<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission file number 1-13516
UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3973627
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3350 North Kedzie
Chicago, Illinois 60618-5722
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(Address of principal executive offices)
(Zip Code)
(773) 478-2323
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year, if changed since last
report)
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
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
---- ----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes_____ No_____
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of issuer's Common Stock, par value $.01 per share,
outstanding as of May 9, 1997 was 6,729,425 shares.
<PAGE> 2
UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
INDEX
PART I. FINANCIAL INFORMATION Page(s)
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 1997 (Unaudited) and December 31, 1996 3
Consolidated Statement of Operations
(Unaudited) - for the three months ended
March 30, 1997 and 1996 4
Consolidated Statement of Cash Flows
(Unaudited) - for the three months ended
March 31, 1997 and 1996 5
Notes to Condensed Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 7 - 8
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 8
Signatures
<PAGE> 3
UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
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Assets (Unaudited)
<S> <C> <C>
Current Assets:
Cash & cash equivalents $112,660 $63,706
Accounts receivable, trade 13,586,389 11,919,002
Inventories 14,186,882 14,441,523
Income taxes refundable 570,405 183,049
Deferred income taxes 488,700 488,700
Prepaid expenses and other current assets 911,408 949,114
----------- -----------
29,856,444 28,045,094
----------- -----------
Property and Equipment, net 8,668,286 8,836,272
----------- -----------
Other Assets:
Goodwill, net 251,108 260,581
Other assets 656,972 884,824
----------- -----------
908,080 1,145,405
----------- -----------
$39,432,810 $38,026,771
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable, trade $9,789,520 $8,583,217
Long-term indebtedness, current portion 3,007,016 2,710,583
Subordinated notes 893,144 1,050,000
Accrued expenses and other current liabilities 1,996,546 1,432,963
----------- -----------
15,686,226 13,776,763
----------- -----------
Long-term Liabilities:
Revolving loan indebtedness 11,598,436 11,432,525
Long-term indebtedness, non-current portion 2,569,567 2,710,145
Deferred income taxes 319,979 323,213
Due to stockholders 876,476 927,724
----------- -----------
15,364,458 15,393,607
----------- -----------
Stockholders' Equity:
Preferred stock (authorized 1,000,000 shares,
$.01 par value, none issued or outstanding) 0 0
Common stock (authorized 15,000,000 shares,
$.01 par value, 6,729,425 shares issued an 67,294 67,294
Additional paid-in-capital 7,817,312 7,777,788
Retained earnings 544,722 1,038,465
Foreign currency translation adjustments (47,202) (27,146)
----------- -----------
8,382,126 8,856,401
----------- -----------
$39,432,810 $38,026,771
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 4
UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Net Sales $14,051,503 $13,010,368
Cost of Sales 11,247,547 11,098,068
----------- -----------
Gross Profit 2,803,956 1,912,300
Selling, General and Administrative Expenses 2,519,196 2,093,275
----------- -----------
Income (Loss) from Operations 284,760 (180,975)
----------- -----------
Other Expense:
Provision for lawsuit settlement 650,000
Interest expense 419,899 268,235
Other 10,604 0
----------- -----------
1,080,503 268,235
----------- -----------
Loss before Provision for Income Taxes (795,743) (449,210)
Income Tax Provision (Benefit) (302,000) (144,043)
----------- -----------
Net Loss ($493,743) ($305,167)
=========== ===========
Net Loss Per Share ($0.07) ($0.05)
=========== ===========
Weighted average number of common
shares outstanding 6,729,425 6,538,353
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 5
UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------
1997 1996
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Loss ($493,743) ($305,167)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 305,934 177,208
Provision for lawsuit settlement 650,000 0
Effect of exchange rate changes (20,056) 4,482
Compensation expense for stock options 39,525 26,906
Deferred income taxes (3,234) 10,445
Changes in operating assets and liabilities:
Accounts receivable, trade (1,667,388) (2,219,669)
Inventories 254,641 129,678
Prepaid expenses and other current assets (349,650) 21,354
Other Assets 142,955 (219,890)
Accounts payable, trade 1,206,303 2,804,447
Accrued expenses and other current liabilities (86,417) (37,942)
----------- ----------
Net cash provided by (used in) operating activities (21,130) 391,852
----------- ----------
Cash Flows from Investing Activities:
(Increase) Decrease in advances & loans to partially
owned entity 0 (141,301)
Purchase of property and equipment (43,578) (1,567,994)
----------- ----------
Net cash used in investing activities (43,578) (1,709,295)
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Cash Flows from Financing Activities:
Issuance of common stock 0 130
Net increase (decrease) in revolving loan indebtedness 165,911 256,724
Net principal borrowings (payments) on notes payable 155,855 990,589
Net proceeds (payments) on subordinated notes (156,856) 0
Net principal borrowings (payments) on loans from
stockholders (51,248) (55,329)
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Net cash provided by financing activities 113,662 1,192,114
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Net Decrease in Cash and Cash Equivalents 48,954 (125,329)
Cash and Cash Equivalents, Beginning of Period 63,706 401,117
----------- ----------
Cash and Cash Equivalents, End of Period $112,660 $275,788
=========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 6
UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. UNAUDITED INTERIM FINANCIAL STATEMENTS
Interim condensed financial statements are prepared pursuant to the
requirements for reporting on Form 10-Q. Accordingly, certain disclosures
accompanying annual financial statements prepared in accordance with generally
accepted accounting principles are omitted.
In the opinion of management of Universal Automotive Industries, Inc. (the
"Company"), all adjustments, consisting solely of normal recurring adjustments,
necessary for the fair presentation of the financial statements for these
interim periods have been included. The current periods' results of operations
are not necessarily indicative of results which ultimately may be achieved for
the year.
2. INVENTORIES
<TABLE>
<CAPTION>
March 31, 1997
--------------
<S> <C>
Finished goods $12,606,794
Work in process 321,478
Raw materials 1,258,610
-----------
$14,186,882
-----------
</TABLE>
3. BASIS OF PRESENTATION
Income Taxes
The Company's effective tax rate in 1996 of 32% varies from the federal
statutory tax rate principally due to losses in the Company's Hungarian
subsidiary for which no current tax benefits are available.
Net Income Per Share
Warrants and options issued by the Company were not included in the computation
of weighted average number of shares, since their inclusion is anti-dilutive.
4. LEGAL PROCEEDINGS
During 1995, a lawsuit was filed against the Company in the United
States Bankruptcy Court by the Trustee of a bankrupt entity ("the Debtor")
with which the Company had transacted both purchases and sales of certain
automotive parts in 1992 and 1993. The Trustee is seeking a total of $5,100,000
in damages under two claims. The largest claim, for approximately $4,600,000
is the result of alleged "voidable transactions" concerning transfers of
product by the Debtor to the Company without receiving "reasonably equivalent
values" (as defined). In April 1997, the Company entered into a settlement
agreement with the Trustee covering all litigation between the parties. The
settlement agreement is contingent upon approval of the US Bankruptcy Court and
lapse of all rights of appeal by creditors of the Estate on or before July 31,
1997. Several creditors have raised objections to the settlement. The
settlement agreement calls for the payment of a total of $250,000 in several
instalments and the issuance of 200,000 shares (with a guaranteed price of
$2.00 per share) of Universal common stock to the Estate to be registered
promptly following closing. The Company has recorded a provision of $650,000
to reflect this settlement agreement. There can be no assurances that the
settlement agreement will be confirmed by the U.S. Bankruptcy Court.
5. BANK FINANCING
At March 31, 1997, the Company was in violation of some covenants under
its credit agreement with American National Bank. The Bank has not yet agreed
to waive these violations for the first quarter of 1997; however, the Company
has executed a forebearance agreement with the Bank and is in the process of
seeking to obtain replacement and additional financing.
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATION AND FINANCIAL CONDITION (1)
RESULTS OF OPERATIONS
Three Months Ended March 31, 1997 Compared To Three Months Ended March 31, 1996
Net sales for the three months ended March 31, 1997 increased by
$1,041,135 or 8% to $14,051,503. Such increase was due primarily to a 51%
increase in sales in the Company's UBP brake parts business. The overall
increase was achieved despite a 49% decrease in the Company's non-brake sales
as a result of the termination of its warehouse distribution business in the
second half of 1996.
Gross profits for the three months ended March 31, 1997 were $2,803,956 or
20.0% of net sales compared to $1,912,300 or 14.7% in the same period of 1996.
Such increase in gross profit was due primarily to increased sales and an
increase in gross profit percentage as sales of higher margin brake parts
replace lower margin non-brake warehouse distribution business discontinued in
1996.
Selling, general and administrative expenses for the three months ended
March 31, 1997 increased by $425,921 or 20.3% from $2,093,275 for the same
period in 1996. Such increase was due primarily to: (i) an increase in selling
and distribution expenses of a mostly variable nature related to the 51%
increase in sales in the Company's UBP brake parts business, (ii) an increase
in marketing expenses incurred by UBP Hungary, and (iii) selling, general, and
administrative expenses related to the friction manufacturing business acquired
by the Company in June, 1996.
Other Expense for the three months ended March 31, 1997 increased to
$1,080,503 from $268,235 for the same period of 1996. The increase is
attributable to a provision for lawsuit settlement of $650,000 (pretax) as
described in Note 4 to the Condensed Financial Statements and an increase of
approximately $152,000 in interest expense due primarily to a higher level of
borrowing at March 31, 1997 compared to March 31, 1996.
Net loss for the three months ended March 31, 1997 was $493,743 compared
to a net loss of $305,167 for the same period in 1996. This increase in net
loss is attributed to the one time provision for lawsuit settlement described
previously offset by increased income from operations due to higher sales and
increased gross profits.
____________________
(1) Some of the statements included in Management's Discussion and Analysis of
Financial Condition and Results of Operations, may be considered to be "forward
looking statements" since such statements relate to matters which have not yet
occurred. Foe example, phrases such as "the Company anticipates," "believes"
or "expects" indicate that it is possible that the event anticipated, believed
or expected may not occur.; Should such event not occur, then the result which
the Company expected also may not occur or occur in a different manner, which
may be more or less favorable to the Company. The Company does not undertake
any obligation to publicly release the result of any revisions to these forward
looking statements that may be made to reflect any future event or
circumstances.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATION AND FINANCIAL CONDITION (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the three months ended March 31,
1997 was $21,130. The major components of this amount are an approximately
$1,200,000 increase in accounts payable resulting from extended vendor payment
terms , which was offset by an approximately $1,700,000 increase in accounts
receivable which was a result of a substantial increase in sales.
Net cash used in investing activities was $43,578, which is attributable
primarily to acquisition of various manufacturing equipment. Net cash
provided from financing activities was $113,662, consisting primarily of
increased bank financing offset by payments on subordinated loans.
The Company expects to continue to finance its operations through cash
flow from cash generated from operations, borrowings under the Company's bank
lines of credit, credit from its suppliers and the net proceeds from additional
financing in the form of senior or subordinated debt or additional equity
financing. At March 31, 1997 the Company was in violation of various covenants
under its American National Bank credit agreement. The Bank has not yet agreed
to waive such violations for the first quarter of 1997; however, the Company
has executed a forebearance agreement with the Bank and is in the process of
seeking to obtain replacement and additional financing.
PART II OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
a) The Company filed a report on Form 8-K dated March 20, 1997
wherein it disclosed information under Item 5.
<PAGE> 9
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
/s/ ARVIN SCOTT
-----------------------------------------------
Arvin Scott, Chief Executive Officer, President
(Principal Executive Officer)
/s/ JEROME J. HISS
------------------------------------------------
Jerome J. Hiss, Chief Financial Officer (Principal
Financial Officer and Principal Accounting Officer)
Date: May 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 112,660
<SECURITIES> 0
<RECEIVABLES> 13,586,389
<ALLOWANCES> 0
<INVENTORY> 14,186,882
<CURRENT-ASSETS> 29,856,444
<PP&E> 11,114,595
<DEPRECIATION> 2,446,309
<TOTAL-ASSETS> 39,432,810
<CURRENT-LIABILITIES> 15,686,226
<BONDS> 14,168,003
0
0
<COMMON> 67,294
<OTHER-SE> 8,314,832
<TOTAL-LIABILITY-AND-EQUITY> 39,432,810
<SALES> 14,051,503
<TOTAL-REVENUES> 14,051,503
<CGS> 11,247,547
<TOTAL-COSTS> 11,247,547
<OTHER-EXPENSES> 3,155,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 419,899
<INCOME-PRETAX> (795,743)
<INCOME-TAX> (302,000)
<INCOME-CONTINUING> (493,743)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (493,743)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
