Use these links to rapidly review the documentUltimate Electronics, Inc. Form 10-Q Index

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United States
Securities and Exchange CommissionWashington, D.C. 20549

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FORM 10-Q

(Mark One)

|/x/ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|--- | ---------------------------------------------------------------------------------------

For the Quarterly Period Ended July 31, 2001

or

|/ / | 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 0-22532

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ULTIMATE ELECTRONICS, INC.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of incorporation or organization)

84-0585211(I.R.S. employer identification no.)


321 West 84th Avenue, Suite A, Thornton, Colorado 80260(Address of principal executive offices, zip code)

(303) 412-2500(Registrant's telephone number, including area code)

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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 /x/  No / /

The
number of outstanding shares of common stock as of September 13, 2001 was 11,066,490.

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Ultimate Electronics, Inc.  Form 10-Q  Index



|                                                                                             
|---------------------------------------------------------------------------------------------
|PART I. FINANCIAL INFORMATION                                                                
|Item 1. Financial Statements:                                                                
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|PART II. OTHER INFORMATION                                                                   
|Item 1. Legal Proceedings                                                                    
|Item 2. Changes in Securities                                                                
|Item 3. Defaults Upon Senior Securities                                                      
|Item 4. Submission of Matters to a Vote of Security Holders                                  
|Item 5. Other Information                                                                    
|Item 6. Exhibits and Reports on Form 8-K.                                                    





Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

ULTIMATE ELECTRONICS, INC.  CONDENSED CONSOLIDATED BALANCE SHEETS  (amounts in thousands, except share and per share data)

|                                                     |                                           | July 31,
2001                                                                                  |        | January 31,
2001
|---------------------------------------------------- | ----------------------------------------- | ---------------------------------------------------------------------------------------------- | ------ | ----------------
|
|Assets:                                              |                                           |                                                                                                |        |                 
|Current assets:                                      |                                           |                                                                                                |        |                 
|                                                     | Cash and cash equivalents                 |                                                                                                | $      | 6,775           
|                                                     | Accounts receivable, net                  |                                                                                                |        | 26,800          
|                                                     | Merchandise inventories, net              |                                                                                                |        | 77,385          
|                                                     | Property held for sale                    |                                                                                                |        |                
|                                                     | Other assets                              |                                                                                                |        | 2,222           
|                                                     |                                           |                                                                                                |        |                 
|                                                     |                                           | Total current assets                                                                           |        |                 
|Property and equipment, net                          |                                           |                                                                                                | 85,385 |                 
|Other assets                                         |                                           |                                                                                                | 3,508  |                 
|                                                     |                                           |                                                                                                |        |                 
|                                                     |                                           | Total assets                                                                                   |        | $               
|                                                     |                                           |                                                                                                |        |                 
|Liabilities and Stockholders' Equity:                |                                           |                                                                                                |        |                 
|Current liabilities:                                 |                                           |                                                                                                |        |                 
|                                                     | Accounts payable                          |                                                                                                | $      | 49,101          
|                                                     | Accrued liabilities                       |                                                                                                |        | 21,843          
|                                                     | Revolving line of credit                  |                                                                                                |        | 14,338          
|                                                     | Deferred revenue                          |                                                                                                |        | 1,917           
|                                                     | Other current liabilities                 |                                                                                                |        | 107             
|                                                     |                                           |                                                                                                |        |                 
|                                                     |                                           | Total current liabilities                                                                      |        |                 
|Deferred revenue, less current portion               |                                           |                                                                                                | 1,989  |                 
|Capital lease obligations, including related parties |                                           |                                                                                                | 1,604  |                 
|Other long term liabilities                          |                                           |                                                                                                | 483    |                 
|                                                     |                                           |                                                                                                |        |                 
|                                                     |                                           | Total long term liabilities                                                                    |        |                 
|Commitments                                          |                                           |                                                                                                |        |                 
|Stockholders' equity:                                |                                           |                                                                                                |        |                 
|                                                     | Preferred stock, par value $.01 per share |                                                                                                |        |                 
|                                                     |                                           | Authorized shares10,000,000                                                                   |        |                 
|                                                     |                                           | No shares issued and outstanding                                                               |        |                 
|                                                     | Common stock, par value $.01 per share    |                                                                                                |        |                 
|                                                     |                                           | Authorized shares40,000,000                                                                   |        |                 
|                                                     |                                           | Issued and outstanding shares: 11,041,215 and 10,938,331 at July 31, 2001 and January 31, 2001 |        |                 
|Additional paid-in capital                           |                                           |                                                                                                | 74,516 |                 
|Retained earnings                                    |                                           |                                                                                                | 36,067 |                 
|                                                     |                                           |                                                                                                |        |                 
|                                                     |                                           | Total stockholders' equity                                                                     |        |                 
|                                                     |                                           |                                                                                                |        |                 
|                                                     |                                           | Total liabilities and stockholders' equity                                                     |        | $               
|                                                     |                                           |                                                                                                |        |                 

See
accompanying notes to Condensed Consolidated Financial Statements.



ULTIMATE ELECTRONICS, INC.  CONSOLIDATED STATEMENTS OF OPERATIONS  (Unaudited)  (amounts in thousands, except per share data)

|                                                                 |  | Three Months Ended
July 31, |         | Six Months Ended
July 31,
|---------------------------------------------------------------- |  | --------------------------- | ------- | -------------------------
|
|Sales                                                            |  | $                           | 117,607 |                          
|Cost of goods sold                                               |  |                             | 79,158  |                          
|                                                                 |  |                             |         |                          
|Gross profit                                                     |  |                             | 38,449  |                          
|Selling, general and administrative expenses                     |  |                             | 35,517  |                          
|                                                                 |  |                             |         |                          
|Income from operations                                           |  |                             | 2,932   |                          
|Interest expense, net                                            |  |                             | 31      |                          
|                                                                 |  |                             |         |                          
|Income before taxes and extraordinary item                       |  |                             | 2,901   |                          
|Income tax expense                                               |  |                             | 1,103   |                          
|                                                                 |  |                             |         |                          
|Income before extraordinary item                                 |  |                             | 1,798   |                          
|Extraordinary loss on early extinguishment of debt, net of taxes |  |                             |        |                          
|                                                                 |  |                             |         |                          
|Net income                                                       |  | $                           | 1,798   |                          
|                                                                 |  |                             |         |                          
|Earnings per share before extraordinary itembasic               |  | $                           | .16     |                          
|Earnings per share before extraordinary itemdiluted             |  | $                           | .16     |                          
|Earnings per sharebasic                                         |  | $                           | .16     |                          
|Earnings per sharediluted                                       |  | $                           | .16     |                          
|Weighted average shares outstandingbasic                        |  |                             | 11,008  |                          
|Weighted average shares outstandingdiluted                      |  |                             | 11,486  |                          

See
accompanying notes to Condensed Consolidated Financial Statements.



ULTIMATE ELECTRONICS, INC.  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (Unaudited)  (amounts in thousands)

|                                                               |  | Six Months Ended
July 31, |        
|-------------------------------------------------------------- |  | ------------------------- | -------
|
|Cash Flows from Operating Activities:                          |  |                           |        
|Net cash provided by operating activities                      |  | $                         | 16,168 
|Cash Flows from Investing Activities:                          |  |                           |        
|Proceeds from sale of investments available for sale           |  |                           |       
|Purchases of property and equipment, net                       |  |                           | (20,541
|                                                               |  |                           |        
|Net cash used in investing activities                          |  |                           | (20,541
|Cash Flows from Financing Activities:                          |  |                           |        
|Principal payments on long-term bonds payable                  |  |                           |       
|Net borrowings under revolving credit agreement                |  |                           | 7,034  
|Principal payments on term loans and capital lease obligations |  |                           | (67    
|Proceeds from exercise of stock options                        |  |                           | 1,227  
|                                                               |  |                           |        
|Net cash provided by (used in) financing activities            |  |                           | 8,194  
|                                                               |  |                           |        
|Net increase (decrease) in cash and cash equivalents           |  |                           | 3,821  
|Cash and cash equivalents at beginning of period               |  |                           | 2,954  
|                                                               |  |                           |        
|Cash and cash equivalents at end of period                     |  | $                         | 6,775  
|                                                               |  |                           |        

See
accompanying notes to Condensed Consolidated Financial Statements.





ULTIMATE ELECTRONICS, INC.  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)  July 31, 2001

1. Significant Accounting Policies



Ultimate Electronics, Inc. is a leading specialty retailer of consumer electronics and home entertainment products located in the Rocky Mountain,
Midwest and Southwest regions of the United States. The Company currently operates forty-one stores, including twenty-two stores in Arizona, Idaho, Iowa, Nevada, New Mexico,
Oklahoma, South Dakota and Utah under the trade name Ultimate Electronics, eleven stores in Colorado under the trade name SoundTrack and eight stores in Minnesota under the trade name Audio King.

The
Company's unaudited condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States
for interim financial reporting and the regulations of the Securities and Exchange Commission for quarterly reporting. Accordingly, they do not include all information and footnotes required by
accounting principles generally accepted in the United States for complete financial statements. In the opinion of the Company, the statements include all adjustments, consisting only of normal
recurring adjustments that are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. Operating results for the three and six month
periods ended July 31, 2001 are not necessarily indicative of the results that may be expected for the year ending January 31, 2002. Seasonal fluctuations in sales of the Company's
products result primarily from the purchasing patterns of individual consumers during the holiday selling season. These patterns tend to moderately concentrate sales in the latter half of the year,
particularly in the fourth quarter. For further information, refer to the financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended January 31, 2001 and other filings with the Securities and Exchange Commission.



The unaudited condensed consolidated financial statements include the accounts of all subsidiaries. All intercompany accounts and transactions have been
eliminated upon consolidation.



On June 27, 2001 the Company opened its sixth Phoenix, Arizona metropolitan area store. On July 25, 2001 the Company entered the Oklahoma City,
Oklahoma market with two new stores. On August 1, 2001 the Company opened its seventh Phoenix, Arizona metropolitan area store.



The Company purchased land and constructed a building for a new store located in Colorado Springs, Colorado. The store opened in November 2000. In
February 2001, the Company entered into a sale-leaseback arrangement with Pearse Investment Company, L.L.L.P., an entity controlled by two principle stockholders of the Company,
William J. and Barbara A. Pearse. There was no gain or loss recognized as a result of the sale.





The Company issued 85,150 shares of common stock during the second quarter, 51,390 of which were issued through its Employee Stock Purchase Plan and the
remainder through option exercises from its Stock Option Plan.



In July 2001, the Financial Accounting Standards Board issued Statement No. 141,Business
Combinations("SFAS 141") and Statement No. 142,Goodwill and Other Intangible Assets("SFAS 142").
SFAS 141 requires companies to reflect intangible assets apart from goodwill and supercedes previous guidance related to business combinations. SFAS 142 eliminates amortization of
goodwill and amortization of indefinite lived intangible assets. However, SFAS 142 also requires the Company to perform impairment tests at least annually on all goodwill and other intangible
assets. These statements are required to be adopted by the Company on February 1, 2002 and for any acquisitions entered into after July 1, 2001. The Company is currently evaluating the
impact upon adoption of these statements on its financial position, results of operations and cash flows.

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

Management's discussion and analysis of financial condition and results of operations and the financial statements and accompanying notes may contain
statements that are not historical facts but are forward-looking statements that involve risks and uncertainties that could cause future results to vary materially from projected results. Such
statements address activities, events or developments that the Company expects, believes, projects, intends, estimates, plans or anticipates will, should, could or may occur, including reference to
future profitability and steps being taken to achieve that result. Factors that could cause actual results to differ materially from the Company's projections, forecasts, estimates and expectations
include, but are not limited to: risks related to the Company's ability to open and operate new stores; the Company's ability to profitably relocate and/or expand existing stores and the willingness
of vendors to permit product sales over the internet; significant competition, including new competition from internet retailers; seasonal fluctuations in the Company's business; changes in trade
regulations and currency fluctuations; risks regarding increases in promotional activities of competitors; the presence or absence of new products or product features in the Company's merchandise
categories; changes in the distribution strategy of the Company's vendors; changes in vendor support for advertising and promotional programs; changes in the Company's merchandise sales mix; the
results of financing efforts; fluctuations in consumer demand and preferences and general economic conditions. Please refer to a discussion of these and other factors in the Company's Annual Report on
Form 10-K for the year ended January 31, 2001 and other filings with the Securities and Exchange Commission. The Company disclaims any intent or obligation to update publicly
these forward-looking statements, whether as a result of new information, future events or otherwise.



Sales for the three months ended July 31, 2001 increased 15% to $117.6 million from $102.0 million for the three months
ended July 31, 2000. Sales for the six months ended July 31, 2001 were $232.7 million, an increase of 18% from sales of $197.0 million for the six months ended
July 31, 2000. The increase in sales was substantially the result of the six new stores added between July 2000 and June 2001 in the
Phoenix, Arizona metropolitan area. Sales of comparable stores were down 5% and 3%, respectively, for the three and six months ended July 31, 2001.

Gross
profit for the three months ended July 31, 2001 increased 16% to $38.4 million (32.7% of sales) from $33.0 million (32.4% of sales) for the
three months ended July 31, 2000. Gross profit for

the six months ended July 31, 2001 increased 18% to $74.0 million (31.8% of sales) compared to $62.8 million (31.9% of sales) for the six months ended
July 31, 2000. Gross profit for the quarter was impacted by strong sales of digital televisions at higher margins than analog televisions as well as slightly higher margins in most of the
Company's other categories.

Selling,
general and administrative expenses for the three months ended July 31, 2001 were $35.5 million (30.2% of sales) compared to $29.4 million (28.9%
of sales) for the three months ended July 31, 2000. Selling, general and administrative expenses for the six months ended July 31, 2001 were $68.2 million (29.3% of
sales) compared to $56.3 million (28.6% of sales) for the six months ended July 31, 2000. The increase in selling, general and administrative expenses as a percentage of sales was
directly related to infrastructure additions necessary for store expansion planned by the Company for this year and next as well as lower comparable store sales.

The
Company recorded income from operations of $2.9 million (2.5% of sales) for the three months ended July 31, 2001 compared to income from operations of
$3.6 million (3.5% of sales) for the three months ended July 31, 2000. Income from operations was $5.8 million (2.5% of sales) for the six months ended
July 31, 2001 compared to $6.5 million (3.3% of sales) for the six months ended July 31, 2000.

Net
interest expense was $31,000 and $89,000, respectively, for the three and six months ended July 31, 2001 compared to $38,000 and $46,000, respectively, for the three
and six months ended July 31, 2000.

Extraordinary
loss on early extinguishment of debt of $254,000 (net of taxes) for the six months ended July 31, 2000 relates to the repayment, in full, of the Company's
10.25% bonds on March 31, 2000.



Historically, the Company's primary sources of liquidity for funding expansion and growth have been net cash from operations, revolving credit lines, term debt
and issuances of common stock. The Company's primary cash requirements are related to expenditures for new store openings and the relocation and/or remodeling of existing store locations. These
expenditures include preopening expenses and additional inventory for new or relocated stores, as well as working capital to support the Company's inventory requirements and selling, general and
administrative expenses. The Company currently operates a total of forty-one stores in ten states.

Net
cash provided by operating activities was $16.2 million for the six months ended July 31, 2001 compared to net cash provided by operating activities of
$3.0 million for the six months ended July 31, 2000 primarily due to higher accounts payable balances partially offset by higher inventory balances in the current year.

Net
cash used in investing activities was $20.5 million for the six months ended July 31, 2001 compared to net cash used in investing activities of
$2.1 million for the six months ended July 31, 2000. The Company had capital expenditures of $25.0 million during the six months ended July 31, 2001 primarily
related to new store openings, the installation of warehouse management software, the reconfiguration of the Company's warehouse distribution center and upgrades to the Company's information systems.
For the six months ended July 31, 2000 the Company had capital expenditures of $14.1 million for new store openings and the relocation and expansion of an existing store location.
In February 2001, the Company received $4.5 million in proceeds from a sale-leaseback arrangement on a new store in Colorado Springs, Colorado. During the first
six months of the prior year, the Company received $12.0 in proceeds from the sale of an investment available for sale, which matured on March 29, 2000.

Net cash provided by financing activities was $8.2 million for the six months ended July 31, 2001 compared to net cash used in financing activities of
$11.7 million for the six months ended July 31, 2000. Net cash provided by financing activities for the current year related primarily to net borrowings on the Company's revolving
line of credit. Net cash used in financing activities for the prior year was primarily the result of repayment, in full, of the Company's 10.25% bonds on March 31, 2000.

The
Company intends to continue to expand into select metropolitan areas in the Rocky Mountain, Midwest and Southwest regions with 30,000 to 34,000 square foot stores. In certain
smaller markets, the store size may be as small as 22,000 square feet. With the exception of the Thornton, Colorado facility, all current stores are leased. The Company opened its sixth and seventh
Phoenix, Arizona metropolitan area stores on June 27 and August 1, 2001, respectively. The Company expects to open an additional Phoenix metropolitan area store in November 2001.
On July 25, 2001 the Company entered the
Oklahoma City, Oklahoma market with two new stores. On October 31, 2000 the Company announced plans for six new stores in the St. Louis, Missouri area with two to four stores expected to open
in fiscal 2002 and the balance in fiscal 2003. On June 7, 2001 the Company announced plans to open thirteen new stores over the next two years in the Dallas/Ft. Worth, Texas area.

The
Company continues to analyze new store opportunities in existing markets to replace or expand some of its smaller locations. With the addition of a new warehouse and install
facility, the Company's Fort Collins, Colorado store is expected to be expanded from 16,600 to 24,000 square feet in the Fall of 2001. The Company also intends to expand its Rochester, Minnesota store
from 3,900 to 5,600 square feet in the fall of fiscal 2002 and is analyzing additional opportunities in the Minneapolis/St. Paul area to relocate and/or expand a number of those locations. This
process is expected to be ongoing over the next few years.

The
cost of these future stores is anticipated to average $3.3 million per store. Leasehold improvements, fixtures and equipment are expected to average $2.2 million,
depending on tenant allowances. The inventory requirement for the Company's new stores is expected to average approximately $1.5 million, approximately $750,000 of which will be financed
through trade credit. Preopening expenses for new stores are expected to average $350,000, and include such items as advertising prior to opening, recruitment and training of new employees and other
costs associated with opening stores. In the event of relocations of existing stores, preopening costs are expected to average $150,000 and will be higher if the Company is required to terminate
existing store leases prior to their maturity.

The
Company's expansion strategy focuses on identification of attractive metropolitan areas in the Rocky Mountain, Midwest and Southwest regions based on an evaluation of local market
opportunities, as well as the size, strength and merchandising philosophy of potential competitors. The Company obtains demographic analyses of major metropolitan areas to determine new store
locations and potential sales volumes, as well as the optimum number of stores to open in a specific market. The Company's specific location strategy focuses on power centers or freestanding locations
near shopping malls. In choosing sites within a market, the Company applies standard site selection criteria that take into account numerous factors including local demographics, traffic patterns,
highway visibility and overall retail activity.

On
September 30, 1998, the Company executed a three-year $40 million credit agreement, as amended, with Foothill Capital Corporation, a wholly owned
subsidiary of Wells Fargo Bank. Borrowings under this revolving line of credit are limited to the lesser of $40 million or 80% of eligible inventory and a portion of accounts receivable. As of
July 31, 2001, the entire $40 million facility was available to the Company, of which $14.3 million was outstanding. Borrowings bear interest, payable monthly, based on a blend of
LIBOR plus 2% and Wells Fargo Bank's prime rate minus 0.375%. Inventories, accounts receivable, equipment and intangibles secure the borrowings. The facility includes negative covenants that limit the
Company's ability to, without the bank's prior approval, and subject to

various exceptions, incur indebtedness, create liens, enter into mergers and consolidations, pay dividends, repurchase the Company's capital stock, issue guarantees, sell assets or engage in
transactions with affiliates. The facility also contains covenants regulating the Company's gross margins, inventory levels, tangible net worth and capital expenditures. The Company was in compliance
with all borrowing covenants as of July 31, 2001. The Company's current line of credit agreement expires on September 30, 2001.The
Company is currently negotiating a new $80 million line of credit agreement with Wells Fargo Retail Finance, a subsidiary of Foothill Capital Corporation, to replace its existing agreement and
expects to have a new agreement finalized prior to the expiration of the existing agreement.

On
March 23, 1995, the Company completed an offering for the sale of $13,000,000 aggregate principal amount of bonds payable (the "Bonds"). The Bonds were redeemable by the
Company at par any time at or after March 31, 2000. On March 31, 2000, the Company paid $13,111,000 to redeem the Bonds in full. The Bonds were redeemed at a redemption price of 100% of
the principal amount and all accrued and unpaid interest as of such date, which totaled $111,000. As a result of the redemption of the Bonds, the Company recognized an extraordinary loss of $254,000
(net of taxes).

The
Company believes that its cash flows from operations and borrowings under its credit facility will be sufficient to fund the Company's operations, debt repayment and expansion
through fiscal 2002. To fund the capital requirements for its anticipated expansion plans beyond fiscal 2002, the Company may be required to seek additional financing, which may take the form of
expansion of its existing credit facility, or possibly additional debt or equity financings. The Company may also re-mortgage its Thornton facility. There can be no assurance that the
Company will be able to obtain such funds on favorable terms, if at all.



The Company's business is affected by seasonal consumer buying patterns. As is the case with many other retailers, the Company's sales and profits have been
greatest in the fourth quarter (which includes the holiday selling season). Due to the importance of the holiday selling season, any factors negatively impacting the holiday selling season could have
a material adverse impact on the Company's financial condition and results of operations. Operating results are dependent on a number of factors, including discretionary consumer spending, which is
affected by local, regional and national economic conditions affecting disposable consumer income, such as employment, business conditions, interest rates and taxation. The Company's quarterly results
of operations may fluctuate significantly as a result of a number of factors, including:



As
the Company has opened additional stores or relocated and expanded stores within markets it already serves, sales at existing stores have been adversely affected. Such adverse
effects may occur in the future. The Company's quarterly operating results also may be affected by increases in merchandise costs, price changes in response to competitive factors, new and increased
competition and product availability.





The Company believes, because of competition among manufacturers and the technological changes in the consumer electronics industry, inflation has not had a
significant effect on results of operations during the last few years.

Item 3. Qualitative and Quantitative Disclosures About Market Risk

The following discusses the Company's exposure to market risks related to changes in interest rates and other general market risks. All of the Company's
investment and financing decisions are supervised or managed by its executive committee. This discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results
could vary materially as a result of a number of factors, including, but not limited to, changes in interest rates and other general market risks, and those set forth in "Management's Discussion and Analysis of Financial
Condition and Results of Operations"appearing elsewhere in this Form 10-Q.

Cash and Cash Equivalents.As of July 31, 2001, the Company had $6.8 million in
non-restricted cash and cash equivalents held in various non-interest bearing accounts. Management considers all highly liquid investments purchased with an original maturity
of three months or less to be cash equivalents.

Outstanding Debt of the Company.The Company had a $40 million revolving line of credit on July 31, 2001.
Borrowings under the line of credit bear interest, payable monthly, based on a blend of LIBOR plus 2% and Wells Fargo Bank's prime rate minus 0.375%. Borrowings under this credit facility were
$14.3 million as of July 31, 2001. Increases in interest rates could increase interest expense associated with future borrowings by the Company, if any. The Company has not hedged
against interest rate changes.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, the Company is a party to certain legal proceedings arising in the ordinary course of its business. Management believes that any resulting
liability, individually or in the aggregate, will either be covered by insurance or will not have a material adverse effect on the Company's financial condition.

Item 2. Changes in Securities.

None

Item 3. Defaults Upon Senior Securities.

None

Item 4. Submission of Matters to a Vote of Security Holders.

The 2001 Annual Meeting of Stockholders of Ultimate Electronics, Inc. was held on June 21, 2001. At the meeting, Alan E. Kessock and Robert W.
Beale were elected as Class I Directors for three-year terms expiring at the 2004 Annual Meeting of Stockholders. William J. Pearse, J. Edward McEntire, David J. Workman, Randall F.
Bellows and Larry D. Strutton continue in their respective terms as Directors of the Company.

The
matters voted upon and passed at the Meeting were the election of the above noted Directors, the proposal to approve an amendment to the Company's Amended and Restated Certificate
of Incorporation to increase the authorized number of shares from 25,000,000 to 50,000,000, of which the

number of shares of common stock shall be increased from 15,000,000 to 40,000,000 and the number of shares of preferred stock shall remain at 10,000,000, and the ratification of the appointment of
Ernst & Young LLP as the Company's independent public accountants for the fiscal year ending January 31, 2002. The results of the voting on these matters is outlined in the following
table:

|Proposal                                                                          |                 | Votes
For  |            | Votes
Against |   | Votes
Abstained
|--------------------------------------------------------------------------------- | --------------- | ---------- | ---------- | ------------- | - | ---------------
|Election of Directors:                                                            |                 |            |            |               |   |                
|                                                                                  | Alan E. Kessock |            | 8,653,493  |               | 0 |                
|                                                                                  | Robert W. Beale |            | 10,286,808 |               | 0 |                
|Proposal to amend the Company's Amended and Restated Certificate of Incorporation |                 | 8,524,294  |            | 1,893,407     |   | 10,602         
|Ratification of Ernst & Young LLP                                                 |                 | 10,357,998 |            | 67,361        |   | 2,944          

Item 5. Other Information.

None

Item 6. Exhibits and Reports on Form 8-K.







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.

|                         |  | ULTIMATE ELECTRONICS, INC.
|------------------------ |  | --------------------------
|Date: September 13, 2001 |  | By: