Universal Power Group Reports First Quarter 2011 Earnings
Universal Power Group, Inc. announced results for the first quarter ended March 31, 2011. For the first quarter, UPG reported net income of $402,677, or $0.08 per share, on net sales of $21.6 million, compared with net income of $505,709, or $0.10 per share, on net sales of $26.0 million in the first quarter of 2010.
"We made a number of significant accomplishments in the first quarter of 2011 to drive UPG’s future growth and profitability," stated Ian Edmonds, UPG’s President and Chief Executive Officer. "Sales to customers other than ADT showed solid growth, and our gross margins continued to improve over the prior year, even as our operating expenses remained flat. In April, we completed our acquisition of Progressive Technologies, Inc. (PTI), which we believe will further support our long-term growth initiatives."
Net sales for the first quarter fell 17.1%, to $21.6 million, from $26.0 million in the first quarter of 2010. Net sales of batteries and related power accessories to customers excluding ADT Security Services (formerly Broadview Security) and its authorized dealers grew 12.4%, to $16.8 million in the first quarter of 2011, compared to $15.0 million for the first quarter of 2010. Net sales to ADT Security Services and its authorized dealers in the first quarter of 2011 were $4.7 million, a decrease of 57.1% from $11.0 million in the same quarter of 2010. This decline was due to the integration of Broadview Security, which was acquired by Tyco International in May 2010, and merged into ADT Security Services. The company continues to work closely with ADT Security Services and its authorized dealers to maintain the level of quality and service they have come to expect from UPG, while supporting their current business. In addition, UPG remains focused on growing sales of batteries and related power accessories.
Gross profit was slightly lower, at $4.3 million in the quarter compared, with $4.4 million in the first quarter of 2010. An increase in sales of higher-margin product lines combined with ongoing efforts to reduce cost and increase efficiency resulted in gross margins of 20.0% for the first quarter of 2011, compared to 17.0% for the first quarter of 2010. Operating expenses remained relatively flat at $3.5 million in the first quarter of 2011, although as a% of sales operating expenses increased due to the lower sales levels.
For the quarter, UPG reported a 19.5% decrease in operating income, to $0.8 million, and a 20.9% decrease in pre-tax income to $0.6 million. This compares to operating income of $1.0 million and pre-tax income of $0.8 million in the first quarter of 2010. The decreased profitability was primarily the result of lower sales levels. On the bottom line, UPG reported net income of $0.4 million, or $0.08 per share, compared to net income of $0.5 million, or $0.10 per share in the prior year’s quarter.
On April 20, 2011 UPG completed the acquisition of Progressive Technologies, Inc. (PTI), a North Carolina company that designs and assembles custom battery products for specialized OEMs in the medical, technology, government and military markets. The acquisition provides UPG with expanded capabilities in the assembly of lithium ion battery packs, enabling the Company to serve the fast-growing medical and technology markets. The total purchase price of $3.3 million included $1.9 million in cash, $1.0 million in notes payable to PTI, and the assumption of $0.4 million in notes payable to third parties. PTI’s expertise in lithium-ion battery packs among other chemistries, further enhances UPG’s product and service offerings. In addition, PTI’s products will strengthen the Company’s position in the medical field and other market segments.
Edmonds concluded: "Despite the lower revenues and net income for the quarter, we made progress towards our long-term goals of diversifying our revenue stream and reinforcing our foundation for future profitability. With the addition of PTI, we plan to take advantage of new opportunities to grow that business and expand our combined presence into new, fast-growing medical and technology markets. While we still face some headwinds from the soft economic recovery and weak consumer confidence, we see opportunities to grow our business organically – as we provide the products, quality and service our customers expect – and through acquisitions like PTI. Fortunately, we are in a strong financial position that can support these efforts on an ongoing basis."