THORNTON, Colo., Dec. 2 /PRNewswire-FirstCall/ -- Ultimate Electronics,
Inc. (Nasdaq: ULTE) announced today its operating results for the third
quarter and nine months ended October 31, 2004.
Highlights:
* Third quarter sales were down 1.6 percent from a year ago; comparable
store sales declined 8 percent
* Gross profit margin improved 160 basis points to 34.8 percent from the
same quarter last year
* Loss from operations for the quarter decreased to $5.5 million
compared to $9.9 million for the third quarter of last year
* Selling, general and administrative expenses were 38.3 percent of
sales, an improvement of 110 basis points from the third quarter of
last year
* J.D. Power ranks Ultimate Electronics #2 in customer satisfaction
For the third quarter ended October 31, 2004, the Company reported a net
loss of $6.5 million ($0.43 per share), compared to a net loss of $6.2 million
($0.42 per share) for the same quarter of the prior year. Loss from
operations was $5.5 million compared to a loss from operations of $9.9 million
for the same quarter of the prior year. Sales were $157.2 million, down
1.6 percent from the prior year. Comparable store sales were down 8 percent
for the quarter. Gross profit margin was 34.8 percent, up 160 basis points
from a year ago. Selling, general and administrative expenses improved as a
percentage of sales to 38.3 percent from 39.4 percent for the same quarter of
the prior year. As of October 31, 2004, availability under the Company's
revolving line of credit was $10.5 million. Covenant EBITDA (as defined
below) for the third quarter ended October 31, 2004 was negative $5.5 million.
For the seven-month period ended October 31, 2004, the Company had
$0.5 million of excess Covenant EBITDA. Reconciliations of the Company's net
loss and cash flows from operating activities to Covenant EBITDA, a non-GAAP
financial measure, are provided in the financial tables at the end of this
earnings release.
During the quarter, sales decreased due to traffic declines driven by
residual impacts from last year and shifting competitive pressures. Sales
were favorably impacted by the improvement in the Company's conversion rate of
store traffic to sales, which the Company believes resulted from its more
focused marketing strategy. Gross profit margin improved due to continued
focus on merchandise selection, inventory management and store level
execution. Selling, general and administrative expenses improved primarily as
a result of reduced advertising and selling expenses.
Dave Workman, President and CEO said, "The $4.4 million improvement in our
third quarter loss from operations indicates that our turnaround initiatives
are taking effect. Our gross profit margin, comparative store sales metrics
and SG&A expenses have improved each quarter since implementing our turnaround
strategy. The results reflect our focused initiatives on increasing gross
margin, managing inventory, improving advertising effectiveness, reducing
SG&A, and enhancing the customer experience with Ultimate Electronics. We
remain committed to our turnaround strategy and expect to see continued
improvement in our business. Our actions position us well for the holiday
season, and as we enter 2005."
For the nine months ended October 31, 2004, the Company reported a net
loss of $31.1 million ($2.09 per share), compared to a net loss of
$9.5 million ($0.65 per share) for the same period of the prior year. Loss
from operations was $27.2 million compared to a loss from operations of
$15.1 million for the same period of the prior year. Sales were
$462.5 million, down 1.5 percent from the prior year. Comparable store sales
were down 9 percent. Gross profit margin was 33.0 percent, compared to
33.2 percent for the same period in the prior year. Selling, general and
administrative expenses increased as a percentage of sales to 38.9 percent
from 36.4 percent for the same period of the prior year, primarily reflecting
the impact of higher rent and depreciation expense for stores opened in the
third quarter of fiscal 2004 and an impairment charge taken in the second
quarter of fiscal 2005, partially offset by a reduction in advertising and
selling expenses. Results for 2005 were also negatively impacted by a
non-cash reversal of an income tax benefit of $1.7 million. The Company
believes that under the guidance provided by FAS 109, the reversal of the
income tax benefit more appropriately represents the Company's tax position.
Third quarter and year-to-date sales by category were as follows:
Third Quarter Ended Nine Months Ended
Category 10/31/2004 10/31/2003 10/31/2004 10/31/2003
Television/DBS 50% 49% 47% 44%
Audio 18% 16% 18% 17%
Video/DVD 10% 12% 12% 13%
Mobile 6% 8% 8% 10%
Home Office 1% 2% 1% 3%
Other 15% 13% 14% 13%
Earlier this month, J.D. Power and Associates ranked Ultimate Electronics
number two in customer satisfaction among consumer U.S. electronics retailers.
"We're pleased to be recognized by J.D. Power," said Mr. Workman. "The
ranking is a reflection of our commitment to the customer and the hard work of
each Ultimate Electronics employee."
The Company's quarterly earnings conference call (December 2, 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
Investor Relations and Webcast-Live icons.
The statements made in this press 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 results of the Company's marketing strategy, the success of the
Company's turnaround strategy and related initiatives, the continued
improvement in the Company's business, and the Company's reversal of a
previously recognized income tax benefit. 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; the change in the Company's independent accountants; and other
risk factors identified in the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 2004, and its Quarterly Report on Form 10-Q for
the quarter ended July 31, 2004, both 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.
Contact: Investor Relations Department, Ultimate Electronics, Inc. at
303-412-2500 (ext. 2640) or 1-800-260-2660 (ext. 2640) or e-mail
shareholder@ulte.com.
SELECTED FINANCIAL INFORMATION
(amounts in thousands except share and per share data)
Quarter ended Quarter ended
October 31, October 31,
2004 % of 2003 % of
(unaudited) Sales (unaudited) Sales
Sales $157,156 $159,703
Cost of goods sold 102,499 65.2% 106,739 66.8%
Gross profit 54,657 34.8% 52,964 33.2%
Selling, general &
administrative expenses 60,178 38.3% 62,883 39.4%
Loss from operations (5,521) (3.5)% (9,919) (6.2)%
Interest expense, net 983 0.6% 105 0.1%
Loss before taxes (6,504) (4.1)% (10,024) (6.3)%
Income tax expense (benefit) -- -- (3,809) (2.4)%
Net loss $(6,504) (4.1)% $(6,215) (3.9)%
Loss per share --
basic and diluted $(0.43) $(0.42)
Shares outstanding --
basic and diluted 14,971,643 14,662,199
Nine months Nine months
ended ended
October 31, October 31,
2004 % of 2003 % of
(unaudited) Sales (unaudited) Sales
Sales $462,460 $469,607
Cost of goods sold 309,729 67.0% 313,498 66.8%
Gross profit 152,731 33.0% 156,109 33.2%
Selling, general &
administrative expenses 179,937 38.9% 171,171 36.4%
Loss from operations (27,206) (5.9)% (15,062) (3.2)%
Interest expense, net 2,164 0.5% 194 --
Loss before taxes (29,370) (6.4)% (15,256) (3.2)%
Income tax expense (benefit) 1,748 0.3% (5,797) (1.2)%
Net loss $(31,118) (6.7)% $(9,459) (2.0)%
Loss per share --
basic and diluted $(2.09) $(0.65)
Shares outstanding --
basic and diluted 14,901,724 14,626,298
SUMMARY BALANCE SHEETS
(amounts in thousands)
October 31, 2004 January 31, 2004
(unaudited) (audited)
Assets:
Current assets:
Cash and cash equivalents $1,853 $4,413
Accounts receivable, net 42,404 44,306
Income tax receivable -- 7,975
Merchandise inventories, net 129,995 113,875
Prepaids and other assets 6,410 3,800
Total current assets 180,662 174,369
Property and equipment, net 145,868 158,247
Deferred tax asset -- 806
Other assets 2,576 2,805
Total assets $329,106 $336,227
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable $46,411 $35,330
Accrued liabilities 30,261 35,177
Other current liabilities 147 494
Total current liabilities 76,819 71,001
Revolving line of credit 68,301 63,186
Term loan facility 13,000 --
Other long term liabilities 2,470 3,105
Stockholders' equity 168,516 198,935
Total liabilities and
stockholders' equity $329,106 $336,227
SUMMARY STATEMENTS OF CASH FLOWS
(amounts in thousands)
Nine months ended Nine months ended
October 31, 2004 October 31, 2003
(unaudited) (unaudited)
Cash Flows from
Operating Activities:
Net loss $(31,118) $(9,459)
Depreciation 16,410 12,023
Changes in operating assets
and liabilities (2,633) (26,463)
Net cash used in operating
activities (17,341) (23,899)
Cash Flows used in Investing
Activities (3,929) (30,088)
Cash Flows from Financing
Activities 18,710 52,250
Net decrease in cash and
cash equivalents (2,560) (1,737)
Cash and cash equivalents at
beginning of period 4,413 2,659
Cash and cash equivalents at
end of period $1,853 $922
NON-GAAP DISCLOSURES: RECONCILIATIONS OF NET LOSS AND CASH FLOWS FROM
OPERATING ACTIVITIES TO COVENANT EBITDA(1)
(amounts in thousands)
Seven month period ended
October 31, 2004(2)
(unaudited)
Reconciliation of Net Loss to
Covenant EBITDA
Net Loss $(25,363)
Adjustments:
Extraordinary gain --
Non-cash impairment loss(3) 7,745
Interest 1,804
Taxes(4) (1,722)
Depreciation(5) 12,036
Covenant EBITDA $ (5,500)
Reconciliation of Covenant EBITDA to
Cash Flows from Operating Activities
Covenant EBITDA $ (5,500)
Adjustments:
Interest (1,804)
Net change in assets and liabilities (1,278)
Cash flows used in operating activities $ (8,582)
(1) The term Covenant EBITDA is used in this earnings release only as
part of the discussion of the Company's compliance with the
financial covenants under its Fourth Amended and Restated Loan and
Security Agreement (the "Credit Agreement"). For purposes of the
Credit Agreement, Covenant EBITDA is defined as net earnings (or
loss), minus extraordinary gains, plus non-cash impairment losses,
interest expense, income taxes, and depreciation and amortization.
For the seven-month period ended October 31, 2004, the Company's
Covenant EBITDA of negative $5.5 million provided $0.5 million more
than the required Covenant EBITDA of negative $6.0 million. The
table above provides reconciliations of Net Loss to Covenant EBITDA
and Covenant EBITDA to Cash Flows from Operating Activities, both
measures of performance calculated and presented in accordance with
accounting principles generally accepted in the United States of
America ("GAAP"). The Company's management believes Cash Flows
from Operating Activities is the most directly comparable GAAP
measure to Covenant EBITDA.
(2) The covenant measurement period is a cumulative calculation that
begins with the one-month period ended April 30, 2004. Cash flows
used in operating activities for the nine month period ended
October 31, 2004 was $26.7 million, compared to $8.6 million for the
seven-month period ended October 31, 2004. The Company had negative
cash flows from operating activities during February and March 2004.
(3) Includes an asset impairment charge of $0.9 million for three
under-performing stores and a reversal of a previously recognized
deferred tax benefit of $6.9 million (i.e. a deferred tax benefit of
$5.1 million recognized in the first quarter ended April 30, 2004
and a deferred tax asset of $1.8 million as of January 31, 2004).
(4) Amount represents the tax benefit recognized in April 2004.
(5) Excludes an asset impairment charge of $0.9 million for three
under-performing stores.
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:
Investor Relations Department of Ultimate
Electronics, Inc., +1-303-412-2500, ext. 2640, or
+1-800-260-2660, ext. 2640, or shareholder@ulte.com
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