SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1995 Commission File Number 0-5097
UNITED VANGUARD HOMES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-2032899
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
4 Cedar Swamp Rd, Glen Cove, NY 11542
- --------------------------------------- ----------
(Address of Principal Executive Office) (Zip Code)
Registrant telephone number, including area code: (516) 759-1188
Indicate by check whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities and Exchange Act of 1934
during the preceding twelve 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 ninety days.
Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of December 31, 1995.
Class Outstanding at December 31, 1995
- --------------------------- --------------------------------
Common stock $.01 par value 2,831,394
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
Part I Financial information
Consolidated Balance Sheets - December 31, 1995
and March 31, 1995 1
Consolidated Statements of Operations -
Three Months and Nine Months ended
December 31, 1995 and 1994 2
Consolidated Statement of Shareholders' Equity -
Nine Months Ended December 31, 1995 3
Consolidated Statements of Cash Flows -
Nine Months Ended December 31, 1995 and 1994 4
Notes to Consolidated Financial Statements 5 - 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 10
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS December 31, March 31,
------ ------------ ---------
1995 1995
---- ----
Property and equipment, at cost:
Land $ 632,408 $ 632,408
Buildings and improvements 4,375,959 4,349,747
Equipment 847,392 827,518
----------- -----------
5,855,759 5,809,673
Less accumulated depreciation
and amortization 3,463,605 3,171,885
----------- -----------
Property and equipment - net 2,392,154 2,637,788
Cash 453,835 249,561
Accounts receivable, less allowance
for doubtful accounts of $40,000,
$40,550 for March 31, 1995 1,143,223 1,129,517
Development project advances 872,754 1,240,788
Other assets 740,194 443,728
----------- -----------
$ 5,602,160 $ 5,701,382
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY IN ASSETS
Mortgages and notes payable $ 7,623,222 $ 9,092,276
Accounts payable 235,768 274,708
Accrued expenses 717,233 884,145
Income taxes payable 163,538 42,750
Resident security deposits 310,011 301,974
Deferred revenue - 177,221
----------- -----------
Total liabilities 9,049,772 10,773,074
----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value:
Authorized - 8,000,000 shares
Issued and outstanding - 2,831,394 shares 28,314 28,314
Additional paid in capital 4,477,919 4,477,919
Deficit (7,953,845) (9,577,925)
----------- -----------
Total stockholders' deficiency
in assets (3,447,612) (5,071,692)
----------- -----------
$ 5,602,160 $ 5,701,382
=========== ===========
See notes to financial statements.
1
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the three months For the nine months
ended ended
December 31, December 31,
------------ ------------
1995 1994 1995 1994
---- ---- ---- ----
Revenues:
<S> <C> <C> <C> <C>
Resident services $ 1,218,485 $ 1,310,821 $ 3,631,923 $ 3,939,355
Health care services 659,458 497,937 1,970,920 1,493,621
Interest 30,598 12,151 91,794 36,453
Development fees 510,215 150,000 930,215 450,000
Other revenues 175,992 52,557 163,474 97,131
----------- ----------- ----------- -----------
2,594,748 2,023,466 6,788,326 6,016,560
----------- ----------- ----------- -----------
Expenses:
Salaries, wages and related benefits 982,648 967,241 3,004,014 2,915,701
Utilities 84,432 111,266 281,677 303,809
Interest 197,363 169,238 552,557 474,128
Depreciation and amortization 94,141 134,245 312,693 403,097
Food costs 185,472 144,480 478,351 422,469
Insurance and property taxes 92,752 72,853 228,833 218,359
Repairs and maintenance 60,556 40,144 168,320 122,413
Other 305,089 192,299 573,067 493,333
----------- ----------- ----------- -----------
2,002,453 1,831,766 5,599,512 5,353,309
----------- ----------- ----------- -----------
Income before other items 592,295 191,700 1,188,814 663,251
Provision for recovery (loss)
of advances to affiliates 135,089 (412,693) 435,266 (1,238,079)
----------- ----------- ----------- -----------
Net income (loss) $ 727,384 $ (220,993) $ 1,624,080 $ (574,828)
=========== =========== =========== ===========
Earnings (loss) per common and common
equivalent share:
Primary $ .22 $ (.04) $ .49 $ (.12)
=========== =========== =========== ===========
Assuming full dilution (1) $ .46
===========
Shares used in computing earnings per
common and common equivalent share:
Primary 3,287,894 4,958,394 3,287,894 4,997,727
=========== =========== =========== ===========
Assuming full dilution (1) 4,048,494
===========
</TABLE>
(1) Not presented for periods in which effect would be anti-dilutive.
See notes to financial statements.
2
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Common Stock Additional
------------ Paid in
Description Shares Amount Capital Deficit Total
----------- ------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1995 2,831,394 $28,314 $4,477,919 $(9,577,925) $(5,071,692)
Net income for nine months
ended December 31, 1995 - - - 1,624,080 1,624,080
--------- ------- ---------- ----------- -----------
Balance, December 31, 1995 2,831,394 $28,314 $4,477,919 $(7,953,845) $(3,447,612)
========= ======= ========== =========== ===========
</TABLE>
See notes to financial statements.
3
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months
ended
December 31,
------------
1995 1994
---- ----
Cash flows from operating activities:
Net income $ 1,624,080 $ (574,828)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 312,742 415,522
Loss (recovery) of advances to affiliates (435,266) 423,800
Changes in operating assets and liabilities:
Restricted cash - 455,893
Accounts receivable (13,706) 25,166
Development and project advances 368,034 (1,110,311)
Other assets (296,466) (120,182)
Accounts payable (38,940) 82,801
Accrued expenses (166,912) (59,321)
Income taxes payable 120,788 (6,820)
Resident security deposits 8,037 (13,478)
Deferred revenue (177,221) -
Advances (to) from affiliates 435,266 (423,800)
----------- -----------
Net cash provided by (used in)
operating activities 1,740,436 (905,558)
----------- -----------
Cash flows used in investing activities:
Purchases of property and equipment (46,257) (154,925)
----------- -----------
Cash flows from financing activities:
Proceeds from borrowing on notes payable - 1,220,000
Principal repayments of mortgages
and notes payable (1,489,905) (137,771)
----------- -----------
Net cash provided by (used in)
financing activities (1,489,905) 1,082,229
----------- -----------
Net increase in cash 204,274 21,746
Cash, beginning of period 249,561 337,154
----------- -----------
Cash, end of period $ 453,835 $ 358,900
=========== ===========
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest $ 470,000 $ 461,703
========= =========
Income taxes $ - $ -
========= =========
4
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1. BASIS OF PRESENTATION
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim periods.
Fee income to which the Company is entitled in connection with the
development of residential retirement centers it does not own, is recognized on
the percentage of completion basis. The Company accrues in full, as soon as
determinable, any losses that arise from contracts for project development.
Revenues from services provided to residents, including, among other things,
room and board and health care, are recognized contemporaneously with the
providing of said services.
The results of operations for the nine month period ended December
31, 1995 are not necessarily indicative of the results to be expected for the
full year. Prior year amounts have been restated. See Note 4.
NOTE 2. INCOME TAXES
The Company adopted SFAS No. 109 "Accounting for Income Taxes" effective
April 1, 1993. The adoption of SFAS 109 had no effect on the Company's financial
position and results of operations. This new statement changes the criteria for
the recognition and measurement of deferred tax assets, including net operating
loss carryforwards.
As of April 1, 1993, the Company had net operating loss carryforwards of
approximately $11,765,000, which were available to offset future taxable income.
Due to the continuing losses incurred, these carryforwards may not be fully
utilized. Accordingly, the deferred tax asset relating to the carryforwards,
which has been approximated to be $4,000,000 at March 31, 1993, has been fully
reserved.
5
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
2. INCOME TAXES
The consolidated provision for income taxes consists of the
following:
Three months Nine months
ended ended
December 31, December 31,
------------ ------------
1995 1995
---- ----
Current:
Federal $ 247,000 $ 659,000
State and local 7,000 161,000
--------- ---------
254,000 820,000
--------- ---------
Deferred:
Federal (247,000) (659,000)
State and local (7,000) (161,000)
--------- ---------
$ - $ -
========= =========
The following is a reconciliation of income taxes at the Federal statutory
rate with income taxes recorded by the Company:
Three months Nine months
ended ended
December 31, December 31,
------------ ------------
1995 1995
---- ----
Computed income taxes
at statutory rate $ 247,000 $ 659,000
State income taxes, net of
Federal income tax benefit 7,000 161,000
Utilization of net operating
loss carryforwards (254,000) (820,000)
--------- ---------
Provision for taxes $ - $ -
========= =========
6
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 3. COMMON STOCK
On March 31, 1995, VVI contributed 2,000,000 shares of UVH common
stock to the Company, which the Company then simultaneously retired. As
consideration of this contribution, VVI shall have the right to be issued one
share of UVH common stock for each $3.44 received by UVH in payment of
indebtedness due it from Gateway or from sales proceeds of said indebtedness.
If the shares had been contributed on March 31, 1994, earnings (loss)
per share on a comparable basis would be as follows:
Three months Nine months
ended ended
December 31, December 31,
------------ ------------
1995 1994 1995 1994
---- ---- ---- ----
Earnings (loss) per share .22 (.07) .49 (.19)
4. PRIOR PERIOD ADJUSTMENTS
The Company has restated its previously issued financial statements for
the three and nine months ended December 31, 1994 to reflect adjustments related
to the receivables due the Company from related parties and the associated
income reported during those years and in prior periods. The adjustments are
necessary as it has been determined that, in part, an entity previously treated
as an unrelated and unaffiliated organization can be construed as a related
party. Additionally, transactions with other related entities should have been
treated as special purpose entities. Accordingly, advances made and previously
recorded management fees and interest income earned on the receivables were
erroneously accounted for.
7
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
4. PRIOR PERIOD ADJUSTMENTS (CONTINUED)
The result of these adjustments reduced the previously reported retained
earnings in assets by $11,120,209 at March 31, 1994. Therefore, the accumulated
deficit as originally reported in the amount of $2,168,935 has been adjusted so
that as restated, the Company reflects a deficiency in assets of $8,951,274. The
adjustments had the following changes on previously reported results of
operations:
Three months Nine months
ended ended
December 31, December 31,
------------ ------------
1995 1995
---- ----
Net income (loss):
As previously reported $ 320,060 $ 992,596
As restated $(220,993) $(574,828)
Net income (loss) per
common share:
As previously reported .06 .20
As restated (.04) (.12)
8
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is Management's Discussion and Analysis of certain
significant factors which have affected the Company's financial position and
operating results during the periods included in the accompanying consolidated
financial statements.
NINE MONTHS 1995 VS 1994
Revenues in 1995 increased 13% or $779,000 to $6,818,000 over the
$6,039,000 recorded in 1994. Development fees of $930,000 earned on the Cedar
Rapids and Hollywood facilities accounted for $480,000 of this increase. The
Cedar Rapids project is on schedule and within its budget, while the Hollywood
project is beginning to move on to the next development stage. Revenues from
resident and health care services improved $170,000, with occupancy remaining at
approximately the same level, while rates increased, especially for health care
services. Interest income increased $55,000 due principally to the collection of
interest earned on Cottage Grove loans. Other revenues increased $73,600 or 61%
as a result of a non-recurring billing adjustment at one of the Company's
Michigan properties.
Salaries and related costs increased 3% compared with 1994, or $88,000.
The increase is due to normal compensation increases. Interest expense increased
$78,400 in the 1995 period compared with 1994. This is due to the additional
interest incurred on the Company's convertible promissory note financing
completed in August, 1994 and interest on its line of credit. The increase in
repairs and maintenance is principally due to Management's implementation of its
plan to refurbish the Michigan facilities.
Depreciation and amortization decreased $90,000 in 1995 as compared with
1994. This is a result of certain intangible assets being fully amortized,
thereby reducing current period charges.
During the nine months ended December 31, 1995, the Company recorded a net
recovery of advances to affiliates aggregating $405,200, as compared with a loss
of $1,260,800 in 1994. This variance is a function of net actual cash paid out
or received from the Company's parent (VVI) and affiliated companies. During the
1995 period, certain notes receivable owned by VVI were collected and proceeds
aggregating $739,000 were remitted to the Company. During the prior period, VVI
had no such receivable collections, which necessitated net cash outlays and a
corresponding expense.
9
<PAGE>
UNITED VANGUARD HOMES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
LIQUIDITY AND CAPITAL RESOURCES AT DECEMBER 31, 1995
At December 31, 1995, the Company's cash position was improved by
approximately $204,000, due to the fact that a significant development fee
receivable was collected during the current quarter. Correspondingly,
development fee receivables decreased approximately $368,000. During the nine
months ended December 31, 1995, the Company was able to reduce its mortgage and
note obligations by approximately $1,490,000, utilizing cash flow from
operations and funds received from affiliates. In general, the cash provided by
operations varies greatly, depending upon the state of completion of a
development project. Up until the current quarter, the Company had been funding
the development costs of the Cottage Grove Project, which had created a
relatively substantial cash drain on operating cash flow. As the Company's
involvement in the Hollywood, Florida project increases, cash will be utilized
until a development bond offering or some similar financing is completed.
However, cash flow from continuing operations in Michigan and residual payments
from Cottage Grove should allow the Company to adequately meet normal operating
and financing requirements.
THREE MONTHS 1995 VS. 1994
The principal reasons for the increases in operations for the three months
ended December 31, 1995 vs. 1994 are outlined in the discussion of the nine
month results. Liquidity and working capital were substantially improved as a
result of the collection of the Cottage Grove Development fee. No material items
which adversely affected liquidity and the financial position occurred in the
three month period.
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the United
Vanguard Homes, Inc. financial statements as of December 31, 1995 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> DEC-31-1996
<CASH> 453,835
<SECURITIES> 0
<RECEIVABLES> 1,183,223
<ALLOWANCES> 40,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,597,058
<PP&E> 5,855,759
<DEPRECIATION> 3,463,605
<TOTAL-ASSETS> 5,602,160
<CURRENT-LIABILITIES> 1,426,550
<BONDS> 7,623,222
0
0
<COMMON> 28,314
<OTHER-SE> (3,475,926)
<TOTAL-LIABILITY-AND-EQUITY> 5,602,160
<SALES> 0
<TOTAL-REVENUES> 6,788,326
<CGS> 0
<TOTAL-COSTS> 5,046,955
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 552,557
<INCOME-PRETAX> 1,624,080
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,624,080
<EPS-PRIMARY> .49
<EPS-DILUTED> .46
</TABLE>
