in September, two stores in Austin, Texas in October, three
stores in Kansas City at the end of October and one store in Wichita, Kansas
at the end of October. As we continue with the expansion of our business, we
maintain the goal of increasing gross margins while reducing our overall cost
of operations. At the end of last quarter, we implemented measures designed
to increase gross margins, with a goal of adding 50 basis points to our
margins over the following 12 to 24 months. These measures included fine-
tuning our commission structure to reduce discounting and improving product
distribution. Our goal is also to reduce selling, general and administrative
costs as a percentage of sales by 200 basis points over the next two years by
creating efficiencies in advertising, store openings, repair services and in
other areas of our operations. While it is still too early to determine the
impact of these measures, indications are that we are making progress. Their
ultimate success will depend in large part on our sales; we are assuming
comparable store sales will be at more normalized levels of positive two to
three percent. Although our May 2003 sales have improved relative to the
comparable stores sales of negative eight percent in the first quarter of
fiscal 2004, May 2003 comparable stores sales to date are down in the low
single digits."
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 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
sales of large format and flat panel televisions; our expectations regarding
increased consumer interest in audio and video products; future acceptance of
new digital and other technologies and products; our plans to discontinue
sales of core computer products and the expected cost and impact on our
earnings of this change; our plans regarding the timing and location of new
store openings; our goal of, and progress towards, increasing gross margins by
50 basis points over the 12 to 24 months beginning with the end of the first
quarter of fiscal 2004; our goal of, and progress towards, decreasing selling
general and administrative expenses as a percentage of sales by 200 basis
points over the same period; and our assumptions regarding comparable store
sales over the next two years. 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; shifts in merchandise mix;
activities of competitors; terrorism and acts of war; consumer acceptance of
new technologies; risks associated with entering new markets; strikes and work
stoppages; 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 quarterly earnings conference call (May 29, 2003 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. 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 .
For further information please contact: Alan E. Kessock, Chief Financial
Officer of Ultimate Electronics, Inc., +1-303-801-4000, alan.kessock@ulte.com.
SELECTED FINANCIAL INFORMATION
(amounts in thousands except share and per share data)
Quarter ended Quarter ended
April 30, 2003 % of April 30, 2002 % of
(unaudited) Sales (unaudited) Sales
Sales $155,685 $142,173
Cost of goods sold 104,776 67.3% 95,499 67.2%
Gross profit 50,909 32.7% 46,674 32.8%
Selling, general &
administrative
expenses 53,160 34.2% 44,472 31.3%
Income (loss)
from operations (2,251) (1.5)% 2,202 1.5%
Interest expense, net 45 -- 193 0.1%
Income (loss) before
taxes and cumulative
effect of change in
accounting principle (2,296) (1.5)% 2,009 1.4%
Income tax expense
(benefit) (872) (0.6)% 763 0.5%
Income (loss) before
cumulative effect of
change in accounting
principle (1,424) (0.9)% 1,246 0.9%
Cumulative effect of
change in accounting
principle -- -- (1,587) (1.1)%
Net loss $(1,424) (0.9)% $(341) (0.2)%
Loss per share - basic $(0.10) $(0.03)
Loss per share - diluted $(0.10) $(0.03)
Shares outstanding -
basic 14,580,727 11,248,376
Shares outstanding -
diluted 14,580,727 11,248,376
SUMMARY BALANCE SHEETS
(amounts in thousands)
April 30, January 31,
2003 2003
(unaudited)
Assets:
Current assets:
Cash and cash equivalents $3,415 $2,659
Accounts receivable, net 40,034 36,184
Merchandise inventories, net 105,838 106,754
Prepaids and other assets 3,322 4,808
Total current assets 152,609 150,405
Property and equipment, net 142,937 141,387
Property under capital leases, net 1,033 1,066
Other assets 1,741 1,741
Total assets $298,320 $294,599
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable $29,263 $36,525
Accrued liabilities 25,508 31,047
Deferred revenue 792 918
Other current liabilities 449 126
Total current liabilities 56,012 68,616
Revolving line of credit 28,949 8,320
Deferred revenue, less current portion 217 372
Other long term liabilities 1,306 3,624
Stockholders' equity 211,836 213,667
Total liabilities and stockholders' equity $298,320 $294,599
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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