DENVER, Nov. 26 /PRNewswire-FirstCall/ -- Ultimate Electronics, Inc.
(Nasdaq: ULTE) announced today its operating results for the third quarter and
nine months ended October 31, 2003.
For the third quarter ended October 31, 2003, the company reported a net
loss of $6,215,000 or $.42 per share on a diluted basis, compared to net
income of $422,000 or $.03 per share on a diluted basis for the same quarter
of the prior year. Sales for the third quarter were $159,703,000, a 10%
decrease from sales of $177,778,000 for the same quarter of the prior year.
Comparable store sales were down 12% for the quarter. Gross profit margin for
the third quarter was 33.2% compared to 34.0% for the same quarter of the
prior year. Gross profit margins were negatively impacted by the decrease in
sales compared to the prior year, the exit from the computer category and the
shortfall in revenues from our repair service business associated with the
conversion to our new management information system during the quarter.
Selling, general and administrative expenses for the third quarter increased
as a percentage of sales to 39.4% from 33.6% for the same quarter of the prior
year. Fixed general and administrative expenses such as occupancy,
depreciation and payroll increased as a percentage of sales by 4.3% compared
to the third quarter of the prior year due to lower than anticipated sales for
the quarter as well as the costs associated with new stores. As a percentage
of sales, net advertising expense increased 58 basis points, insurance costs
increased 36 basis points and training and other costs associated with the
implementation of our new management information system represented 90 basis
points.
For the nine months ended October 31, 2003, the company reported a net
loss of $9,459,000 or $.65 per share on a diluted basis, compared to a net
loss of $848,000 or $.06 per share on a diluted basis for the same period of
the prior year. The net loss for the nine months ended October 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 nine months ended
October 31, 2003 were $469,607,000, a 2% increase from sales of $461,973,000
for the same period of the prior year. Comparable store sales were down 10%
for the nine months ended October 31, 2003. Gross profit margin for the nine
months ended October 31, 2003 was 33.2%, compared to 33.6% for the same period
in the prior year. Selling, general and administrative expenses for the nine
months increased as a percentage of sales to 36.4% from 33.3% for the same
period of 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 first nine months of the prior year, due to lower than
anticipated sales for the nine months as well as the costs associated with new
stores. For the nine months ended October 31, 2003, insurance costs increased
37 basis points as a percentage of sales, primarily due to rising costs of
healthcare, and training and other costs associated with the implementation of
our new management information system represented 31 basis points. The above
increases in expenses as a percentage of sales for the nine months were
partially offset by a decrease in preopening expense of 48 basis points due to
fewer store openings this year.
Third quarter and year-to-date sales by category were as follows:
Third Quarter Ended Nine Months Ended
Category 10/31/2003 10/31/2002 10/31/2003 10/31/2002
Television/DBS 49% 45% 44% 40%
Audio 16% 17% 17% 18%
Video/DVD 12% 13% 13% 15%
Mobile 9% 9% 10% 10%
Home Office 2% 3% 3% 4%
Other 12% 13% 13% 13%
Ed McEntire, Chief Executive Officer, stated, "The first nine months, and
the third quarter in particular, have been challenging for our company.
Overall store traffic during the third quarter did not meet our expectations.
In addition, unexpected issues with the conversion to our new management
information system contributed to our sales and earnings shortfall. While we
believed that we had put the critical issues behind us, we continue to
experience gaps in the expected performance of the system. We continue to
allocate significant resources to resolve these performance issues. We
believe that until the performance issues are resolved, they could continue to
have a negative impact on our overall results. For the first 25 days of our
fourth quarter, total sales are down 1% over the same period in the prior
year. Comparable store sales for the quarter to date are down 10%, a slight
improvement from the third quarter."
Dave Workman, President and Chief Operating Officer, stated, "To rebuild
traffic and sales momentum, we have committed an additional $2 million to our
marketing efforts during the upcoming holiday season. We plan to focus these
efforts on promotional sales in the areas of HDTV, DVD recorders and holiday
gift oriented categories. We are also currently testing a number of concepts
related to sales of DVD software. We will evaluate the results of our DVD
software test and the other traffic initiatives after the holiday selling
season. We are encouraged with the sales increase in our homebuilder business
and the related product sales and expect sales to continue to increase as we
focus additional resources on the growing opportunities in that market. In
spite of the challenging year, we believe that we have initiatives in place to
enable us to capitalize on the growth in digital products and return to our
historic levels of sales growth and operating performance."
Alan Kessock, Senior Vice President of Finance and Chief Financial
Officer, stated, "Our inventory finished the third quarter at approximately
$138 million, up 24% compared to the third quarter of last year, due to the
shortfall in sales experienced in September and October and reduced inventory
visibility during the system conversion. Our borrowings under our revolving
line of credit were approximately $60 million at the end of the third quarter,
due to the shortfall in our sales, the increase in our inventory levels and
capital expenditures for the construction of the six new stores opened during
the quarter. We are taking steps to bring our inventory levels back in line
by year-end. In addition, we continue to look for ways to reduce expenses
without compromising our sales or gross profit margins. We plan to update our
sales and earnings expectations for the fourth quarter and full fiscal year in
early January."
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 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 efforts to rebuild traffic and sales momentum; the impact of
system performance issues on our results; future sales growth in the
homebuilder business; initiatives to improve operating performance; the
reduction of inventory levels and expenses; and the timing of the release of
our sales and earnings expectations for the fourth quarter. 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 the operation
of our new management information system; risks associated with entering new
markets; 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 (November 26, 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
SELECTED FINANCIAL INFORMATION
(amounts in thousands except share and per share data)
Quarter ended Quarter ended
October 31, October 31,
2003 % of 2002 % of
(unaudited) Sales (unaudited) Sales
Sales $159,703 $177,778
Cost of goods sold 106,739 66.8% 117,290 66.0%
Gross profit 52,964 33.2% 60,488 34.0%
Selling, general &
administrative
expenses 62,883 39.4% 59,792 33.6%
Income (loss) from
operations (9,919) (6.2)% 696 0.4%
Interest expense, net 105 0.1% 15 --
Income (loss)
before taxes (10,024) (6.3)% 681 0.4%
Income tax expense
(benefit) (3,809) (2.4)% 259 0.2%
Net income (loss) $(6,215) (3.9)% $422 0.2%
Loss per share -
basic $(0.42) $0.03
Loss per share -
diluted $(0.42) $0.03
Shares
outstanding -
basic 14,662,199 14,507,248
Shares
outstanding -
diluted 14,662,199 14,671,583
Nine months Nine months
ended ended
October 31, October 31,
2003 % of 2002 % of
(unaudited) Sales (unaudited) Sales
Sales $469,607 $461,973
Cost of goods sold 313,498 66.8% 306,737 66.4%
Gross profit 156,109 33.2% 155,236 33.6%
Selling, general &
administrative
expenses 171,171 36.4% 153,873 33.3%
Income (loss) from
operations (15,062) (3.2)% 1,363 0.3%
Interest expense, net 194 -- 169 --
Income (loss)
before taxes and
cumulative effect
of change in
accounting principle (15,256) (3.2)% 1,194 0.3%
Income tax expense
(benefit) (5,797) (1.2)% 455 0.1%
Income (loss) before
cumulative effect
of change in
accounting principle (9,459) (2.0)% 739 0.2%
Cumulative effect
of change in
accounting principle -- -- (1,587) (0.4)%
Net loss $(9,459) (2.0)% $(848) (0.2)%
Earnings (loss)
per share before
cumulative effect
of change in
accounting
principle - basic $(0.65) $0.06
Earnings (loss)
per share before
cumulative effect
of change in
accounting
principle -
diluted $(0.65) $0.05
Loss per share -
basic $(0.65) $(0.06)
Loss per share -
diluted $(0.65) $(0.06)
Shares
outstanding -
basic 14,626,298 13,369,905
Shares
outstanding -
diluted 14,626,298 13,644,772
SUMMARY BALANCE SHEETS
(amounts in thousands)
October 31,
2003 January 31,
(unaudited) 2003
Assets:
Current assets:
Cash and cash equivalents $922 $2,659
Accounts receivable, net 44,568 36,184
Merchandise inventories, net 137,889 106,754
Prepaids and other assets 3,668 4,808
Total current assets 187,047 150,405
Property and equipment, net 159,553 141,387
Property under capital leases, net 965 1,066
Other assets 1,749 1,741
Total assets $349,314 $294,599
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable $59,020 $36,525
Accrued liabilities 21,229 31,047
Revolving line of credit 59,940 --
Deferred revenue 521 918
Other current liabilities 137 126
Total current liabilities 140,847 68,616
Revolving line of credit -- 8,320
Other long term liabilities 3,554 3,996
Stockholders' equity 204,913 213,667
Total liabilities and stockholders' equity $349,314 $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
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