Universal Power Group Inc. (fka UPGI)

[Knowledge is King]

UPG reports $.12 vs $.08


(COMTEX) B: Universal Power Group Reports 52% Increase in Third Quarter Ne
t Income ( BusinessWire )
B: Universal Power Group Reports 52% Increase in Third Quarter Net Income ( Busi
nessWire )

CARROLLTON, Texas, Nov 10, 2009 (BUSINESS WIRE) --
Universal Power Group, Inc. (NYSE Amex: UPG), a Texas-based distributor
and supplier of batteries and related power accessories and a provider
of supply chain and other value-added services, reported a 52.4 percent
increase in net income despite softer sales for the third quarter ended
Sept. 30, 2009. In addition, as a result of supply chain efficiencies,
UPG reported improved operating leverage which drove margins and an
$8.0
million decrease in inventory levels year-to-date.

Due largely to economic conditions, UPG reported a 10.3 percent decline
in net sales to $27.5 million, compared to $30.6 million for the third
quarter of 2008. Increased sales volume on certain higher-margin
products, reduced volatility for raw material costs and improved
efficiencies across the company's supply chain helped boost gross
margin
in the quarter to 16.5 percent of net sales, compared to 15.0 percent
for the same quarter of 2008. UPG reported gross profit of $4.5 million
in the 2009 third quarter, compared to gross profit of $4.6 million in
the 2008 third quarter.

The Company reported operating income of $1.2 million, an increase of
23.1 percent compared to operating income of $1.0 million in the third
quarter of 2008. At the bottom line, UPG posted net income of $0.6
million, or $0.12 per diluted share, for the third quarter of 2009
compared to net earnings of $0.4 million, or $0.08 per diluted share,
in
the comparable quarter of 2008.

"This was another quarter in the right direction, highlighted by margin
improvements, continued control over operating costs and strengthening
our balance sheet," stated UPG's president and chief executive officer,
Ian Edmonds. "We are taking every step to add efficiencies into our
business and to position ourselves for the eventual economic recovery.
Improved relationships with our suppliers, increased efficiencies
within
our supply chain and reduced volatility in certain raw material costs
all contributed to the gross margin improvements. Several of these
factors are also helping us increase inventory turnover, improving our
balance sheet and providing better service to our customers. We also
made strides in reducing our operating expenses in the third quarter,
an
indication of our leaner structure."

Third Quarter and Year-to-Date Overview

Net sales for the third quarter fell to $27.5 million from $30.6 million
in the third quarter of 2008. For the first nine months, net sales fell
8.0 percent to $83.1 million, from $90.4 million in the first nine
months last year. Core battery and related power accessory revenues
(from sources other than Broadview Security and its authorized dealers)
decreased 15.9 percent to $14.5 million in the third quarter of 2009,
compared with core revenues of $17.3 million for the third quarter of
2008. UPG attributed the lower sales volume in its core business to the
general slowdown in global demand. For the nine-month period, core
battery and related power accessory revenues decreased 10.6 percent to
$44.7 million, from $50.0 million in 2008.

UPG reported net sales from Broadview Security and its authorized
dealers in the third quarter of 2009 of $13.0 million, a decrease of
3.0
percent year-over-year from $13.4 million in the third quarter of 2008.
For the nine-month period, net sales from Broadview Security and its
authorized dealers declined 4.8 percent year-over-year to $38.4
million,
compared to $40.4 million in the same quarter of 2008. Net sales from
Broadview Security and its authorized dealers accounted for 47.2
percent
of total revenues in the third quarter of 2009, compared with 43.6
percent in the prior year's quarter, and 46.2 percent of total revenues
in the 2009 nine-month period, compared to 44.7 percent in 2008.

Gross profit was $4.5 million, or 16.5 percent of sales in the 2009
third quarter, compared to gross profit of $4.6 million, or 15.0
percent
of sales in the 2008 third quarter. For the first nine month of 2009,
gross profit rose to $14.5 million, or 17.4 percent of sales, from
$13.6
million, or 15.0 percent of sales in the first nine months of 2008.

Operating expenses decreased by $0.3 million, or 8.1 percent, in the
third quarter of 2009 compared to the third quarter of 2008. The
company
attributed the improvement in operating expenses to a leaner
operational
structure and general efficiency improvements across the organization.
Year-to-date operating expenses increased $2.9 million to $13.3
million,
compared with $10.4 million in the comparable period of 2008. The
majority of this increase was due to $2.5 million in settlement charges
incurred in the first quarter, relating to the departure of the
Company's former CEO and the cancellation of the agreement with the
Company's former primary independent sourcing agent.

For the nine-month period, UPG reported operating income of $1.2
million, compared to operating income of $3.2 million for the first
nine
months of 2008. Excluding the settlement charges incurred in the first
quarter, UPG's operating income would have been $3.7 million, an
increase of 15.7 percent over the comparable period in the prior year,
and net income before provision for income taxes would have been $3.0
million, an increase of approximately 21.1 percent over the 2008
period.
For the first nine months, UPG reported a net loss of $0.5 million, or
$0.10 per share, compared with net income of $1.4 million, or $0.29 per
share in the first nine months of 2008.

Balance Sheet & Financial Position

On the balance sheet, inventory was reduced by $8.0 million
year-to-date, to $29.3 million, in line with management's commitment to
reduce inventory levels from the high levels at the end of 2008. UPG's
management team is committed to better controlling inventory levels in
an effort to improve efficiencies, increase inventory turnover and
maintain adequate inventory to support current levels of customer
demand. UPG also reduced outstanding borrowings to $9.1 million,
compared with $14.4 million at the end of 2008.

UPG generated operating cash flow of $6.5 million in the nine months
ended Sept. 30, 2009, compared to operating cash flow of $2.2 million
in
the same period of 2008. The improved cash generated by operations in
2009 was used primarily to reduce outstanding borrowings on its
short-term line of credit. The company ended the third quarter with
$0.4
million in cash and cash equivalents.

Outlook

Edmonds continued: "Though we continue to face soft conditions in the
broad economy, we are seeing more reasons for optimism in 2010,
especially when considering our expanded relationships with existing
customers, as well as our ongoing efforts to establish new
relationships. Our strong balance sheet, along with our proven ability
to manage costs and improve efficiencies, will allow us to capitalize
on
new opportunities to increase our product offerings and provide our
retail and strategic partners a more complete line of batteries and
power accessories. It will also help us secure opportunities to broaden
our base of suppliers, including opportunities for potential
joint-ventures with new and existing partners. The vision behind all of
these initiatives is improved bottom line results, supported by
diversification into new markets and a global reach for UPG's products."

Reconciliation of GAAP Operating Income and Income Before Provision
for Income Taxes to Non-GAAP Operating Income and Income Before
Provision for Income Taxes (Unaudited)

The following table reconciles Operating Income and Income before
provision for income taxes, as reported in accordance with U.S.
Generally Accepted Accounting Principals ("GAAP"), to non-GAAP
operating
income and Income before provision for income taxes. We believe that
non-GAAP operating income, which is generally operating income less
costs related to settlement agreements, more accurately reflects our
operating efficiency. Non-GAAP operating income and income before
provision for income taxes, are non-GAAP financial measures and should
not be considered an alternative to, or more meaningful than, net
income
prepared on a GAAP basis. Additionally, non-GAAP operating income and
income before provision for income taxes may not be comparable to
similar metrics used by others in our industry.
Financial Summary (Non-GAAP)
(unaudited)
Three
Months Ended September 30, Nine Months Ended September 30,
2009
2008 2009 2008
Operating income and income before provision for income taxes as
reported:
Operating expenses $
3,305,166 $ 3,595,313 $ 10,726,856 $ 10,366,426
Settlement expenses --
-- 2,529,345 --
Total operating expenses
3,305,166 3,595,313 13,256,201 10,366,426
Operating income
1,231,943 1,000,619 1,194,297 3,218,784
Other expense, net
(240,110) (235,645) (718,791) (736,714)
Income before provision for income taxes
991,833 764,974 475,506 2,482,070
Non-GAAP measures to exclude settlement expenses from operating
expenses:
Settlement expenses --
-- 2,529,345 --
Non-GAAP operating income $
1,231,943 $ 1,000,619 $ 3,723,642 $ 3,218,784
Non-GAAP income before provision for income taxes $
991,833 $ 764,974 $ 3,004,851 $ 2,482,070

Conference Call Information

Universal Power Group will host an investor conference call today,
discuss
financial results for the third quarter and nine months ended September
30, 2009.

Interested parties may access the conference call by dialing
1.866.730.5762; passcode 10540969. The conference call will also be
broadcast live on www.upgi.com
and through the Thomson StreetEvents Network. Individual investors can
listen to the call at www.earnings.com,
Thomson's individual investor portal. Institutional investors can
access
the call via Thomson StreetEvents (www.streetevents.com),
a password-protected event management site.

A replay of the conference call will be made available through November
16, 2009 by calling 1.888.286.8010, passcode 15592079, and an archived
webcast will be available at www.upgi.com.

About Universal Power Group, Inc.

Universal Power Group, Inc. (NYSE Amex: UPG) is a leading supplier and
distributor of batteries and power accessories, and a provider of
supply
chain and other value-added services. UPG's product offerings include
proprietary brands of industrial and consumer batteries of all
chemistries, chargers, jump-starters, 12-volt accessories, solar and
security products. UPG's supply chain services include procurement,
warehousing, inventory management, distribution, fulfillment and
value-added services such as sourcing, battery pack assembly,
coordination of battery recycling efforts, and product design and
development. For more information, please visit the UPG website at
www.upgi.com.

Forward-Looking Statements

Statements in this press release that are not statements of historical
or current fact constitute "forward-looking statements." Such
forward-looking statements involve known and unknown risks,
uncertainties and other unknown factors that could cause the Company's
actual operating results to be materially different from any historical
results or from any future results expressed or implied by such
forward-looking statements. In addition to statements that explicitly
describe these risks and uncertainties, readers are urged to consider
statements that contain terms such as "believes," "belief," "expects,"
"expect," "intends," "intend," "anticipate," "anticipates," "plans,"
"plan," to be uncertain and forward-looking. The forward-looking
statements contained herein are also subject generally to other risks
and uncertainties that are described from time to time in the Company's
filings with Securities and Exchange Commission. Historical financial
results are not necessarily indicative of future performance.
UNIVERSAL POWER GROUP, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS
September
30, December 31,
2009
2008
CURRENT ASSETS
Cash and cash equivalents $
442,785 $ 326,194
Restricted cash --
900,000
Accounts receivable:
Trade, net of allowance for doubtful accounts of $1,210,692 and
11,969,526 12,423,279
$1,143,213
Other
18,654 50,303
Inventories - finished goods, net of allowance for obsolescence of
29,349,295 37,304,500
$522,908 and $358,350
Current deferred tax asset (net of valuation allowance of $768,324
1,697,163 1,555,173
and $0)
Income tax receivable --
193,386
Prepaid expenses and other current assets
1,156,281 880,528
Total current assets
44,633,704 53,633,363
PROPERTY AND EQUIPMENT
Logistics and distribution systems
1,821,590 1,795,935
Machinery and equipment
994,137 651,916
Furniture and fixtures
436,424 436,424
Leasehold improvements
388,334 388,334
Vehicles
223,633 155,630

3,864,118 3,428,239
Less accumulated depreciation and amortization
(1,851,550) (1,407,712)
Net property and equipment
2,012,568 2,020,527
OTHER ASSETS
246,896 86,879
TOTAL ASSETS $
46,893,168 $ 55,740,769
UNIVERSAL POWER GROUP, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30,
December 31,
2009
2008
CURRENT LIABILITIES
Line of credit $
9,092,470 $ 14,351,775
Accounts payable
11,394,754 16,418,768
Accrued liabilities
1,113,627 200,100
Interest rate swap liability
417,586 484,131
Current portion of notes payable to Zunicom, Inc.
1,462,500 1,462,500
Current portion of settlement expenses
949,388 --
Current portion of capital lease
obligations 20,549
--
Current portion of deferred rent 81,035
57,984
Total current liabilities
24,531,910 32,975,258
LONG TERM LIABILITIES
Notes payable to Zunicom, Inc., less current portion
2,559,375 3,656,250
Capital lease obligations, less current portion 54,081
--
Settlement expenses, less current portion
1,233,712 --
Non-current deferred tax liability
190,585 230,611
Deferred rent, less current portion 70,345
168,317
Total long term liabilities
4,108,098 4,055,178
TOTAL LIABILITIES
28,640,008 37,030,436
COMMITMENTS
SHAREHOLDERS' EQUITY
Common stock - $0.01 par value, 50,000,000 shares authorized, 50,000
50,000
5,000,000 shares issued and outstanding
Additional paid-in capital
15,550,947 15,529,783
Retained earnings
2,927,820 3,450,076
Accumulated other comprehensive loss
(275,607) (319,526)
Total shareholders' equity
18,253,161 18,710,333
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $
46,893,168 $ 55,740,769
UNIVERSAL POWER GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three
Months Ended September 30, Nine Months Ended September 30,
2009
2008 2009 2008
Net sales $
27,494,909 $ 30,648,315 $ 83,132,341 $ 90,372,517
Cost of sales
22,957,800 26,052,383 68,681,843 76,787,307
Gross profit
4,537,109 4,595,932 14,450,498 13,585,210
Operating expenses
3,305,166 3,595,313 10,726,856 10,366,426
Settlement expenses
-- -- 2,529,345 --
Total operating expenses
3,305,166 3,595,313 13,256,201 10,366,426
Operating income
1,231,943 1,000,619 1,194,297 3,218,784
Other income (expense)
Interest expense (including $66,353, $88,471, $213,184 and $263,490
(238,936) (235,701) (719,732) (737,283)
to Zunicom, Inc.)
Other expense, net
(1,174) -- (1,174) --
Interest income
-- 56 2,115 569
Total other expense, net
(240,110) (235,645) (718,791) (736,714)
Income before provision for income taxes
991,833 764,974 475,506 2,482,070
Provision for income taxes
(379,765) (363,369) (997,762) (1,053,249)
Net income (loss) $
612,068 $ 401,605 $ (522,256) $ 1,428,821
Net income (loss) per share
Basic $
0.12 $ 0.08 $ (0.10) $ 0.29
Diluted $
0.12 $ 0.08 $ (0.10) $ 0.29
Basic
5,000,000 5,000,000 5,000,000 5,000,000
Diluted
5,004,794 5,000,000 5,000,000 5,000,000
UNIVERSAL POWER GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine
Months Ended September 30,
2009
2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $
(522,256) $ 1,428,821
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization of property and equipment
588,616 403,917
Provision for bad debts
320,000 91,406
Provision for obsolete inventory
230,000 140,000
Deferred income taxes
(182,016) (137,216)
Loss on disposal of property
2,174 --
Stock-based compensation
21,164 124,009
Changes in operating assets and liabilities:
Accounts receivable - trade
159,087 (3,668,143)
Accounts receivable - other
31,649 11,378
Inventories
7,989,448 3,317,619
Prepaid expenses and other current assets
(275,753) (341,040)
Income tax receivable
193,386 --
Other assets
-- (18,295)
Accounts payable
(5,025,190) 259,956
Accrued liabilities
890,903 597,280
Settlement expenses
2,183,100 --
Deferred rent
(74,921) (36,512)
Net cash provided by operating activities
6,529,391 2,173,180
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment
(57,950) (443,112)
Net cash paid in Monarch acquisition
(892,000) --
Deposit in escrow account
-- (900,000)
Change in restricted cash
900,000 --
Proceeds from sale of equipment
1,000 --
Net cash used in investing activities
(48,950) (1,343,112)
CASH FLOWS FROM FINANCING ACTIVITIES
Net activity on line of credit
(5,259,305) (129,590)
Payment on notes payable to Zunicom, Inc.
(1,096,875) (365,625)
Payments on note and capital lease obligations
(7,671) (6,609)
Net cash used in financing activities
(6,363,851) (501,824)
Net increase in cash and cash equivalents
116,591 328,244
Cash and cash equivalents at beginning of periodiEUR i
326,194 691,288
Cash and cash equivalents at end of period $
442,785 $ 1,019,532
SUPPLEMENTAL DISCLOSURES
Income taxes paid $
854,837 $ 1,182,162
Interest paid $
719,732 $ 737,283
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING AND INVESTING ACTIVITIES
Purchase of equipment with a note payable $
75,961 $ --

SOURCE: Universal Power Group, Inc.
Company Contact:
Universal Power Group, Inc.
Mimi Tan, SVP
469-892-1122
[e-mail]
or
Investor Relations:
Lambert, Edwards & Associates
Jeff Tryka, Ryan McGrath
616-233-0500
[e-mail]
Copyright Business Wire 2009
*** end of story ***