Universal Automotive Industries, Inc. Issues Letter to Shareholders and Customers


igor@af
07-13-2003, 01:44 AM
ALSIP, Ill., July 10 -- Universal Automotive
Industries, Inc. (Nasdaq: UVSL, UVSLW) today announced that it will be mailing
the attached mid-year letter from Arvin Scott, its President and CEO, to
Shareholders and Customers, addressing the status of its business:

To Our Shareholders and Customers:

Typically I write to you just once a year -- but these have not been
typical times. Coming off the heels of a profitable year in 2002, where
we were beginning to feel the wind at our backs, it's discouraging to have
lost some momentum due to factors beyond our control. So, I want to take
the opportunity at the mid-year mark to review some of the initiatives
that have been implemented to right our business and share with you some
of our plans for the balance of 2003 aimed at bringing Universal
Automotive Industries to performance levels that will result in sustained
profitability.

As we have noted before, in 2002, Universal was negatively impacted by a
sales decline that was primarily a result of consolidation among auto part
distributors and retailers and pricing deflation in the brake drum and
rotor segment. We were able to mitigate these lost sales and margins due
to cost containment efforts and reflect a modest profit in the year.

During the months of April, May and June of 2003, the company suffered
significant supply chain challenges in its core product line of brake
drums and rotors. These fill rate declines were due primarily to a fire
that occurred at the location of a key supplier in late February and were
further exacerbated by late shipments from a secondary supplier. I am
pleased to report that we now believe we have this situation under control
and expect that Universal's supply chain fill rates during the first weeks
of July will be at a 90 percent level. However, to respond to softer
sales due to the inability to fill orders, we have implemented additional
aggressive cost controls throughout the organization that are expected to
save us between $550,000 and $700,000 on an annualized basis.

I believe strongly that we are able to successfully meet our challenges
head on by leveraging the expertise we have built over the course of the
last 15 months with new key executives whose industry experience
compliments the myriad talents of existing Universal employees. Guided by
this bolstered team, additional restructuring efforts have included
workforce reductions, productivity improvements at our manufacturing
locations, the divestiture of certain non-performing businesses, the
refinancing of debt and salary reductions at the executive management
level.

In addition to the initiatives implemented thus far, we have engaged an
outside strategic advisor to augment our efforts and help refine our
strategic plan to fundamentally strengthen the company from the bottom up.
I am confident that they will provide important insight and advisory
services to enable us to better leverage Universal's infrastructure and
core competencies. Part of this strategy might include evaluating certain
key acquisitions subject to availability of financing. Such moves will be
considered very selectively to ensure they advance our goal of
strengthening our position as a leading automotive brake part supplier to
distributors and retailers in the United States.

To further reinforce our balance sheet and provide capital for general
corporate purposes, in early July 2003, we completed a private placement
of securities to an accredited investor in the gross aggregate amount of
$1.55 million. Under terms of the financing, Universal Automotive
provided the investor with a two-year deferred interest convertible
unsecured note, 50 percent of which is convertible into common shares at
any time following 180 days after the closing date of the transaction.
The remaining 50 percent of the note will be convertible at any time
following 300 days after the closing. The note will be convertible into
common shares at a conversion price equal to 100 percent of the volume
weighted average sales price for ten trading days immediately prior to the
related notice of conversion and carries additional warrants. For
additional information regarding the private placement please refer to the
company's Form 8K as filed with the Securities and Exchange Commission and
available on its website. Reedland Capital Partners, an institutional
division of Financial West Group, acted as placement agent in the
transaction.

We are determined to bring the company to a level of sustained
profitability and to generate a return on shareholder equity that mirrors
the high intrinsic value that we believe exists within the company.
Achieving this objective will take some time. For fiscal 2003, we expect
to report a net loss in the range of $550,000 to $1.0 million due,
primarily, to the supply chain problems reported earlier. However, with
these fill rate problems behind us, we believe we are in a better position
to implement our strategic plan.

Our paramount goal, however, is to maintain what we believe is Universal's
unparalleled reputation for being responsive to customers' needs. As we
move forward, we plan to enhance customer satisfaction to ensure that our
highly skilled, world-class customer service team is available to answer
any questions that may arise -- recognizing that, to build market share,
we must, in addition to manufacturing and distributing quality products,
stay in close contact with our customers in order to retain a competitive
edge and foster life-long business partners.

In conclusion, we want to express our sincere appreciation to our
employees, our customers and our shareholders for supporting us through a
challenging time. We have a definitive plan to emerge from these
challenges a solid, viable company deeply committed to supplying world
class brake parts to a growing automotive aftermarket. I look forward to
reporting to you on our progress during the months ahead.

Sincerely,

Arvin Scott
President and Chief Executive Officer
July 10, 2003


This communication contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which are intended to
be covered by safe harbors created hereby. Such forward-looking statements
involve known and unknown risks, uncertainties (including those risk factors
referenced in the Company's filings with the Securities and Exchange
Commission and the risks that the Company will not be able to recover from the
challenges presented by its recent supply chain problems and the risk that
projections are susceptible to numerous factors outside the Company's
control), and other factors that may cause the actual results, performance or
achievements of the Company to be materially different from any future
results, performance, or achievements of the Company expressed or implied by
such forward-looking statements.



SOURCE Universal Automotive Industries, Inc.
Web Site: http://www.uaiinc.com

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