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 January 1, 2000 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 February 25, 2000, 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 - January 1, 2000,
April 3, 1999 and December 26, 1998 (unaudited) 3
Condensed Consolidated Statements of Operations
and Retained Deficit - Three Months
Ended January 1, 2000 and December 26, 1998 (Unaudited) 4
Condensed Consolidated Statements of Operations
and Retained Deficit - Nine Months
Ended January 1, 2000 and December 26, 1998 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows - Nine Months
Ended January 1, 2000 and December 26, 1998 (Unaudited) 6
Notes to Condensed Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-10
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 January 1, 2000,
April 3, 1999 and December 26, 1998
(unaudited)
<TABLE>
<CAPTION>
January 1, April 3, December 26,
Assets 2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,612,139 927,982 1,870,908
Marketable investment securities -- 439,640 590,664
Inventories 2,240,646 2,309,600 2,821,832
Current portion due from officers/shareholders 13,451 42,769 45,302
Prepaid expenses and other current assets 270,237 291,809 336,068
----------- ----------- -----------
Total current assets 4,136,473 4,011,800 5,664,774
Property and equipment, net 1,218,845 1,249,289 1,358,404
Due from officers/shareholders 801 3,385 8,916
Other assets 240,693 195,560 204,939
----------- ----------- -----------
$ 5,596,812 5,460,034 7,237,033
=========== =========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term obligations $ 59,149 108,280 493,436
Accounts payable 2,822,683 2,240,109 3,033,582
Accrued liabilities 761,952 706,407 1,094,939
----------- ----------- -----------
Total current liabilities 3,643,784 3,054,796 4,621,957
Long-term obligations 429,388 469,759 488,625
Deferred rent 96,000 63,030 61,911
Minority interest in a subsidiary 37,005 49,121 90,436
----------- ----------- -----------
Total liabilities 4,206,177 3,636,706 5,262,929
----------- ----------- -----------
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 (3,286,357) (2,856,923) (2,716,920)
Accumulated other comprehensive income - net unrealized
appreciation on investment securities -- 3,259 14,032
----------- ----------- -----------
2,408,970 2,841,663 2,992,439
Treasury stock, 3,159,245 common shares, at cost (1,018,335) (1,018,335) (1,018,335)
----------- ----------- -----------
Total shareholders' equity 1,390,635 1,823,328 1,974,104
Commitments and contingencies
----------- ----------- -----------
$ 5,596,812 5,460,034 7,237,033
=========== =========== ===========
</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 January 1, 2000 and December 26, 1998
(Unaudited)
January 1, December 26,
2000 1998
----------- -----------
Net sales $ 4,617,637 5,331,522
----------- -----------
Costs and expenses:
Cost of sales 2,710,500 3,141,285
Selling, general and administrative expenses 1,724,241 1,890,707
Depreciation and amortization 29,930 59,014
----------- -----------
4,464,671 5,091,006
Income from operations 152,966 240,516
----------- -----------
Other (expense) income:
Interest expense (13,995) (24,377)
Interest income 3,608 6,387
Other income -- 39,245
----------- -----------
(10,387) 21,255
----------- -----------
Income before minority interest 142,579 261,771
Minority interest in net income of
consolidated subsidiary 34,260 50,416
----------- -----------
Net income 108,319 211,355
Retained deficit, beginning of period (3,394,676) (2,928,275)
----------- -----------
Retained deficit, end of period (3,286,357) (2,716,920)
=========== ===========
Basic and diluted earnings per share $ 0.01 0.02
=========== ===========
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Retained Deficit
Nine months ended January 1, 2000 and December 26, 1998
(Unaudited)
January 1, December 26,
2000 1998
------------ ------------
Net sales $ 11,701,838 13,126,196
------------ ------------
Costs and expenses:
Cost of sales 6,845,172 7,796,882
Selling, general and administrative expenses 5,163,741 5,633,225
Depreciation and amortization 126,939 176,523
------------ ------------
12,135,852 13,606,630
Loss from operations (434,014) (480,434)
------------ ------------
Other (expense) income:
Interest expense (42,700) (81,764)
Intereset income 35,164 31,412
Other income -- 39,245
------------ ------------
(7,536) (11,107)
------------ ------------
Loss before minority interest (441,550) (491,541)
Minority interest in net (loss) income of
consolidated subsidiary 12,116 (15,140)
------------ ------------
Net loss (429,434) (506,681)
Retained deficit, beginning of period (2,856,923) (2,210,239)
------------ ------------
Retained deficit, end of period $ (3,286,357) (2,716,920)
============ ============
Basic and diluted loss per share (0.04) (0.04)
============ ============
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Nine months ended January 1, 2000 and December 26, 1998
(Unaudited)
<TABLE>
<CAPTION>
January 1, December 26,
2000 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (429,434) (506,681)
----------- -----------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 126,939 176,523
Deferred rent 32,970 (923)
Minority interest in net (loss) income of consolidated
subsidiary (12,116) 63,140
Change in assets and liabilities affecting cash flows from
operating activities:
(Increase) decrease in:
Inventories 68,954 (388,399)
Prepaid expenses and other current assets 21,572 50,980
Other assets (45,133) (3,287)
Increase (decrease) in:
Accounts payable 582,574 1,018,908
Accrued liabilities 55,545 193,614
----------- -----------
Net cash provided by operating activities 401,871 603,875
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (96,496) (170,594)
Repayment of due from officers/shareholders 31,902 28,806
Purchase of marketable investment securities -- (1,032,621)
Sales of marketable investment securities 436,381 1,488,729
----------- -----------
Net cash provided by investing activities 371,787 314,320
----------- -----------
Cash flows from investing activities:
Repayment of long-term debt (89,501) (328,385)
----------- -----------
Net cash used in financing activities (89,501) (328,385)
----------- -----------
Net increase in cash and cash equivalents 684,157 589,810
Cash and cash equivalents, beginning of period 927,982 1,281,098
----------- -----------
Cash and cash equivalents, end of period $ 1,612,139 1,870,908
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 42,700 28,600
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
January 1, 2000 and December 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 January 1, 2000). 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 nine months ended January 1, 2000, 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) December 26,
1998 quarterly financial information to conform to the presentation used in
the (unaudited) January 1, 2000 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 loss per share have been computed by dividing net loss,
by the weighted average number of shares outstanding during the period.
(continued)
7
<PAGE>
Basic and diluted loss per share were calculated as follows:
Nine months Nine months
ended Ended
------------- -------------
January 1, December 26,
2000 1998
Basic and diluted:
Net loss $ (429,434) (506,681)
================ ===========
Weighted average shares 12,158,209 12,158,209
================ ===========
Basic and diluted loss per share (0.04) (0.04)
================ ===========
(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 nine month period ended
January 1, 2000, there was no provision for income taxes as the Company has
excess net operating loss carryforwards for federal income tax purposes.
(continued)
8
<PAGE>
URT INDUSTRIES, INC.
Item 2. Management's Discussions and Analysis of Financial Condition and Results
of Operations for the Three Months and Nine Months Ended January 1,
2000, Compared to the Nine Months ended December 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 third quarter ended January
1, 2000 of the Company's fiscal year ended April 1, 2000 by $713,885 or 13.4
percent compared to the third quarter of fiscal 1999. Comparable store sales for
the third quarter were down 7.9 percent. Sales for the thirty-nine weeks ended
January 1, 2000 decreased by $1,424,358 or 10.9 percent which is primarily due
to the fact the Company operated one more store in the third quarter of fiscal
1999 as well as the fact that comparable sales for the thirty-nine weeks ended
January 1, 2000 were down 6.3 percent.
Cost of Sales. The Company's cost of sales as a percentage of net sales
decreased from 58.9 percent in the previous year's third quarter to 58.7 percent
for the third quarter ended January 1, 2000, as well as from 59.4 percent in the
previous year's first thirty-nine weeks to 58.5 percent in the current year's
thirty-nine weeks ended January 1, 2000. 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, increased as a percentage of net
sales to 37.9 percent for the third quarter ended January 1, 2000 compared to
36.6 percent in the prior year third quarter. The increase is primarily
attributable the decrease in net sales offset by a decrease in comparable store
expenses of 2.2 percent. Selling, general and administrative expenses including
depreciation, expressed as a percentage of net sales increased to 45.2 percent
for the thirty-nine weeks ended January 1, 2000 compared to 44.2 percent in the
thirty-nine weeks ended December 26, 1998. The increase is primarily
attributable to the decrease in net sales offset by a decrease in comparable
store expenses of 2.0 percent and a decrease in corporate overhead of 1.9
percent.
Net Income (Loss). The Company had net income of approximately $108,000 for the
third quarter ended January 1, 2000 compared to net income of approximately
$211,000 for the third quarter ended December 26, 1998. The decreased in net
income is primarily attributable to the decrease in net sales discussed above.
The net loss for the thirty-nine weeks ended January 1, 2000 was approximately
$429,000 compared to a net loss of approximately $507,000 for the thirty-nine
weeks ended December 26, 1998. The decrease in net loss is primarily
attributable to an increase in gross profit percentage, a decrease in interest
expense, a reduction in corporate overhead offset by the decrease in comparable
store sales.
(continued)
9
<PAGE>
URT INDUSTRIES, INC.
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. 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 January 1, 2000, the Company had long-term obligations
of $429,388. 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. The Company has not had any failures or disruptions to
its financial and operating systems as of the date of this filing.
(continued)
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
(continued)
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 nine month period ended
January 1, 2000, and is qualified in its entirety by reference to such financial
statements:
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-01-2000
<PERIOD-END> JAN-01-2000
<CASH> 1,612,139
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 2,240,646
<CURRENT-ASSETS> 4,136,473
<PP&E> 3,109,644
<DEPRECIATION> (1,890,799)
<TOTAL-ASSETS> 5,596,812
<CURRENT-LIABILITIES> 3,643,784
<BONDS> 0
0
0
<COMMON> 153,175
<OTHER-SE> 1,237,460
<TOTAL-LIABILITY-AND-EQUITY> 5,596,812
<SALES> 11,701,838
<TOTAL-REVENUES> 11,701,838
<CGS> 6,845,172
<TOTAL-COSTS> 6,845,172
<OTHER-EXPENSES> 5,290,680
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (42,700)
<INCOME-PRETAX> (429,434)
<INCOME-TAX> 0
<INCOME-CONTINUING> (429,434)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (429,434)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
