<PAGE>
<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Period ended March 31, 1995
Commission File Number: 1-7795
UNC INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 54-1078297
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
175 Admiral Cochrane Drive
Annapolis, MD 21401
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code (410) 266-7333
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
Number of shares of Common Stock, par $0.20, outstanding as of May 4,
1995: 17,657,781 (excluding 700,000 treasury shares held by a subsidiary).
<PAGE>
<PAGE> 2
UNC Incorporated, and Subsidiaries
INDEX
Page No.
--------
Part I. Financial Information
Consolidated Statements of Earnings
Three Months Ended March 31, 1995 and 1994 1
Consolidated Balance Sheets
March 31, 1995 and December 31, 1994 2
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1995 and 1994 3
Notes to Consolidated Financial Statements 4
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 14
Signature Page 15
Exhibit Index 16
<PAGE>
<PAGE> 3
UNC Incorporated and Subsidiaries
Consolidated Statements of Earnings
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1995 1994
--------- ---------
<S> <C> <C>
Sales and operating revenues $ 125,703 $ 138,412
Costs and expenses:
Cost and operating expenses 106,385 113,696
Selling, general and
administrative expenses 14,085 16,266
--------- ---------
120,470 129,962
--------- ---------
Operating income 5,233 8,450
Other income (expense):
Interest income 404 7
Interest expense (5,138) (4,521)
Other (424) (419)
--------- ---------
(5,158) (4,933)
--------- ---------
Earnings before income taxes 75 3,517
Income tax provision (26) (1,055)
--------- ---------
Net earnings $ 49 $ 2,462
========= =========
Net earnings per share $ $ .14
========= =========
</TABLE>
<PAGE>
<PAGE> 4
UNC Incorporated and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---------- ------------
<S> <C> <C>
Assets
- ------
Current assets:
Cash $ 1,300 $ 2,619
Accounts receivable, less allowance for
doubtful accounts of $3,893 and $3,706,
respectively 83,351 89,279
Unbilled costs and accrued profits on
contracts in progress 13,533 14,097
Inventories 86,792 85,110
Assets held for sale 43,422 49,174
Other 8,045 8,168
-------- --------
Total current assets 236,443 248,447
Assets held for sale - noncurrent 2,300 2,300
Property, plant and equipment, at cost 74,329 73,478
Less accumulated depreciation 30,013 28,789
-------- --------
Net property, plant and equipment 44,316 44,689
Cost in excess of net assets of acquired com-
panies, less accumulated amortization of $24,586
and $23,397, respectively. 138,939 140,128
Other assets 33,379 32,470
-------- --------
Total assets $455,377 $468,034
======== ========
</TABLE>
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<PAGE> 5
UNC Incorporated and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---------- ------------
<S> <C> <C>
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Revolving Senior Bank Debt, prime plus 1/2% due 1995 $ 48,500 $ 40,000
Current portion of other long-term debt 6,713 2,971
Accounts payable 24,874 38,918
Income taxes 3,547 3,521
Accruals and other current liabilities 57,171 62,863
-------- --------
Total current liabilities 140,805 148,273
Long-term debt, less current portion:
9 1/8% Senior Notes due 2003 100,000 100,000
7 1/2% Convertible Subordinated Debentures due 2006 64,800 69,000
Other 2,352 2,352
-------- --------
Total long-term debt, less current portion 167,152 171,352
Other noncurrent liabilities 48,319 49,512
-------- --------
Total liabilities 356,276 369,137
Shareholders' equity:
Series preferred stock, par value $1.00 per share;
Authorized 12,000,000 shares; 250,000 designated
Series A Junior Participating Preferred Stock,
none issued
Common stock, par value $0.20 per share; authorized
50,000,000 shares; issued 18,357,781 and
18,242,134 shares, respectively 3,672 3,648
Additional paid-in capital 123,569 122,940
Retained earnings (17,324) (17,373)
-------- --------
109,917 109,215
Less:
Treasury stock, at cost (700,000 shares) 8,750 8,750
Minimum pension liability adjustment 540 540
Unearned compensation-restricted stock 1,526 1,028
-------- --------
Total shareholders' equity 99,101 98,897
-------- --------
Total liabilities and shareholders' equity $455,377 $468,034
======== ========
</TABLE>
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<PAGE> 6
UNC Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 49 $ 2,462
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 3,090 3,456
Provision for losses on accounts receivable 289 334
Income from leveraged lease (652)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 5,639 (6,741)
(Increase) decrease in unbilled costs & accrued
profits on contracts in progress 564 (275)
(Increase) in inventories (1,682) (2,162)
Decrease in other current assets 121 3,601
(Increase) decrease in other noncurrent assets (1,287) 921
(Decrease) in accounts payable (14,044) (11,480)
(Decrease) in accruals and other current
liabilities (5,692) (5,202)
Increase in income taxes payable 26 184
Decrease in other noncurrent liabilities (79) (197)
(Decrease) in discontinued operations
liabilities (1,114) (526)
-------- --------
Total adjustments (14,169) (18,739)
-------- --------
Net cash provided (used) by operating activities (14,120) (16,277)
-------- --------
Cash flows from investing activities:
Net proceeds from sale of assets 5,953
Additions to property, plant and equipment (1,259) (6,662)
-------- --------
Net cash provided (used) by investing activities 4,694 (6,662)
-------- --------
Cash flows from financing activities:
Additions to debt 52,000 62,500
Reductions in debt (43,958) (40,234)
Other transactions 65 48
-------- --------
Net cash provided (used) by financing activities 8,107 22,314
-------- --------
Net (decrease) in cash (1,319) (625)
Cash at beginning of year 2,619 1,494
-------- --------
Cash at end of period $ 1,300 $ 869
======== ========
</TABLE>
<PAGE>
<PAGE> 7
UNC Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
1. The accompanying financial statements, which should be read in conjunction
with the Consolidated Financial Statements included in the Annual Report
filed on Form 10-K for the year ended December 31, 1994, are unaudited.
The statements have been prepared in the ordinary course of business for
the purpose of providing information with respect to the interim periods,
and are subject to audit at the close of the year. It is the opinion of
the management of the Company that all adjustments (none of which were
other than normal recurring accruals) necessary for a fair presentation
of such periods have been included. Results of interim periods are not
necessarily indicative of results to be expected for the full year.
Certain prior period amounts have been reclassified to conform to the 1995
presentation.
2. Inventories at March 31, 1995 and December 31, 1994:
(Dollars in thousands)
1995 1994
-------- --------
Component parts and materials $ 62,909 $ 61,282
Work in process 18,735 21,161
Supplies 5,148 2,667
-------- --------
$ 86,792 $ 85,110
======== ========
3. Net sales of tangible products in the quarter ended March 31, 1995
amounted to $77.9 million and cost and operating expenses related to
tangible goods sold amounted to $62.4 million.
4. In July 1993, the Company issued $100 million principal amount of 9-1/8%
Senior Notes due 2003. The notes are guaranteed by all of the Company's
subsidiaries in the manner described below. The combined guarantors are
jointly and severally liable under the subsidiary guarantees.
The Company's obligations under the Notes are unconditionally guaranteed
by each of the Company's subsidiaries (the "Guarantees"). Each Guarantee
is a senior unsecured obligation of the subsidiary providing such
Guarantee and ranks pari passu with all senior unsecured indebtedness of
such subsidiary. The subsidiaries also have guaranteed the indebtedness
outstanding under the Company's revolving credit facility (the "Subsidiary
Bank Guarantees"). The Subsidiary Bank Guarantees are collateralized, in
general, by the accounts receivable and inventory of the subsidiaries and
therefore effectively rank senior to the Guarantees. The Guarantees are
in effect only for as long as the Subsidiary Bank Guarantees remain in
effect. If the Guarantees are terminated the Notes will be obligations
solely of the Company and will be effectively subordinated to all existing
and future indebtedness of the subsidiaries.
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<PAGE> 8
The following condensed consolidating information presents:
(1) Condensed financial statements as of March 31, 1995 and for the three
months ended March 31, 1995 and 1994 of (a) the Company on a parent
company only basis (Parent Company), (b) the Combined Guarantors, and
(c) the Company on a consolidated basis.
(2) The Parent Company with its investments in subsidiaries accounted for
on the equity method.
(3) Elimination entries necessary to consolidate the Parent Company and its
subsidiaries.
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<PAGE> 9
UNC INCORPORATED
Condensed Consolidating Balance Sheet
As of March 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Assets
- -------
Current assets:
Cash $ 829 $ 471 $ 1,300
Accounts receivable, net 977 82,374 83,351
Unbilled costs and accrued
profits on contracts in progress 13,533 13,533
Inventories 86,792 86,792
Assets held for sale 18,309 25,113 43,422
Other 906 7,139 8,045
-------- -------- ---------
Total current assets 21,021 215,422 236,443
-------- -------- ---------
Assets held for sale nonrecurrent 2,300 2,300
Property, plant & equipment, net 838 43,478 44,316
Cost in excess of net assets
of acquired companies, net 138,939 138,939
Other noncurrent assets 13,338 20,041 33,379
Investments in and advances
to subsidiaries 304,457 $(304,457)
-------- -------- --------- ---------
Total assets $339,654 $420,180 $(304,457) $ 455,377
======== ======== ========= =========
</TABLE>
<PAGE>
<PAGE> 10
UNC INCORPORATED
Condensed Consolidating Balance Sheet
As of March 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Current portion of long-term debt $ 26,835 $ 28,378 $ 55,213
Accounts payable 216 24,658 24,874
Accruals and other current liabilities 19,869 40,849 60,718
-------- -------- ---------
Total current liabilities 46,920 93,885 140,805
-------- -------- ---------
Long-term debt 166,800 352 167,152
Other noncurrent liabilities 18,083 30,236 48,319
-------- -------- ---------
Total liabilities 231,803 124,473 356,276
-------- -------- ---------
Common stock and additional paid
in capital 127,241 127,241
Retained earnings (deficit) (17,324) (17,324)
Equity of subsidiaries and
advances of parent 304,457 $(304,457)
-------- -------- --------- ---------
109,917 304,457 (304,457) 109,917
Less:
Treasury stock at cost
(700,000 shares) 8,750 8,750
Minimum pension liability adjustment 540 540
Unearned compensation-restricted
stock 1,526 1,526
-------- -------- --------- ---------
Total shareholders' equity 107,851 295,707 (304,457) 99,101
-------- -------- --------- ---------
Total liabilities and
shareholders' equity $339,654 $420,180 $(304,457) $ 455,377
======== ======== ========= =========
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<PAGE> 11
UNC INCORPORATED
Condensed Consolidating Balance Sheet
As of December 31, 1994
(Dollars in thousands)
</TABLE>
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Assets
- -------
Current assets:
Cash $ 1,519 $ 1,100 $ 2,619
Accounts receivable, net 640 88,639 89,279
Unbilled costs and accrued
profits on contracts in progress 14,097 14,097
Inventories 85,110 85,110
Assets held for sale 18,449 30,725 49,174
Other 1,168 7,000 8,168
-------- -------- ---------
Total current assets 21,776 226,671 248,447
-------- -------- ---------
Assets held for sale nonrecurrent 2,300 2,300
Property, plant & equipment, net 790 43,899 44,689
Cost in excess of net assets
of acquired companies, net 140,128 140,128
Other noncurrent assets 10,011 22,459 32,470
Investments in and advances
to subsidiaries 304,392 $(304,392)
-------- -------- --------- ---------
Total assets $336,969 $435,457 $(304,392) $ 468,034
======== ======== ========= =========
</TABLE>
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<PAGE> 12
UNC INCORPORATED
Condensed Consolidating Balance Sheet
As of December 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Current portion of long-term debt $ 14,400 $ 28,571 $ 42,971
Accounts payable 1,387 37,531 38,918
Accruals and other current liabilities 25,643 40,741 66,384
-------- -------- ---------
Total current liabilities 41,430 106,843 148,273
-------- -------- ---------
Long-term debt 171,000 352 171,352
Other noncurrent liabilities 16,892 32,620 49,512
-------- -------- ---------
Total liabilities 229,322 139,815 369,137
-------- -------- ---------
Common stock and additional paid
in capital 126,588 126,588
Retained earnings (deficit) (17,373) (17,373)
Equity of subsidiaries and
advances of parent 304,392 $(304,392)
-------- -------- --------- ---------
109,215 304,392 (304,392) 109,215
Less:
Treasury stock at cost
(700,000 shares) 8,750 8,750
Minimum pension liability adjustment 540 540
Unearned compensation-restricted
stock 1,028 1,028
-------- -------- --------- ---------
Total shareholders' equity 107,647 295,642 (304,392) 98,897
-------- -------- --------- ---------
Total liabilities and
shareholders' equity $336,969 $435,457 $(304,392) $ 468,034
======== ======== ========= =========
</TABLE>
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<PAGE> 13
UNC INCORPORATED
Condensed Consolidating Statement of Earnings
Three Months Ended March 31, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Sales and operating revenues $ $ 125,703 $ 125,703
Costs and expenses
Costs and operating expenses 106,385 106,385
Selling, general and administrative
expenses 3,273 10,812 14,085
Allocated expenses (1,107) 1,107
--------- --------- ---------
2,166 118,304 120,470
--------- --------- ---------
Operating income (2,166) 7,399 5,233
Other income (expense)
Interest income 384 20 404
Interest expense (4,078) (1,060) (5,138)
Other (378) (46) (424)
Equity in income of subsidiaries 4,103 $ (4,103)
--------- --------- --------- ---------
31 (1,086) (4,103) (5,158)
--------- --------- --------- ---------
Earnings before income taxes (2,135) 6,313 (4,103) 75
Income tax benefit (provision) 2,184 (2,210) (26)
--------- --------- --------- ---------
Net earnings $ 49 $ 4,103 $ (4,103) $ 49
========= ========= ========= =========
</TABLE>
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<PAGE> 14
UNC INCORPORATED
Condensed Consolidating Statement of Earnings
Three Months Ended March 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Sales and operating revenues $ $ 138,412 $ 138,412
Costs and expenses
Costs and operating expenses 113,696 113,696
Selling, general and administrative
expenses 4,542 11,724 16,266
Allocated expenses (1,776) 1,776
--------- --------- ---------
2,766 127,196 129,962
--------- --------- ---------
Operating income (2,766) 11,216 8,450
Other income (expense)
Interest income 3 4 7
Interest expense (3,358) (1,163) (4,521)
Other (420) 1 (419)
Equity in income of subsidiaries 7,853 $ (7,853)
--------- --------- --------- ---------
4,078 (1,158) (7,853) (4,933)
--------- --------- --------- ---------
Earnings before income taxes 1,312 10,058 (7,853) 3,517
Income tax benefit (provision) 1,150 (2,205) (1,055)
--------- --------- --------- ---------
Net earnings $ 2,462 $ 7,853 $ (7,853) $ 2,462
========= ========= ========= =========
</TABLE>
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UNC INCORPORATED
Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Consolidated
------- ---------- ------------
<S> <C> <C> <C>
Net cash flow from (used by) operations $ (9,463) $ (4,657) $(14,120)
Cash flows from investing activities:
Net proceeds from sales of assets 865 5,088 5,953
Additions to property, plant and
equipment (118) (1,141) (1,259)
--------- --------- ---------
Net cash provided (used) by
investing activities 747 3,947 4,694
--------- --------- ---------
Cash flows from financing activities:
Additions to debt 52,000 52,000
Reductions in debt (43,765) (193) (43,958)
Other transactions, net 65 65
Net cash transfers to (from) parent 851 (851)
--------- --------- ---------
Net cash provided (used) by
financing activities 9,151 (1,044) 8,107
--------- --------- ---------
Net increase (decrease) in cash 435 (1,754) (1,319)
--------- --------- ---------
Cash at beginning of year 1,519 1,100 2,619
--------- --------- ---------
Cash at end of period $ 1,954 $ (654) $ 1,300
========= ========= =========
</TABLE>
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UNC INCORPORATED
Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Consolidated
--------- ---------- ------------
<S> <C> <C> <C>
Net cash flow from (used by) operations $ 4,507 $ (20,784) $(16,277)
Cash flows from investing activities:
Additions to property, plant and
equipment (6,662) (6,662)
--------- --------- ---------
Net cash provided (used) by
investing activities (6,662) (6.662)
--------- --------- ---------
Cash flows from financing activities:
Additions to debt 41,500 21,000 62,500
Reductions in debt (30,500) (9,734) (40,234)
Other transactions, net 48 48
Net cash transfers to (from) parent (16,158) 16,158
--------- --------- ---------
Net cash provided (used) by
financing activities (5,110) 27,424 22,314
--------- --------- ---------
Net decrease in cash (603) (22) (625)
--------- --------- ---------
Cash at beginning of year 857 637 1,494
--------- --------- ---------
Cash at end of period $ 254 $ 615 $ 869
========= ========= =========
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<PAGE> 17
UNC Incorporated and Subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
The Company's operations are conducted in one business segment which
includes: the overhaul of aircraft engines, industrial gas turbine engines
and aircraft accessories, the manufacture and remanufacture of jet engine and
aircraft components and providing maintenance and training, repair and
logistical contract services.
Quarter Ended March 31, 1995 Compared with Quarter Ended March 31, 1994
- ------------------------------------------------------------------------
Revenues were $125.7 million in the first quarter of 1995 compared with
$138.4 million in the 1994 quarter, a decrease of $12.7 million (9.2%).
Operating income in the 1995 quarter of $5.2 million decreased $3.2 million
(38.1%) compared with the 1994 quarter.
Revenues for the Engine Overhaul Division in the 1995 quarter decreased $4.7
million (13.6%) to $29.7 million. The reduction in revenues is due in part
to closing the engine overhaul facility in Burbank, California at the end of
1994, which was part of the Company's restructuring program. Also the 1994
quarter included revenues from an aircraft leveraged lease transaction which
are non-recurring due to the sale of the asset in December 1994. These
reductions were partially offset by an increase in the overhaul and repair of
industrial turbine engines. Operating income decreased $0.4 million to $2.2
million in the 1995 quarter principally due to the non-recurring leveraged
lease income.
Revenues from the Component Services Division in the 1995 quarter increased
$1.4 million (9.5%) to $15.9 million on increased volume. Operating income
of $1.7 million decreased $0.9 million (34.9%) in the 1995 quarter due to
pricing pressures and increased material costs.
The Company's Manufacturing Division revenues for the 1995 quarter of $21.0
million decreased $6.2 million (22.8%) compared with the 1994 quarter. The
reduction in revenues is principally due to lower volume at our two engine
component manufacturing facilities due to the continued weakness in the
aviation industry marketplace. This decrease was partially offset by
increased volume at the aerostructures manufacturing facility in Washington
due to new subcontracts awarded in April 1994 and January 1995. Operating
income decreased $1.0 million (34.9%) to 1.8 million principally due to lower
volume in the engine component facilities, partially offset by increased
margins in the aerostructures facility in Washington.
Aviation Services Division revenues of $59.1 million decreased $3.3 million
(5.2%) in the 1995 quarter. The decrease in revenues is due to reduced
levels of contract flight training and aircraft maintenance activities, lower
contract field team manning due to the phase-out of Desert Storm related
activities and to the sale of UNC Helicopter in December 1994 which was part
of the Company's restructuring strategy. Operating income decreased $1.5
million (48.2%) to 1.6 million in the 1995 quarter principally due to lower
volume.
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<PAGE> 18
Selling, general and administrative expenses in the first quarter of 1995
were $14.1 million or 11.2% of sales compared with $16.3 million or 11.8% of
sales in the 1994 quarter. The decrease in selling, general and
administrative expenses in the 1995 quarter is due to the closing of the
Burbank engine overhaul facility, the sale of UNC Helicopter in December 1994
and other cost savings resulting from the restructuring program initiated in
the second half of 1994.
The Defense Department is continuing to close various military bases where
the Company provides contract services. A portion of the workload of these
bases is being relocated to bases where the Company already performs aircraft
maintenance functions. Further consolidation of military training and
maintenance contracts is expected as bases are eliminated and other defense
cuts reduce the value of individual contracts. However, the Company expects
that continued pressures on defense spending could increase the outsourcing
of services currently being provided by military and other government
personnel to lower cost providers such as the Company. Additional
opportunities for work from Army, Air Force and Navy depots may result from
the recommendations made by the Congressionally-mandated DoD-Industry Depot
Maintenance Task Force on which UNC is represented. For example, the
employees of the U.S. Air Force's Newark Aerospace Guidance and Metrology
Depot in Ohio selected the Company in open competition and the Company has
formed an alliance named UNC Newark with these employees. UNC Newark will
compete for the Air Force "privatization-in-place" contract which is
scheduled to begin in conjunction with that base closure in December 1995.
"Privatization-in-place" is a concept under which facilities will be
transferred to local jurisdictions and the depot work will be performed by
commercial companies. In May 1995 the Company was awarded a contract to
develop the plans, procedures and processes to implement the U.S. Army's
Brigade Afloat program. Also in May the Company was awarded a one year
contract, with four one year options, by the U.S. Army's Communications and
Electronics Command at Ft. Monmouth, N.J. with a potential value of
approximately $105 million.
Continued effort on the part of the U.S. government to further reduce defense
spending is affecting the demand for aircraft engines used in military
applications and could have an impact on the Company's manufacturing
operations. In an effort to reduce the potential effect of these reductions,
the Company's manufacturing operation have focused their marketing efforts
for the past several years on commercial rather than military products. The
Company's OEM customers continue to significantly reduce the number of
suppliers and their own procurement staffs. The Company remains a part of
the reduced subcontractor base and as such has obtained new contracts that
may not have been available in the past when the base of suppliers was much
larger. Although the Company's Manufacturing Division provided its principal
customers with price concessions during 1992, 1993, and 1994 in anticipation
of receiving additional future orders, the Company believes that increased
volume from these anticipated additional orders, together with on-going
productivity enhancement and cost reduction programs, should mitigate the
effect of the price concessions. Furthermore, during the second half of 1993
<PAGE>
<PAGE> 19
and the first quarter of 1994, the Company expanded its backlog as well as
its customer base, by acquiring the contract backlog of two financially
pressured competitors. The work-in-process of these contracts has been
transferred to existing Company facilities, along with the required tooling
and inventories.
Interest expense increased $0.6 million in the first quarter of 1995 due to
higher average debt levels and higher interest rates.
Liquidity and Capital Resources
- -------------------------------
The sale of excess assets identified in the restructuring program has
generated $15 million in net cash since the implementation of the program in
July 1994. The sale of the Naval Products facility to the Mohegan Indian
Tribe will provide approximately $27 million. Activity is proceeding toward
the final approval and closing of the transaction. Additional inventory and
other asset sales are also underway and the Company expects to meet its
assets sale goals of $50 million in 1995 with the remaining $25 million to be
completed by June 1996.
Long-term debt, including current portion, was $222.4 million at March 31,
1995 compared to $214.3 million at December 31, 1994. The Company is
currently in discussions with a lender concerning a new medium term revolving
credit facility. The Company anticipates closing on the line in May 1995.
At such time, it is anticipated the revolving credit will be classified as a
long-term liability. The Company's debt-to-capitalization rate at March 31,
1995 was 69.2% compared with 68.4% at December 31, 1994. At March 31, 1995,
the Company's working capital was $95.6 million with a current ratio of 1.7
to 1 compared with $100.2 million, a current ratio of 1.7 to 1 at December
31, 1994.
Capital expenditures in the first quarter of 1995 amounted to $1.3 million
compared with $6.7 million in the 1994 quarter. The higher level of
expenditures in the first quarter of 1994 were principally due to equipment
purchased in connection with the acquisition of the Anadite contract backlog,
completion of the expansion of facilities in connection with the award of the
contract backlog previously performed by the Heintz Corporation, equipment
purchases to implement new and improved manufacturing techniques and the
purchase of tooling related to the engine overhaul business. It is
anticipated that capital expenditures for the remainder of 1995 will be less
than depreciation and amortization expense and will be financed from
internally generated funds, lease arrangements and revolving credit
borrowings.
<PAGE>
<PAGE> 20
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- -------------------------------------------
(a) Exhibits Description
- ------------ -------------------------------------------------
Exhibit 11 Computation of Earnings Per Common Share
(b) Reports on Form 8-K:
- ------------------------
No reports on Form 8-K were filed by the Company during the quarter ended
March 31, 1995.
<PAGE>
<PAGE> 21
UNC Incorporated and Subsidiaries
SIGNATURE
Pursuant to requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
UNC Incorporated
Date: May 15, 1995 By: /s/ Robert L. Pevenstein
------------------------------
Robert L. Pevenstein
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE>
<PAGE> 22
UNC Incorporated and Subsidiaries
SEQUENTIAL EXHIBIT INDEX
Exhibit
Sequential Sequential
Number Description Page
- ---------- ---------------------------------------------- -----------
Exhibit 11 Computation of Earnings Per Common Share 23
<PAGE>
<PAGE> 23
EXHIBIT 11
UNC INCORPORATED AND SUBSIDIARIES
Earnings Per Share
(In thousands except per share amounts)
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1995 1994
--------- ---------
<S> <C> <C>
Net earnings $ 49 $ 2,462
========= =========
Calculation of primary earnings per share:
Average common shares outstanding
during the period primary (1) 17,632 17,390
--------- ---------
Earnings per share, primary:
Net earnings $ $ .14
========= =========
Calculation of fully diluted
earnings per share:
Average common shares outstanding
during the period (1) 17,632 17,390
Increase in common stock equivalents:
Stock options under treasury stock method 228 559
--------- ---------
Adjusted average shares outstanding for
the period fully diluted 17,860 17,949
--------- ---------
Earnings per share, fully diluted:
Net earnings $ $ .14
========= =========
</TABLE>
(1) Exclusive of 700,000 treasury shares for all years presented.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the consolidated balance sheet as of 3/31/95 and the
related consolidated statement of earnings, cash flows and
notes to consolidated financial statements for the quarter ended
3/31/95 and is qualified in its entirety by reference to such
financial statements and notes.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,300
<SECURITIES> 0
<RECEIVABLES> 87,244
<ALLOWANCES> 3,893
<INVENTORY> 86,792
<CURRENT-ASSETS> 236,443
<PP&E> 74,329
<DEPRECIATION> 30,013
<TOTAL-ASSETS> 455,377
<CURRENT-LIABILITIES> 140,805
<BONDS> 167,152
<COMMON> 3,672
0
0
<OTHER-SE> 95,429
<TOTAL-LIABILITY-AND-EQUITY> 455,377
<SALES> 77,926<F1>
<TOTAL-REVENUES> 125,703
<CGS> 62,409<F1>
<TOTAL-COSTS> 106,385
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 289<F2><F3>
<INTEREST-EXPENSE> 5,138
<INCOME-PRETAX> 75
<INCOME-TAX> 26
<INCOME-CONTINUING> 49
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<PAGE>
<FN>
<F1>See Note 3 of Notes to Consolidated Financial Statements
<F2>The provision for doubtful accounts and notes is included with Selling,
General and Administrative Expenses in the Consolidated Statement of
Earnings.
<F3>It also appears in the Consolidated Statement of Cash Flows under the
title "Provision for losses on accounts receivables".
</FN>
</TABLE>
