DENVER, Aug. 28 /PRNewswire-FirstCall/ -- Ultimate Electronics, Inc.
(Nasdaq: ULTE) announced today its operating results for the second quarter
and six months ended July 31, 2003.
For the second quarter ended July 31, 2003, the company reported a net
loss of $1,820,000 or $.12 per share on a diluted basis, compared to a net
loss of $929,000, or $.07 per share on a diluted basis for the same quarter of
the prior year. Sales for the second quarter were $154,219,000, a 9% increase
from sales of $142,022,000 for the same period of the prior year. Comparable
store sales were down 10% for the quarter. Gross profit margin for the second
quarter was 33.9% compared to 33.8% for the same quarter of the prior year.
Selling, general and administrative expenses for the second quarter increased
90 basis points as a percentage of sales to 35.8% from 34.9% for the same
quarter of the prior year. Fixed general and administrative expenses such as
occupancy, depreciation and salaries increased as a percentage of sales by
approximately 220 basis points compared to the second 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. As
a percentage of sales, insurance costs increased 16 basis points and training
costs associated with the expected implementation of our new management
information system increased 13 basis points. These increases for the quarter
were partially offset by decreases as a percentage of sales in preopening
expense (120 basis points), due to fewer new stores being opened this year,
and net advertising expense (40 basis points).
For the six months ended July 31, 2003, the company reported a net loss of
$3,244,000 or $.22 per share on a diluted basis, compared to a net loss of
$1,270,000 or $.10 per share on a diluted basis for the same period of the
prior year. The net loss for the six months ended July 31, 2002 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 six months ended July 31,
2003 were $309,904,000, a 9% increase from sales of $284,195,000 for the same
period of the previous year. Comparable store sales were down 9% for the six
months ended July 31, 2003. Gross profit margin for the six months ended July
31, 2003 was 33.3%, the same percentage for the same period in the prior year.
Selling, general and administrative expenses for the six months increased
190 basis points as a percentage of sales to 35.0% from 33.1% for the same
period of the prior year. Fixed general and administrative expenses such as
occupancy, depreciation and salaries increased as a percentage of sales by
approximately 210 basis points compared to the first half of the prior year,
due to lower than anticipated sales for the six months and increased costs
associated with the 12 new stores opened in the latter half of last year. For
the six months ended July 31, 2003, insurance costs increased approximately
40 basis points as a percentage of sales, primarily due to rising costs of
healthcare, and professional and legal fees increased approximately 20 basis
points as a percentage of sales. The above increases in expenses as a
percentage of sales for the six months were partially offset by decreases in
preopening expense (60 basis points) and lower net advertising expense
(30 basis points).
Second quarter and year-to-date sales by category were as follows:
Second Quarter Ended Six Months Ended
Category 7/31/2003 7/31/2002 7/31/2003 7/31/2002
Television/DBS 42% 37% 42% 37%
Audio 18% 18% 18% 19%
Video/DVD 13% 16% 14% 16%
Mobile 11% 12% 10% 11%
Home Office 3% 4% 3% 4%
Other 13% 13% 13% 13%
Ed McEntire, Chief Executive Officer, stated, "The first six months have
been challenging for our company, and we continue to concentrate our efforts
on increasing sales and gross profit margin while reducing expenses. For the
first 26 days of our third quarter, comparable store sales have shown
improvement from the second quarter's 10% decline and are currently down 5%.
Our initiatives to increase gross profit margin have resulted in a slight
improvement in the second quarter, and our internal plans call for continued
improvement in gross profit margin in the second half of the year. In
addition, we remain on schedule to open seven new stores during the next three
months and re-grand open our remaining Audio King stores as Ultimate
Electronics coinciding with the opening of our seventh store in the
Minneapolis/St. Paul, Minnesota market."
Dave Workman, President and Chief Operating Officer, stated, "Overall
traffic continued to show declines during the second quarter when compared to
the same period of the prior year. While we have experienced growth in
digital projection and flat panel televisions and have gained market share in
the television and other core categories, the overall industry performance
remains a challenge. During the third quarter, we plan to substantially
complete our exit from the computer category and reset our stores with
expanded selections of categories we believe will increase store traffic,
including Playstation(TM), portable electronics and cordless telephones. In
addition, the company plans to test a number of concepts related to the sales
of DVD software to increase store traffic, customer retention and incremental
revenue opportunities."
Alan Kessock, Senior Vice President of Finance and Chief Financial
Officer, stated, "Our inventory finished the second quarter of fiscal 2003
down 7% compared to the second fiscal quarter of last year, due to a reduction
in our computer inventory and efforts to increase our inventory turns. We
also reduced our borrowings under our revolving line of credit from
$29 million at the end of the first quarter to under $2 million at the end of
the second quarter."
Mr. Kessock continued, "Based upon the current trends in our business, we
are now expecting comparable store sales for the third quarter to be down in
the mid-single digits with total sales up slightly. For the fourth quarter,
we are now expecting comparable store sales to be down in the low single
digits with total sales up approximately 10%, due to the planned opening of
six new stores in the third quarter and one store early in the fourth quarter.
Based upon these sales expectations, we expect the loss for the third quarter
to be between $.07 and $.11 per share, the earnings for the fourth quarter to
be between $.51 and $.56 per share and the profit for the full fiscal year to
be between $.18 and $.26 per share. Non-recurring costs associated with our
exit from the computer category and the implementation of our new management
information system of $.06 to $.08 per share are included in these estimates."
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
success of efforts to increase gross profit margin; plans to increase sales
and reduce expenses; plans regarding the timing and location of new store
openings and the re-grand opening of stores under the name Ultimate
Electronics; plans to increase store traffic, customer retention and
incremental revenue opportunities by offering DVD software and expanded
selections of certain merchandise; expected comparable store sales and total
sales for the third and fourth quarters of fiscal 2004; estimated earnings or
loss per share for the third and fourth quarters of fiscal 2004 and for the
full year; the timing and estimated cost per share of exiting from the
computer category and implementing our new management information system.
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; loss of
goodwill associated with the name change of our Audio King stores to Ultimate
Electronics; risks associated with the operation of our new management
information system; 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 (August 28, 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 .
Contact: Alan E. Kessock, Chief Financial Officer, Ultimate Electronics,
Inc., 303-801-4000 or e-mail alan.kessock@ulte.com
SELECTED FINANCIAL INFORMATION
(amounts in thousands except share and per share data)
Quarter Quarter
ended ended
July 31, July 31,
2003 % of 2002 % of
(unaudited) Sales (unaudited) Sales
Sales $154,219 $142,022
Cost of goods sold 101,983 66.1% 93,948 66.2%
Gross profit 52,236 33.9% 48,074 33.8%
Selling, general &
administrative
expenses 55,128 35.8% 49,609 34.9%
Loss from operations (2,892) (1.9)% (1,535) (1.1)%
Interest expense
(income), net 44 -- (39) --
Loss before taxes (2,936) (1.9)% (1,496) (1.1)%
Income tax benefit (1,116) (0.7)% (567) (0.4)%
Net loss $(1,820) (1.2)% $(929) (0.7)%
Loss per share -
basic $(0.12) $(0.07)
Loss per share -
diluted $(0.12) $(0.07)
Shares outstanding -
basic 14,634,482 14,284,910
Shares outstanding -
diluted 14,634,482 14,284,910
Six months Six months
ended ended
July 31, July 31,
2003 % of 2002 % of
(unaudited) Sales (unaudited) Sales
Sales $309,904 $284,195
Cost of goods sold 206,759 66.7% 189,447 66.7%
Gross profit 103,145 33.3% 94,748 33.3%
Selling, general &
administrative
expenses 108,288 35.0% 94,081 33.1%
Income (loss) from
operations (5,143) (1.7)% 667 0.2%
Interest expense, net 89 -- 154 --
Income (loss) before
taxes and cumulative
effect of change in
accounting principle (5,232) (1.7)% 513 0.2%
Income tax expense
(benefit) (1,988) (0.6)% 196 0.1%
Income (loss) before
cumulative effect of
change in accounting
principle (3,244) (1.1)% 317 0.1%
Cumulative effect of
change in accounting
principle -- -- (1,587) (0.5)%
Net loss $(3,244) (1.1)% $(1,270) (0.4)%
Earnings (loss) per
share before cumulative
effect of change in
accounting principle -
basic $(0.22) $0.02
Earnings (loss) per
share before cumulative
effect of change in
accounting principle -
diluted $(0.22) $0.02
Loss per share -
basic $(0.22) $(0.10)
Loss per share -
diluted $(0.22) $(0.10)
Shares outstanding -
basic 14,608,050 12,791,808
Shares outstanding -
diluted 14,608,050 13,099,476
SUMMARY BALANCE SHEETS
(amounts in thousands)
July 31, January 31,
2003 2003
(unaudited)
Assets:
Current assets:
Cash and cash equivalents $2,474 $2,659
Accounts receivable, net 35,892 36,184
Merchandise inventories, net 98,053 106,754
Prepaids and other assets 3,458 4,808
Total current assets 139,877 150,405
Property and equipment, net 148,753 141,387
Property under capital leases, net 999 1,066
Other assets 1,749 1,741
Total assets $291,378 $294,599
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable $48,419 $36,525
Accrued liabilities 25,634 31,047
Deferred revenue 661 918
Other current liabilities 133 126
Total current liabilities 74,847 68,616
Revolving line of credit 1,757 8,320
Deferred revenue, less current portion 94 372
Other long term liabilities 3,574 3,624
Stockholders' equity 211,106 213,667
Total liabilities and
stockholders' equity $291,378 $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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