UNITED STATES
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 June 28, 1997 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 (I.R.S. Employer
Incorporation or Organization) I.D. No.)
1180 E. Hallandale Beach Blvd.,Hallandale, FL 33009
- --------------------------------------------- -------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (954) 454-5554
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 registrants were
required to file such reports), 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 June 28, 1997, there were outstanding:
10,857,068 shares of Class A common stock
1,301,141 shares of Class B common stock
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 28, 1997 (Unaudited) and March 29, 1997 3
Condensed Consolidated Statements of Operations and Retained
Deficit - Three Months Ended June 28, 1997 and June 29, 1996
(Unaudited) 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended June 28, 1997 and June 29, 1996 (Unaudited) 5
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
URT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
June 28, 1997 and March 29, 1997
<TABLE>
<CAPTION>
Assets June 28, March 29,
1997 1997
---- ----
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,451,666 3,130,516
Marke table investment securities 1,417,365 --
Inventories 2,904,024 2,855,494
Current portion due from officers/shareholders 30,832 30,832
Prepai d expenses and other current assets 184,307 332,954
Total current assets 5,988,194 6,349,796
Property and equipment, net 1,413,775 1,459,084
Due from officers/shareholders 72,503 77,885
Other assets 181,773 181,290
----------- -----------
$ 7,656,245 8,068,055
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term obligations 730,726 730,239
Accounts payable 1,619,788 1,371,8 69
Accrued liabilities 855,013 1,073,376
----------- -----------
Total current liabilities 3,205,527 3,175,484
Long-term obligations 1,227,866 1,337,19 0
Deferred rent 144,798 156,036
Minority interest in a subsidiary 43,134 57,730
----------- -----------
Total liabilities 4,621,325 4,726,440
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Shareholders' equity:
Common stock, $.01 par value; 30,000,000 shares
authorized; 15,317,454 shares issued 153,175 153,175
Additional paid-in capital 5,542,152 5,542,152
Retained deficit (1,642,072) (1,335,377)
----------- -----------
4,053,255 4,359,950
Treasury stock, 3,159,245 common shares, at cost (1,018,335) (1,018,335)
----------- -----------
Total shareholders' equity 3,034,920 3,341,615
Commitments and contingencies
$ 7,656,245 8,068,055
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Retained Deficit
Three months ended June 28, 1997 and June 29, 1996
(Unaudited)
<TABLE>
<CAPTION>
June 28, June 29,
1997 1996
----------- ----------
<S> <C> <C>
Net sales $ 4,124,351 4,305,821
----------- ----------
Costs and expenses:
Cost of sales 2,553,090 2,824,152
Selling, general and administrative expenses 1,759,464 1,959,945
Depreciation and amortization 66,653 75,663
----------- ----------
4,379,207 4,859,760
----------- ----------
Loss from operations (254,856) (553,939)
----------- ----------
Other (expense) income:
Interest expense (45,777) (18,613)
Interest income 23,342 53,159
----------- ----------
(22,435) 34,546
Loss before reorganization costs, income
taxes and minority interest (277,291) (519,393)
Reorganization costs:
Professional fees (44,000) (97,538)
----------- ----------
Loss before income taxes and minority
interest (321,291) (616,931)
Provision for income taxes -- --
----------- ----------
Loss before minority interest (321,291) (616,931)
Minority interest in net loss of consolidated subsidiary (14,596) (68,918)
----------- ----------
Net loss (306,695) (548,013)
Retained deficit, beginning of period (1,335,377) (173,591)
----------- ----------
Retained deficit, end of period $(1,642,072) (721,604)
=========== ==========
Net loss per common share $ (.02) (.04)
=========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three months ended June 28, 1997 and June 29, 1996
(Unaudited)
<TABLE>
<CAPTION>
June 28, June 29,
1997 1996
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (306,695) (548,013)
----------- ----------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 66,563 75,663
Deferred rent (11,238) (863)
Minority interest in net loss of consolidated
subsidiary
(14,596) (68,918)
Change in assets and liabilities affecting cash
flows from operating activities:
(Increase) decrease in:
Inventories (48,530) 981,253
Prepaid expenses and other current assets 148,647 73,924
Other assets (483) 6,712
Increase (decrease) in:
Accounts payable 247,919 325,613
Accrued liabilities (218,363) 8,409
Liabilities subject to compromise -- (1,391,267)
----------- ----------
Net cash used in operating activities (136,776) (537,487)
----------- ----------
Cash flows from investing activities:
Purchase of marketable investment securities (1,417,365) (584,709)
Purchases of property and equipment (21,254) (28,437)
Due from officers/shareholders 5,382 11,494
----------- ----------
Net cash used in investing activities (1,433,237) (601,652)
----------- ----------
</TABLE>
(Continued)
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<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
June 28, June 29,
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
Cash flows from financing activities:
Repayment of long-term obligations (108,837) (39,507)
----------- -----------
Net cash used in financing activities (108,837) (39,507)
----------- -----------
Net decrease in cash and cash equivalents (1,678,850) (1,178,646)
Cash and cash equivalents, beginning of year 3,130,516 3,258,061
----------- -----------
Cash and cash equivalents, end of year $ 1,451,666 2,079,415
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 19,633 18,613
=========== ===========
Supplemental schedule of non-cash operating and investing
activities relating to the reorganization:
Liabilities subject to compromise March 30, 1996 $ 5,671,434
Less: Inventory returns for credit (1,391,267)
-----------
Liabilities subject to compromise June 29, 1996 $ 4,280,167
===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 28, 1997 and June 29, 1996
(Unaudited)
(1) Basis of Financial Statement Presentation
The accompanying unaudited condensed 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.
It is suggested that the accompanying unaudited condensed consolidated
financial statements be read in conjunction with the consolidated financial
statements and notes included in the Company's annual report on Form 10-K
for the year ended March 29, 1997.
The results of operations for the three months ended June 28, 1997, are not
necessarily indicative of the operating results to be expected for the year
ending March 28, 1998. The Company's business is seasonal. Historically,
approximately 24 percent of the Company's sales have occurred in the first
fiscal quarter.
The consolidated financial statements include the accounts of URT
Industries, Inc. (the "Parent") and its wholly owned nonoperating
subsidiary, and its majority-owned operating subsidiary, Peaches
Entertainment Corporation (93.5 percent of the outstanding stock of which
was owned by the Parent, as of June 28, 1997). All significant intercompany
accounts have been eliminated. Reference to the Company encompasses all or
any of the aforementioned entities.
Certain reclassifications have been made to the (unaudited) June 29, 1996
quarterly consolidated financial information to conform to the presentation
used in the (unaudited) June 28, 1997 consolidated financial information.
(2) Reorganization and Emergence From Chapter 11
On January 16, 1996 (the "Petition Date"), Peaches Entertainment
Corporation commenced reorganization proceedings under Chapter 11 of the
United States Bankruptcy Code. An amended plan of reorganization was
confirmed by the Bankruptcy Court on October 23, 1996 (the "confirmation
date"), and became effective February 3, 1997 (the "effective date"),
subject to satisfaction of certain conditions which were satisfied February
19, 1997. All of the allowed claims were either paid on the effective date
or are reflected in current and long-term obligations in the financial
statements, payable primarily over a two year period from the effective
date. The mortgage holder will receive 100 percent of the allowed claim,
with interest, except the balloon payment was extended from September 1997
to September 2002.
(3) 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.
(Continued)
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<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(4) Income Taxes
The Company follows Statement of Financial Accounting Standard ("SFAS") No.
109, "Accounting for Income Taxes." The Company files a consolidated tax
return with its subsidiaries. For the three-month period ended June 28,
1997, there was no (benefit) provision for income taxes as the Company had
net operating loss carryforwards for federal income tax purposes.
(5) New Accounting Prouncement
In February 1997, the FASB issued Statement of Financial Accounting
Standard No. 128, "Earnings Per Share" ("Statement 128"). Statement 128 is
effective for financial statements issued for periods ending after December
15, 1997. Statement 128 establishes standards for computing and presenting
earnings per share ("EPS"), simplifies the standards previously found in
APB No. 15, "Earnings Per Share," and makes them comparable to
International EPS Standards. The Company will begin disclosing EPS in
accordance with Statement 128 beginning with the year ended March 28, 1998.
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<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussions and Analysis of Financial Condition and Results
of Operations for the Three Months Ended June 28, 1997, Compared to the
Three Months ended June 29, 1996.
From time to time, the Company may make certain statements that contain
"forward-looking" information (as defined in the Private Securities Litigation
Reform Act of 1995). Words such as "believe," "anticipate," "estimate,"
"project" and similar expressions are intended to identify such forward-looking
statements. Forward-looking statements may be made by management orally or in
writing, including, but not limited to, in press releases, as part of this
Management's Discussion and Analysis of Financial Condition and Results of
Operations and as a part of other filings. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of their
respective dates, and are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should any of the underlying assumptions prove incorrect, actual results of
current and future operations may vary materially from those anticipated,
estimated or projected.
Results of Operations
Net sales for the three months ended June 28, 1997 (such three month period is
hereafter referred to as "1997") decreased by approximately 4.2 percent compared
to the three months ended June 29, 1996 (such three month period is hereafter
referred to as "1996"). Such decrease is attributed to a decrease in comparable
store sales (4.2 percent).
The cost of sales for 1997 was lower than that for 1996 due principally to a
decrease in net sales. Cost of sales as a percentage of net sales has decreased
from 65.6 percent in 1996 to 61.9 percent in 1997 primarily due to the fact that
the Company began to receive discounts associated with normal trade terms
throughout 1997, increases in other purchase discounts and an increase in
certain retail selling prices.
Selling, general and administrative (SG&A) expenses in 1997 decreased by 11.0
percent compared to 1996. Such decrease is attributable to an increase in
comparable store expenses (5.0 percent), and a decrease in corporate overhead
(6.0 percent). SG&A expenses as a percentage of net sales decreased from 45.5
percent in 1996 to 42.3 percent in 1997 primarily due to overhead reductions.
Recently, Peaches primary suppliers have taken steps to help protect the retail
marketplace from certain low cost retailers of music. These steps include not
disbursing cooperative advertising funds to retailers which engage in low cost
selling practices in violation of the minimum advertised pricing policies of
such suppliers. Management believes that such initiatives, in combination with
the other factors mentioned immediately below, should help the Company to
restore itself to a competitive position in subsequent fiscal years. Other
factors which, in management's opinion, should help the Company to restore
itself to a competitive position in the future are the closing of the six
unprofitable stores which were closed during 1996, the closing of the former
headquarters and warehouse, the termination of other unprofitable business
arrangements as described herein and concentration on advantages which Peaches
has over certain of its competitors, including large inventory, convenient store
locations and a high level of customer service, which includes the ability of
the customer to sample virtually all music before purchasing and an extremely
efficient special order program.
-9-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
The Company incurred a net loss of approximately $307,000 in 1997 versus a net
loss of approximately $548,000 in 1996. The significant reduction in net loss is
attributed to the success of the Chapter 11 reorganization, however, such
success was offset by professional fees relating to the reorganization of
$44,000.
Liquidity and Capital Resources
The Company had working capital of $2,782,667 at June 28, 1997 compared to
working capital of $3,174,312 at March 29, 1997 and a current ratio (the ratio
of total current assets to total current liabilities) of 1.9 to 1 at June 28,
1997 compared to a current ratio of 2.0 to 1 at March 29, 1997.
At June 28, 1997, the Company had long-term obligations of $1,227,866.
Management anticipates that its ability to repay its long-term obligations will
be satisfied primarily through funds generated from its operations.
Management anticipates that cash generated from operations and cash equivalents
on hand will provide sufficient liquidity to maintain adequate working capital
for operations. Management would attempt to obtain financing for the opening of
any new stores during the next few years.
Inflation trends have not had an impact upon revenue 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.
For a discussion of recent developments and uncertainties affecting the
Company's liquidity and capital resources, see notes 2 and 3 to the
(Confirmation of Amended Plan of Reorganization) included in the Company's
annual report on Form 10-K for the year ended March 29, 1997 consolidated
financial statements.
In February 1997, the FASB issued Statement of Financial Accounting Standard No.
128, "Earnings Per Share" ("Statement 128"). Statement 128 is effective for
financial statements issued for periods ending after December 15, 1997.
Statement 128 establishes standards for computing and presenting earnings per
share ("EPS"), simplifies the standards previously found in APB No. 15,
"Earnings Per Share," and makes them comparable to international EPS standards.
The Company will begin disclosing EPS in accordance with Statement 128 beginning
with the year ended March 28, 1998.
-10-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.0 Financial Data Schedule
(b) Reports on Form 8-K
None
-11-
<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: 8/29/97 /s/ Allan Wolk
--------------------------------------------
Allan Wolk, Chairman of the Board, President
(Principal Executive Officer)
Date: 8/29/97 /s/ Jason Wolk
--------------------------------------------
Jason Wolk, Executive Vice President,
Chief Financial Officer
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
registrant's financial statements as of and for the three month period ended
June 28, 1997, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-28-1998
<PERIOD-END> JUN-28-1997
<CASH> 1,451,666
<SECURITIES> 1,417,365
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 2,904,024
<CURRENT-ASSETS> 5,988,194
<PP&E> 3,979,408
<DEPRECIATION> 2,565,633
<TOTAL-ASSETS> 7,656,245
<CURRENT-LIABILITIES> 3,205,527
<BONDS> 0
0
0
<COMMON> 153,175
<OTHER-SE> 2,881,745
<TOTAL-LIABILITY-AND-EQUITY> 7,656,245
<SALES> 4,124,351
<TOTAL-REVENUES> 4,124,351
<CGS> 2,553,090
<TOTAL-COSTS> 2,553,090
<OTHER-EXPENSES> 1,811,243
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 60,651
<INCOME-PRETAX> (321,291)
<INCOME-TAX> 0
<INCOME-CONTINUING> (306,695)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (306,695)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
