10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2013
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ____________ to ____________

Commission file number:  001-33207

Universal Power Group, Inc.

(Exact name of registrant as specified in its charter)

TEXAS	75-1288690
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
488 S. Royal Lane, Coppell, Texas	75019
(Address of principal executive offices)	(Zip Code)

(469) 892-1122

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ               No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yesþ              No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o        Accelerated filer o        Non-accelerated filer o        Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o                      No þ

As of May 9, 2013, 5,020,000 shares of Common Stock were outstanding.

Table of Contents

				Page
PART I — Financial Information					1
	Item 1.	Condensed Consolidated Financial Statements			1
			Condensed Consolidated Balance Sheets March 31, 2013 (Unaudited) and December 31, 2012		1
			Condensed Consolidated Statements of Operations (Unaudited)		3
			Condensed Consolidated Statements of Comprehensive Income (Unaudited)		4
			Condensed Consolidated Statements of Cash Flows (Unaudited)		5
			Notes to Condensed Consolidated Financial Statements (Unaudited)		6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			10
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk			14
	Item 4.	Controls and Procedures			14
PART II — Other Information					15
	Item 6.	Exhibits			15
Signatures					16

FORWARD-LOOKING STATEMENTS

This report includes “forward-looking statements”, as defined in the Private Securities Litigation Reform Act of 1995 or by the U.S. Securities and Exchange Commission (“SEC”) in its rules, regulations and releases.  The term forward looking statements refers to, among other things, all statements other than statements of historical facts contained in this report, including statements regarding our future financial position, business strategy and plans and objectives of management for future operations.  The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements.  We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.  These forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors, described in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC (“Annual Report”) and elsewhere in this report, which could adversely affect our business and financial performance.  In addition, our past results of operations do not necessarily indicate our future results.  Finally, the third-party logistics services business and the battery and related power accessory supply and distribution business are highly competitive and rapidly changing.  New risk factors emerge from time to time and it is not possible for us to anticipate all the relevant risks to our business.  We cannot assess the impact of all such risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ materially from those contained in any forward-looking statements.

Except as otherwise required by applicable laws and regulations, we undertake no obligation to publicly update or revise any forward-looking statements or the risk factors described in this report or our Annual Report, whether as a result of new information, future events, changed circumstances or any other reason after the date of this report.  Neither the Private Securities Litigation Reform Act of 1995 nor Section 27A of the Securities Act of 1933 provides any protection to us for statements made in this report.  You should not rely upon forward-looking statements as predictions of future events or performance.  We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur.  Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

The terms “we”, “our”, “us”, or any derivative thereof, as used herein refer to Universal Power Group, Inc.

(i)

PART I — FINANCIAL INFORMATION

Item 1.             Condensed Consolidated Financial Statements

UNIVERSAL POWER GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

(Amounts in thousands except share amounts)

	March 31, 2013			December 31, 2012
	(unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	980		$	2,069
Accounts receivable:
Trade, net of allowance for doubtful accounts of $137 (unaudited) and $324		12,161			8,847
Other		174			455
Inventories – finished goods, net of allowance for obsolescence of $485 (unaudited) and $423		30,130			30,396
Current deferred tax asset		880			838
Income tax receivable		421			512
Prepaid expenses and other current assets		1,291			970
Total current assets		46,037			44,087
PROPERTY AND EQUIPMENT
Logistics and distribution systems		1,877			1,908
Machinery and equipment		484			709
Furniture and fixtures		881			518
Leasehold improvements		918			395
Vehicles		40			111
Total property and equipment		4,200			3,641
Less accumulated depreciation and amortization		(2,467	)		(3,173	)
Net property and equipment		1,733			468
GOODWILL		1,387			1,387
INTANGIBLES, net		548			593
OTHER ASSETS		161			155
NON-CURRENT DEFERRED TAX ASSET		274			357
		2,370			2,492
TOTAL ASSETS	$	50,140		$	47,047

See accompanying notes to unaudited condensed consolidated financial statements.

1

UNIVERSAL POWER GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

LIABILITIES AND SHAREHOLDERS’ EQUITY

(Amounts in thousands except share amounts)

	March 31, 2013		December 31, 2012
	(unaudited)
CURRENT LIABILITIES
Line of credit	$	12,820	$	12,188
Accounts payable		8,101		7,231
Accrued liabilities		681		386
Current portion of capital lease and note obligations		682		620
Deferred landlord improvements		84		—
Total current liabilities		22,368		20,425
LONG-TERM LIABILITIES
Capital lease and note obligations, less current portion		3,732		3,608
Deferred landlord improvements		812		—
Total long-term liabilities		4,544		3,608
TOTAL LIABILITIES		26,912		24,033
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY
Common stock - $0.01 par value, 50,000,000 shares authorized, 5,020,000 shares issued and outstanding		50		50
Additional paid-in capital		16,393		16,390
Retained earnings		6,785		6,574
Total shareholders’ equity		23,228		23,014
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	50,140	$	47,047

See accompanying notes to unaudited condensed consolidated financial statements.

2

UNIVERSAL POWER GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Amounts in thousands except per share data)

	Three Months Ended March 31,
	2013			2012
Net sales	$	20,458		$	26,338
Cost of sales		16,024			21,685
Gross profit		4,434			4,653
Operating expenses		3,931			4,085
Operating income		503			568
Other income (expense)
Interest expense		(85	)		(143	)
Other, net		(50	)		127
Total other expense, net		(135	)		(16	)
Income from continuing operations before provision for income taxes		368			552
Provision for income taxes		(157	)		(216	)
Income from continuing operations		211			336
Discontinued operations:
Loss from operations of discontinued Monarch Outdoor Adventures, LLC		—			(61	)
Provision for income taxes		—			17
Loss on discontinued operations		—			(44	)
Net income	$	211		$	292
Net income per share
Basic:
Income from continuing operations	$	0.04		$	0.07
Gain (loss) on discontinued operations	$	—		$	(0.01	)
Net income	$	0.04		$	0.06
Diluted:
Income from continuing operations	$	0.04		$	0.06
Gain (loss) on discontinued operations	$	—		$	(0.01	)
Net income	$	0.04		$	0.05
Weighted average shares outstanding
Basic		5,020			5,020
Diluted		5,133			5,202

See accompanying notes to unaudited condensed consolidated financial statements.

3

UNIVERSAL POWER GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Amounts in thousands)

	Three Months Ended March 31,
	2013		2012
Net income	$	211	$	292
Amortization of hedging instrument		—		28
Comprehensive income	$	211	$	320

See accompanying notes to unaudited condensed consolidated financial statements.

4

UNIVERSAL POWER GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Amounts in thousands)

	Three Months Ended March 31,
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	211		$	292
Items not requiring (providing) cash:
Depreciation and amortization		96			135
Provision for bad debts		78			23
Provision for obsolete inventory		102			140
Loss on disposal of property and equipment		50			—
Deferred income taxes		41			129
Stock-based compensation		3			3
Changes in operating assets and liabilities
Accounts receivable – trade		(3,392	)		(2,988	)
Accounts receivable – other		281			49
Inventories		164			(130	)
Income taxes receivable/payable		91			78
Prepaid expenses and other assets		(327	)		(1,773	)
Accounts payable		870			3,375
Accrued liabilities		295			(233	)
Settlement accrual		—			(241	)
Net cash used in operating activities		(1,437	)		(1,141	)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment		3			—
Purchases of property and equipment		(168	)		(17	)
Net cash used in investing activities		(165	)		(17	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net activity on line of credit		632			1,269
Payments on capital lease and note obligations		(119	)		(38	)
Net cash provided by financing activities		513			1,231
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(1,089	)		73
Cash and cash equivalents at beginning of period		2,069			283
Cash and cash equivalents at end of period	$	980		$	356
SUPPLEMENTAL DISCLOSURES
Income taxes paid	$	13		$	7
Interest paid	$	86		$	144
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Acquisition of property and equipment through landlord incentives	$	896		$	—
Acquisition of property and equipment through capital lease	$	345		$	—

See accompanying notes to unaudited condensed consolidated financial statements.

5

UNIVERSAL POWER GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE A — BASIS OF PRESENTATION

The condensed consolidated interim unaudited financial statements of Universal Power Group, Inc. (“UPG” or the “Company”), a Texas corporation, included in this quarterly report have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included for the three-month periods ended March 31, 2013 and 2012.  The results for the three-month period ended March 31, 2013 are not necessarily indicative of the results that may be expected for the full year.  Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with GAAP have been condensed or omitted.  The unaudited condensed consolidated financial statements included in this filing should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2012, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 29, 2013.  The condensed consolidated balance sheet of the Company as of December 31, 2012 has been derived from the audited consolidated balance sheet as of that date.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.  All significant intercompany accounts and transactions have been eliminated in consolidation.

NOTE B — ORGANIZATION

The Company is a distributor and supplier of batteries and related power accessories to a diverse range of industries, and a provider of third-party fulfillment and logistics services and value-added solutions.  The Company’s primary logistics center is located in Coppell, Texas and regional logistic centers are located in Las Vegas, Nevada and Atlanta, Georgia.  The Company’s customers are primarily located in the United States.  A small portion of the Company’s sales is to customers located in the United Kingdom, Australia, Ireland, Japan, China, Canada and Latin America.

Until December 20, 2006, the Company was a wholly owned consolidated subsidiary of Zunicom, Inc. (“Zunicom”), a Texas corporation, whose stock is quoted on the OTC Markets under the symbol “ZNCM.”  On December 20, 2006, the SEC declared effective a registration statement filed by the Company registering the sale of 3,000,000 shares of its common stock, including 1,000,000 shares owned by Zunicom (the “IPO”).  As a result of the IPO, Zunicom’s interest in the Company was reduced to 40%.  Zunicom no longer owns a controlling interest in UPG; however, as the largest shareholder, Zunicom does have significant influence over UPG.

On January 8, 2009, the Company formed a limited liability company under the name Monarch Outdoor Adventures LLC d/b/a Monarch Hunting (“Monarch”), through which it acquired all of the tangible and intangible assets of a manufacturer and retailer of high-quality hunting products including battery and solar powered deer feeders, hunting blinds, stands and accessories for approximately $892,000.  Monarch is located in Arlington, Texas and has customers throughout the United States.  Monarch’s revenue and assets are not material to the Company’s consolidated financial statements. At March 31, 2012, the carrying value of Monarch’s assets was approximately $400,000. On May 4, 2012, the Company sold Monarch for $130,000.  See Note K.

On April 20, 2011, the Company completed an acquisition of substantially all of the business assets of Progressive Technologies, Inc. (“PTI”), a North Carolina company that designs and builds custom battery packs.  The acquisition consideration totaled approximately $3,300,000.  PTI’s expertise in lithium-ion battery packs, among other chemistries, further enhances the Company’s product and service offerings.  In addition, PTI’s products will strengthen the Company’s position in the medical field and other market segments.  On September 1, 2011, PTI changed its legal name to ProTechnologies, Inc.

        On January 9, 2013, the Company became the sole member of a newly formed entity, SAM Security, LLC (“SAM”).  SAM provides a do-it-yourself (“DIY”) home security system to retailers throughout the U.S.

6

UNIVERSAL POWER GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE C — STOCK-BASED COMPENSATION

At March 31, 2013, common shares reserved for future issuance include 1,980,000 shares issuable under the 2006 Stock Option Plan, as amended, as well as 20,000 shares issuable upon exercise of options not granted under the 2006 Stock Option Plan.  At March 31, 2013, there were 1,433,842 options outstanding under the 2006 Stock Option Plan, and 546,158 options are available for future grants.

There were no options granted during the three months ended March 31, 2013 or 2012.

At March 31, 2013, the aggregate intrinsic value of options outstanding and exercisable was $124,889.

At March 31, 2013, all outstanding options under the 2006 Stock Option Plan were fully vested with no remaining unrecognized compensation expense.

On June 25, 2007, Zunicom issued restricted stock to certain employees of UPG for past and future services.  The Company amortized the fair value of 398,144 shares, which had not been forfeited, and compensation expense has been fully vested.  On June 24, 2011, Zunicom issued an additional 99,538 restricted shares of its common stock to the same Company employees who received the grant in June 2007 and who were still employed by the Company.  As a condition to this grant, the grantees agreed to extend the restricted period on the shares issued in June 2007 for an additional three years.  As a result, all 497,682 shares will vest on June 24, 2014.  The Company is amortizing the fair value as compensation expense over the 36-month vesting period in accordance with ASC Topic 718, Compensation – Stock Compensation.  Approximately $2,800 compensation expense related to these shares was recorded during the three-month periods ended for both March 31, 2013 and 2012.  At March 31, 2013, there is approximately $14,200 of remaining unrecognized compensation expense associated with this grant.

On March 21, 2007, the Company issued stock options to non-employees to purchase 20,000 shares of the Company’s common stock at an exercise price of $7.00 per share vesting over three years and expiring December 19, 2016.  These stock options remain outstanding as of March 31, 2013. 

NOTE D — NET INCOME (LOSS) PER SHARE

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding for the period.

Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding for the period.  The Company’s common stock equivalents include all common stock issuable upon the exercise of outstanding stock options and warrants.

For the three-month period ended March 31, 2013, the dilutive effect of 852,592 stock options is included in the calculation and 601,250 stock options are excluded from the calculation as they are antidilutive.  For the three-month period ended March 31, 2012, the dilutive effect of 852,592 stock options is included in the calculation and 571,250 stock options are excluded from the calculation as they are antidilutive.  

NOTE E — LINE OF CREDIT

Effective December 20, 2012, the Company entered into a credit agreement with Comerica Bank under which it may borrow up to $34.0 million, including a $30.0 million revolving line of credit (“Credit Line”) and $4.0 million term loan (“Term Loan”).  The Credit Line replaced the credit facility that the Company had with Wells Fargo.  All borrowings are secured by a first lien on all of the Company’s assets.  In addition, the Company may request an increase in the maximum Credit Line to $40.0 million.  Its borrowing availability is dependent upon its level of accounts receivable and inventory.  With respect to the interest rate for each borrowing, the Company has the option to choose a “LIBOR-base Rate” or “Daily Adjusted LIBOR-based Rate” plus an “Applicable LIBOR Margin.”  Under the Credit Line, interest is payable monthly and the outstanding principal is due at maturity, on December 20, 2016 (the “Maturity Date”).  Under the Term Loan, principal is payable in equal monthly installments of $47,619, plus interest beginning on February 1, 2013 with the entire unpaid principal amount due on the Maturity Date.  At March 31, 2013, approximately $12.8 million was outstanding under the Credit Line and $3.9 million was outstanding under the term loan.  Both the Credit Line and Term Loan were accruing interest at the rate of 2.08% per annum.

7

UNIVERSAL POWER GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The credit agreement contains customary negative covenants restricting the Company’s ability to take certain actions without Comerica’s consent, including incurring additional indebtedness, transferring or encumbering assets, and acquiring other businesses.  If there is an “event of default”, including failure to pay, bankruptcy, breach of covenants and breach of representations and warranties, all amounts outstanding under the Credit Agreement will become immediately due and payable.  In addition, the Company must maintain certain financial covenants on a quarterly basis.

Interest Rate Swap

The Company terminated an Interest Swap Agreement (“ISA”) it had with its previous lender in connection with a prior credit agreement and, consequently, discontinued hedge accounting as of December 16, 2009.  The Company continues to incur interest expense commensurate with its original, hedged risk, and there is currently no indication that interest payments on the hedged transaction would not continue.  Therefore, the realized losses related to the ISA will not be recognized immediately and will remain in accumulated other comprehensive income (loss).  These losses were reclassified into interest expense over the original contractual term of the ISA starting as of December 16, 2009 through July 5, 2012.

NOTE F — CONCENTRATIONS

At March 31, 2013, the Company had receivables due from one customer of approximately $2.5 million and as of March 31, 2012, the Company had receivables due from a different customer of approximately $2.7 million.During the three months ended March 31, 2013, one customer accounted for 17.8% of net sales.  During the three months ended March 31, 2012, another customer accounted for 11% of net sales.

NOTE G — LEGAL PROCEEDINGS

The Company is not currently party to any legal proceedings than those arising in the ordinary course of business, which management does not believe will have a material adverse effect on the Company’s financial position, operating results, or cash flows, regardless of the outcome.

NOTE H — INCOME TAXES

The Company files income tax returns in the U.S. federal jurisdiction and various states.  With a few exceptions, the Company is no longer subject to U.S. state and local income tax examinations by tax authorities for years before 2008.

The Company recorded income tax expense from continuing operations of approximately $157,000 and $216,000 for each of the three-month periods ended March 31, 2013 and 2012, respectively.  The Company’s effective tax rate was 42.7% and 39.1% for the three-month periods ended March 31, 2013 and 2012, respectively.  The taxes were higher than the statutory rate of 34% primarily as a result of state income taxes and items not deductible for income tax reporting.

NOTE I— GOODWILL

Goodwill represents the excess of the cost of an acquisition over the fair value of the net identifiable assets of the acquired business. Goodwill is tested annually for impairment and when events or circumstances change to suggest that the carrying amount may not be recoverable. For purposes of impairment testing, goodwill is allocated to reporting units, which are either at the operating segment level or one reporting level below the operating segment. Goodwill is recorded in the financial statements at cost less accumulated impairment losses.  In the second quarter of 2012, management performed the required annual impairment test under the qualitative assessment methodology and determined that goodwill was not impaired.

8

UNIVERSAL POWER GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE J — SEGMENT AND GEOGRAPHIC INFORMATION

The accounting standard for segment reporting requires enterprises to report financial information and descriptive information about reportable operating segments.  It also establishes standards for related disclosures about products and services, geographic areas and major customers.  The Company evaluated the accounting standard for segment reporting and determined that the Company operates in only one segment.

NOTE K — DISCONTINUED OPERATIONS

On May 4, 2012, pursuant to a Securities Purchase Agreement, dated as of May 4, 2012 (the “Agreement”), the Company sold all of the issued and outstanding membership interests of Monarch for $130,000.  Of the purchase price, $50,000 was paid in cash at closing and $80,000 was evidenced by a 6% secured promissory note maturing May 1, 2014.  The principal amount of the note and all accrued interest thereon is payable in 24 equal monthly installments of $3,692 beginning on June 1, 2012.  The note is secured by a pledge of all of the membership interests in Monarch as well as a lien on all of Monarch’s assets.  The purchasers also agreed to sublet from the Company for a minimum term of two years the premises used by Monarch at an annual rental of $42,000.  The Agreement contains representations and warranties, covenants and indemnification provisions typical of those in these types of transactions.  UPG realized a pre-tax loss of approximately $600,000 related to the sale of Monarch including lease obligations retained for the manufacturing facility.

********

9

Item 2.          Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and related notes included elsewhere in this report.

Business Overview

We are (i) a leading supplier and distributor of batteries, related power accessories and security accessories and (ii) a third-party logistics services provider, specializing in supply chain management and value-added services.

We purchase both finished goods and components from domestic and international suppliers. We add value to products and components by packaging them in customer specified “kits” or tailor made units that are convenient for the customer to order and ship. Additionally, we have several customers that require specific battery pack assemblies. We obtain batteries and components and reconfigure finished goods based upon customer specifications. We refer to this process as battery pack assemblies.

Distribution Business

We sell, distribute and market batteries, related power accessories, renewable power products and security accessories under various manufacturer brands, private labels and our own proprietary brands.  We are one of the leading domestic distributors of sealed, or “maintenance-free,” lead-acid batteries (“SLA batteries”).  We also assemble lithium-ion and other custom battery packs.  Our principal product lines include:

● batteries and custom battery packs of a wide variety of chemistries, battery chargers and related accessories;

● portable battery-powered products, such as jump starters;

● low voltage wire and cable products;

● security system components, such as alarm panels, perimeter access controls, horns, sirens, speakers, transformers, cable and wire; and

● renewable power products such as solar power generators and solar products.

Our customers include original equipment manufacturers (OEMs), distributors and both online and traditional retailers.  Our products represent basic power solutions to a wide variety of existing applications in a broad market spectrum.  They are used in a diverse and growing range of industries and applications including automotive, medical mobility, consumer goods, electronics, marine, hunting, powersports, solar portable power, security and surveillance, energy management, electrical and telecommunications.

The demand for batteries and related power accessories is impacted by consumer preferences, technological developments, fuel costs, which impact both manufacturing and shipping, the cost of lead and copper, the two principal raw materials used to manufacture batteries, and general economic conditions.  We believe that technological change drives growth as new product introductions accelerate sales and provide us with new opportunities.  At the same time, battery chemistries are also evolving due to changes in consumer demands and preferences that are driven, in part, by environmental and safety concerns and the need for greater density power and longer life.  Therefore, we continue to stay current regarding advances and changes in battery technology.

Third-Party Logistics

We are also a third-party logistics services provider specializing in supply chain management and value-added services, designed to help customers optimize performance by allowing them to outsource supply chain management functions.  Our supply chain management services include inventory sourcing, procurement, warehousing and fulfillment.  Our value-added services include custom kitting, private labeling, product development and engineering, graphic design and sales and marketing.

10

We believe that the demand for third-party logistics and supply chain management solutions is growing, particularly with globalization.  To be successful, businesses have not only to excel in their core competencies, but they must also execute their supply chain processes quickly and accurately.  To remain competitive, businesses strive to identify ways to more efficiently manage their supply chain and streamline their logistics processes by minimizing inventory levels, reducing order and cash-to-cash cycle lengths and outsourcing manufacturing and assembly operations to low-cost locations.  An efficient supply chain has become a critical element to improving financial performance.  As a result, businesses are increasingly turning to organizations that provide a broad array of logistics and supply chain solutions.  These trends have been further facilitated by the rapid growth of technology enabling seamless electronic interfaces between systems of service providers and their customers.

Operations Overview

We continue to focus on executing upon our long-term strategic plan to penetrate new markets, develop new higher-margin products and diversifying to minimize our exposure to the broader economy.

Our acquisition of ProTechnologies, Inc. (“PTI”) is indicative of this strategy. PTI is a lithium-ion battery pack assembler and distributor; and holds several ISO certifications required by medical and other specialized purchasers of battery packs.  As a result, the acquisition of PTI expands our product and service offerings, adds to our technical capabilities and enables us to penetrate new markets such as medical, military, metering, mining, hobby, handheld communications and OEM applications.

On May 4, 2012, pursuant to a Securities Purchase Agreement, dated as of May 4, 2012 (“Agreement”), we sold all of the issued and outstanding membership interests of Monarch for $130,000.  Of the purchase price, $50,000 was paid in cash at closing and $80,000 was evidenced by a 6% secured promissory note due May 1, 2014.  We realized a pre-tax loss of approximately $600,000 related to the sale of Monarch in our second-quarter financial results. When we first purchased Monarch in January 2009, we believed that it held promise in terms of the variety of Monarch’s battery-powered products that might be enhanced by UPG’s supply chain infrastructure.  Unfortunately, over the past three years we determined there was not enough overlap and opportunity for growth in Monarch to justify continued investment in the business.  During that time, Monarch generated operating losses, and we were unable to generate profit or positive cash flow from its operations, however as a result of the sale, we expect improved cash flows for our overall business because the ongoing investment demands from Monarch will no longer be required.  

11

Results of Operations

The following table compares our statement of operations data for the three months ended March 31, 2013 and 2012.  The trends suggested by this table may not be indicative of future operating results, which will depend on various factors including the nature of revenues (sales of batteries and other power accessory products versus logistics or value added services) and the relative mix of products sold (batteries versus other power supply products), which can vary from quarter to quarter, as well as the state of the general economy.  In addition, our operating results in future periods may also be affected by acquisitions.

	Three months ended March 31,
	2013						2012
	Amount			Percentage			Amount				Percentage
	(dollars in thousands)
Net sales	$	20,458			100.0	%		$	26,338			100.0	%
Cost of sales		16,024			78.3	%			21,685			82.3	%
Gross profit		4,434			21.7	%			4,653			17.7	%
Operating expenses		3,931			19.2	%			4,085			15.5	%
Operating income		503			2.5	%			568			2.2	%
Interest expense, net		(85	)		(0.5	%)			(143	)		(0.6	%)
Other, net		(50	)		(0.2	%)			127			0.5	%
Income from continuing operations before provision for income taxes		368			1.8	%			552			2.1	%
Provision for income taxes		(157	)		(0.8	%)			(216	)		(0.8	%)
Income from continuing operations		211			1.0	%			336			1.3	%
Loss on discontinued operations		—			0.0	%			(61	)		(0.2	%)
Provision for income taxes		—			0.0	%			17			0.0	%
Loss on discontinued operations		—			0.0	%			(44	)		(0.0	%)
Net income	$	211			1.0	%		$	292			1.1	%

Comparison of the three months ended March 31, 2013 and 2012

Net sales

Consolidated net sales for the three-month period ended March 31, 2013 was $20.5 million compared to $26.4 million for 2012, a decrease of $5.9 million, or 22.3%.  This decrease was attributable to the decrease in sales to ADT and its authorized dealers and reduction in sales to retail customers.

Cost of sales

Cost of sales is comprised of the base product cost, freight, duty and servicing fees where applicable.  Cost of sales totaled $16.0 million for the three-month period ended March 31, 2013 compared to $21.7 million in the comparable 2012 period, an decrease of $5.7 million, or 26.1%.  Cost of sales as a percentage of sales decreased to 78.3% in the 2013 period from 82.3% for 2012.  Our overall gross margin for the three-month period ended March 31, 2013, was approximately 21.7% compared to a gross margin of 17.7% for the comparable period in 2012.  The increase in gross profit margin is attributable to a decrease in sales to ADT and its authorized dealers and a shift in product mix.

Operating expenses

Operating expenses for the three-month period ended March 31, 2013 decreased by approximately $154,000, or 3.8%, compared to 2012.  The decrease in operating expenses is mainly attributable to decreases of (i) $233,000 in legal and professional fees; (ii) $110,000 in facilities cost including depreciation and amortization and marketing and trade show; and (iii) $72,000 in marketing and trade show expense, off-set by an increase of $189,000 in bad debt expenses, insurance costs, and various operation expenses.

12

Operating income

Operating income for the three-month period ended March 31, 2013 was approximately $503,000 compared to $568,000 in the corresponding 2012 period.

Interest expense

Interest expense totaled approximately $85,000 for the three-month period ended March 31, 2013 compared to $143,000 for the corresponding 2013 period, a decrease of approximately $58,000.  The average outstanding loan balance on the line of credit for the 2013 and 2012 periods was $11.9 million and $13.3 million, respectively, with a weighted average interest rate of 2.08% on all 2013 borrowings and a weighted average interest rate of 2.53% on 2012 borrowings.  The 2012 period included $29,000 of interest expense related to the interest rate swap which was fully expensed in June 2012.

Discontinued operations

For the three-month period ended March 31, 2013 we did not have any gain or loss from discontinued operations compared to a loss of $44,000 in the same period in 2012.  We sold Monarch for $130,000 of which approximately $50,000 was net cash and $80,000 was in a two-year secured promissory note.  The proceeds from the sale were offset by $100,000 in inventory, $200,000 in property and equipment and $400,000 in rent.  The total remaining contractual estimated lease obligation amounted to $700,000 accrued in connection with the sale, including future estimated property taxes, until the expiration of the Monarch lease on August 31, 2018 offset by sublease income and estimated fair rental value for the remainder of the Monarch lease term of $300,000.

Income taxes

We recorded an income tax expense on continuing operations of approximately $157,000 and $216,000 for each of the three-month periods ended March 31, 2013 and 2012, respectively.  Our effective tax rate was 42.7% and 39.1% for the three-month periods ended March 31, 2013 and 2012, respectively.  The rates reflect federal as well as state taxes.  The high effective tax rates for both periods are driven by state income taxes and amounts not deductible for tax reporting purposes.

Liquidity and capital resources

We had cash and cash equivalents of approximately $980,000 and $2.1 million at March 31, 2013 and December 31, 2012, respectively.

For the three-month period ended March 31, 2013, net cash used in operating activities was approximately $1.4 million compared to $1.1 million used in operating activities for the three-month period ended March 31, 2012.  The net cash used in operating activities for 2013 reflects an increase in trade accounts receivable of $3.4 million, an increase in prepaid expenses and other assets of $327,000, offset by an increase in accounts payable and accrued liabilities of $1.2 million and decreases of accounts receivable other, inventories and income tax receivable of $536,000.

Cash used in investing activities for the three-month period ended March 31, 2013 was $165,000 compared to $17,000 for the corresponding period in 2012.  The increase in cash used in investing activities is due to purchases of property and equipment in 2013 of $168,000 which offset by proceeds of $3,000 from the sale of property and equipment.   

Net cash provided by financing activities for the three-month period ended March 31, 2013 was approximately $513,000 as compared to $1.2 million for the corresponding period in 2012.  The decrease in cash provided by financing activities was primarily due to a reduced draw down our line of credit offset by payments on capital lease and note obligations.

13

There was non cash activity related to the acquisition of property and equipment through a landlord incentive of $896,000 and through a capital lease of $345,000 during the period ended March 31, 2013.

Effective December 20, 2012, we entered into a credit agreement with Comerica Bank under which we may borrow up to $34.0 million, including a $30.0 million revolving line of credit (“Credit Line”) and $4.0 million term loan (“Term Loan”).  The Credit Line replaced the credit facility that we had with Wells Fargo.  All borrowings are secured by a first lien on all of our assets.  In addition, we may request an increase in the maximum Credit Line to $40.0 million.  Our borrowing availability is dependent upon our level of accounts receivable and inventory.  With respect to the interest rate for each borrowing, we have the option to choose a “LIBOR-base Rate” or “Daily Adjusted LIBOR-based Rate” plus an “Applicable LIBOR Margin.”  Under the Credit Line, interest is payable monthly and the outstanding principal is due at maturity, on December 20, 2016 (the “Maturity Date”).  Under the Term Loan, principal is payable in equal monthly installments of $47,619, plus interest beginning on February 1, 2013 with the entire unpaid principal amount due on the Maturity Date.  At March 31, 2013, approximately $12.8 million was outstanding under the Credit Line and $3.9 million was outstanding under the term loan.  Both the Credit Line and Term Loan were accruing interest at the rate of 2.08% per annum.

We believe that our cash and cash equivalents, cash provided by operations and cash available under our Credit Line will be sufficient to meet our operational needs over the next 12 months.

Capital Resources

We have committed expenses to our new corporate office and warehouse facilities in Coppell, Texas that we moved into in March 2013.  We may enter into various commitments during 2013 if expansion opportunities arise.  We will disclose material items in press releases and other appropriate filings as they develop.  We have no off balance sheet financing arrangements.

Item 3.         Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide the information required by this item.

Item 4.         Controls and Procedures

Management, with the participation of our chief executive officer/interim chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report.  Based on that evaluation, our chief executive officer/interim chief financial officer has concluded that, as of the end of such period, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is:  (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms; and (ii) accumulated and communicated to management, including our chief executive/interim chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

14

PART II — OTHER INFORMATION

Item 6.         Exhibits

The following exhibits are furnished as part of this report or incorporated herein as indicated

Exhibit No.		Description
3(i)		Amended and Restated Certificate of Formation (including Amended and Restated Articles of Incorporation) (1)
3(ii)		Amended and Restated Bylaws (1)
4.1		Specimen stock certificate (1)
4.2		Form of representatives’ warrant (1)
4.3		$4,000,000 Installment Note dated December 20, 2012 (11)
4.4		$30,000,000 Master Revolving Note dated December 20, 2012 (11)
10.1(a)**		Form of 2006 Stock Option Plan (1)
10.1(b)		Form of Stock Option Agreement (1)
10.1(c)**		Amendment to the 2006 Stock Option Plan (6)
10.2		Separation Agreement between UPG and Randy Hardin (2)
10.3**		Form of Ian Edmonds Employment Agreement (7)
10.7		Real Property Lease for 1720 Hayden Drive, Carrollton, Texas (1)
10.9		Real Property Lease for Las Vegas, Nevada (1)
10.10		Real Property Lease for Atlanta, GA (9)
10.11		Termination Agreement with Stan Battat d/b/a Import Consultants (3)
10.12		Third-Party Logistics & Purchase Agreement, dated as of November 3, 2008, with Brinks Home Security, Inc., (currently ADT Security Services (formerly Broadview Security), Inc.) (4)
10.13		Credit Agreement with Wells Fargo Bank, National Association (8)
10.14		Security Agreement with Wells Fargo Bank, National Association (8)
10.15		Real Property Lease for 488 S. Royal Lane, Coppell, Texas (10)
10.16		Credit Agreement, effective as of December 20, 2012 between the Company and Comerica Bank (11)
10.17		Security Agreement, effective as of December 20, 2012 between the Company and Comerica Bank (11)
31.1		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1		Certification of the Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101.INS***		XBRL Instance Document
101.SCH***		XBRL Taxonomy Extension Schema Document
101.CAL***		XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB***		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE***		XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF***		XBRL Taxonomy Extension Definition Linkbase Document.
*	Filed herewith.
**	Management Contract, compensatory plan or arrangement.
***	Furnished with this report. In accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.
(1)	Incorporated herein by reference to the Exhibit with the same number to our Registration Statement on Form S-1 (SEC File No. 333-137265) effective as of December 20, 2006.
(2)	Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on January 23, 2009.
(3)	Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on March 17, 2009.
(4)	Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on November 7, 2008.
(6)	Incorporated herein by reference to Exhibit 10.1(c) to our Annual Report on Form 10-K for the year ended December 31, 2008.
(7)	Incorporated herein by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q for the period ended September 30, 2009.
(8)	Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on December 23, 2009.
(9)	Incorporated herein by reference to Exhibit 10.10 to our Annual Report on Form 10-K for the year ended December 31, 2010.
(10)	Incorporated herein by reference to our Quarterly Report on Form 10-Q for the period ended September 30, 2012, filed on November 9, 2012.
(11)	Incorporated herein by reference to our Current Report on Form 8-K filed on December 31, 2012

15

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Universal Power Group, Inc.
Date: May 13, 2013	/s/ Ian Edmonds
	Ian Edmonds
	President and Chief Executive Officer
	(Principal Executive Officer)
	/s/ Ian Edmonds
	Ian Edmonds
	Interim Chief Financial Officer
	(Principal Financial and Accounting Officer)

16

EX-31.1

EXHIBIT 31.1

Certification

I, Ian Edmonds, certify that:

1.      I have reviewed this quarterly report on Form 10-Q of Universal Power Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 13, 2013	/s/ Ian Edmonds
	Ian Edmonds
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

Certification

I, Ian Edmonds, certify that:

1.      I have reviewed this quarterly report on Form 10-Q of Universal Power Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 13, 2013	/s/ Ian Edmonds
	Ian Edmonds
	Interim Chief Financial Officer
	(Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

 18 U.S.C. SECTION 1350,

 AS ADOPTED PURSUANT TO

 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Universal Power Group, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2013 as filed with the Securities and Exchange Commission (“SEC”) on the date hereof (the “Report”), I, Ian Edmonds, President, Chief Executive Officer and Interim Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

Date: May 13, 2013	/s/ Ian Edmonds
	Ian Edmonds
	President, Chief Executive Officer and
	Interim Chief Financial Officer
	(Principal Executive and Financial Officer)

XML

CONCENTRATIONS (Detail Textuals) (Customer Concentration Risk, USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2013 Net Sales Customer One	Mar. 31, 2012 Net Sales Customer Two	Mar. 31, 2013 Accounts Receivable Customer One	Mar. 31, 2012 Accounts Receivable Customer Two
Concentration Risk [Line Items]
Due from third party			$ 2.5	$ 2.7
Percentage of net sales by third party	17.80%	11.00%

XML

STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2013

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

STOCK-BASED COMPENSATION

NOTE C — STOCK-BASED COMPENSATION

At March 31, 2013, common shares reserved for future issuance include 1,980,000 shares issuable under the 2006 Stock Option Plan, as amended, as well as 20,000 shares issuable upon exercise of options not granted under the 2006 Stock Option Plan.  At March 31, 2013, there were 1,433,842 options outstanding under the 2006 Stock Option Plan, and 546,158 options are available for future grants.

There were no options granted during the three months ended March 31, 2013 or 2012. 

At March 31, 2013, the aggregate intrinsic value of options outstanding and exercisable was $124,889.

At March 31, 2013, all outstanding options under the 2006 Stock Option Plan were fully vested with no remaining unrecognized compensation expense.

On June 25, 2007, Zunicom issued restricted stock to certain employees of UPG for past and future services.  The Company amortized the fair value of 398,144 shares, which had not been forfeited, and compensation expense has been fully vested.  On June 24, 2011, Zunicom issued an additional 99,538 restricted shares of its common stock to the same Company employees who received the grant in June 2007 and who were still employed by the Company.  As a condition to this grant, the grantees agreed to extend the restricted period on the shares issued in June 2007 for an additional three years.  As a result, all 497,682 shares will vest on June 24, 2014.  The Company is amortizing the fair value as compensation expense over the 36-month vesting period in accordance with ASC Topic 718, Compensation – Stock Compensation.  Approximately $2,800 compensation expense related to these shares was recorded during the three-month periods ended for both March 31, 2013 and 2012.  At March 31, 2013, there is approximately $14,200 of remaining unrecognized compensation expense associated with this grant.

On March 21, 2007, the Company issued stock options to non-employees to purchase 20,000 shares of the Company’s common stock at an exercise price of $7.00 per share vesting over three years and expiring December 19, 2016.  These stock options remain outstanding as of March 31, 2013. 

XML

DISCONTINUED OPERATIONS (Detail Textuals) (Monarch Outdoor Adventures, LLC, USD $) In Thousands, unless otherwise specified	0 Months Ended
	May 04, 2012 Installment
Monarch Outdoor Adventures, LLC
Discontinued Operations [Line Items]
Sale of issued and outstanding membership interests of Monarch	$ 130,000
Cash received on sale of limited liability company	50,000
Secured promissory note received on sale of limited liability company	80,000
Interest rate on note	6.00%
Number of equal monthly installments	24
Equal monthly installment	3,692
Frequency of Periodic Payment	Monthly
Term of premises	2 years
Annual rent	42,000
Pre-tax loss	$ (600,000)

XML

ORGANIZATION

3 Months Ended

Mar. 31, 2013

Organization [Abstract]

ORGANIZATION

NOTE B — ORGANIZATION

The Company is a distributor and supplier of batteries and related power accessories to a diverse range of industries, and a provider of third-party fulfillment and logistics services and value-added solutions.  The Company’s primary logistics center is located in Coppell, Texas and regional logistic centers are located in Las Vegas, Nevada and Atlanta, Georgia.  The Company’s customers are primarily located in the United States.  A small portion of the Company’s sales is to customers located in the United Kingdom, Australia, Ireland, Japan, China, Canada and Latin America.

Until December 20, 2006, the Company was a wholly owned consolidated subsidiary of Zunicom, Inc. (“Zunicom”), a Texas corporation, whose stock is quoted on the OTC Markets under the symbol “ZNCM.”  On December 20, 2006, the SEC declared effective a registration statement filed by the Company registering the sale of 3,000,000 shares of its common stock, including 1,000,000 shares owned by Zunicom (the “IPO”).  As a result of the IPO, Zunicom’s interest in the Company was reduced to 40%.  Zunicom no longer owns a controlling interest in UPG; however, as the largest shareholder, Zunicom does have significant influence over UPG.

On January 8, 2009, the Company formed a limited liability company under the name Monarch Outdoor Adventures LLC d/b/a Monarch Hunting (“Monarch”), through which it acquired all of the tangible and intangible assets of a manufacturer and retailer of high-quality hunting products including battery and solar powered deer feeders, hunting blinds, stands and accessories for approximately $892,000.  Monarch is located in Arlington, Texas and has customers throughout the United States.  Monarch’s revenue and assets are not material to the Company’s consolidated financial statements. At March 31, 2012, the carrying value of Monarch’s assets was approximately $400,000. On May 4, 2012, the Company sold Monarch for $130,000.  See Note K.

On April 20, 2011, the Company completed an acquisition of substantially all of the business assets of Progressive Technologies, Inc. (“PTI”), a North Carolina company that designs and builds custom battery packs.  The acquisition consideration totaled approximately $3,300,000.  PTI’s expertise in lithium-ion battery packs, among other chemistries, further enhances the Company’s product and service offerings.  In addition, PTI’s products will strengthen the Company’s position in the medical field and other market segments.  On September 1, 2011, PTI changed its legal name to ProTechnologies, Inc. 

        On January 9, 2013, the Company became the sole member of a newly formed entity, SAM Security, LLC (“SAM”).  SAM provides a do-it-yourself (“DIY”) home security system to retailers throughout the U.S. 

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
CURRENT ASSETS
Cash and cash equivalents	$ 980	$ 2,069
Accounts receivable:
Trade, net of allowance for doubtful accounts of $137 (unaudited) and $324	12,161	8,847
Other	174	455
Inventories - finished goods, net of allowance for obsolescence of $485 (unaudited) and $423	30,130	30,396
Current deferred tax asset	880	838
Income tax receivable	421	512
Prepaid expenses and other current assets	1,291	970
Total current assets	46,037	44,087
PROPERTY AND EQUIPMENT
Logistics and distribution systems	1,877	1,908
Machinery and equipment	484	709
Furniture and fixtures	881	518
Leasehold improvements	918	395
Vehicles	40	111
Total property and equipment	4,200	3,641
Less accumulated depreciation and amortization	(2,467)	(3,173)
Net property and equipment	1,733	468
GOODWILL	1,387	1,387
INTANGIBLES, net	548	593
OTHER ASSETS	161	155
NON-CURRENT DEFERRED TAX ASSET	274	357
Total noncurrent assets	2,370	2,492
TOTAL ASSETS	50,140	47,047
CURRENT LIABILITIES
Line of credit	12,820	12,188
Accounts payable	8,101	7,231
Accrued liabilities	681	386
Current portion of capital lease and note obligations	682	620
Deferred landlord improvements	84
Total current liabilities	22,368	20,425
LONG-TERM LIABILITIES
Capital lease and note obligations, less current portion	3,732	3,608
Deferred landlord improvements	812
Total long-term liabilities	4,544	3,608
TOTAL LIABILITIES	26,912	24,033
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock - $0.01 par value, 50,000,000 shares authorized, 5,020,000 shares issued and outstanding	50	50
Additional paid-in capital	16,393	16,390
Retained earnings	6,785	6,574
Total shareholders' equity	23,228	23,014
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 50,140	$ 47,047

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 211	$ 292
Items not requiring (providing) cash:
Depreciation and amortization	96	135
Provision for bad debts	78	23
Provision for obsolete inventory	102	140
Loss on disposal of property and equipment	50
Deferred income taxes	41	129
Stock-based compensation	3	3
Changes in operating assets and liabilities
Accounts receivable - trade	(3,392)	(2,988)
Accounts receivable - other	281	49
Inventories	164	(130)
Income taxes receivable/payable	91	78
Prepaid expenses and other assets	(327)	(1,773)
Accounts payable	870	3,375
Accrued liabilities	295	(233)
Settlement accrual		(241)
Net cash used in operating activities	(1,437)	(1,141)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment	3
Purchases of property and equipment	(168)	(17)
Net cash used in investing activities	(165)	(17)
CASH FLOWS FROM FINANCING ACTIVITIES
Net activity on line of credit	632	1,269
Payments on capital lease and note obligations	(119)	(38)
Net cash provided by financing activities	513	1,231
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(1,089)	73
Cash and cash equivalents at beginning of period	2,069	283
Cash and cash equivalents at end of period	980	356
SUPPLEMENTAL DISCLOSURES
Income taxes paid	13	7
Interest paid	86	144
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Acquisition of property and equipment through landlord incentives	896
Acquisition of property and equipment through capital lease	$ 345

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STOCK-BASED COMPENSATION (Detail Textuals 1) (USD $)	1 Months Ended		3 Months Ended		1 Months Ended
	Jun. 24, 2011 Restricted Stock	Jun. 24, 2011 Restricted Stock Zunicom	Mar. 31, 2013 Restricted Stock Zunicom	Mar. 31, 2012 Restricted Stock Zunicom	Jun. 25, 2007 Restricted Stock Zunicom Certain Employees	Mar. 21, 2007 Non Employee Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Amortization of fair value not forfeited					398,144
Shares issued in period		99,538
Extended period	3 years
Number of shares vested on maturity		497,682
Vesting period of common stock		36 months				3 years
Compensation expense			$ 2,800	$ 2,800
Unrecognized compensation expense			$ 14,200
Stock options granted						20,000
Exercise price per share of options granted						$ 7.00
Expiration date of stock options						Dec. 19, 2016

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LINE OF CREDIT (Details Textuals) (USD $)	3 Months Ended
	Mar. 31, 2013	Dec. 20, 2012
Wells Fargo | Revolving Credit | Maximum
Line of Credit Facility [Line Items]
Borrowing capacity under revolving credit agreement		$ 40,000,000
Comerica Bank
Line of Credit Facility [Line Items]
Borrowing capacity under revolving credit agreement		34,000,000
Amount outstanding	12,800,000
Interest rate on outstanding borrowings	2.08%
Comerica Bank | Revolving Credit
Line of Credit Facility [Line Items]
Borrowing capacity under revolving credit agreement		30,000,000
Comerica Bank | Term Loan
Line of Credit Facility [Line Items]
Borrowing capacity under revolving credit agreement		4,000,000
Line of credit facility, installment payment	47,619
Line of credit facility, frequency of payments	Monthly
Amount outstanding	$ 3,900,000
Interest rate on outstanding borrowings	2.08%

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BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2013

Basis Of Accounting [Abstract]

BASIS OF PRESENTATION

NOTE A — BASIS OF PRESENTATION

The condensed consolidated interim unaudited financial statements of Universal Power Group, Inc. (“UPG” or the “Company”), a Texas corporation, included in this quarterly report have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included for the three-month periods ended March 31, 2013 and 2012.  The results for the three-month period ended March 31, 2013 are not necessarily indicative of the results that may be expected for the full year.  Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with GAAP have been condensed or omitted.  The unaudited condensed consolidated financial statements included in this filing should be read in conjunction with the Company's audited financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2012, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 29, 2013.  The condensed consolidated balance sheet of the Company as of December 31, 2012 has been derived from the audited consolidated balance sheet as of that date.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.  All significant intercompany accounts and transactions have been eliminated in consolidation.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Statement Of Financial Position [Abstract]
Allowance for doubtful accounts (in dollars)	$ 137	$ 324
Allowance for obsolescence, inventory (in dollars)	$ 485	$ 423
Common stock par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	5,020,000	5,020,000
Common stock, shares outstanding	5,020,000	5,020,000

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DISCONTINUED OPERATIONS

3 Months Ended

Mar. 31, 2013

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS

NOTE K — DISCONTINUED OPERATIONS

On May 4, 2012, pursuant to a Securities Purchase Agreement, dated as of May 4, 2012 (the “Agreement”), the Company sold all of the issued and outstanding membership interests of Monarch for $130,000.  Of the purchase price, $50,000 was paid in cash at closing and $80,000 was evidenced by a 6% secured promissory note maturing May 1, 2014.  The principal amount of the note and all accrued interest thereon is payable in 24 equal monthly installments of $3,692 beginning on June 1, 2012.  The note is secured by a pledge of all of the membership interests in Monarch as well as a lien on all of Monarch’s assets.  The purchasers also agreed to sublet from the Company for a minimum term of two years the premises used by Monarch at an annual rental of $42,000.  The Agreement contains representations and warranties, covenants and indemnification provisions typical of those in these types of transactions.  UPG realized a pre-tax loss of approximately $600,000 related to the sale of Monarch including lease obligations retained for the manufacturing facility.  

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Document and Entity Information	3 Months Ended
	Mar. 31, 2013	May 09, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	UNIVERSAL POWER GROUP INC.
Entity Central Index Key	0001372000
Trading Symbol	upg
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		5,020,000
Document Type	10-Q
Document Period End Date	Mar. 31, 2013
Amendment Flag	false
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1

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ORGANIZATION (Detail Textuals)	1 Months Ended
	Dec. 20, 2006
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Sale of shares of common stock	3,000,000
Zunicom, Inc.
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Sale of shares of common stock	1,000,000
Percentage of ownership	40.00%

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Income Statement [Abstract]
Net sales	$ 20,458	$ 26,338
Cost of sales	16,024	21,685
Gross profit	4,434	4,653
Operating expenses	3,931	4,085
Operating income	503	568
Other income (expense)
Interest expense	(85)	(143)
Other, net	(50)	127
Total other expense, net	(135)	(16)
Income from continuing operations before provision for income taxes	368	552
Provision for income taxes	(157)	(216)
Income from continuing operations	211	336
Discontinued operations:
Loss from operations of discontinued Monarch Outdoor Adventures, LLC		(61)
Provision for income taxes		17
Loss on discontinued operations		(44)
Net income	$ 211	$ 292
Basic:
Income from continuing operations (in dollars per share)	$ 0.04	$ 0.07
Gain (loss) on discontinued operations (in dollars per share)		$ (0.01)
Net income (in dollars per share)	$ 0.04	$ 0.06
Diluted:
Income from continuing operations (in dollars per share)	$ 0.04	$ 0.06
Gain (loss) on discontinued operations (in dollars per share)		$ (0.01)
Net income (in dollars per share)	$ 0.04	$ 0.05
Weighted average shares outstanding
Basic (in shares)	5,020	5,020
Diluted (in shares)	5,133	5,202

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CONCENTRATIONS

3 Months Ended

Mar. 31, 2013

Risks and Uncertainties [Abstract]

CONCENTRATIONS

NOTE F — CONCENTRATIONS

At March 31, 2013, the Company had receivables due from one customer of approximately $2.5 million and as of March 31, 2012, the Company had receivables due from a different customer of approximately $2.7 million.During the three months ended March 31, 2013, one customer accounted for 17.8% of net sales.  During the three months ended March 31, 2012, another customer accounted for 11% of net sales.

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LINE OF CREDIT

3 Months Ended

Mar. 31, 2013

Debt Disclosure [Abstract]

LINE OF CREDIT

NOTE E — LINE OF CREDIT

Effective December 20, 2012, the Company entered into a credit agreement with Comerica Bank under which it may borrow up to $34.0 million, including a $30.0 million revolving line of credit (“Credit Line”) and $4.0 million term loan (“Term Loan”).  The Credit Line replaced the credit facility that the Company had with Wells Fargo.  All borrowings are secured by a first lien on all of the Company’s assets.  In addition, the Company may request an increase in the maximum Credit Line to $40.0 million.  Its borrowing availability is dependent upon its level of accounts receivable and inventory.  With respect to the interest rate for each borrowing, the Company has the option to choose a “LIBOR-base Rate” or “Daily Adjusted LIBOR-based Rate” plus an “Applicable LIBOR Margin.”  Under the Credit Line, interest is payable monthly and the outstanding principal is due at maturity, on December 20, 2016 (the “Maturity Date”).  Under the Term Loan, principal is payable in equal monthly installments of $47,619, plus interest beginning on February 1, 2013 with the entire unpaid principal amount due on the Maturity Date.  At March 31, 2013, approximately $12.8 million was outstanding under the Credit Line and $3.9 million was outstanding under the term loan.  Both the Credit Line and Term Loan were accruing interest at the rate of 2.08% per annum.

The credit agreement contains customary negative covenants restricting the Company’s ability to take certain actions without Comerica’s consent, including incurring additional indebtedness, transferring or encumbering assets, and acquiring other businesses.  If there is an “event of default”, including failure to pay, bankruptcy, breach of covenants and breach of representations and warranties, all amounts outstanding under the Credit Agreement will become immediately due and payable.  In addition, the Company must maintain certain financial covenants on a quarterly basis.

Interest Rate Swap

The Company terminated an Interest Swap Agreement (“ISA”) it had with its previous lender in connection with a prior credit agreement and, consequently, discontinued hedge accounting as of December 16, 2009.  The Company continues to incur interest expense commensurate with its original, hedged risk, and there is currently no indication that interest payments on the hedged transaction would not continue.  Therefore, the realized losses related to the ISA will not be recognized immediately and will remain in accumulated other comprehensive income (loss).  These losses were reclassified into interest expense over the original contractual term of the ISA starting as of December 16, 2009 through July 5, 2012.

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NET INCOME (LOSS) PER SHARE (Details Textuals) (Stock Options)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Stock Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Dilutive effect of stock options included in the calculation	852,592	852,592
Antidilutive securities excluded from the calculation of earning per share	601,250	571,250

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ORGANIZATION (Detail Textuals 1) (Monarch Outdoor Adventures, LLC, USD $) In Thousands, unless otherwise specified	May 04, 2012	Mar. 31, 2012	Jan. 08, 2009
Monarch Outdoor Adventures, LLC
Related Party Transaction [Line Items]
Acquisition of the tangible and intangible assets of a manufacturer and retailer of high-quality hunting products			$ 892,000
Carrying value Monarch's assets		400,000
Sale of issued and outstanding membership interests of Monarch	$ 130,000

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GOODWILL

3 Months Ended

Mar. 31, 2013

Intangible Assets, Net (Including Goodwill) [Abstract]

GOODWILL

NOTE I— GOODWILL

Goodwill represents the excess of the cost of an acquisition over the fair value of the net identifiable assets of the acquired business. Goodwill is tested annually for impairment and when events or circumstances change to suggest that the carrying amount may not be recoverable. For purposes of impairment testing, goodwill is allocated to reporting units, which are either at the operating segment level or one reporting level below the operating segment. Goodwill is recorded in the financial statements at cost less accumulated impairment losses.  In the second quarter of 2012, management performed the required annual impairment test under the qualitative assessment methodology and determined that goodwill was not impaired.

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LEGAL PROCEEDINGS

3 Months Ended

Mar. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

LEGAL PROCEEDINGS

NOTE G — LEGAL PROCEEDINGS

The Company is not currently party to any legal proceedings than those arising in the ordinary course of business, which management does not believe will have a material adverse effect on the Company’s financial position, operating results, or cash flows, regardless of the outcome.

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INCOME TAXES

3 Months Ended

Mar. 31, 2013

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE H — INCOME TAXES

The Company files income tax returns in the U.S. federal jurisdiction and various states.  With a few exceptions, the Company is no longer subject to U.S. state and local income tax examinations by tax authorities for years before 2008.

The Company recorded income tax expense from continuing operations of approximately $157,000 and $216,000 for each of the three-month periods ended March 31, 2013 and 2012, respectively.  The Company's effective tax rate was 42.7% and 39.1% for the three-month periods ended March 31, 2013 and 2012, respectively.  The taxes were higher than the statutory rate of 34% primarily as a result of state income taxes and items not deductible for income tax reporting.

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SEGMENT AND GEOGRAPHIC INFORMATION

3 Months Ended

Mar. 31, 2013

Segment Reporting [Abstract]

SEGMENT AND GEOGRAPHIC INFORMATION

NOTE J — SEGMENT AND GEOGRAPHIC INFORMATION

The accounting standard for segment reporting requires enterprises to report financial information and descriptive information about reportable operating segments.  It also establishes standards for related disclosures about products and services, geographic areas and major customers.  The Company evaluated the accounting standard for segment reporting and determined that the Company operates in only one segment.

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STOCK-BASED COMPENSATION (Detail Textuals) (Equity Incentive Compensation Plan 2006, Stock Options, USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2013
Equity Incentive Compensation Plan 2006 | Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issuable under stock option plan	1,980,000
Shares issuable upon exercise of options not granted	20,000
Options outstanding under the plan	1,433,842
Options available for future grants under the plan	546,158
Intrinsic value of options outstanding and exercisable	$ 124,889

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INCOME TAXES (Details Textuals) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Income Tax Disclosure [Abstract]
Income tax expense	$ 157,000	$ 216,000
Effective tax rate	42.70%	39.10%
Statutory federal rate	34.00%	34.00%

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Statement Of Other Comprehensive Income [Abstract]
Net income	$ 211	$ 292
Amortization of hedging instrument		28
Comprehensive income	$ 211	$ 320

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NET INCOME (LOSS) PER SHARE

3 Months Ended

Mar. 31, 2013

Earnings Per Share [Abstract]

NET INCOME (LOSS) PER SHARE

NOTE D — NET INCOME (LOSS) PER SHARE

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding for the period.

Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding for the period.  The Company’s common stock equivalents include all common stock issuable upon the exercise of outstanding stock options and warrants.

For the three-month period ended March 31, 2013, the dilutive effect of 852,592 stock options is included in the calculation and 601,250 stock options are excluded from the calculation as they are antidilutive.  For the three-month period ended March 31, 2012, the dilutive effect of 852,592 stock options is included in the calculation and 571,250 stock options are excluded from the calculation as they are antidilutive.  

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SEGMENT AND GEOGRAPHIC INFORMATION (Details Textuals)	3 Months Ended
	Mar. 31, 2013 Segments
Segment Reporting [Abstract]
Number of reportable segment	1

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ORGANIZATION (Detail Textuals 2) (Progressive Technologies, Inc, USD $) In Thousands, unless otherwise specified	Apr. 20, 2011
Progressive Technologies, Inc
Business Acquisition [Line Items]
Business acquisition, total consideration	$ 3,300,000