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 October 2, 1999 Commission File No. 0-06882
URT INDUSTRIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Florida 59-1167907
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
Incorporation or 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 December 9, 1999, there were outstanding:
10,857,068 shares of Class A common stock
1,348,141 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 -October 2, 1999,
April 3, 1999 and September 26, 1998 (unaudited) 3
Condensed Consolidated Statements of Operations and Retained
Deficit - Three Months Ended October 2, 1999
and September 26, 1998 (Unaudited)
4
Condensed Consolidated Statements of Operations
and Retained Deficit - Six Months Ended October 2, 1999 and
September 26, 1998 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows -
Six Months Ended October 2, 1999 and
September 26, 1998 (Unaudited) 6
Notes to Condensed Consolidated 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
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
URT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
October 2, 1999, April 3, 1999 and September 26, 1998
(unaudited)
<TABLE>
<CAPTION>
October 2, April 3, September 26,
1999 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 664,748 927,982 694,981
Marketable investment securities -- 439,640 663,313
Inventories 2,265,410 2,309,600 2,643,727
Current portion due from officers/shareholders 24,029 42,769 45,302
Prepaid expenses and other current assets 192,492 291,809 281,567
----------- ----------- -----------
Total current assets 3,146,679 4,011,800 4,328,890
Property and equipment, net 1,234,081 1,249,289 1,404,942
Due from officers/shareholders 1,170 3,385 18,003
Other assets 231,896 195,560 208,295
----------- ----------- -----------
$ 4,613,826 5,460,034 5,960,130
=========== =========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term obligations $ 75,494 108,280 573,038
Accounts payable 2,121,371 2,240,109 2,093,655
Accrued liabilities 604,815 706,407 909,415
----------- ----------- -----------
Total current liabilities 2,801,680 3,054,796 3,576,108
Long-term obligations 443,042 469,759 518,625
Deferred rent 84,043 63,030 62,950
Minority interest in a subsidiary 2,745 49,121 40,020
----------- ----------- -----------
Total liabilities 3,331,510 3,636,706 4,197,703
----------- ----------- -----------
Shareholders' equity:
Common stock, $.01 par value; 30,000,000 shares authorized;
15,317,454 shares issued 153,175 153,175 153,175
Additional paid-in capital 5,542,152 5,542,152 5,542,152
Retained deficit (3,394,676) (2,856,923) (2,928,275)
Unrealized gain on securities available for sale -- 3,259 13,710
----------- ----------- -----------
2,300,651 2,841,663 2,780,762
Treasury stock, 3,159,245 common shares, at cost (1,018,335) (1,018,335) (1,018,335)
----------- ----------- -----------
Total shareholders' equity 1,282,316 1,823,328 1,762,427
Commitments and contingencies
----------- ----------- -----------
$ 4,613,826 5,460,034 5,960,130
=========== =========== ===========
</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 October 2, 1999 and September 26, 1998
(Unaudited)
<TABLE>
<CAPTION>
October 2, September 26,
1999 1998
----------- -----------
<S> <C> <C>
Net sales $ 3,426,062 3,924,914
----------- -----------
Costs and expenses:
Cost of sales 1,958,344 2,336,793
Selling, general and administrative expenses 1,751,178 1,900,808
Depreciation and amortization 49,228 58,963
----------- -----------
3,758,750 4,296,564
Loss from operations (332,688) (371,650)
----------- -----------
Other (expense) income:
Interest expense (14,198) (27,571)
Interest income 21,864 9,661
----------- -----------
7,666 (17,910)
----------- -----------
Loss before minority interest (325,022) (389,560)
Minority interest in net loss of consolidated subsidiary (27,316) (20,839)
----------- -----------
Net loss (297,706) (368,721)
Retained deficit, beginning of period (3,096,970) (2,559,554)
----------- -----------
Retained deficit, end of period (3,394,676) (2,928,275)
=========== ===========
Basic and diluted loss per share $ (0.02) (0.03)
=========== ===========
</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 October 2, 1999 and September 26, 1998
(Unaudited)
<TABLE>
<CAPTION>
October 2, September 26,
1999 1998
----------- -----------
<S> <C> <C>
Net sales $ 7,084,201 7,794,674
----------- -----------
Costs and expenses:
Cost of sales 4,134,672 4,655,597
Selling, general and administrative expenses 3,439,500 3,742,518
Depreciation and amortization 97,009 117,509
----------- -----------
7,671,181 8,515,624
Loss from operations (586,980) (720,950)
----------- -----------
Other (expense) income:
Interest expense (28,705) (57,387)
Interest income 31,556 25,025
----------- -----------
2,851 (32,362)
----------- -----------
Loss before minority interest (584,129) (753,312)
Minority interest in net loss of consolidated subsidiary (46,376) (35,276)
----------- -----------
Net loss (537,753) (718,036)
Retained deficit, beginning of period (2,856,923) (2,210,239)
----------- -----------
Retained deficit, end of period $(3,394,676) (2,928,275)
=========== ===========
Basic and diluted loss per share (0.04) (0.06)
=========== ===========
</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 October 2, 1999 and September 26, 1998
(Unaudited)
<TABLE>
<CAPTION>
October 2, September 26,
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (537,753) (718,036)
---------- ----------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 97,009 117,509
Deferred rent 21,013 116
Minority interest in net loss of consolidated subsidiary (46,376) 12,724
Change in assets and liabilities affecting cash flows from
operating activities:
(Increase) decrease in:
Inventories 44,190 (210,294)
Prepaid expenses and other current assets 99,317 105,481
Other assets (36,336) (6,643)
Increase (decrease) in:
Accounts payable (118,738) 78,981
Accrued liabilities (101,592) 8,090
---------- ----------
Net cash used in operating activities (579,266) (612,072)
---------- ----------
Cash flows from investing activities:
Purchase of property and equipment (81,802) (158,118)
Repayment of due from officers/shareholders 20,955 19,719
Purchase of marketable investment securities -- (172,658)
Sales of marketable investment securities 436,381 555,795
---------- ----------
Net cash provided by investing activities 375,534 244,738
---------- ----------
Cash flows from investing activities:
Repayment of long-term debt (59,502) (218,783)
---------- ----------
Net cash used in financing activities (59,502) (218,783)
---------- ----------
Net (decrease) in cash and cash equivalents (263,234) (586,117)
Cash and cash equivalents, beginning of period 927,982 1,281,098
---------- ----------
Cash and cash equivalents, end of period $ 664,748 694,981
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 28,705 9,707
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
October 2, 1999 and September 26, 1998
(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 (87.5 percent of the outstanding stock of which
was owned by the Parent, as of October 2, 1999). 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 financial statements
and notes included in the Company's annual report on Form 10-K for the year
ended April 3, 1999.
The results of operations for the six months ended October 2, 1999, are not
necessarily indicative of the operating results to be expected for the year
ending April 1, 2000. The Company's business is seasonal in nature, with
the highest sales and earnings historically occurring in the third quarter
of the fiscal year, which includes the holiday selling season.
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) September 26,
1998 quarterly financial information to conform to the presentation used in
the (unaudited) October 2, 1999 financial information.
(2) Earnings Per Share
In December 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("Statement
128"), which establishes new standards for computing and presenting
earnings per share ("EPS"). Earnings per share for all prior periods have
been restated to reflect the provisions of this Statement.
Basic and diluted earnings (loss) per share have been computed by dividing
net earnings (loss), by the weighted average number of shares outstanding
during the period.
7
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
October 2, 1999 and September 26, 1998
(Unaudited)
Basic and diluted loss per share were calculated as follows:
Six months Six months
ended Ended
---------------- -----------
October 2, September 26,
1999 1998
Basic and diluted:
Net loss $ 537,753 718,036
================ ===========
Weighted average shares 12,158,209 12,158,209
================ ===========
Basic and diluted loss per share (0.04) (0.06)
================ ===========
(3) Marketable Securities
The Company's marketable securities consist of equity securities and
Treasury bills, and are considered available for sale with cost
approximating fair market value. 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 and other income.
(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. Any applicable tax charge or credits are
allocated on a separate return basis. For the six month period ended
October 2, 1999, there was no (benefit) provision for income taxes as the
Company has excess net operating loss carryforwards for federal income tax
purposes.
8
<PAGE>
URT INDUSTRIES, INC.
Item 2. Management's Discussions and Analysis of Financial Condition
and Results of Operations for the Three Months and Six Months
Ended October 2, 1999, Compared to the Six Months ended September
26, 1998.
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 sections of this Annual Report 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
Sales. The Company's net sales decreased during the second quarter ended October
2, 1999 of the Company's fiscal year ended April 1, 2000 by 12.7 percent
compared to the second quarter of fiscal 1999. A 5.6 percent decrease is
primarily attributable to the fact that the Company operated one less store as
well as a 7.1 percent comparable store decline. Sales for the twenty-six weeks
ended October 2, 1999 were down by 9.1 percent which is primarily due to the
fact that comparable sales for the twenty-six weeks ended October 2, 1999 were
down 5.7 percent and a 3.4 percent decrease attributable to the Company
operating one less store.
Cost of Sales. The Company's cost of sales as a percentage of net sales
decreased from 59.5 percent in the previous year's second quarter to 57.1
percent for the second quarter ended October 2, 1999, as well as from 59.7
percent in the previous year's first twenty-six weeks to 58.4 percent in the
current year's twenty-six weeks ended October 2, 1999. The decreases in cost of
sales as a percentage of sales are primarily attributable to increases in
certain retail prices.
Selling, General and Administrative. Selling, general and administrative (SG&A)
expenses, including depreciation, in the second quarter of 2000 fiscal year
decreased by 8.1 percent compared to the second quarter of 1999 fiscal year.
SG&A expenses, including depreciation for the first six months of 2000 fiscal
year decreased by 8.4 percent compared to the first six months of 1999 fiscal
year. The above decreases are primarily attributable to the fact that the
Company operated one less store in the first six months of fiscal 2000, as well
as a reduction in corporate overhead. SG&A expenses as a percentage of net sales
increased to 52.5 percent for the second quarter ended October 2, 1999 compared
to 49.9 percent in the prior year second quarter and SG&A expenses as a
percentage of net sales increased from 49.5 percent in the first six months of
fiscal 1999 to 49.9 percent in the first six months of fiscal 2000.
Net Loss. The Company incurred a net loss of approximately $298,000 for the
second quarter ended October 2, 1999 compared to a net loss of approximately
$369,000 for the second quarter ended September 26, 1998. The net loss for the
twenty-six weeks ended October 2, 1999 was approximately $538,000 compared to a
net loss of approximately $718,000 for the twenty-six weeks ended September 26,
1998. The decrease in net loss is primarily attributable to the fact that the
twenty-six weeks ended September 26, 1998 included costs associated with opening
of one new store. The reduction in net loss is also attributable to an increase
in gross profit percentage, a decrease in interest expense, a reduction in
corporate overhead offset by a decrease in comparable store sales.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Capital Resources. Cash generated from operations and cash
equivalents are the Company's primary source of liquidity. Management
anticipates that the cash generated from operations, cash equivalents on hand
and financing will provide sufficient liquidity to maintain adequate working
capital for operations. Management anticipates that it would use funds generated
from operations as well as possible financing, for the opening of any new
stores, which it may plan to open this fiscal year. For a discussion of
uncertainties affecting the Company's liquidity and capital resources, see note
3 to the financial statements on form 10-K for the year ended April 3, 1999.
Long-Term Obligations. At October 2, 1999, the Company had long-term obligations
of $443,042. Management anticipates that its ability to repay its long-term
obligations will be satisfied primarily through funds generated from its
operations.
OTHER MATTERS
Impact of Inflation. Although the Company cannot accurately determine the
precise effect of inflation on its operations, management does not believe
inflation has had a material effect on the results of operations in the last
three fiscal years. When the cost of merchandise items has increased, the
Company has been able to pass the increase on to its customers.
Seasonality. The Company's business is seasonal in nature, with the highest
sales and earnings historically occurring in the third fiscal quarter, which
includes the Christmas selling season.
Year 2000 Compliance. The Year 2000 Issue is the result of computer programs
being written using two digits rather than four to define the applicable year.
Any of the Company's computer programs that have data-sensitive software may
recognize a date using "00" as year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions of operations.
The Company has assessed that it is required to upgrade portions of its software
which was originally purchased from outside vendors, so that its computer
systems will properly utilize dates beyond December 31, 1999. The Company has
purchased its upgraded software and testing and implementation was completed in
November 1999. The cost of the upgrade of the Company's software was
approximately $20,000. The cost of new hardware was approximately $40,000.
Additionally, the Company is dependent on basic public infrastructure, such as
telecommunications and utilities, in order to function normally. Significant
long-term interruptions of this infrastructure could have an adverse effect on
the operations of the Company. Additionally, the Company must rely on assurances
from suppliers and vendors that their information systems and key services will
be Year 2000 compliant, and the Company currently has no practical alternatives
if these major suppliers experience problems. Therefore, even if the Company, in
a timely manner, successfully implements the necessary changes to its computer
systems, some problems may not be identified or corrected in time to prevent
material adverse consequences or business interruptions to the Company, and
there can be no absolute assurance that there will not be a material adverse
effect on the Company's operations, liquidity or financial condition as a result
of the Year 2000 issue.
10
<PAGE>
URT INDUSTRIES, INC.
OTHER INFORMATION
PART II
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.
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: ______________ --------------------------------------------
Allan Wolk, Chairman of the Board, President
(Principal Executive Officer)
Date: ______________ ---------------------------------------------
Jason Wolk, Executive Vice President,
Chief Financial Officer
(Principal Financial and Accounting Officer)
12
<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
October 2, 1999, and is qualified in its entirety by reference to such financial
statements:
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-01-2000
<PERIOD-END> OCT-02-1999
<CASH> 664,748
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 2,265,410
<CURRENT-ASSETS> 3,146,679
<PP&E> 3,094,950
<DEPRECIATION> 1,860,869
<TOTAL-ASSETS> 4,613,826
<CURRENT-LIABILITIES> 2,801,680
<BONDS> 0
0
0
<COMMON> 153,175
<OTHER-SE> 1,129,141
<TOTAL-LIABILITY-AND-EQUITY> 4,613,826
<SALES> 7,084,201
<TOTAL-REVENUES> 7,084,201
<CGS> 4,134,672
<TOTAL-COSTS> 4,134,672
<OTHER-EXPENSES> 3,536,509
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,705
<INCOME-PRETAX> (537,753)
<INCOME-TAX> 0
<INCOME-CONTINUING> (537,753)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (537,753)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
