Ultrak could lose major retail contract

SSN Staff  - 
Tuesday, January 1, 2002

LEWISVILLE, Texas-A major U.S. retailer will no longer carry some of Ultrak's do-it-yourself security product line after its stores exhaust their current supply agreements, Ultrak announced in late July.

Discount retailer Sam's Club told the security manufacturer that it would discontinue three units it keeps in stock of the Exxis security product line and replace the products with those of another supplier, Ultrak said. Current supply contracts between Sam's and Ultrak are expected to be fulfilled in October.

Ultrak officials were not available for comment before press time and did not offer a reason for Sam's Club's decision.

In a statement, company officials said that the loss of Sam's Club as a retailer of the Exxis products would mean an annual loss of $20 million in revenue and about $3 million in pre-tax revenue. If that revenue stream is not replaced with sales to another retailer, "the revenue loss would have a material adverse effect on Ultrak's financial results beginning in the fourth quarter of 2001," the release said.

While Ultrak is in active discussions with other retailers to try and make up for the loss of that revenue, the company reported that Sam's Club had expressed interest in carrying other Exxis products that it is not currently offering.

Company officals said they had purposely limited its sales of the Exxis system to Sam's Club in order to protect that supply agreement.

Combined with ongoing cost reductions, such as cutting 15 percent of its global workforce, the closing of a central distribution facility in Belgium and the phasing out of its French CCTV division, company officials expect on-going cost reductions in all business units to make up for losses in revenues. The company also plans to debut a line of digital products for its dealers.