SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1995 Commission File No. 0-6882
URT INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Florida 59-1167907
- ------------------------------------------------ --------------------------
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER I.D. NO.)
ORGANIZATION)
3451 Executive Way, Miramar, Florida 33025
- ------------------------------------------------ --------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (305) 432-4200
--------------------------
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 and (2) has been subject to the filing requirements for
at least the past 90 days.
YES X NO___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
At September 30, 1995, there were outstanding:
11,222,918 shares of Class A common stock
1,309,063 shares of Class B common stock
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
<TABLE>
<CAPTION>
URT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1995 and April 1, 1995
September 30, April 1,
ASSETS 1995 1995
------ ---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,036,973 2,014,147
Marketable investment securities 2,712,496 2,649,534
Inventories 4,953,136 5,578,737
Current portion of due from officers/shareholders 28,470 28,470
Land held for sale -- 300,000
Prepaid expenses and other current assets 297,657 368,205
Refundable income taxes 257,860 257,229
------------ ------------
Total current assets 9,286,592 11,196,322
Property and equipment, net 2,550,053 3,102,928
Due from officers/shareholders 125,602 139,550
Other assets 153,816 208,995
------------ ------------
$ 12,116,063 14,647,795
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations 58,913 110,028
Accounts payable 3,251,604 4,130,530
Accrued liabilities 1,343,506 1,787,628
------------ ------------
Total current liabilities 4,654,023 6,028,186
Long-term obligations, less current portion 944,589 929,654
Accrued rent 529,389 500,470
Minority interest in a subsidiary 331,094 486,644
------------ ------------
6,459,095 7,944,954
------------ ------------
Shareholders' equity:
Common stock, Class A, $.01 par value. Authorized 20,000,000 shares; issued
13,764,588 shares; outstanding 11,222,918 shares at September 30, 1995
and at April 1, 1995 137,646 137,646
Common stock, Class B, $.01 par value. Authorized 10,000,000 shares; issued
1,552,866 shares; outstanding 1,309,063 at September 30, 1995 and
1,313,283 at April 1, 1995
15,529 15,529
Capital in excess of par 5,542,152 5,542,152
Retained earnings 942,599 1,987,944
------------ ------------
6,637,926 7,683,271
Less stock held in treasury, at cost (note 5) (980,958) (980,430)
------------ ------------
Commitments and contingencies (note 4) 5,656,968 6,702,841
------------ ------------
$ 12,116,063 14,647,795
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
- 1 -
<PAGE>
<TABLE>
<CAPTION>
URT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Six months ended September 30, 1995 and October 1, 1994
(Unaudited)
September 30, October 1,
1995 1994
---- ----
<S> <C> <C>
Net sales $ 11,595,216 15,009,809
------------ ----------
Costs and expenses:
Cost of sales 7,382,051 9,345,857
Selling, general and administrative 5,463,036 6,432,532
------------ ----------
12,845,087 15,778,389
------------ ----------
Loss from operations (1,249,871) (768,580)
------------ ----------
Other (charges) credits:
Interest expense (57,417) (41,140)
Interest income 106,393 86,699
------------ ----------
48,976 45,559
------------ ----------
Income before benefit for income taxes and minority
interest in net loss of consolidated subsidiary (1,200,895) (723,021)
Benefit for income taxes (note 3) -- (216,000)
------------ ----------
Loss before minority interest in net loss of
consolidated subsidiary (1,200,895) (507,021)
Minority interest in net loss of consolidated subsidiary (155,550) (63,116)
------------ ----------
Net loss (1,045,345) (443,905)
Retained earnings, beginning of period 1,987,944 3,747,029
------------ ----------
Retained earnings, end of period $ 942,599 3,303,124
============ ==========
Net loss per common share (note 2) $ (.09) (.04)
============ ==========
</TABLE>
See accompanying notes to consolidated financial statements.
- 2 -
<PAGE>
<TABLE>
<CAPTION>
URT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Three months ended September 30, 1995 and October 1, 1994
(Unaudited)
September 30, October 1,
1995 1994
---- ----
<S> <C> <C>
Net sales $ 5,326,936 7,392,240
----------- -----------
Costs and expenses:
Cost of sales 3,384,239 4,579,270
Selling, general and administrative 2,678,519 3,254,160
----------- -----------
6,062,758 7,833,430
----------- -----------
Loss from operations (735,822) (441,190)
----------- -----------
Other (charges) credits:
Interest expense (36,685) (20,524)
Interest income 55,933 44,102
----------- -----------
19,248 23,578
----------- -----------
Income before benefit for income taxes and minority
interest in net loss of consolidated subsidiary (716,574) (417,612)
Benefit for income taxes (note 3) -- (106,000)
----------- -----------
Loss before minority interest in net loss of
consolidated subsidiary (716,574) (311,612)
Minority interest in net loss of consolidated subsidiary (91,413) (37,510)
----------- -----------
Net loss (625,161) (274,102)
Retained earnings, beginning of period 1,567,760 3,577,226
----------- -----------
Retained earnings, end of period $ 942,599 3,303,124
=========== ===========
Net loss per common share (note 2) $ (.06) (.02)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
- 3 -
<PAGE>
<TABLE>
<CAPTION>
URT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended September 30, 1995 and October 1, 1994
(Unaudited)
September 30, October 1,
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,045,345) (443,905)
----------- -----------
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 247,489 247,704
Minority interest in net loss of subsidiary (155,550) (63,116)
Changes in assets and liabilities affecting cash flows from operating
activities:
(Increase) decrease in:
Inventories 625,601 (792,883)
Prepaid expenses and other current assets 70,548 (109,962)
Other assets 55,179 96,617
Refundable income taxes (631) (281,600)
Increase (decrease) in:
Accounts payable (878,926) 411,149
Accrued liabilities (320,737) (98,376)
Accrued rent 28,919 10,255
Long-term obligations 73,848 --
----------- -----------
Total adjustments (254,260) (580,212)
----------- -----------
Net cash used in operating activities (1,299,605) (1,024,117)
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (133,242) (514,012)
Repayment of due from officers/shareholders 13,948 12,881
Proceeds from property and equipment 615,243 --
Purchase of marketable investment securities (62,962) (2,111,791)
----------- -----------
Net cash (used in) provided by investing
activities 432,987 (2,612,922)
----------- -----------
Cash flows from financing activities:
Repayment of long-term debt (110,028) (125,168)
Acquisition of treasury stock (528) (44,923)
Acquisition of subsidiary stock -- (13,222)
Issuance of common stock -- 17,250
----------- -----------
Net cash used in financing activities (110,556) (166,063)
----------- -----------
Net decrease in cash (977,174) (3,803,102)
Cash, beginning of period 2,014,147 6,723,034
----------- -----------
Cash, ending of period $ 1,036,973 2,919,932
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 48,976 41,140
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
- 4 -
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995 and October 1, 1994
(Unaudited)
(1) BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and,
therefore, do not include all footnotes and information necessary for a
fair presentation of financial position, results of operations, and
cash flows in conformity with generally accepted accounting principles.
However, in the opinion of management, all adjustments (consisting only
of normal recurring accruals) necessary for a fair presentation have
been made.
The results of operations for the six months ended September 30, 1995,
are not necessarily indicative of the operating results to be expected
for the year ending September 30, 1994. The Company's business is
seasonal. Historically, approximately 22% of the Company's sales have
occurred in the second fiscal quarter.
Inventories, which consist of compact discs, tapes and accessories, are
stated at the lower of cost (principally average) or market.
Certain reclassifications have been made to the (unaudited) October 1,
1994 quarterly financial information to conform to the presentation
used in the (unaudited) September 30, 1995 financial information.
(2) NET LOSS PER COMMON SHARE
Net loss per common share was computed by dividing net loss by the
weighted average number of total common shares outstanding during the
periods.
(3) INCOME TAXES
The Company follows Statement of Financial Accounting Standard (SFAS
109) "Accounting for Income Taxes."
The Company files a consolidated tax return with its subsidiaries.
The Company anticipates that for fiscal year 1996 its tax rate will be
approximately 37%.
(4) COMMITMENTS
The Company is a lessee under various operating leases. Several of them
contain escalation clauses principally tied to the Consumer Price
Index. Several of the leases contain renewal options.
- 5 -
(Continued)
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The aggregate minimum rental commitments provided for in such leases at
September 30, 1995, are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING AMOUNT
------------------ ------
<S> <C>
1996 $ 1,812,210
1997 1,695,177
1998 1,561,568
1999 1,340,440
2000 1,181,966
Thereafter 4,810,057
------------
$ 12,401,418
============
</TABLE>
Rent expense under operating leases amounted to $988,953 and $1,218,000
for the six months ended September 30, 1995 and October 1, 1994,
respectively.
(5) TREASURY STOCK
Treasury stock consists of the following number of shares:
<TABLE>
<CAPTION>
September 30, April 1,
1995 1995
---- ----
<S> <C> <C>
Class A common stock 2,541,670 2,541,670
Class B common stock 243,803 239,583
</TABLE>
- 6 -
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1995,
COMPARED TO THE SIX MONTHS ENDED OCTOBER 1, 1994
RESULTS OF OPERATIONS
Net sales for the six months ended September 30, 1995 ("1995") decreased by
approximately 22.8% compared to the six months ended October 1, 1994 ("1994").
Such decrease is attributed to a decrease in comparable store sales (13.9%), and
a decrease in sales in those stores that closed during 1995 versus 1994 (8.9%).
During the last few years, non-traditional music retailers such as appliance and
computer retailers and super bookstores have begun to sell prerecorded music and
video products. They have adopted policies of selling music products at near or
below wholesale cost ass a means of attracting customers to sell other products.
During the current fiscal year, the effect of this competition was encountered
in some of our markets and will be expanded to some others in the future. The
Company has reduced prices which has resulted in lower sales and lower gross
profit. The Company believes that it will remain competitive due to its
locations, selection of product and superior customer service.
The cost of sales for 1995 was lower than that for 1994 due to the decrease in
net sales. Cost of sales as a percentage of net sales has increased from 62.3%
in 1994 to 63.7% in 1995 due to a reduction in retail pricing in an effort to
meet the increased competition.
Selling, general and administrative expenses (SG&A) expenses in 1995 decreased
16.2% compared to 1994. Such decrease is attributable to a decrease in
comparable store expense (4.2%), a decrease in store operating expenses of
stores that opened or closed during 1995 versus 1994 (8.6%) and a decrease in
corporate overhead (1.0%). SG&A expenses as a percentage of net sales increased
from 42.8% in 1994 to 47.1% in 1995 due to the fixed nature of certain expenses
and the decrease in net sales in addition to the aforementioned items.
The Company incurred a net loss of approximately $1,045,000 in 1995 versus a net
loss of approximately $444,000 in 1994 due to the reduction in net sales and
gross profit as described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $4,632,569 at September 30, 1995 compared to
working capital of $5,168,136 at April 1, 1995, and a current ratio (the ratio
of total current assets to total current liabilities) of 1.99 to 1 at September
30, 1995 compared to a current ratio of 1.86 to 1 at April 1, 1995.
The Company has historically maintained a strong cash position and management
believes that this will continue in the future.
At September 30, 1995, the Company had long-term obligations of $944,589.
Management anticipates that its ability to repay its long-term debt will be
satisfied primarily through funds general from its operations.
Management believes that the Company has excellent relationships with its banks
and suppliers and does not anticipate any significant difficulties in financing
operations at current levels.
- 7 -
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Management anticipates that cash generated from operations and cash equivalent
on hand will provide sufficient liquidity to maintain adequate working capital
for operations. Management believes that the Company would be able to obtain
financing for the opening of any new stores during the next few years.
Inflation trends have not had an impact upon revenues because increases in costs
have been passed along to customers.
The Company's business is seasonal in nature, with the highest sales and
earnings occurring in the third fiscal quarter, which includes the Christmas
selling season.
- 8 -
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
OTHER INFORMATION
PART II
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
In the opinion of the Company, no Form 8-K was required to be filed during the
quarter reporting any material unusual charges or credits to income during the
quarter, or reporting a change in independent accountants.
- 9 -
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
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.
URT INDUSTRIES, INC.
---------------------------------------
Registrant
Date: November 13, 1995 /s/ Allan Wolk
-------------------------------- ---------------------------------------
Allan Wolk, Chairman of the Board
(PRINCIPAL EXECUTIVE OFFICER)
Date: November 13, 1995 /s/ Jason Wolk
-------------------------------- ---------------------------------------
Jason Wolk, Vice President
(PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
- 10 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTH PERIOD ENDED
SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 1,036,973
<SECURITIES> 2,712,496
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 4,953,136
<CURRENT-ASSETS> 4,286,592
<PP&E> 5,671,421
<DEPRECIATION> 3,121,368
<TOTAL-ASSETS> 12,116,063
<CURRENT-LIABILITIES> 4,654,023
<BONDS> 0
<COMMON> 153,175
0
0
<OTHER-SE> 5,503,793
<TOTAL-LIABILITY-AND-EQUITY> 12,116,063
<SALES> 11,595,216
<TOTAL-REVENUES> 11,595,216
<CGS> 7,382,051
<TOTAL-COSTS> 7,382,051
<OTHER-EXPENSES> 5,463,036
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67,417
<INCOME-PRETAX> (1,200,895)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,200,895)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,200,895)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
