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 September 27, 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 Incorporation or (I.R.S. Employer I.D. No.)
Organization)
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 September 27, 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 -
September 27, 1997 (Unaudited) and March 29, 1997 3
Condensed Consolidated Statements of Operations and
Retained Deficit - Three Months Ended September 27, 1997
and September 28, 1996 (Unaudited) 4
Condensed Consolidated Statements of Operations and
Retained Deficit - Six Months Ended September 27, 1997
and September 28, 1996 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows -
Six Months Ended September 27, 1997 and September 28, 1996
(Unaudited) 6
Notes to Condensed Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
URT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September 27, 1997 and March 29, 1997
<TABLE>
<CAPTION>
Assets September 27, March 29,
1997 1997
---- ----
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,255,651 3,130,516
Marketable investment securities 1,272,342 --
Inventories 2,813,055 2,855,494
Current portion due from officers/shareholders 30,832 30,832
Prepaid expenses and other current assets 269,998 332,954
----------- -----------
Total current assets 5,641,878 6,349,796
Property and equipment, net 1,356,397 1,459,084
Due from officers/shareholders 61,522 77,885
Other assets 187,567 181,290
----------- -----------
$ 7,247,364 8,068,055
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term obligations 757,978 730,239
Accounts payable 1,756,630 1,371,869
Accrued liabilities 975,620 1,073,376
----------- -----------
Total current liabilities 3,490,228 3,175,484
Long-term obligations 1,091,663 1,337,190
Deferred rent 133,559 156,036
Minority interest in a subsidiary 21,638 57,730
----------- -----------
Total liabilities 4,737,088 4,726,440
----------- -----------
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 (2,166,716) (1,335,377)
----------- -----------
3,528,611 4,359,950
Treasury stock, 3,159,245 common shares, at cost (1,018,335) (1,018,335)
----------- -----------
Total shareholders' equity 2,510,276 3,341,615
Commitments and contingencies
----------- -----------
$ 7,247,364 8,068,055
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-3-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Retained Deficit
Three months ended September 27, 1997 and September 28, 1996
(Unaudited)
<TABLE>
<CAPTION>
September 27, September 28,
1997 1996
---- ----
<S> <C> <C>
Net sales $ 3,808,512 3,888,049
----------- -----------
Costs and expenses:
Cost of sales 2,347,920 2,479,044
Selling, general and administrative expenses 1,935,043 1,878,736
Depreciation and amortization 67,339 75,663
----------- -----------
4,350,302 4,433,443
Loss from operations (541,790) (545,394)
----------- -----------
Other (expense) income:
Interest expense (43,615) (18,318)
Interest income 39,265 37,051
----------- -----------
(4,350) 18,733
----------- -----------
Loss before reorganization costs, income
taxes and minority interest (546,140) (526,661)
Reorganization costs:
Professional fees -- (97,538)
----------- -----------
Loss before income taxes and minority
interest
(546,140) (624,199)
Provision for income taxes -- --
----------- -----------
Loss before minority interest (546,140) (624,199)
----------- -----------
Minority interest in net loss of consolidated subsidiary (21,496) (73,035)
----------- -----------
Net loss (524,644) (551,164)
Retained deficit, beginning of period (1,642,072) (721,604)
----------- -----------
Retained deficit, end of period $(2,166,716) (1,272,768)
=========== ===========
Net loss per common share $ (.04) (.05)
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-4-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Retained Deficit
Six months ended September 27, 1997 and September 28, 1996
(Unaudited)
<TABLE>
<CAPTION>
September 27, September 28,
1997 1996
---- ----
<S> <C> <C>
Net sales $ 7,932,863 8,193,870
----------- -----------
Costs and expenses:
Cost of sales 4,901,010 5,303,196
Selling, general and administrative expenses 3,694,507 3,835,530
Depreciation and amortization 133,992 154,477
----------- -----------
8,729,509 9,293,203
Loss from operations (796,646) (1,099,333)
----------- -----------
Other (expense) income:
Interest expense (89,392) (36,931)
Interest income 62,607 90,210
----------- -----------
(26,785) 53,279
----------- -----------
Loss before reorganization costs, income
taxes and minority interest (823,431) (1,046,054)
Reorganization costs:
Professional fees (44,000) (195,076)
----------- -----------
Loss before income taxes and minority interest
(867,431) (1,241,130)
Provision for income taxes -- --
----------- -----------
Loss before minority interest (867,431) (1,241,130)
Minority interest in net loss of consolidated subsidiary (36,092) (141,953)
----------- -----------
Net loss (831,339) (1,099,177)
Retained deficit, beginning of period (1,335,377) (173,591)
----------- -----------
Retained deficit, end of period $(2,166,716) (1,272,768)
=========== ===========
Net loss per common share $ (.07) (.09)
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-5-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Six months ended September 27, 1997 and September 28, 1996
(Unaudited)
<TABLE>
<CAPTION>
September 27, September 28,
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (831,339) (1,099,177)
----------- -----------
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 133,992 154,477
Deferred rent (22,477) (8,673)
Minority interest in net loss of consolidated subsidiary
(36,092) (141,953)
Change in assets and liabilities affecting cash flows from operating
activities:
(Increase) decrease in:
Inventories 42,439 1,530,515
Prepaid expenses and other current assets 62,956 (334,744)
Other assets (6,277) 14,666
Refundable income taxes -- (702)
Increase (decrease) in:
Accounts payable 384,761 555,463
Accrued liabilities (97,756) 236,011
Liabilities subject to compromise -- (1,693,812)
----------- -----------
Net cash used in operating activities (369,793) (787,929)
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (31,305) (31,546)
Repayment of due from officers/shareholders 16,363 19,124
Purchase of marketable investment securities (1,417,365) --
Sales of marketable investment securities 145,023 1,176,627
----------- -----------
Net cash (used in) provided by investing activities
(1,287,284) 1,164,205
----------- -----------
Cash flows from investing activities:
Repayment of long-term debt (217,788) (67,799)
----------- -----------
Net cash used in financing activities (217,788) (67,799)
----------- -----------
Net (decrease) increase in cash and cash
equivalents (1,874,865) 308,477
</TABLE>
-6-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
September 27, September 28,
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Cash and cash equivalents, beginning of period 3,130,516 3,258,061
----------- -----------
Cash and cash equivalents, end of period $ 1,255,651 3,566,538
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 38,811 36,931
=========== ===========
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 (1,693,812)
-----------
Liabilities subject to compromise September 28, 1996 $ 3,977,622
===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-7-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 27, 1997 and September 28, 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.
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 September 27, 1997). All significant
intercompany accounts have been eliminated. Reference to the Company
encompasses all or any of the aforementioned entities.
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 six months ended September 27, 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 21 percent of the Company's sales have occurred
in the second fiscal quarter.
Certain reclassifications have been made to the (unaudited) September 28,
1996 quarterly consolidated financial information to conform to the
presentation used in the (unaudited) September 27, 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 January 17, 1997 (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.
-8-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(4) Marketable Securities
The Company's debt and equity securities are considered available-for-sale
at September 27, 1997. Securities classified as available-for-sale are
reported at fair market value with unrealized gains and losses included in
stockholders' equity. Realized gains and losses are included in interest
income.
(5) 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 six-month period ended September 27,
1997, there was no (benefit) provision for income taxes as the Company had
net operating loss carryforwards for federal income tax purposes.
(6) New Accounting Pronouncement
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 quarter ended December 27,
1997.
-9-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussions and Analysis of Financial Condition and
Results of Operations for the Six Months Ended September 27, 1997,
Compared to the Six Months ended September 28, 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 this filing or 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 six months ended September 27, 1997 (such six month period is
hereafter referred to as "1997") decreased by approximately 3.2 percent compared
to the six months ended September 28, 1996 (such six month period is hereafter
referred to as "1996"). Such decrease is attributed to a decrease in comparable
store sales (3.2 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 64.7 percent in 1996 to 61.8 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 4.1
percent compared to 1996. Such decrease is attributable to a decrease in
comparable store expenses (4.9 percent), offset by an increase in corporate
overhead (0.8 percent). SG&A expenses as a percentage of net sales increased
from 48.3 percent in 1996 to 48.7 percent in 1997 due to the fixed nature of
certain expenses and the decrease in net sales offset by the aforementioned
items.
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 above, 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.
-10-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
The Company incurred a net loss of approximately $831,000 in 1997 versus a net
loss of approximately $1,099,000 in 1996. The significant reduction in net loss
is attributed to an increase in gross profit percentage and a decrease in
expenses as discussed above.
Liquidity and Capital Resources
The Company had working capital of $2,151,650 at September 27, 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 1.6 to 1 at September
27, 1997 compared to a current ratio of 2.0 to 1 at March 29, 1997.
At September 27, 1997, the Company had long-term obligations of $1,091,663.
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 and Liquidity) 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 quarter ended December 27, 1997.
-11-
<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
A Report on Form 8-K dated November 12, 1997 was filed on or about
such date to report on the timing of this filing.
-12-
<PAGE>
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: 12/3/97 /s/ Allan Wolk
--------------------------------------------
Allan Wolk, Chairman of the Board, President
(Principal Executive Officer)
Date: 12/3/97 /s/ Jason Wolk
--------------------------------------------
Jason Wolk, Executive Vice President,
Chief Financial Officer
(Principal Financial and Accounting Officer)
-13-
<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 27, 1997, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-28-1998
<PERIOD-END> SEP-27-1997
<CASH> 1,255,651
<SECURITIES> 1,272,342
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 2,813,055
<CURRENT-ASSETS> 5,641,878
<PP&E> 3,989,457
<DEPRECIATION> 2,633,060
<TOTAL-ASSETS> 7,247,364
<CURRENT-LIABILITIES> 3,490,228
<BONDS> 0
0
0
<COMMON> 153,175
<OTHER-SE> 2,357,101
<TOTAL-LIABILITY-AND-EQUITY> 7,247,364
<SALES> 7,932,863
<TOTAL-REVENUES> 7,932,863
<CGS> 4,901,010
<TOTAL-COSTS> 4,901,010
<OTHER-EXPENSES> 3,828,499
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (89,392)
<INCOME-PRETAX> (867,431)
<INCOME-TAX> 0
<INCOME-CONTINUING> (831,339)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (831,339)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
