<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 September 30, 2000
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
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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.)
11859 South Central Avenue
Alsip, Illinois 60803
---------------------
(Address of principal executive offices)
(Zip Code)
(708) 293-4050
--------------
(Registrant's telephone number, including area code)
N/A
(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 November 11, 2000 was 7,243,570 shares.
<PAGE> 2
UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
INDEX
-----
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page(s)
------- --------------------- -------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 2000 (Unaudited) and December 31, 1999 3
Consolidated Statements of Operations
(Unaudited) - for the three months and nine months ended
September 30, 2000 and 1999 4
Consolidated Statements of Cash Flows
(Unaudited) - for the nine months ended
September 30, 2000 and 1999 5 - 6
Notes to Condensed Financial Statements (Unaudited) 7 - 8
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 9 - 11
Item 3. Quantitative and Qualitative Disclosure About Market Risk 12
PART II. OTHER INFORMATION
Items 1 through 5 are not applicable to this report.
Item 6 - Exhibits and Reports on Form 8-K 12
Signatures 12
EXHIBIT II - Computation of Earnings Per Share 13
</TABLE>
2
<PAGE> 3
UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
Assets (Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 86,907 $ 35,457
Accounts receivable, trade 19,007,347 15,849,708
Due from stockholders 237,262 237,262
Inventories 17,532,869 17,938,629
Deferred income taxes 307,761 395,000
Prepaid expenses and other current assets 1,180,940 1,060,650
Net current assets of discontinued operation 215,227 339,535
------------ ------------
38,568,313 35,856,241
------------ ------------
Property and Equipment - continuing operations, net 5,187,015 4,758,305
------------ ------------
Property and Equipment - discontinued operation, net 800,000 800,000
------------ ------------
Other Assets:
Goodwill, net 555,555 569,073
Deferred income taxes 490,000 490,000
Other assets 724,142 686,148
------------ ------------
1,769,697 1,745,221
------------ ------------
$ 46,325,025 $ 43,159,767
============ ============
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable, trade $ 14,046,787 $ 10,691,507
Long-term indebtedness, current portion 240,594 508,955
Accrued expenses and other current liabilities 4,183,558 4,668,252
Estimated loss on disposal of discontinued operation 979,338 1,500,000
------------ ------------
19,450,277 17,368,714
------------ ------------
Long-term Liabilities:
Revolving loan indebtedness 17,465,651 16,764,671
Subordinated debenture 4,419,375 4,385,625
Long-term indebtedness, non-current portion 1,154,818 1,308,847
Deferred income taxes 250,183 258,734
------------ ------------
23,290,027 22,717,877
------------ ------------
Minority interest in subsidiary 450,000 0
------------ ------------
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,
7,243,570 shares and 6,829,310 issued and outstanding
at September 30, 2000 and December 31, 1999, respectively) 72,435 68,293
Additional paid-in-capital 8,660,836 8,413,978
Retained earnings (4,698,814) (4,514,672)
Accumulated other comprehensive losses (899,736) (894,423)
------------ ------------
3,134,721 3,073,176
------------ ------------
$ 46,325,025 $ 43,159,767
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 18,940,835 $ 17,544,653 $ 56,439,032 $ 50,921,948
Cost of sales 15,363,728 13,619,990 44,793,437 40,259,296
------------ ------------ ------------ ------------
Gross profit 3,577,107 3,924,663 11,645,595 10,662,652
Selling, general, and administrative expenses 3,397,384 3,194,242 9,985,385 8,473,621
------------ ------------ ------------ ------------
Income from operations 179,723 730,421 1,660,210 2,189,031
------------ ------------ ------------ ------------
Other (Income) Expense:
Interest expense 678,184 503,495 1,929,814 1,443,875
Other (2,006) (1,914) (56,464) (13,437)
------------ ------------ ------------ ------------
676,178 501,581 1,873,350 1,430,438
------------ ------------ ------------ ------------
Income (loss) before provision (benefit) for
income taxes (496,455) 228,840 (213,140) 758,593
Income tax provision (benefit) (164,900) 44,300 (29,000) 179,800
------------ ------------ ------------ ------------
Income (loss) from continuing operations (331,555) 184,540 (184,140) 578,793
Loss from discontinued operation 0 (320,080) 0 (907,329)
------------ ------------ ------------ ------------
Net income (loss) $ (331,555) $ (135,540) $ (184,140) $ (328,536)
============ ============ ============ ============
Comprehensive Income (Loss):
Net income (loss) $ (331,555) $ (135,540) $ (184,140) $ (328,536)
Other comprehensive gain (loss), foreign
currency translation adjustment 21,126 105,617 (5,313) 48,661
------------ ------------ ------------ ------------
Comprehensive Income (Loss) $ (310,429) $ (29,923) $ (189,453) $ (279,875)
============ ============ ============ ============
Earnings (Loss) Per Share:
Basic:
Continuing operations $ (0.05) $ 0.03 $ (0.03) $ 0.08
Discontinued operation 0.00 (0.05) 0.00 (0.13)
------------ ------------ ------------ ------------
Net $ (0.05) $ (0.02) $ (0.03) $ (0.05)
------------ ------------ ------------ ------------
Diluted:
Continuing operations $ (0.05) $ 0.03 $ (0.03) $ 0.08
Discontinued operation 0.00 (0.05) 0.00 (0.13)
------------ ------------ ------------ ------------
Net $ (0.05) $ (0.02) $ (0.03) $ (0.05)
============ ============ ============ ============
Weighted average number of common shares Outstanding:
Basic 7,036,563 6,793,777 6,914,194 6,783,411
Common stock equivalents resulting from
warrants and options 0 367,342 0 368,777
------------ ------------ ------------ ------------
Diluted 7,036,563 7,161,119 6,914,194 7,152,188
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements
4
<PAGE> 5
UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $ (184,140) $ (328,536)
Net loss from discontinued operations 0 (907,328)
----------- -----------
Income (loss) from continuing operations (184,140) 578,792
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Depreciation and amortization 916,570 757,008
Provision for bad debts 360,103 396,887
Effect of exchange rate changes (5,313) 48,661
Compensation expense for stock options 29,700 29,700
Stock issued for services 72,675 51,563
Deferred income taxes and other 171,216 204,559
Changes in operating assets and liabilities:
Accounts receivable, trade (3,517,742) (8,370,899)
Inventories 405,760 (3,020,857)
Prepaid expenses and other current assets (120,290) (291,126)
Other assets (201,995) (143,609)
Accounts payable, trade 3,355,278 7,572,590
Accrued expenses and other current liabilities (484,694) 906,433
----------- -----------
Net cash provided by (used in) operating activities from
continuing operations 797,128 (1,280,298)
Net cash used in operating activities from
discontinued operations (396,354) (513,251)
----------- -----------
Net cash provided by (used in) operating activities 400,774 (1,793,549)
----------- -----------
Cash Flows for Investing Activities - purchase of
property and equipment (1,198,412) (1,282,530)
----------- -----------
Cash Flows from Financing Activities:
Net increase in revolving loan indebtedness 700,978 2,605,000
Proceeds from notes payable 0 560,092
Proceeds from issuance of preferred stock of subsidiary 450,000 0
Principal payments on notes payable (422,390) (329,750)
Proceeds from issuance of common stock from exercise of options 120,500 0
----------- -----------
Net cash provided by financing activities 849,088 2,835,342
----------- -----------
Net Increase (Decrease) in Cash 51,450 (240,737)
Cash, Beginning of Period 35,457 347,626
----------- -----------
Cash, End of Period $ 86,907 $ 106,888
=========== ===========
Cash of continuing operations $ 86,907 $ 101
Cash of discontinued operations (included with
net current assets of discontinued operations) -- 106,787
----------- -----------
$ 86,907 $ 106,888
=========== ===========
</TABLE>
5
<PAGE> 6
UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September 30,
-------------------------------
2000 1999
---------- ----------
Supplemental Disclosures of Cash Flow
Information:
Cash paid for interest $1,996,650 $1,694,466
---------- ----------
Cash paid for income taxes $ 41,000 $ 39,793
---------- ----------
Supplemental Disclosures of Noncash
Investing and Financing Activities -
Issuance of common stock for services $ 72,675 $ 51,563
---------- ----------
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 7
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. For additional disclosures, see the Notes to
Consolidated Financial Statements contained in Universal Automotive Industries,
Inc. (the "Company") Annual Report on Form 10-K for the year ended December 31,
1999.
In the opinion of management of 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
period's results of operations are not necessarily indicative of results which
ultimately may be achieved for the year.
2. INVENTORIES
September 30, 2000
------------------
Finished goods $14,516,690
Work in process 165,700
Raw materials 2,850,479
-----------
$17,532,869
3. BASIS OF PRESENTATION
Income Taxes
The Company's effective tax rate for the three and nine months ended September
30, 2000 varies from the statutory tax rate because the Company's subsidiary
eParts eXchange, Inc. is not included in the Company's consolidated income tax
return. The Company's effective tax rate for the three and nine months ended
September 30, 1999 varies from the statutory tax rate principally due to losses
in the Company's Hungarian subsidiary for which no current tax benefits are
available.
Net Income (Loss) Per Share
Warrants and options issued by the Company are only included in the computation
of weighted average number of shares, where their inclusion is not
anti-dilutive. For the three and nine months ended September 30, 2000, common
stock equivalents are not included in the weighted average number of shares
outstanding in determining net loss per share.
4. LASALLE INDEBTEDNESS
The Company was not in compliance of one of its covenants under its credit
agreement with LaSalle Bank National Association or its subsidiaries ("LaSalle")
as of September 30, 2000. LaSalle has issued a waiver of that non-compliance.
7
<PAGE> 8
5. EXERCISE OF FINOVA WARRANTS
Finova Mezzanine Capital, Inc. ("Finova") has elected to exercise a warrant to
purchase 450,000 shares of the Company's common stock at an exercise price of
$0.83 per share. The warrants are more fully described in Note 4 to the 1999
audited financial statements. Finova has elected to use a "cashless" exercise
provision whereby Finova received a net of 279,260 shares of common stock after
surrendering 170,743 shares which have a fair market value equal to the
aggregate exercise price. Therefore, the Company received no cash proceeds from
this transaction when the shares were issued in September 2000.
6. CAPITALIZATION OF EPARTS EXCHANGE, INC.
Capitalization of eParts eXchange, Inc. is as follows as of September 30, 2000:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Shares Authorized Shares Issued Percent of Shares Issued
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common, Par $.00001, issued to: 30,000,000
Universal Automotive Industries, Inc. 7,000,000 74%
Officers and directors 2,500,000 26%
-------------------------------------------------------------------------------------------------------------------
Preferred, Series A , Par $00001 7,000,000 900,000
-------------------------------------------------------------------------------------------------------------------
</TABLE>
The Series A Preferred was issued for total proceeds of $450,000 which is shown
in the Balance Sheet as Minority Interest in Subsidiary. Each share of Series A
Preferred Stock is convertible into one share of Common at any time and has
voting rights, together with the Common Stock, on an "as converted" basis. All
liquidation proceeds accrue to Series A Preferred Stock until Series A holders
receive a return equal to the original investment plus 10%. In addition, the
Company agreed to grant the Series A holders a two year right to put their
Series A shares to the Company at the ratio of one quarter share of Company
common stock for each Series A Preferred share so tendered. The Company has
historically sold certain commodity aftermarket parts on a drop ship basis;
effective May 1, 2000, the Company contributed this business to eParts eXchange,
Inc., which is more in line with such subsidiary's commodity auction business
than the Company's core brake parts business.
7. DISCONTINUED OPERATIONS
As previously disclosed in Note 9 of the 1999 audited financial statements, the
Company finalized its decision to discontinue its Hungarian operation in
December 1999. As of December 31, 1999, the Company provided for estimated costs
of disposition of $1,500,000 including estimated losses of the discontinued
operation during the disposal period. For the three and nine months ended
September 30, 2000, losses from the discontinued operation of $166,000 and
$521,000, respectively were applied against the aforementioned reserve. The
Statements of Operations for the three and nine months ended September 30, 1999
were restated to reflect this treatment.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION(1)
GENERAL
We are a manufacturer and distributor of brake rotors, drums, disc brake
pads, relined brake shoes, non-asbestos friction lining, and a complete line of
hydraulic parts. We believe that we are the leading supplier of "value line"
brake parts (brake parts sold at prices significantly below those of certain
leading national brand name brake parts) to mass-market retailers, traditional
warehouse distributors and specialty undercar distributors in North America.
Management's discussion and analysis of financial condition and results of
operations that follow are based on restated financial condition and results of
operations for both periods presented due to the treatment of the Company's
Hungarian foundry as a discontinued business.
RESULTS OF OPERATIONS
Three Months Ended September 30, 2000 Compared To Three Months Ended
September 30, 1999
Net sales for the three months ended September 30, 2000 were $18,941,000,
an increase of $1,396,000 or 8% over the same quarter in 1999. Shipments of US
brake products increased $3,176,000 or 21.8% as the Company increased its
market penetration with the addition of new customers in 2000, especially Pep
Boys, Inc., in spite of softness in the North American automotive aftermarket.
This increase was offset, however, by lower commodity sales ($228,000) and the
lack of Canadian distribution business sales ($1,552,000) that was sold as of
December 31, 1999.
Gross profits for the three months ended September 30, 2000 were $3,577,000
or 18.9% of net sales compared to $3,925,000 or 22.4% in the same period of
1999. Third quarter 1999 gross profit included $304,000 of gross profit related
to the Canadian distribution business that was sold as of December 31, 1999.
Before the effect of the sale of the Canadian distribution business, gross
profit decreased from $3,621,000 or 22.6% of sales in the 1999 quarter to
$3,557,000 or 18.9% of sales. This decrease is attributable to granting
pricing concessions to maintain volume in the face of a softening automotive
aftermarket and under-absorption of manufacturing costs due to the acquisition
of friction manufacturing capacity.
----------------------
(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. For 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.
9
<PAGE> 10
Selling, general and administrative ("SG&A") expenses for the three months
ended September 30, 2000 increased by $203,000 or 6.4% to $3,397,000 from
$3,194,000 for the same period in 1999. Included in SG&A expenses for the third
quarter of 1999 are $286,000 of costs related to the Canadian distribution
business that was sold as of December 31, 1999. Before the effects of this
factor, SG&A expenses related to the Company's base business increased to
$3,397,000 for the third quarter of 2000 compared to $2,908,000 in the same
quarter of 1999. The increase was due primarily to increased freight costs and
additional marketing and sales costs associated with obtaining new brake
business.
Other expense for the three months ended September 30, 2000 increased by
$175,000 to $676,000 from $501,000 for the same period of 1999. Higher interest
expense in the third quarter ended September 30, 2000 was the reason for the
increase compared to the same period of 1999. The increase in interest expense
was due primarily to a higher level of borrowing at September 30, 2000 compared
to September 30, 1999 and higher interest rates.
The absence of a loss from discontinued operations for the quarter ended
September 30, 2000 is due to the fact that the loss from the discontinued
Hungarian iron foundry operation for the quarter ended September 30, 2000 of
$166,000 has been charged against the reserve for such losses established as of
December 31, 1999.
Loss from continuing operations for the three months ended September 30,
2000 was $332,000 compared to income from continuing operations of $185,000 for
the same 1999 period. This decrease in profitability is due to factors set forth
before, particularly reduced gross profit margin and increased sales related
expenses associated with maintaining market position and increased interest
costs. Total net loss for the three months ended September 30, 2000 was $332,000
compared to $136,000 for the same period in 1999.
Nine Months Ended September 30, 2000 Compared to Nine Months Ended
September 30, 1999
Net sales for the nine months ended September 30, 2000 was $56,439,000, an
increase of $5,517,000 or 10.8% from the same 1999 period. This increase was in
spite of lower commodity sales ($1,718,000) and the lack of Canadian
distribution business sales ($5,043,000) that was sold as of December 31, 1999.
Sales of US brake parts for the nine months ended September 30, 2000 increased
30.4% or $12,279,000 over the same 1999 period due primarily to the addition of
a major new customer and increased sales of friction product.
Gross profits for the nine months ended September 30, 2000 increased
$983,000 or 9.2% to $11,646,000 from $10,663,000 for the same nine-month period
in 1999. Included in gross profit for the nine months ended September 30, 2000
was $353,000 of one-time costs related to the realignment of the Company's
friction manufacturing facilities. Included in gross profit for the nine months
ended September 30, 1999 was $909,000 of gross profit related to the Canadian
distribution business that was sold as of December 31, 1999. Before the effects
of these two factors, the gross profit margin percentage for the nine-month
period was 21.3% which was level with the same 1999 percentage. Gross profits
for the US brake business for the nine months ended September 30, 2000 were
$11,682,000, an increase of $2,570,000 or 28.0% over the 1999 period. This
increase was due to higher sales and a more profitable sales mix.
10
<PAGE> 11
Nine months ended September 30, 2000 selling, general and administrative
expenses were $9,985,000, an increase of $1,512,000 or 17.8% from $8,474,000 for
the same period in 1999. Included in SG&A expenses in the nine-month period
ended September 30, 2000 was $101,000 of costs related to the start-up of the
Company's e-commerce subsidiary, eParts eXchange, Inc. Included in SG&A expenses
for the nine- month period ended September 30, 1999 is $991,000 of costs related
to the Canadian distribution business that was sold as of December 31, 1999.
Before the effects of these two factors, SG&A expenses related to the Company's
base business increased to $9,884,000 for the nine months ended September 30,
2000 compared to $7,483,000 in the same period of 1999. The increase was due
primarily to increased freight costs and additional marketing and sales costs
associated with obtaining new brake business.
Other Expense for the nine months ended September 30, 2000 increased by
$443,000 to $1,873,000 from $1,430,000 for the same period of 1999 attributable
to higher interest expense. The increase in interest expense was due primarily
to a higher average level of borrowing and increasingly higher interest rates
during the period.
The absence of a loss from discontinued operations for the nine months
ended ended September 30, 2000 is due to the fact that the loss from the
discontinued Hungarian iron foundry operation for this period of $521,000 has
been charged against the reserve for such losses established as of December 31,
1999.
For the nine month period ended September 30, 2000, net loss from
continuing operations was $184,000 compared to net income from continuing
operations of $579,000 for the nine months ended September 30, 1999. The
principal reasons for decreased profitability was that the Company incurred
$454,000 of one-time facility realignment costs and start-up costs of eParts
eXchange, Inc. and increased interest costs. Total net loss for the nine months
ended September 30, 2000 was $184,000 compared to a net loss of $329,000 for the
same period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities from continuing operations for
the nine months ended September 30, 2000 was $401,000 compared to net cash used
in operating activities of $1,794,000 for the same 1999 period. Cash generated
through an increase in accounts payable ($3.5 million) was sufficient to provide
cash required to finance growth in accounts receivable ($3.5 million) necessary
to support the Company's sales growth.
Net cash used in investing activities was $1,198,000, which is attributable
to acquisition of various tooling, manufacturing equipment, and computer
equipment, particularly in connection with the Company's realignment and
consolidation of its friction manufacturing facilities and establishing its
e-commerce subsidiary, eParts eXchange, Inc.
Net cash provided by financing activities was $849,000, consisting
primarily of borrowings under the Company's revolving credit agreement and
capital contribution to the Company's subsidiary, eParts eXchange, Inc. of
$450,000.
The Company expects to continue to finance its operations through cash flow
generated from operations, borrowings under the Company's bank lines of credit
and credit from its suppliers.
11
<PAGE> 12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We believe that our Company does not have significant exposure to market
risk associated with derivative financial instruments, other financial
instruments, or derivative commodity instruments. The Company had previously
utilized only limited derivative financial instruments and did not use them for
trading purposes and has never used derivative commodity instruments. At
September 30, 2000, there were no such derivative instruments. The fair value of
financial instruments, other than debt instruments, closely approximates their
carrying value. Because the interest rate of the revolving loan and the term
loan with LaSalle National Bank adjusts with the changes in the market rate of
interest, we believe that the fair value is equivalent to the carrying value. We
believe that the interest rate of 12.25% on the subordinated debenture is
approximately equal to the current rate available for similar debt. Accordingly,
the fair value of this debenture approximates its carrying value.
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 11 - Computation of Earnings Per Share
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: November 14, 2000
12
