<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[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: 001-13973
UNICAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 65-0788314
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
10800 Biscayne Boulevard, Suite 800
Miami, Florida 33161
(Address of principal executive office) (Zip Code)
(305) 899-5000
(Registrant's telephone number, including area code)
Not Applicable (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. [X] Yes [ ] No
On May 14, 1999, there were 52,740,032 shares of Common Stock outstanding.
<PAGE> 2
<TABLE>
<CAPTION>
UNICAPITAL CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
Table of Contents
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements 3
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Consolidated Statement of Stockholders' Equity 7
Notes to Unaudited Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 19
PART II. OTHER INFORMATION 21
Item 1. Legal Proceedings 21
Item 6. Exhibits and Reports on Form 8-K 21
Signatures
Exhibit Index
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
UniCapital Corporation and Subsidiaries
Consolidated Balance Sheets
(Dollars in Thousands, Except Share Data)
<TABLE>
<CAPTION>
(unaudited)
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 12,886 $ 9,772
Accounts receivable 31,379 41,987
Notes receivable 27,950 9,647
Net investment in direct financing and sales-type leases 459,803 373,113
Equipment under operating leases, net 513,354 430,229
Equipment held for sale or lease 195,978 79,897
Investments 18,121 29,548
Property and equipment, net 11,867 8,433
Goodwill, net of accumulated amortization
of $14,709 and $10,119, respectively 617,504 613,646
Deposits and other assets 80,136 73,251
---------- ----------
Total assets $1,968,978 $1,669,523
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Recourse debt $ 307,290 $ 196,279
Non-recourse and limited recourse debt 664,594 471,043
Accounts payable and accrued expenses 71,051 84,967
Security and other deposits 31,726 24,473
Income taxes payable -- 6,353
Deferred income taxes 68,510 66,522
Other liabilities 2,854 2,598
---------- ----------
Total liabilities 1,146,025 852,235
---------- ----------
Commitments and contingencies -- --
Stockholders' equity:
Preferred stock, $.001 par value, 20,000,000
shares authorized, no shares issued and
outstanding -- --
Common stock, $.001 par value, 200,000,000 shares
authorized, 52,505,323 and 51,433,539 shares issued
and outstanding, respectively 53 51
Additional paid-in capital 803,615 796,960
Stock subscription notes receivable (3,443) (3,443)
Accumulated other comprehensive income 959 1,064
Retained earnings 21,769 22,656
---------- ----------
Total stockholders' equity 822,953 817,288
---------- ----------
Total liabilities and stockholders' equity $1,968,978 $1,669,523
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE> 4
UniCapital Corporation and Subsidiaries
Consolidated Statements of Operations
(Dollars in Thousands, Except Share Data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1999 March 31, 1998
------------------ ------------------
<S> <C> <C>
Finance income from direct financing and sales-type leases $ 11,625 $ --
Rental income from operating leases 33,027 --
Sales of equipment 48,555 --
Gain on sale of leases 283 --
Fees, commissions and remarketing income 6,217 --
Interest and other income 2,984 --
----------- ----------
Total revenues 102,691 --
----------- ----------
Cost of operating leases 16,074 --
Cost of equipment sold 36,564 --
Interest expense 18,911 --
Selling, general and administrative expenses 25,169 17,315
Goodwill amortization 4,590 --
----------- ----------
Total expenses 101,308 17,315
----------- ----------
Income (loss) from operations 1,383 (17,315)
Provision for income taxes 2,270 --
----------- ----------
Net loss $ (887) $ (17,315)
=========== ==========
Loss per common share, basic $ (0.02) $ (2.72)
Loss per common share, diluted $ (0.02) $ (2.72)
Weighted average shares outstanding, basic 51,915,588 6,373,363
Weighted average shares outstanding, diluted 52,333,431 6,373,363
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE> 5
UniCapital Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1999 March 31, 1998
------------------- ------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (887) $ (17,315)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 24,612 --
Deferred income tax expense 1,988 --
Provision for credit losses 1,541 --
Compensation expense related to equity issuances -- 17,308
Gain on sale of lease financing receivables (283) --
Gain on sale of equipment (11,991) --
Equity in net earnings of minority-owned affiliates (93) --
Changes in other assets and liabilities:
Notes and accounts receivable (7,695) --
Deposits and other assets (10,100) (1,792)
Accounts payable and accrued expenses (13,916) 470
Security and other deposits 7,253 --
Income taxes payable (6,353) --
Other liabilities 256 --
--------- ---------
Net cash used in operating activities (15,668) (1,329)
--------- ---------
Cash flows from investing activities:
Capital expenditures (3,031) --
Proceeds from sale of lease financing receivables 31,574 --
Proceeds from sale of equipment 22,628 --
Collection of direct financing and sales-type
leases, net of finance income earned 47,141 --
Investment in direct financing and sales-type leases and
purchases of equipment for sale or lease (370,756) --
Decrease in investments, net 11,427 --
--------- ---------
Net cash used in investing activities (261,017) --
--------- ---------
Cash flows from financing activities:
Proceeds from recourse debt 292,765 50
Repayment of recourse debt (181,754) --
Proceeds from non-recourse and limited recourse debt 265,347 --
Repayment of non-recourse and limited recourse debt (96,559) --
Proceeds from issuance of common stock -- 1,290
--------- ---------
Net cash provided by financing activities 279,799 1,340
--------- ---------
Increase in cash and cash equivalents 3,114 11
Cash and cash equivalents at beginning of period 9,772 30
--------- ---------
Cash and cash equivalents at end of period $ 12,886 $ 41
========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE> 6
UniCapital Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(continued)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1999 March 31, 1998
----------------------- -----------------------
<S> <C> <C>
Supplemental disclosure of cash flow information for non-cash items:
Stock subscription notes receivable received as consideration
for issuance of common stock $ -- $3,831
======== ======
Notes received as partial consideration on sales of
aircraft engines $ 9,200 $ --
======== ======
Debt assumed in connection with acquisition of aircraft
and aircraft engines $ 24,763 $ --
======== ======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
6
<PAGE> 7
UniCapital Corporation and Subsidiaries
Consolidated Statement of Stockholders' Equity
(Dollars in Thousands)
(unaudited)
<TABLE>
<CAPTION>
Accumulated
Additional Stock Other
Common Paid-In Subscription Comprehensive Retained Comprehensive
Stock Capital Notes Receivable Income Earnings Income Total
----- ------- ---------------- ------ -------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 $ 51 $ 796,960 $ (3,443) $ 1,064 $ 22,656 $ 817,288
Issuance of 1,071,784 shares of
Common Stock in connection
with 1998 earnouts for
companies acquired in 1998 2 6,655 -- -- -- 6,657
Comprehensive income:
Net income -- -- -- -- (887) $ (887) (887)
Other comprehensive income:
Change in net unrealized gain
on securities, net of deferred
taxes of ($64) -- -- -- (105) -- (105) (105)
---------
Total comprehensive income $ (992)
=========
--------- --------- --------- --------- --------- ---------
Balance at March 31, 1999 $ 53 $ 803,615 $ (3,443) $ 959 $ 21,769 $ 822,953
========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
7
<PAGE> 8
UNICAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION AND NATURE OF BUSINESS
UniCapital Corporation, incorporated in Delaware, was founded in
October 1997 to create a national operator and integrator of equipment leasing
and specialty finance businesses serving the commercial market. UniCapital
Corporation acquired twelve equipment leasing, specialty finance and related
businesses (the "Founding Companies") upon consummation of an initial public
offering (the "Offering") of its common stock ("Common Stock") in May 1998.
Subsequent to the Offering, UniCapital Corporation acquired, through merger or
purchase, five additional companies, continuing the expansion of its national
operations. UniCapital Corporation, the Founding Companies and the subsequently
acquired companies are referred to collectively as the "Company".
The Company originates, acquires, sells and services equipment leases
and arranges structured financing in the computer and telecommunications
equipment, large ticket and structured finance, middle market and small ticket
areas of the equipment leasing industry. In addition, the Company provides lease
administration and processing services, which include the servicing of certain
leases sold to third parties. The Company's leases and structured financing
arrangements cover a broad range of equipment, including aircraft and aircraft
equipment, computer and telecommunications equipment, construction and
manufacturing equipment, office equipment, tractor trailers, printing equipment,
car washes, petroleum retail equipment and vending machines.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and the
rules and regulations of the Securities and Exchange Commission for interim
financial statements. Accordingly, the interim statements do not include all of
the information and disclosures required for annual financial statements. In
the opinion of the Company's management, all adjustments (consisting solely of
adjustments of a normal recurring nature) necessary for a fair presentation of
these interim results have been included. Intercompany accounts and
transactions have been eliminated. The results for the interim periods are not
necessarily indicative of the results to be expected for the entire year.
The financial statements should be read in conjunction with the
Company's audited financial statements included in the Company's Form 10-K for
the year ended December 31, 1998 filed with the Securities and Exchange
Commission.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
For a description of the Company's accounting policies, refer to the
Notes to consolidated financial statements included in the Company's Form 10-K
for the year ended December 31, 1998 filed with the Securities and Exchange
Commission.
NOTE 3--INCOME TAXES
The Company accounts for income taxes under SFAS No. 109, "Accounting
for Income Taxes." Under this method, deferred tax assets and liabilities are
determined based on the differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse. Valuation
allowances are provided to reduce deferred taxes to the amount expected to be
realized based on available evidence. The Company's effective tax rate differs
from that computed at the statutory rate principally as a result of
non-deductible goodwill amortization and compensation expense related to certain
equity issuances.
NOTE 4--STOCKHOLDERS' EQUITY
During the three months ended March 31, 1999, the Company issued
1,071,784 shares of Common Stock to the former owners of certain companies
acquired in 1998. These shares were issued in connection with 1998 earnout
arrangements and have been recorded as additional purchase price in the amount
of $6.7 million.
NOTE 5--EARNINGS PER SHARE
Earnings (loss) per share have been calculated and presented in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share", which requires the Company to compute and present basic
and diluted earnings per share. Dilutive securities are excluded from the
computation in periods in which they have an anti-dilutive effect.
8
<PAGE> 9
NOTE 6--SEGMENT INFORMATION
The following table presents selected financial information for the
Company's reporting segments for the three months ended March 31, 1999 (in
thousands):
<TABLE>
<CAPTION>
Technology
Aircraft and
Air Engine Finance
Group Group Group
----- ----- -----
<S> <C> <C> <C>
Finance income from direct financing
and sales-type leases $ -- $ 105 $ 8,911
Rental income from operating leases 16,738 1,312 14,827
Sales of equipment -- 24,501 24,054
Gain on sale of leases -- -- 283
Fees, commissions and remarketing
income 26 -- 3,714
Interest and other income 385 206 1,232
---------- ---------- ----------
Total revenues 17,149 26,124 53,021
Cost of operating leases 7,048 186 8,782
Cost of equipment sold -- 16,255 20,309
Interest expense 7,340 878 5,509
Selling, general and administrative
expenses 2,360 908 10,936
Goodwill amortization 698 1,197 2,167
---------- ---------- ----------
Total expenses 17,446 19,424 47,703
---------- ---------- ----------
Income (loss) before taxes $ (297) $ 6,700 $ 5,318
========== ========== ==========
Net investment in direct financing and
sales-type leases $ -- $ 12,663 $ 350,323
========== ========== ==========
Equipment under operating leases, net $ 423,964 $ 10,067 $ 79,088
========== ========== ==========
Investment in equity method investees $ -- $ -- $ 3,963
========== ========== ==========
Total assets $ 661,197 $ 181,192 $ 892,485
========== ========== ==========
Total debt $ 330,137 $ 9,129 $ 329,171
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Business
Credit Corporate
Group Division Consolidated
----- -------- ------------
<S> <C> <C> <C>
Finance income from direct financing
and sales-type leases $ 2,609 $ -- $ 11,625
Rental income from operating leases 150 -- 33,027
Sales of equipment -- -- 48,555
Gain on sale of leases -- -- 283
Fees, commissions and remarketing
income 1,812 665 6,217
Interest and other income 559 602 2,984
---------- ---------- ----------
Total revenues 5,130 1,267 102,691
Cost of operating leases 58 -- 16,074
Cost of equipment sold -- -- 36,564
Interest expense 1,094 4,090 18,911
Selling, general and administrative
expenses 6,832 4,133 25,169
Goodwill amortization 451 77 4,590
---------- ---------- ----------
Total expenses 8,435 8,300 101,308
---------- ---------- ----------
Income (loss) before taxes $ (3,305) $ (7,033) $ 1,383
========== ========== ==========
Net investment in direct financing and
sales-type leases $ 96,157 $ 660 $ 459,803
========== ========== ==========
Equipment under operating leases, net $ 235 $ -- $ 513,354
========== ========== ==========
Investment in equity method investees $ -- $ -- $ 3,963
========== ========== ==========
Total assets $ 193,413 $ 40,691 $1,968,978
========== ========== ==========
Total debt $ 66,341 $ 237,106 $ 971,884
========== ========== ==========
</TABLE>
Financial information for the three months ended March 31, 1998
includes certain organizational costs incurred by the Corporate Division. The
net loss reported by the Company for the three months ended March 31, 1998 was
$17.3 million, which was comprised of non-cash compensation charges for certain
equity issuances.
NOTE 7--UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma financial information for the three months
ended March 31, 1998 includes the results of UniCapital Corporation combined
with the Founding Companies and subsequent acquisitions as if all acquisitions
had occurred at the beginning of the period presented. This unaudited pro forma
financial information includes the effects of (a) the acquisition of the
Founding Companies; (b) the Offering; (c) the subsequent acquisitions; (d)
certain reductions in salaries, bonuses and benefits to the stockholders and
9
<PAGE> 10
managers of the Founding Companies and the subsequent acquisitions to which
they have contractually agreed prospectively; (e) amortization of goodwill; (f)
the incremental provision for federal and state income taxes assuming all
entities were subject to corporate federal and state income taxes; and (g) the
incremental costs of being a public company.
The unaudited pro forma financial information may not be comparable to
and may not be indicative of the Company's results of operations subsequent to
the acquisitions because the Founding Companies and the subsequent acquisitions
were not under common control or management and had different tax and capital
structures during the periods presented.
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31, 1998
------------------------
(in thousands, except share data)
<S> <C>
Total revenues $88,270
Income before taxes $20,393
Net income $10,921
Earnings per common share, basic $ 0.22
Earnings per common share, diluted $ 0.22
</TABLE>
NOTE 8--SUBSEQUENT EVENTS (UNAUDITED)
On May 5, 1999, the Company acquired, through its wholly-owned
subsidiary UniCapital Air Group, Inc., the equity interest in a portfolio of 36
commercial aircraft, with an appraised fair value of approximately $1.32
billion, from GE Capital Aviation Services, a division of GE Capital
Corporation. All of the aircraft are subject to net operating leases. The
acquisition closed simultaneously with a securitization, entitled Aircraft
Finance Trust, which provides non-recourse financing at a fixed weighted
average interest rate of 6.69% for 96.7% of the acquisition price. The Company
paid the $39.1 million purchase price for the equity interest in cash.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
The following discussion should be read in conjunction with the
unaudited consolidated financial statements, including the related notes thereto
appearing elsewhere in this Quarterly Report on Form 10-Q, as well as the
Company's audited consolidated financial statements for the year ended December
31, 1998 as filed on Form 10-K.
UniCapital was founded in October 1997 as a Delaware corporation. We
commenced operations in May 1998 in conjunction with the consummation of our
initial public offering and the acquisition of twelve equipment leasing,
specialty finance and related businesses. In June, July and August 1998, we
completed the acquisition of five additional equipment leasing, specialty
finance and related businesses. We intend to integrate the businesses,
operations and administrative functions of the businesses that we acquired over
a period of time. Integration may present opportunities to reduce costs through
the elimination of duplicate functions and through economies of scale, and may
necessitate additional costs and expenditures for corporate management and
administration, corporate expenses related to being a public company, systems
integration, employee relocation and severance and facilities expansion. These
various costs and possible cost-savings make comparison of future operating
results with historical operating results difficult.
We derive the majority of our revenue from lease payments on leases
originated and held by the Company and sales of equipment, including sales of
equipment off-lease and the sale of new and used equipment. In addition, we
derive revenue from servicing fees, late charges and administrative fees. We
also receive remarketing fees for the sale of off-lease equipment on behalf of
equity investors in leases and we may obtain a premium for sales prices in
excess of an agreed-upon amount.
We expect to fund the majority of the leases that we originate through
credit facilities. We may sell leases to third parties or refinance them through
a securitization program or other structured finance products. To date, we have
not completed a securitization transaction. Should we be unable to sell or
securitize leases with fixed rates within a reasonable period of time after
funding, our operating margins could be adversely affected by any increase in
interest rates to the extent that we have not effectively hedged our interest
rate exposure on variable rate debt. Moreover, increases in interest rates which
cause us to raise the implicit interest rate charged to our customers could
decrease demand for our lease products.
The leases we acquire or originate generally are noncancelable for a
specified term during which we generally receive scheduled payments sufficient,
in the aggregate, to cover our borrowing costs and, when aggregated with the
residual, the costs of the underlying equipment. The noncancelable term of each
lease is generally equal to or less than the equipment's estimated economic
life. Initial terms of the leases in our portfolio generally range from 12 to 84
months. Certain of the leases we acquire or originate carry a $1.00 buy-out
provision upon maturity of the lease.
Our leases are collateralized by the equipment leased as well as, in
some cases, a personal guarantee provided by a principal of the lessee. We
manage credit risk through diversifying our business customer base, geographic
location of lessees and the type of business equipment leased. We believe that
prepayment risks are mitigated by the noncancelable, full payout structure of
the majority of our leases.
11
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RECENT DEVELOPMENTS
On April 26, 1999 we announced that we will retain on-balance sheet
leases that we transfer to our commercial paper credit facility, as well as
leases to be transferred in connection with possible future securitizations. We
expect to recognize income over the term of these leases as finance income, as
these transfers will no longer meet the criteria necessary to qualify as sales.
The leases transferred into the commercial paper facility, and those expected to
be transferred in connection with future securitizations, are generated by our
Technology and Finance Group and our Business Credit Group. We intend to
continue our core business practice of selling certain leases to third parties
on a whole-loan basis. These sales are typically non-recourse, and we maintain
no retained interest in those leases. Maintaining these third party funding
sources is consistent with our objective of having access to diverse funding
sources. We also announced that we will reduce significantly our trading-related
sales of commercial aircraft. We expect that our future sales of aircraft will
be limited primarily to risk management related sales to maintain proper
diversification of lessees, aircraft type, country risk, lease expiration dates
and other factors, within our aircraft portfolio.
On May 5, 1999 we acquired, through our wholly-owned subsidiary
UniCapital Air Group Inc., the equity interest in a portfolio of 36 commercial
aircraft, with an appraised fair value of approximately $1.32 billion, from GE
Capital Aviation Services, a division of GE Capital Corporation. All of the
aircraft are subject to net operating leases. The acquisition closed
simultaneously with a securitization which provides non-recourse financing at a
fixed weighted average interest rate of 6.69% for 96.7% of the acquisition
price. We paid the $39.1 million purchase price for the equity interest in cash.
HISTORICAL RESULTS OF OPERATIONS
We were incorporated in October 1997 and commenced operations in May
1998 in conjunction with the consummation of our initial public offering and the
acquisition of twelve equipment leasing, specialty finance and related
businesses. The following table sets forth selected financial data for the
Company and its subsidiaries on a historical basis and as a percentage of
revenues for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------------------------------
1999 1998
----------------------- ----------------------
(unaudited)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Finance income from direct financing and sales-type leases $ 11,625 11.3% $ -- -- %
Rental income from operating leases 33,027 32.2 -- --
Sales of equipment 48,555 47.3 -- --
Gain on sale of leases 283 0.3 -- --
Fees, commissions and remarketing income 6,217 6.1 -- --
Interest and other income 2,984 2.8 -- --
-------- ----- -------- ------
Total revenues 102,691 100.0 -- --
-------- ----- -------- ------
Cost of operating leases 16,074 15.7 -- --
Cost of equipment sold 36,564 35.6 -- --
Interest expense 18,911 18.4 -- --
Selling, general and administrative expenses 25,169 24.5 17,315 --
Goodwill amortization 4,590 4.5 -- --
-------- ----- -------- ------
Total expenses 101,308 98.7 17,315 --
-------- ----- -------- ------
Income (loss) from operations 1,383 1.3 (17,315) --
Provision for income taxes 2,270 2.2 -- --
-------- ----- -------- ------
Net loss $ (887) (0.9)% $(17,315) -- %
======== ===== ======== ======
</TABLE>
12
<PAGE> 13
HISTORICAL RESULTS OF OPERATIONS BY SEGMENT
The following table sets forth the combined results of operations of
UniCapital and its subsidiaries by segment for the three months ended March 31,
1999.
<TABLE>
<CAPTION>
AIRCRAFT TECHNOLOGY BUSINESS
AIR ENGINE AND FINANCE CREDIT CORPORATE
GROUP GROUP GROUP GROUP DIVISION CONSOLIDATED
-------- -------- -------- -------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Finance and income from direct financing
and sales-type leases $ -- $ 105 $ 8,911 $ 2,609 $ -- $ 11,625
Rental income from operating leases 16,738 1,312 14,827 150 -- 33,027
Sales of equipment -- 24,501 24,054 -- -- 48,555
Gain on sale of leases -- -- 283 -- -- 283
Fees, commissions and remarketing
income 26 -- 3,714 1,812 665 6,217
Interest and other income 385 206 1,232 559 602 2,984
-------- -------- -------- -------- -------- --------
Total revenues 17,149 26,124 53,021 5,130 1,267 102,691
Cost of operating leases 7,048 186 8,782 58 -- 16,074
Cost of equipment sold -- 16,255 20,309 -- -- 36,564
Interest expense 7,340 878 5,509 1,094 4,090 18,911
Selling, general and administrative
expenses 2,360 908 10,936 6,832 4,133 25,169
Goodwill amortization 698 1,197 2,167 451 77 4,590
-------- -------- -------- -------- -------- --------
Total expenses 17,466 19,424 47,703 8,435 8,300 101,308
-------- -------- -------- -------- -------- --------
Income (loss) before taxes $ (297) $ 6,700 $ 5,318 $ (3,305) $ (7,033) $ 1,383
======== ======== ======== ======== ======== ========
</TABLE>
UNAUDITED PRO FORMA AND HISTORICAL RESULTS OF OPERATIONS
The pro forma financial information for the period presented do not
represent combined results of operations presented in accordance with generally
accepted accounting principles, but are only a summation of the revenues,
operating expenses and general and administrative expenses of the Company on a
pro forma combined basis as if all of the Company's acquisitions and the
Company's initial public offering had taken place at the beginning of the period
presented. This unaudited pro forma financial information includes the effects
of the acquisitions, the initial public offering, certain reductions in
salaries, bonuses and benefits to which certain employee-stockholders of
acquired companies agreed contractually, amortization of goodwill, the
incremental provision for federal and state income taxes assuming all entities
were subject to corporate federal and state income taxes and certain incremental
costs associated with being a public company.
The pro forma financial information may not be comparable to, and may
not be indicative of, our future results of operations. The following discussion
should be read in conjunction with the Company's Unaudited Consolidated
Financial Statements and the related notes thereto appearing elsewhere in this
Quarterly Report on Form 10-Q.
The following table sets forth selected financial data for the Company
and its subsidiaries on a historical and a pro forma basis and as a percentage
of revenues for the periods indicated.
13
<PAGE> 14
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
------------------------- ------------------------
(unaudited)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Finance income from direct financing and sales-type leases $ 11,625 11.3% $ 12,512 14.2%
Rental income from operating leases 33,027 32.2 13,611 15.4
Sales of equipment 48,555 47.3 49,937 56.6
Gain on sale of leases 283 0.3 3,857 4.4
Fees, commissions and remarketing income 6,217 6.1 6,144 7.0
Interest and other income 2,984 2.8 2,209 2.4
--------- ----- --------- -----
Total revenues 102,691 100.0 88,270 100.0
--------- ----- --------- -----
Cost of operating leases 16,074 15.7 8,629 9.8
Cost of equipment sold 36,564 35.6 30,420 34.5
Interest expense 18,911 18.4 9,599 10.9
Selling, general and administrative expenses 25,169 24.5 16,807 19.0
Goodwill amortization 4,590 4.5 4,530 5.1
--------- ----- --------- -----
Total expenses 101,308 98.7 69,985 79.3
--------- ----- --------- -----
Income from operations 1,383 1.3 18,285 20.7
Equity in income from minority-owned affiliates -- -- 2,108 2.4
--------- ----- --------- -----
Income before taxes 1,383 1.3 20,393 23.1
Provision for income taxes 2,270 2.2 9,472 10.7
--------- ----- --------- -----
Net income (loss) $ (887) (0.9)% $ 10,921 12.4%
========= ===== ========= =====
</TABLE>
HISTORICAL RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE
PRO FORMA COMBINED RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1998
Finance income from direct financing and sales-type leases. Finance income from
direct financing and sales-type leases for the three months ended March 31, 1999
decreased by $0.9 million, or 7.1%, from $12.5 million for the pro forma three
months ended March 31, 1998. This decrease is primarily due to a decrease in the
number of leases held by the Business Credit Group, due to sales of leases in
the year ended December 31, 1998.
Rental income from operating leases. Rental income from operating leases for the
three months ended March 31, 1999 increased by $19.4 million, or 142.6%, from
$13.6 million for the pro forma three months ended March 31, 1998. This increase
is primarily due to higher investment in equipment under operating leases in the
Air Group and Technology and Finance Group as compared to the prior period.
Sales of equipment. Sales of equipment for the three months ended March 31, 1999
decreased by $1.4 million, or 2.8%, from $49.9 million for the pro forma three
months ended March 31, 1998. This decrease is primarily due to the decrease in
sales of equipment by the Technology and Finance Group, partially offset by
increased sales of aircraft engines. The decrease in sales of equipment by the
Technology and Finance Group is primarily attributable to the consummation of a
significant transaction during the three months ended March 31, 1998 that did
not recur in the three months ended March 31, 1999.
Gain on sale of leases. Gain on sale of leases for the three months ended March
31, 1999 decreased by $3.6 million, or 92.7%, from $3.9 million for the pro
forma three months ended March 31, 1998. This decrease is primarily due to the
Company's decision to increase the amount of leases retained for its own
portfolio rather than to sell leases in transactions qualifying for gain-on-sale
accounting treatment.
Interest and other income. Interest and other income for the three months ended
March 31, 1999 increased by $0.8 million, or 35.1%, from $2.2 million for the
pro forma three months ended March 31, 1998. This increase is primarily due to
interest income from overnight investments and interest income on the Company's
investment in retained certificates.
14
<PAGE> 15
Cost of operating leases. Cost of operating leases for the three months ended
March 31, 1999 increased by $7.4 million, or 86.3%, from $8.6 million for the
pro forma three months ended March 31, 1998. This increase is primarily due to
higher investment in equipment under operating leases in the Air Group and
Technology and Finance Group as compared to the prior period.
Cost of equipment sold. Cost of equipment sold for the three months ended March
31, 1999 increased by $6.1 million, or 20.2%, from $30.4 million for the pro
forma three months ended March 31, 1998. This increase is primarily due to
increased sales of aircraft engines.
Interest expense. Interest expense for the three months ended March 31, 1999
increased by $9.3 million, or 97.0%, from $9.6 million for the pro forma three
months ended March 31, 1998. This increase is primarily due to increased
borrowings outstanding to finance the growth of the Company's lease and
equipment portfolio and acquisitions.
Selling, general and administrative expenses. Selling, general and
administrative expenses for the three months ended March 31, 1999 increased by
$8.4 million, or 49.8%, from $16.8 million for the pro forma three months ended
March 31, 1998. This increase is primarily due to actual corporate overhead
expenses that were considerably in excess of the minimum amount necessary to
operate a public company that had been assumed by the Company is formulating the
1998 pro forma amount, and increased expenses for the Technology and Finance
Group, primarily attributable to the expansion of the sales force.
Equity in income from minority-owned affiliates. During the three months ended
March 31, 1999, the Company liquidated a significant portion of its investments
in minority-owned affiliates.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1999, we had cash and cash equivalents of approximately
$12.9 million. Our business is capital intensive and requires access to
substantial short-term and long-term credit to fund new equipment leases and the
purchase of equipment. We will continue to require access to significant
additional capital to maintain and expand the volume of leases that we fund, as
well as to fund any future acquisitions of lease portfolios or leasing and
specialty finance companies.
Our uses of cash include the origination of equipment leases and the
purchase of equipment, payment of interest expenses, repayment of borrowings
under our credit facilities, operating and administrative expenses, income taxes
and capital expenditures, and may include payment of the cash portion of the
earn-out arrangements with the former stockholders of certain of the acquired
companies, as well as any future acquisitions of companies or lease portfolios.
On March 10, 1999, we entered into a letter of intent to purchase a
portfolio of nine commercial aircraft subject to net operating leases for
approximately $312 million. We intend to purchase these aircraft with up to $39
million in cash and approximately $278 million in a combination of seller
financing and third-party financing for which we are currently negotiating. We
expect the transaction to close by June 30, 1999. After consummation of the
transaction, the seller is obligated to offer to sell us an additional $400
million in commercial aircraft prior to the end of 1999.
In order to complete the transaction described above, we must obtain
additional financing or fund the necessary cash requirements from the sale of
assets or equipment subject to lease. We are currently negotiating to obtain the
necessary funding through financing or sales.
We believe that funds generated from operations and possible future
sources of borrowings, including the Senior Credit Facilities and Aircraft
Facility, will be sufficient to finance our current operations and planned
capital expenditure requirements at least for the next twelve months, assuming
satisfactory renewal or replacement of such
15
<PAGE> 16
facilities. If we are unable to renew or replace our credit facilities, our
business, financial condition and results of operations would be materially and
adversely affected. From time-to-time we engage in discussions and conduct
analyses with respect to possible acquisitions of equipment, lease portfolios
and businesses, some of which may lead to and include negotiation and execution
of letters of intent. In order to consummate these transactions, we will need to
issue additional equity securities, incur additional indebtedness or obtain
additional sources of financing.
Credit Facilities
We have a $1.2 billion credit facility, which consist of the following
sub-facilities:
(i) a $300.0 million Corporate Revolving Credit Facility, primarily to
finance acquisitions and working capital; as of March 31, 1999 we had borrowings
of $237.1 million outstanding, with a weighted average interest rate of 6.49%.
This facility, which was entered into in June 1998, has a three-year term;
(ii) a $300.0 million Special Purpose Entity Large Ticket Warehouse
Facility primarily to finance the purchase and leasing of aircraft and aircraft
engines; as of March 31, 1999 we had borrowings of $15.5 million outstanding,
with a weighted average interest rate of 6.69%. This facility, which was entered
into in June 1998, has a 364-day term; and
(iii) two asset-backed commercial paper facilities totaling $600.0
million to finance small ticket and middle market leases, consisting of an
Equipment Lease Receivable Purchase Facility and an Equipment Lease Receivable
Financing Facility; as of March 31, 1999 $ 336.0 million was outstanding under
the Purchase Facility and $ 69.9 million was outstanding under the Finance
Facility, with a weighted average interest rate of 5.68%. The Purchase Facility
and the Financing Facility, which were entered into in June 1998 and July 1998,
respectively, have 364-day terms.
We also have a $500.0 million revolving credit facility to finance the
purchase and leasing of aircraft. As of March 31, 1999 we had borrowings
outstanding of $190.0 million, with a weighted average interest rate of 7.69%.
This facility, which was entered into in October 1998, has a 364-day term. On
March 26, 1999 we entered into an amendment to this credit facility. The credit
facility permits us to borrow up to a specified percentage of the value of the
collateral. The amendment increased this percentage and provides for an increase
in the applicable interest rate in the event that we borrow in excess of the
amount that would have been permitted prior to the amendment.
On April 30, 1999 we entered into a loan arrangement in the amount of
$40.5 million, to fund the purchase of the equity interest in the portfolio of
36 commercial aircraft that we acquired from GE Capital Aviation Services on May
5, 1999 and for general corporate purposes. The loan has a 6-month term and an
interest rate of LIBOR plus 400 basis points. The loan is secured by a security
interest in the aircraft and engine assets held by the special purpose entities
which are the borrowers under the loan arrangement.
YEAR 2000 READINESS
As many computer systems and other equipment with embedded chips or
processors (collectively, "Business Systems") use only two digits to represent
the year, they may be unable to process accurately certain data before, during
or after the year 2000. As a result, business and governmental entities are at
risk for possible miscalculations or systems failures causing disruptions in
their business operations. This is commonly known as the Year 2000 ("Y2K")
issue.
We are in the process of implementing a Y2K readiness program with the
objective of having all of our significant Business Systems functioning properly
with respect to the Y2K issue before January 1, 2000. The program is divided
into three major sections -- Infrastructure, Applications Software, and
third-party suppliers and customers ("External Agents"). The phases common to
all sections are: (1) inventorying Y2K items and assigning priorities; (2)
assessing the Y2K compliance of those items; (3) repairing, retiring or
replacing the items that are determined not to be Y2K compliant, beginning with
the items considered most critical to the Company's operations; (4) testing
those items; (5) implementing necessary changes; and (6) designing and
implementing contingency plans.
16
<PAGE> 17
Infrastructure. This section consists of hardware and systems software
other than Applications Software. We estimate that approximately 55 percent of
the activities related to this section were completed by March 31, 1999. The
testing phase is ongoing as hardware or system software is remediated, upgraded
or replaced. All Infrastructure activities are expected to be completed by the
end of 1999.
Applications Software. This section includes the remediation,
retirement or replacement of applications software that is not Y2K compliant. We
are using both internal and external resources to complete this process. As of
March 31, 1999, approximately 85 percent of the applications software was
remediated or replaced, and tested. The implementation of these is scheduled to
be completed by August 31, 1999. The remaining applications are expected to be
remediated or replaced by June 30, 1999, tested by October 31, 1999, and
implemented by the end of 1999.
External Agents. This section includes the process of identifying and
prioritizing service providers, vendors, suppliers, customers and governmental
entities that we believe will be critical to our business operations after
January 1, 2000. We could be adversely affected if these critical business
partners failed to provide essential services. We are sending questionnaires,
conducting interviews, browsing websites and using other available means to
attempt to ascertain the Y2K readiness of our critical business partners. We
expect to complete this process by June 30, 1999.
We are developing contingency plans intended to mitigate possible
disruptions in business operations that may result from the Y2K issue and we are
developing cost estimates for these plans. If our Y2K readiness program is
unsuccessful, we may, as a contingency plan, contract with third party lease
portfolio service providers to meet the servicing needs of our daily operations.
Contingency plans and related cost estimates will be continually refined, as
additional information becomes available.
We estimate that the aggregate cost of our Y2K efforts will be
approximately $1.3 million, of which approximately $1.0 million has been spent.
The costs of remediation are being expensed as they are incurred and are being
funded through operating cash flow. The costs associated with the replacement of
computerized systems, hardware or equipment (currently estimated to be
approximately $0.5 million), substantially all of which has been capitalized,
are included in the above estimates.
Our Y2K readiness program is an ongoing process and the estimates of
costs and completion dates for various components of the Y2K readiness program
described above are subject to change. The failure to correct a Y2K issue could
result in a failure of certain normal business activities or operations, which
could adversely affect the Company's results of operations, liquidity and
financial condition.
FLUCTUATIONS IN QUARTERLY RESULTS
We could experience fluctuations in quarterly operating results due to
a number of factors including, among others, the consummation of a transaction
in a particular calendar quarter (or the failure to complete such a
transaction), variations in the volume of leases originated and variations in
interest rates. In addition, certain of our operating subsidiaries may from time
to time experience relatively large transactions for one or a few customers or
relatively large sales of equipment, which may not recur or may not be followed
by correspondingly large transactions in subsequent periods. Moreover, to the
extent that we retain for our own portfolio a greater portion of the leases that
we acquire or originate and the equipment that we acquire, we will not generate
revenue from gain on sale for the retained leases or revenue from sales of the
retained equipment. As a result of these fluctuations, results for any one
quarter, including historical results, should not be relied upon as being
indicative of performance in future quarters.
17
<PAGE> 18
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
Certain statements contained in this Quarterly Report on Form 10-Q
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements generally can be
identified by the use of forward-looking terminology such as "may," "will,"
"intend," "estimate," "anticipate," "believe," or "continue" or the negative
thereof or variations thereon or similar terminology. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance or achievements of the Company, or
industry results, to be materially different from possible future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: general economic
and business conditions; changes in interest rates; changes in asset values;
inflation or deflation; changes in markets for financial products, including
securitized assets; changes in political, social and economic conditions and
local regulations; changes in, or failure to comply with, government
regulations; demographic changes; changes in the mix of sources of revenues;
competition; changes in business strategy or development plans; availability of
capital sufficient to meet the Company's need for capital or on terms or at
times acceptable to the Company; and availability of qualified personnel.
Factors that could cause or contribute to such differences include those
discussed under the heading "Factors that May Affect Future Operating Results"
in the Company's Annual Report on Form 10-K for the year ended December 31,
1998. The Company assumes no obligation to update any forward-looking statements
to reflect actual results or changes in the factors affecting such
forward-looking statements.
18
<PAGE> 19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
We incur debt to fund the origination and acquisition of leases,
equipment, lease portfolios and equipment leasing businesses and for general
corporate purposes. The interest rates charged on the debt are generally
determined based on variable measures of interest rates such as the U.S. Federal
Reserve Prime rate ("Prime") or the London Interbank Offered Rate ("LIBOR"). For
information regarding amounts outstanding and weighted average interest rates at
March 31, 1999, see the discussion in "Liquidity and Capital Resources."
We continually monitor interest rates in order to mitigate exposure to
unfavorable variations. Our objectives in managing this risk include:
o achieving certain ratios of fixed-rate debt to variable-rate
debt; and
o achieving certain levels of our aggregate cost of funds.
As a result, from time to time we utilize interest rate swaps and forward
contracts in U.S. Treasury securities. These instruments synthetically alter the
repricing characteristics of variable-rate debt obligations, effectively
allowing us to pay a fixed interest rate on a portion of the debt, which reduces
our exposure to unfavorable variations in Prime or LIBOR. There are risks
associated with the use of these instruments, including:
o the possible inability of the counterparties to meet the terms
of their contracts; and
o market movements in values and interest rates.
We do not enter into interest rate swap agreements or forward contracts on U.S.
Treasury securities for trading purposes.
The table below presents, as of March 31, 1999, the following
information regarding interest rate swap agreements and forward contracts on
U.S. Treasury securities to which we are a party: (i) notional amount of the
agreement, (ii) the fixed interest rate to be paid by the Company, (iii) the
variable rate to be paid by the counterparty under the agreement, (iv) the fair
value of the instrument and (v) the maturity of the agreement.
<TABLE>
<CAPTION>
EFFECTIVE PERIOD OF INTEREST RATE SWAP
Average Notional Amount for the Twelve Months Ending March 31,
---------------------------------------------------------------------------------
March 31, 1999 2000 2001 2002 2003 2004 Thereafter
--------------
Interest Rate Swaps
- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Notional amount $12,527,756
Rate to be paid by 5.265%
the Company
Rate to be received 30-day CP (a)
by the Company
Fair value at March $ (13,105)
31, 1999
Maturity June 1999
Notional amount $75,000,000 $75,000,000 $75,000,000 $75,000,000 $46,875,000
Rate to be paid by 5.125%
the Company
</TABLE>
19
<PAGE> 20
<TABLE>
<CAPTION>
EFFECTIVE PERIOD OF INTEREST RATE SWAP
Average Notional Amount for the Twelve Months Ending March 31,
---------------------------------------------------------------------------------
March 31, 1999 2000 2001 2002 2003 2004 Thereafter
--------------
Interest Rate Swaps
- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Rate to be received 3-month LIBOR
by the Company
Fair value at March $ 972,076
31, 1999
Maturity November 2002
Notional amount $21,113,129 $20,085,613 $5,456,045 $10,324,038 $6,632,835 $4,086,043 $1,648,896
Rate to be paid by 5.240%
the Company
Rate to be received 30-day CP (a)
by the Company
Fair value at March $ 97, 283
31, 1999
Maturity March 2007
Notional amount $ 47,158,283 $39,952,516 $27,049,560 $15,765,173 $9,913,554 $5,601,599 $2,036,018
Rate to be paid by 5.495%
the Company
Rate to be received 30-day CP (a)
by the Company
Fair value at March $ (150,523)
31, 1999
Maturity January 2006
Forward Contract on
Treasury Securities
- -------------------
Notional amount $ 8,000,000
Rate to be paid by 4.990%
the Company
Rate to be received 5-year Treasury (b)
by the Company
Fair value at March $ 64,886
31, 1999
Maturity July 1999
</TABLE>
- --------------------------
(a) The rate to be received by the Company is based on a 30-day commercial
paper rate published by the U.S. Federal Reserve (H15 report).
(b) The rate to be received by the Company is based on the interest rate
offered on 5-year Treasury securities at the date of maturity of the
forward contract.
20
<PAGE> 21
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
UniCapital and its subsidiaries are from time to time parties to
lawsuits arising out of our respective operations. We believe that any pending
litigation to which we or our subsidiaries are parties will not have a material
adverse effect upon our business or financial condition.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a.) Exhibits
10.01 Consulting Agreement dated March 18, 1999 by and
among Jacom Computer Services, Inc., Schooner
Capital Group, Inc. and John Alfano.
11.01 Statement Regarding Computation of Per Share Earnings
27.01 Financial Data Schedule
(b.) Reports on Form 8-K
None
21
<PAGE> 22
SIGNATURES
Pursuant to the requirement 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.
UNICAPITAL CORPORATION
(Registrant)
Date: May 17, 1999 By: /s/ JONATHAN NEW
--------------------------------------------
Jonathan New
Chief Financial Officer
(Principal Financial and Accounting Officer)
22
<PAGE> 1
Exhibit 10.01
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT, dated this 18th day of March, 1999, is by
and among (i) Jacom Computer Services, Inc., a New York corporation (the
"Company") and a wholly-owned subsidiary of UniCapital Corporation, a Delaware
corporation ("UniCapital"); (ii) Schooner Capital Group, Inc., a Florida
corporation ("Consultant"); and (iii) John Alfano.
RECITALS
A. The Company desires to engage Consultant and to have the benefit of
the skills and services of Consultant and its employees, and Consultant desires
to accept such engagement by the Company, on the terms and conditions set forth
herein.
B. John Alfano is the sole shareholder of the Consultant.
C. Concurrently with the execution of this Agreement by the parties
hereto, John Alfano shall resign his position as an officer and employee of the
Company.
NOW, THEREFORE, in consideration of the mutual promises, terms,
covenants and conditions set forth herein, and the performance of each, the
parties hereto, intending legally to be bound, hereby agree as follows:
AGREEMENTS
1. ENGAGEMENT; TERM. The Company hereby engages Consultant to provide
the services described herein, and Consultant hereby accepts such engagement by
the Company, for a term beginning on the date hereof and continuing until May
19, 2000, unless sooner terminated (the "Term").
2. POSITION AND DUTIES. The Company hereby engages Consultant to
provide advice and assistance to the Company on sales and marketing matters
affecting the Company. Consultant hereby accepts this engagement upon the terms
and conditions herein contained and agrees to devote such time, attention, and
efforts as necessary to fulfill Consultant's obligations hereunder.
3. FEES. For all services rendered by Consultant hereunder, the Company
shall pay Consultant an annual fee of $333,000, payable on the last day of each
month during the Term. In addition, Consultant shall be eligible for stock
options of UniCapital under the 1998 Long Term Incentive Plan, as well as other
perquisites offered to consultants by the Company and UniCapital.
4. TERMINATION; RIGHTS ON TERMINATION. At any time after the
commencement of the Term, either the Company or Consultant may, with or without
cause, terminate this Agreement, effective 30 days after written notice is
provided to the other party (the "Termination Date"); provided that if the
Termination Date is not the last day of the month, then the termination shall be
effective on the last day of the month in which the Termination Date occurs.
Upon termination of this Agreement, Consultant shall be entitled to receive all
fees earned
<PAGE> 2
through the effective date of termination. Notwithstanding any provision to the
contrary set forth in this Agreement, Consultant shall not be entitled to
receive any other fees after the effective date of termination of this
Agreement. All other rights and obligations of UniCapital, the Company,
Consultant and John Alfano under this Agreement shall cease as of the effective
date of termination, except that the obligations of Consultant and John Alfano
under Sections 5, 6, 7, 8 and 9 below shall survive such termination.
5. RESTRICTION ON COMPETITION.
(a) During the Term, and thereafter, if Consultant continues to
provide services to the Company and/or any other entity owned by or affiliated
with the Company or UniCapital on an "at will" basis, for the duration of such
period, and thereafter for a period of two years, neither Consultant nor John
Alfano shall, directly or indirectly, for itself or himself or on behalf of or
in conjunction with any other person, company, partnership, corporation,
business, group, or other entity (each, a "Person"):
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant, advisor, or sales representative, in any
business engaged in providing or servicing equipment leasing or specialty
finance products or services in direct competition with the Company or
UniCapital, or any business engaging in the consolidation of the equipment
leasing or specialty finance industry, within the United States of America (the
"Territory");
(ii) call upon any Person who is, at that time, within the
Territory, an employee of the Company or UniCapital for the purpose or with the
intent of enticing such employee away from or out of the employ of the Company
or UniCapital;
(iii) call upon any Person who or that is, at that time, or has
been, within one year prior to that time, a customer of the Company or
UniCapital within the Territory for the purpose of soliciting or selling
products or services in direct competition with the Company or UniCapital within
the Territory; or
(iv) on Consultant's or John Alfano's own behalf or on behalf of
any competitor, call upon any Person that, during the term of this Agreement,
was either called upon by the Company or UniCapital as a prospective acquisition
candidate or was the subject of an acquisition analysis conducted by the Company
or UniCapital.
(b) The foregoing covenants shall not be deemed to prohibit
Consultant or John Alfano from acquiring as an investment not more than five
percent of the capital stock of a competing business, whose stock is traded on a
national securities exchange or through the automated quotation system of a
registered securities association.
(c) It is further agreed that, in the event that Consultant shall
cease to provide services to the Company or UniCapital and either Consultant or
John Alfano enters into a business or pursues other activities that, at such
time, are not in competition with the Company or UniCapital, neither Consultant
nor John Alfano shall be chargeable with a violation of this Section 5 if the
Company or UniCapital subsequently enters the same (or a similar) competitive
2
<PAGE> 3
business or activity. In addition, if neither Consultant nor John Alfano has
actual knowledge that its or his actions violate the terms of this Section 5,
neither Consultant nor John Alfano shall be deemed to have breached the
restrictive covenants contained herein if, promptly after being notified by the
Company or UniCapital of such breach, Consultant and John Alfano cease the
prohibited actions.
(d) For purposes of this Section 5, references to "UniCapital" shall
mean UniCapital Corporation, together with its subsidiaries and affiliates.
(e) The covenants in this Section 5 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. If any provision of this Section 5 relating to the time
period or geographic area of the restrictive covenants shall be declared by a
court of competent jurisdiction to exceed the maximum time period or geographic
area, as applicable, that such court deems reasonable and enforceable, said time
period or geographic area shall be deemed to be, and thereafter shall become,
the maximum time period or largest geographic area that such court deems
reasonable and enforceable and this Agreement shall automatically be considered
to have been amended and revised to reflect such determination.
(f) All of the covenants in this Section 5 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of either Consultant or John Alfano
against the Company or UniCapital, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by UniCapital or
the Company of such covenants; provided, that upon the failure of the Company to
make any payments required under this Agreement, Consultant may, upon 30 days'
prior written notice to the Company, waive its right to receive any additional
compensation pursuant to this Agreement and engage in any activity prohibited by
the covenants of this Section 5. It is specifically agreed that the period of
two years stated at the beginning of this Section 5, during which the agreements
and covenants of Consultant and John Alfano made in this Section 5 shall be
effective, shall be computed by excluding from such computation any time during
which either Consultant or John Alfano is in violation of any provision of this
Section 5.
(g) If the time period specified by this Section 5 shall be reduced
by law or court decision, then, notwithstanding the provisions of Section 4
above, Consultant shall be entitled to receive from the Company the fee
described in section 3 for the longer of (i) the time period during which the
provisions of this Section 5 shall be enforceable under the provisions of such
applicable law, or (ii) the time period during which Consultant and John Alfano
are not engaging in any competitive activity, but in no event longer than the
applicable period provided in Section 4 above.
(h) Consultant and John Alfano have carefully read and considered
the provisions of this Section 5 and, having done so, agree that the restrictive
covenants in this Section 5 impose a fair and reasonable restraint on Consultant
and John Alfano and are reasonably required to protect the interests of the
Company and UniCapital, and their respective officers, directors, employees, and
stockholders. It is further agreed that the Company, Consultant and John Alfano
intend that such covenants be construed and enforced in accordance with the
changing activities, business, and locations of the Company and UniCapital
throughout the term of these covenants.
3
<PAGE> 4
6. CONFIDENTIAL INFORMATION. Consultant and John Alfano hereby agree to
hold in strict confidence and not to disclose to any third party any of the
valuable, confidential, and proprietary business, financial, technical,
economic, sales, and/or other types of proprietary business information relating
to the Company and/or UniCapital (including all trade secrets), in whatever
form, whether oral, written, or electronic (collectively, the "Confidential
Information"), to which either Consultant or John Alfano has, or is given (or
has had or been given), access as a result of its or his relationship with the
Company. It is agreed that the Confidential Information is confidential and
proprietary to the Company and/or UniCapital because such Confidential
Information encompasses technical know-how, trade secrets, or technical,
financial, organizational, sales, or other valuable aspects of the Company's and
UniCapital's business and trade, including, without limitation, technologies,
products, processes, plans, clients, personnel, operations, and business
activities. This restriction shall not apply to any Confidential Information
that (a) becomes known generally to the public through no fault of Consultant of
John Alfano; (b) is required by applicable law, legal process, or any order or
mandate of a court or other governmental authority to be disclosed; or (c) is
reasonably believed by Consultant or John Alfano, based upon the advice of legal
counsel, to be required to be disclosed in defense of a lawsuit or other legal
or administrative action brought against Consultant or John Alfano; provided,
that in the case of clauses (b) or (c), Consultant and John Alfano shall give
the Company reasonable advance written notice of the Confidential Information
intended to be disclosed and the reasons and circumstances surrounding such
disclosure, in order to permit the Company to seek a protective order or other
appropriate request for confidential treatment of the applicable Confidential
Information.
7. INVENTIONS. Consultant and John Alfano shall disclose promptly to
the Company and UniCapital any and all significant conceptions and ideas for
inventions, improvements, and valuable discoveries, whether patentable or not,
that are conceived or made by Consultant or John Alfano, solely or jointly with
another, during the term of this Agreement or within one year thereafter, and
that are directly related to the business or activities of the Company or
UniCapital and that Consultant or John Alfano conceives as a result of its or
his relationship with the Company, regardless of whether or not such ideas,
inventions, or improvements qualify as "works for hire." Each of Consultant and
John Alfano hereby assigns and agrees to assign all its or his interests therein
to the Company or its nominee. Whenever requested to do so by the Company,
Consultant and John Alfano shall execute any and all applications, assignments,
or other instruments that the Company shall deem necessary to apply for and
obtain Letters Patent of the United States or any foreign country or to
otherwise protect the Company's interest therein.
8. RETURN OF COMPANY PROPERTY. Promptly upon termination of this
Agreement for any reason or no reason, Consultant, John Alfano or John Alfano's
personal representative shall return to the Company (a) all Confidential
Information; (b) all other records, designs, patents, business plans, financial
statements, manuals, memoranda, lists, correspondence, reports, records, charts,
advertising materials, and other data or property delivered to or compiled by
Consultant or John Alfano by or on behalf of the Company, UniCapital or their
respective
4
<PAGE> 5
representatives, vendors, or customers that pertain to the business of the
Company or UniCapital, whether in paper, electronic, or other form; and (c) all
keys, credit cards, vehicles, and other property of the Company or UniCapital.
Neither Consultant nor John Alfano shall retain or cause to be retained any
copies of the foregoing. Each of Consultant and John Alfano hereby agrees that
all of the foregoing shall be and remain the property of the Company or
UniCapital, as the case may be, and be subject at all times to their discretion
and control.
9. NO PRIOR AGREEMENTS. Consultant hereby represents and warrants to
the Company and UniCapital that the execution of this Agreement by Consultant,
the engagement of Consultant by the Company, and the performance of the services
required hereunder will not violate or be a breach of any agreement with a
former employer, client, or any other Person. Further, Consultant agrees to
indemnify and hold harmless the Company and UniCapital and their respective
officers, directors, and representatives for any claim, including, but not
limited to, reasonable attorneys' fees and expenses of investigation, of any
such third party that such third party may now have or may hereafter come to
have against the Company, UniCapital or such other persons, based upon or
arising out of any non-competition agreement, non-solicitation agreement,
invention, secrecy, or other agreement between Consultant and such third party
that was in existence as of the date of this Agreement.
10. BINDING EFFECT. This Agreement may not be assigned or transferred
by either party without the prior written consent of the other party, which
consent shall not be unreasonably withheld. Subject to the terms of this Section
10, this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by the parties hereto and their respective heirs, legal
representatives, and assigns. If the Company is merged with or into another
subsidiary or affiliate of UniCapital, such action shall not be considered to
cause an assignment of this Agreement, and the surviving or successor entity
shall become the beneficiary of this Agreement and all references to the
"Company" shall be deemed to refer to such surviving or successor entity. It is
intended that UniCapital will be a third-party beneficiary of the rights of the
Company under this Agreement. No other Person shall be a third-party
beneficiary.
11. COMPLETE AGREEMENT WAIVER; AMENDMENT. This Agreement is not a
promise of future engagement. Neither Consultant nor John Alfano has any oral
representations, understandings, or agreements with the Company, UniCapital or
any of their respective officers, directors, or representatives covering the
same subject matter as this Agreement. This Agreement is the final, complete,
and exclusive statement and expression of the agreement between the Company,
UniCapital, Consultant and John Alfano with respect to the subject matter
hereof, and cannot be varied, contradicted, or supplemented by evidence of any
prior or contemporaneous oral or written agreements. This written Agreement may
not be later modified except by a further writing signed by a duly authorized
officer of the Company, UniCapital, Consultant and John Alfano, and no term of
this Agreement may be waived except by a writing signed by the party waiving the
benefit of such term.
5
<PAGE> 6
12. NOTICE. Whenever any notice is required hereunder, it shall be
given in writing addressed as follows:
To the Company: Jacom Computer Services, Inc.
207 Washington Street
Northvale, New Jersey 07647
Attention: Robert Seaman III
To UniCapital: UniCapital Corporation
10800 Biscayne Boulevard
Miami, Florida 33161
Attention: Martin Kalb
To Consultant: Schooner Capital Group, Inc.
585 Schooner Lane
Longboat Key, Florida 34228
Attention: John Alfano
Notice shall be deemed given and effective three days after the deposit in the
U.S. mail of a writing addressed as above and sent first class mail, certified,
return receipt requested, or, if sent by express delivery, hand delivery, or
facsimile, when actually received. Any party may change the address for notice
by notifying the other party of such change in accordance with this Section 12.
13. SEVERABILITY; HEADINGS. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. This
severability provision shall be in addition to, and not in place of, the
provisions of Section 5(c) above. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
14. EQUITABLE REMEDY. Because of the difficulty of measuring economic
losses to the Company and/or UniCapital as a result of a breach of the
restrictive covenants set forth in Sections 5, 6, 7 and 8, and because of the
immediate and irreparable damage that would be caused to the Company and/or
UniCapital for which monetary damages would not be a sufficient remedy, it is
hereby agreed that in addition to all other remedies that may be available to
the Company or UniCapital at law or in equity, the Company and UniCapital shall
be entitled to specific performance and any injunctive or other equitable relief
as a remedy for any breach or threatened breach of the aforementioned
restrictive covenants.
15. ARBITRATION. Any unresolved dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration
conducted in accordance with the rules of the American Arbitration Association
then in effect. The arbitrators shall not have the authority to add to, detract
from, or modify any provision hereof nor to award punitive damages to any
injured party. A decision by a majority of the arbitration panel shall be final
and binding. Judgment may be entered on the arbitrators' award in any court
having jurisdiction. Each party shall bear its own counsel fees. The arbitration
proceeding shall be held in the city where the principal office of the Company
is located. Notwithstanding the foregoing, the Company and/or UniCapital shall
be entitled to seek injunctive or other equitable relief, as contemplated by
Section 14 above, from any court of competent jurisdiction, without the need to
resort to arbitration.
6
<PAGE> 7
16. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of New York, without giving effect to any
conflicts of laws principles thereof that would compel the application of the
substantive laws of any other jurisdiction. The Company, UniCapital, Consultant
and John Alfano each hereby irrevocably submits to the jurisdiction of the state
or federal courts located in the State of New York in connection with any suit,
action or other proceeding arising out of or relating to this Agreement and
hereby agrees not to assert, by way of motion, as a defense, or otherwise in
such suit, action or proceeding that the suit, action or proceeding is brought
in an inconvenient forum, that the venue of the suit, action or proceeding is
improper or that this Agreement or the subject matter hereof may not be enforced
by such courts.
17. RELATIONSHIP OF CONSULTANT AND THE COMPANY. The parties hereto
understand, acknowledge and agree that Consultant's and John Alfano's
relationship to the Company and UniCapital created by this Agreement is that of
an independent contractor and not an employee. In this regard, Consultant and
John Alfano further understand, acknowledge and agree that neither the Company
nor UniCapital shall be responsible for withholding any income taxes, paying any
payroll taxes, providing other benefits or fulfilling other employer-type
obligations for or on behalf of Consultant or John Alfano.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first written above.
Schooner Capital Group, Inc.
By: /s/ JOHN ALFANO
------------------------------------
Name: John Alfrano
----------------------------------
Title: President
---------------------------------
/s/ JOHN ALFANO
----------------------------------------
John Alfano
Jacom Computer Services, Inc.
By: /s/ ROBERT NEW
------------------------------------
Name: Robert New
----------------------------------
Title: Chairman
---------------------------------
UniCapital Corporation
By: /s/ ROBERT NEW
------------------------------------
Name: Robert New
----------------------------------
Title: Chief Executive Officer
---------------------------------
8
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 11.01
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(Dollars in thousands except per share data)
Three Months Ended March 31,
1999 1998
----------- ----------
<S> <C> <C>
BASIC:
Weighted average common shares outstanding 51,915,588 6,373,363
----------- ----------
Net loss ................................. $ (887) $ (17,315)
----------- ----------
Income available to common shareholders .. $ (887) $ (17,315)
=========== ==========
Basic earnings (loss) per share .......... $ (0.02) $ (2.72)
=========== ==========
DILUTED:
Weighted average common shares outstanding 51,915,588 6,373,363
----------- ----------
Assumed exercise of stock options ........ 203,843 --
----------- ----------
Contingently issuable shares ............. 214,000 --
----------- ----------
Total shares used in computation ......... 52,333,431 6,373,363
=========== ==========
Income (loss) available to common
shareholders ........................... $ (887) $ (17,315)
=========== ==========
Diluted earnings (loss) per shares ....... $ (0.02) $ (2.72)
=========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 12,886
<SECURITIES> 14,158
<RECEIVABLES> 519,132
<ALLOWANCES> 6,472
<INVENTORY> 195,978
<CURRENT-ASSETS> 0
<PP&E> 13,206
<DEPRECIATION> 1,339
<TOTAL-ASSETS> 1,968,978
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 53
<OTHER-SE> 822,900
<TOTAL-LIABILITY-AND-EQUITY> 1,968,978
<SALES> 48,555
<TOTAL-REVENUES> 102,691
<CGS> 36,564
<TOTAL-COSTS> 101,308
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,541
<INTEREST-EXPENSE> 18,911
<INCOME-PRETAX> 1,383
<INCOME-TAX> 2,270
<INCOME-CONTINUING> (887)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (887)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
