-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C1bAPb5WCLT3gYjN61IBcODQfUV0ckLXSuo1kqhebz/dDm94+U4ZyJpTRlm2X6hJ 9Qsj0mDni6ChoVD+KMm+wQ== 0000950137-99-001663.txt : 19990517 0000950137-99-001663.hdr.sgml : 19990517 ACCESSION NUMBER: 0000950137-99-001663 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIVERSAL AUTOMOTIVE INDUSTRIES INC /DE/ CENTRAL INDEX KEY: 0000931457 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MOTOR VEHICLE SUPPLIES & NEW PARTS [5013] IRS NUMBER: 363973627 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13516 FILM NUMBER: 99624140 BUSINESS ADDRESS: STREET 1: 3350 NORTH KEDZIE CITY: CHICAGO STATE: IL ZIP: 60618 BUSINESS PHONE: 7734782323 10-Q 1 FORM 10-Q 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, 1999 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 --------------------------------------- (Address of principal executive offices) (Zip Code) (773) 478-2323 --------------------------------------------------- (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 May 11, 1999 was 6,784,810 shares. 2 UNIVERSAL AUTOMOTIVE INDUSTRIES, INC. INDEX ----- PART I. FINANCIAL INFORMATION Page(s) - ------------------------------ ------- Item 1. Financial Statements Consolidated Balance Sheets March 31, 1999 (Unaudited) and December 31, 1998 3 Consolidated Statements of Operations (Unaudited) - for the three months ended March 31, 1999 and 1998 4 Consolidated Statements of Cash Flows (Unaudited) - for the three months ended March 31, 1999 and 1998 5 Notes to Condensed Financial Statements (Unaudited) 6-7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 7-9 PART II. OTHER INFORMATION - --------------------------- Item 6 - Exhibits and Reports on Form 8-K 10 Signatures 10 EXHIBIT II - Computation of Earnings Per Share 11 2 3 UNIVERSAL AUTOMOTIVE INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS March 31, 1999 December 31, 1998 -------------- ----------------- (Unaudited) Assets Current Assets: Cash $ 276,131 $ 347,626 Accounts receivable, trade 13,476,505 10,553,136 Inventories 17,077,593 16,101,634 Income taxes refundable 285,100 234,225 Deferred income taxes 1,062,800 1,062,800 Prepaid expenses and other current assets 1,224,915 1,027,198 ----------- ----------- 33,403,044 29,326,619 ----------- ----------- Property and Equipment, net 8,291,563 8,210,547 ----------- ----------- Other Assets: Goodwill, net 307,215 305,945 Deferred income taxes 145,200 145,200 Other assets 978,790 940,219 ----------- ----------- 1,431,205 1,391,364 ----------- ----------- $43,125,812 $38,928,530 ----------- ----------- Liabilities and Stockholders' Equity Current Liabilities: Accounts payable, trade $10,212,755 $6,910,313 Long-term indebtedness, current portion 359,483 321,500 Accrued expenses and other current liabilities 4,054,618 3,987,300 ----------- ----------- 14,626,856 11,219,113 ----------- ----------- Long-term Liabilities: Revolving loan indebtedness 14,190,000 12,910,000 Subordinated debenture 4,351,875 4,340,625 Long-term indebtedness, non-current portion 3,861,636 3,784,340 Deferred income taxes 181,172 177,072 ----------- ----------- 22,584,683 21,212,037 ----------- ----------- 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, 6,784,810 shares and 6,769,425 issued and outstanding at March 31, 1999 and December 31, 1998, respectively) 67,848 67,694 Additional paid-in-capital 8,292,144 8,257,398 Retained earnings (1,813,223) (1,228,070) Accumulated other comprehensive losses (632,496) (599,642) ----------- ----------- 5,914,273 6,497,380 ----------- ----------- $43,125,812 $38,928,530 ----------- ----------- The accompanying notes are an integral part of the financial statements. 3 4 UNIVERSAL AUTOMOTIVE INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended March 31, ----------------------------- 1999 1998 ---- ---- Net Sales $15,199,025 $14,524,313 Cost of Sales 12,742,126 11,492,346 ----------- ----------- Gross Profit 2,456,899 3,031,967 Selling, General, and Administrative Expenses 2,726,933 2,458,893 ----------- ----------- Income (Loss) From Operations (270,034) 573,074 ----------- ----------- Other Expense: Interest expense 511,231 504,875 Other (594) (29,633) ----------- ----------- 510,637 475,242 ----------- ----------- Income (Loss) before Provision for Income Taxes (780,671) 97,832 Income Tax Provision (Benefit) (195,518) 55,700 ----------- ----------- Net Income (Loss) $ (585,153) $ 42,132 =========== =========== Comprehensive Income (Loss): Net Income (Loss) $ (585,153) $ 42,132 Other comprehensive loss, foreign currency translation adjustment (32,854) (19,961) ----------- ----------- Comprehensive Income (Loss) $ (618,007) $ 22,171 =========== =========== Earnings Per Share: Basic: Net Income (Loss) Per Share $ (0.09) $ 0.01 =========== =========== Weighted average number of common shares outstanding 6,771,647 6,769,425 =========== =========== Diluted: Net Income (Loss) Per Share $ (0.09) $ 0.01 =========== =========== Weighted average number of common shares outstanding 6,771,647 6,772,512 =========== =========== The accompanying notes are an integral part of the financial statements 4 5 UNIVERSAL AUTOMOTIVE INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended March 31, ------------------------------ 1999 1998 ----------- ----------- Cash Flows from Operating Activities: Net Income ( Loss) $ (585,153) $ 42,132 Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 279,510 302,457 Effect of exchange rate changes (32,854) (19,961) Compensation expense for stock options 9,900 0 Deferred income taxes and other 15,351 12,297 Changes in operating assets and liabilities: Accounts receivable, trade (2,923,370) (1,478,041) Inventories (975,959) (852,769) Prepaid expenses and other current assets (223,592) (109,298) Other assets (94,720) 65,262 Accounts payable, trade 3,302,440 1,671,034 Accrued expenses and other current liabilities 67,318 14,872 ----------- ----------- Net cash used in operating activities (1,161,129) (352,015) ----------- ----------- Cash Flows for Investing Activities: Purchase of property and equipment (305,645) (258,750) ----------- ----------- Net cash used in investing activities (305,645) (258,750) ----------- ----------- Cash Flows from Financing Activities: Net increase in revolving loan indebtedness 1,280,000 600,000 Proceeds on notes payable 202,316 0 Principal (payments) on notes payable (87,037) (40,318) Principal (payments) on loans from shareholders 0 (35,095) ----------- ----------- Net cash provided by financing activities 1,395,279 524,587 ----------- ----------- Net Increase (Decrease) in Cash (71,495) (86,178) Cash, Beginning of Period 347,626 196,010 ----------- ----------- Cash, End of Period $ 276,131 $ 109,832 =========== =========== Supplemental Disclosures of Cash Flow Information: Cash paid for interest $ 501,068 $ 410,562 ----------- ----------- Cash paid for income taxes $ 0 $ 47,111 ----------- ----------- Supplemental Disclosures of Noncash Investing and Financing Activities - Issuance of common stock for services $ 25,000 $ 0 ----------- ----------- The accompanying notes are an integral part of the financial statements. 5 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. For additional disclosures, see the Notes to Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. 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 period's results of operations are not necessarily indicative of results which ultimately may be achieved for the year. 2. INVENTORIES March 31, 1999 -------------- Finished goods $ 14,927,074 Work in process 195,103 Raw materials 1,955,416 -------------- $ 17,077,593 -------------- 3. BASIS OF PRESENTATION Income Taxes The variation of the Company's effective tax rate 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 are only included in the computation of weighted average number of shares, where their inclusion is not anti-dilutive. For the three months ended March 31, 1999, common stock equivalents are not included in the weighted average number of shares outstanding in determining net loss per share. 4. LASALLE NATIONAL BANK INDEBTEDNESS The Company's credit agreement for (a) a revolving line of credit of up to $20 million based on eligible accounts receivable and inventory and (b) a term loan in the initial amount of $4.45 million had an initial term ending May 1, 1999. The Company has agreed to a LaSalle proposal to renew and restructure the credit agreement to provide for an increased amount of credit as well as increased borrowing availability, however the final amount of such increase has not yet been determined. The proposed renewal bears a term ending May 1, 2002. LaSalle has temporarily extended the existing credit agreement to July 30, 1999 so that the renewal process can be completed. At March 31, 1999, the Company was not in compliance with certain loan covenants but had received waivers from LaSalle concerning such noncompliance. 6 7 5. GEOGRAPHICAL SEGMENT DATA
United Consolidated States Canada Europe Eliminations Total ------ ------ ------ ------------ ----- Total Revenue: Unaffiliated Customers $12,213,867 $ 1,684,812 $ 1,300,346 $ 0 $15,199,025 Inter area transfers 178,129 1,196,386 0 (1,374,515) 0 ----------- ----------- ----------- ------------ ----------- Total $12,391,996 $ 2,881,198 $ 1,300,346 $ (1,374,515) $15,199,025 =========== =========== =========== ============ =========== Income (Loss) from operations $ 230,450 $ (180,827) $ (319,657) $ 0 $ (270,034) =========== =========== =========== ============ =========== Total assets $54,288,001 $12,608,758 $ 4,138,433 $(27,909,380) $43,125,812 =========== =========== =========== ============ ===========
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATION AND FINANCIAL CONDITION(1) RESULTS OF OPERATIONS Three Months Ended March 31, 1999 Compared To Three Months Ended March 31, 1998 Net sales for the three months ended March 31, 1999 increased $674,712 or 5% over the same quarter in 1998 to $15,199,025. The Company's sales of brake products increased 1% compared to the same 1998 quarter reflective of the Company's success in replacing 1998 sales lost by virtue of the bankruptcy of one of the Company's largest customers in the first quarter of 1998. Compared to the first quarter of 1998, non-brake related sales of wholesale commodities increased 76% offset by a 21% decrease in sales of gray iron castings by UBP Csepel Iron Foundry. Gross profits for the three months ended March 31, 1999 were $2,456,899 or 16.2% of net sales compared to $3,031,967 or 20.9% in the same period of 1998. The decrease in gross profit is attributable to (a) securing two new national buying groups as customers in late 1998 at lower pricing in anticipation of significant incremental sales volumes in the future and (b) lower sales at UBP Csepel Iron Foundry which were adversely affected by the impact of the Russian economic crisis on a large foundry customer. The Company believes that the economic situation in Russia will continue in the short term; however, the Foundry's marketing and sales efforts are directed toward increasing sales in Central and Western Europe. - ------------------------------------------------------------------------------- (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. 7 8 Selling, general and administrative expenses for the three months ended March 31, 1999 increased by $268,040 or 10.9% to $2,726,933 from $2,458,893 for the same period in 1998. The increase was due primarily to increased variable costs associated with increased sales and costs incurred in connection with the Company's effort to improve UBP Csepel Iron Foundry's marketing and sales efforts. Other expense for the three months ended March 31, 1999 increased to $510,637 from $475,242 for the same period of 1998. The increase is attributable to higher interest expense in the first quarter ended March 31, 1999 compared to the same period of 1998. The increase in interest expense was due primarily to a higher level of borrowing at March 31, 1999 compared to March 31, 1998. Net loss for the three months ended March 31, 1999 was $585,153 compared to net income of $42,132 for the same period in 1998. This decrease in net income is attributed to the individual factors discussed above. LIQUIDITY AND CAPITAL RESOURCES Net cash used in operating activities for the three months ended March 31, 1999 was $1,161,129. Cash generated through an increase in accounts payable ($3.3 million) did not fully offset cash used in operations ($0.3 million) and cash required to finance growth in accounts receivable ($2.9 million) and inventories ($1.0 million) necessary to support the Company's sales growth. Net cash used in investing activities was $305,645, which is attributable primarily to acquisition of various items of tooling, manufacturing equipment, and warehouse equipment. Net cash provided by financing activities was $1,395,279, consisting primarily of borrowings under the Company's revolving credit agreement and capital leases. 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. As indicated in Note 4 to the Condensed Financial Statements, the Company has agreed to a proposal from LaSalle National Bank to renew and restructure its credit agreement to expand the line available and to permit increased borrowing availability. "YEAR 2000" COMPLIANCE The Company has reviewed the information technology ("IT") and non-IT systems and related software in use throughout its operations that could be affected by the Year 2000 issue. The Year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. Thus, time sensitive software may recognize a date using the digits "00" as the year 1900 rather than the year 2000. This could result in system failure or miscalculation. IT Systems The Company has three major IT systems, the software for which has been licensed from various IT vendors: a system that processes and controls sales, inventory, and warehouse operations for its North American distribution business; an accounting system for its North American business; and an integrated business/accounting system for its Hungarian foundry. 8 9 The distribution business IT system requires a software upgrade from the vendor to be Year 2000 compliant. The Company chose to upgrade its computer hardware and operating system prior to installing the software upgrades to take advantage of more efficient computer operations and robust capabilities the new operating system offers. The new hardware and operating system have been installed and migration to the fully Year 2000 compliant software upgrades are scheduled to be complete by June 30, 1999. The cost of the new hardware and operating system software is approximately $75,000. The upgrade version of the software is provided by the vendor under a maintenance agreement. The accounting system in use for the North American business has been certified as Year 2000 compliant by the software publisher for the version in use. No additional costs are anticipated for this system. The Year 2000 upgrade needed for the integrated business/accounting system in use at the Hungarian foundry has been installed and has been provided by the software vendor under a maintenance agreement. Non-IT Systems The Company has considered the risk that the Year 2000 issue may adversely affect non-IT systems in use. In several instances, the provider of outside services has certified Year 2000 compliance (i. e. banking, payroll processing, etc.). The Company believes that its manufacturing processes are not subject to Year 2000 risk due to the nature of the processes and machines in use. The Company also believes that the impact of other non-IT systems not being Year 2000 compliant would be minimal. Third Party Issues The Company is currently addressing the Year 2000 readiness of third parties whose business interruption would have a material adverse affect on our business. Significant vendors and customers are being surveyed to ascertain their plans for Year 2000 readiness. The survey is planned to be complete and results evaluated by June 30, 1999. In a highly unlikely worst case scenario in which a portion of the Company's computer system fails to produce accurate data due to Year 2000, a temporary manual/personal computer system would be used until the software is corrected or until replacement software is installed. Despite diligent preparation, unanticipated third-party failures, more general public infrastructure failures or failure to successfully conclude our Year 2000 readiness efforts as planned could have a material adverse impact on the Company's results of operations, financial condition and cash flows in 2000 and beyond. 9 10 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: May 14, 1999 10 EX-11 2 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT II - ---------- UNIVERSAL AUTOMOTIVE INDUSTRIES, INC. COMPUTATION OF EARNINGS PER SHARE Three Months Ended March 31, ---------------------------- 1999 1998 ---- ---- BASIC NET INCOME (LOSS) PER COMMON SHARE Net Income (Loss) $ (585,153) $ 42,132 ---------- ---------- Weighted average Common Shares outstanding 6,771,647 6,769,425 ---------- ---------- Basic Net Income (Loss) Per Common Share $ (0.09) $ 0.01 ========== ========== DILUTED NET INCOME (LOSS) PER COMMON SHARE Net Income (Loss) $ (585,153) $ 42,132 ---------- ---------- Weighted average Common Shares outstanding 6,771,647 6,769,425 Options and warrants assumed to be Common Stock equivalents using Treasury Stock Method 0 3,087 ---------- ---------- Weighted average common shares outstanding, as adjusted 6,771,647 6,772,512 ---------- ---------- Diluted Net Income (Loss) per Common Share $ (0.09) $ 0.01 ========== ========== 11 EX-27 3 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 276,131 0 13,897,048 420,543 17,077,593 33,403,044 12,003,071 3,711,508 43,125,812 14,626,856 22,403,511 0 0 67,848 5,846,425 43,125,812 15,199,025 15,199,025 12,742,126 12,742,126 2,726,933 95,190 511,231 (780,671) (195,518) (585,153) 0 0 0 (585,153) (0.09) (0.09)
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