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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 SEPTEMBER 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD
FROM __________TO_____________
COMMISSION FILE NUMBER 1-8009
UNR INDUSTRIES, INC.
(DELAWARE)
332 South Michigan Avenue
Chicago, Illinois 60604-4385
I.R.S. Employer Identification Number 36-3060977
TELEPHONE NUMBER (312) 341-1234
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
Outstanding as of
November 14, 1996
-----------------
Common Stock $.01 par value................ 52,442,316
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
(unaudited)
THREE MONTHS ENDED SEPT 30 NINE MONTHS ENDED SEPT 30
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales $ 41,910 $ 32,994 $ 110,724 $ 111,254
Cost of products sold 29,300 22,927 77,413 77,778
--------- --------- --------- ---------
Gross Profit 12,610 10,067 33,311 33,476
Selling, general & admin.
expenses 3,824 2,618 11,051 10,305
--------- --------- --------- ---------
Operating Income 8,786 7,449 22,260 23,171
Interest income (expense), net 694 257 637 1,413
--------- --------- --------- ---------
Income from continuing operations
before income taxes 9,480 7,706 22,897 24,584
Income tax provision 3,700 3,100 9,000 9,800
--------- --------- --------- ---------
Income from continuing operations 5,780 4,606 13,897 14,784
Discontinued operations:
Income from operations, net 418 2,465 3,859 7,954
Gain on sales, net 21,900 --- 21,900 ---
--------- --------- --------- ---------
NET INCOME $ 28,098 $ 7,071 $ 39,656 $ 22,738
--------- --------- --------- ---------
--------- --------- --------- ---------
Net Income Per Share:
Continuing operations $ .11 $ .09 $ .27 $ .29
Discontinued operations:
Income from operations .01 .05 .08 .16
Gain on sales, net .42 --- .42 ---
--------- --------- --------- ---------
NET INCOME PER SHARE $ .54 $ .14 $ .77 $ .45
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average number of shares
outstanding 52,431 52,142 52,355 51,704
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1
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<TABLE>
<CAPTION>
UNR INDUSTRIES, INC. AND SUBSIDIARIES
BALANCE SHEETS
(IN THOUSANDS)
(unaudited)
SEPTEMBER 30 DECEMBER 31
1996 1995
----------- -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 44,366 $ 5,878
Accounts, notes and other receivables, less allowance for doubtful
accounts of $2,374 in 1996 and $2,185 in 1995 26,169 17,464
Inventories 28,002 27,549
Deferred income taxes 0 7,876
Prepaid expenses 899 988
----------- -----------
TOTAL CURRENT ASSETS 99,436 59,755
----------- -----------
PLANT AND EQUIPMENT, at cost 34,016 29,653
Less: Accumulated depreciation (18,759) (17,827)
----------- -----------
TOTAL PLANT AND EQUIPMENT 15,257 11,826
----------- -----------
OTHER ASSETS
Net assets of discontinued operations 0 89,026
Other (primarily restricted cash in 1996) 6,533 619
----------- -----------
TOTAL ASSETS $ 121,226 $ 161,226
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ --- $ 6,000
Accounts payable 8,756 5,236
Accrued expenses 17,099 16,852
Current portion of long-term liabilities 181 190
Accrued income taxes 11,440 513
Reserve for discontinued operations 6,206 ---
----------- -----------
TOTAL CURRENT LIABILITIES 43,682 28,791
----------- -----------
LONG-TERM LIABILITIES 10,540 4,671
----------- -----------
STOCKHOLDERS' EQUITY
Common stock 528 525
Capital surplus 27,919 66,898
Retained earnings 43,880 67,843
Treasury stock (1,595) (1,595)
Notes receivable from officers (3,009) (5,525)
Unearned portion of restricted stock (719) (382)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 67,004 127,764
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 121,226 $ 161,226
----------- -----------
----------- -----------
</TABLE>
2
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<TABLE>
<CAPTION>
UNR INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30
(IN THOUSANDS)
(unaudited)
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 39,656 $ 22,738
Adjustments for noncash items included in net income-
Depreciation and amortization 1,150 1,071
Deferred income taxes 5,270 9,800
Provision for deferred employee compensation 181 135
Gain on sales of discontinued operations (21,900) ---
Operating requirements-
Accounts receivable (increase) decrease (8,704) 1,120
Inventories (increase) (453) (5,687)
Prepaid expenses decrease 89 230
Accounts payable & accrued expenses increase (decrease) 6,831 (2,046)
Discontinued operations (25,866) 1,009
----------- -----------
Net cash provided by (used for) operating activities $ (3,746) $ 28,370
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant and equipment $ (4,543) $ (1,431)
Proceeds from the sale of discontinued operations 153,869 13,985
(Increase) in other assets (5,952) (415)
----------- -----------
Net cash provided by investing activities $ 143,374 $ 12,139
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in long-term liabilities $ (140) $ (148)
Increase in long-term liabilities 6,000 ---
Proceeds from short-term borrowings 4,000 ---
Payment of short-term borrowings (10,000) ---
Dividends paid (104,667) (80,211)
Repayment of officer's loans 2,515 1,995
Issuance of common stock 1,152 692
----------- -----------
Net cash (used for) financing activities $ (101,140) $ (77,672)
----------- -----------
Net increase (decrease) in cash and cash equivalents $ 38,488 $ (37,163)
Cash & cash equivalents, beginning of period 5,878 68,991
----------- -----------
Cash & cash equivalents, end of period $ 44,366 $ 31,828
----------- -----------
----------- -----------
Cash paid during the period for interest $ 595 $ 461
----------- -----------
----------- -----------
Cash paid during the period for income taxes $ 7,259 $ 1,253
----------- -----------
----------- -----------
</TABLE>
3
<PAGE>
UNR INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(1) Nature of Operations:
UNR Industries, Inc. ("UNR" or the "Company") manufactures towers, poles,
mounts and related accessories used principally to support telecommunications
antennae for wireless communications, such as private microwave, cellular
telephone, PCS (personal communications systems), commercial and amateur
broadcasting and home television. The Company also produces shelters and
cabinets of concrete and fiberglass to house electronic telecommunications
equipment.
The Company conducts its business principally through its ROHN Division
which has manufacturing facilities in Peoria, Illinois (towers and poles),
Frankfort, Indiana (tower components and mounts), and Bessemer, Alabama
(shelters).
(2) Principles of Consolidation:
The financial statements include the consolidated accounts of UNR and its
subsidiaries. All significant intercompany transactions have been eliminated in
consolidation.
(3) Income Taxes:
On December 21, 1992, the Internal Revenue Service issued final regulations
under Section 468B "Special Rules for Designated Settlement Funds." The Section
468B regulations deal with the tax treatment of the Company's 1989 transfer of
29.4 million shares of UNR stock to the UNR Asbestos-Disease Claims Trust.
Based on these regulations, the Company and the Trust elected to treat the Trust
as a Qualified Settlement Fund on January 1, 1993, which entitled the Company to
a tax deduction equivalent to the value of the stock held by the Trust on that
date. This deduction substantially reduced the Company's 1993 income tax
liability and generated tax loss carry-backs and carry-forwards.
At December 31, 1995, the Company had available approximately $15.0 million
of net operating loss carry-forwards for both continuing and discontinued
operations, to offset future taxable income through 2008. The Company also had
general business tax credits of $3.4 million which are available to reduce
future Federal income taxes through 2002. A portion of these credits begin to
expire starting in 1997. Alternative minimum tax (AMT) credits of approximately
$6.3 million are available to reduce future Federal taxable income over an
indefinite period.
(4) Net Income Per Share:
Net income per share is based on the weighted average number of common
shares outstanding during each period. Dilution, which would result if all
outstanding options were exercised, is not significant to the net income per
share computation.
(5) Other Assets:
Other assets at September 30, 1996, includes approximately $5.2 million of
unused proceeds of a $6.0 million industrial revenue bond incurred for the
purpose of financing the acquisition and construction of a new manufacturing
facility in Frankfort, Indiana. These funds have been invested in U.S. Treasury
Bills, and are carried at cost which approximates market.
4
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(6) Treasury Stock:
In 1990, the Company announced that its Board of Directors had authorized
the acquisition, through both negotiated transactions involving large blocks and
open market purchases, of up to 1.5 million shares of its common stock to be
held as treasury shares and be available to meet requirements of its Key
Executives' Stock Option Plan and other corporate purposes. As of September 30,
1996, 1,133,525 shares have been purchased.
(7) Dividends Declared:
On September 27, 1996, the Company paid an extraordinary dividend of $2.00
per share to stockholders of record as of September 17, 1996. On December 28,
1995, the Company paid an extraordinary dividend of $1.00 per share to
stockholders of record as of the close of business on December 18, 1995. On
April 17, 1995, the Company paid a regular cash dividend of $.25 per share and
an extraordinary dividend of $1.30 per share to stockholders of record as of the
close of business on April 3, 1995.
(8) Inventories:
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method. Inventory costs include material,
labor and factory overhead.
Total inventories included the following classifications (In Thousands):
September 30, December 31,
1996 1995
---------- ----------
Finished goods $ 12,587 $ 12,254
Work-in-process 3,138 3,791
Raw materials 12,277 11,504
---------- ----------
Total Inventories $ 28,002 $ 27,549
---------- ----------
---------- ----------
(9) Discontinued Operations:
On September 7, 1995, the Company announced that its Board of Directors
authorized Company management to explore the sale of all or a majority of the
common stock of the Company. On January 26, 1996, the Company announced that
efforts to sell the entire Company did not result in a satisfactory offer and
that it would begin discussions with multiple parties regarding the sale of four
of its five operating divisions. The discontinued divisions are the Leavitt
Tube division, a producer of mechanical and structural steel tubing, the
Commercial Products division, a manufacturer of steel and plastic shopping
carts, the Home Products division, a manufacturer of stainless steel and
composite sinks and the Real Time Solutions, Inc. subsidiary, a supplier of
"pick-to-light" inventory picking systems. Net assets of these divisions are
classified as "Net assets of discontinued operations" in the accompanying
balance sheets.
On May 16, 1996, the Company announced the signing of a definitive sales
agreement to sell its UNR-Leavitt Division to Chase Brass, Industries for $95.0
million cash, subject to closing adjustments. This transaction was closed in
August, 1996.
On June 19, 1996, the Company announced the signing of a definitive sales
agreement to sell its Unarco Commercial Products Division to Richards Capital
Fund, L.P. for $41.0 million cash, subject to closing adjustments. This
transaction was closed in July, 1996.
5
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On August 27, 1996, the Company announced the signing of a definitive sales
agreement to sell its UNR Home Products division to Franke, Inc. for $21.4
million cash, subject to closing adjustments. This transaction was closed in
September, 1996.
The accompanying statements of income include a gain on sales of discontinued
operations of $21.9 million, net of income taxes, to reflect the closed
transactions for its UNR-Leavitt, Unarco Commercial Products and UNR Home
Products Divisions.
The accompany balance sheet includes reserves for discontinued operations to
reflect future payments associated with the sale of the three divisions sold
during the third quarter, as well as costs associated with any future sale of
Real Time Solutions, Inc.
(10) Basis of Reporting for Interim Financial Statements:
The unaudited financial statements included herein have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Company's Annual Report and Form 10-K for the year ended December 31, 1995.
The financial statements presented herewith reflect all adjustments
(consisting of normal and recurring accruals) which, in the opinion of
management, are necessary for fair statement of the results of operations for
the three and nine-month periods ended September 30, 1996 and 1995. Results of
operations for interim periods are not necessarily indicative of results to be
expected for an entire year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company's 1995 Annual Report and Form 10-K contain management's
discussion and analysis of financial condition and results of operations for the
year ended December 31, 1995. The following discussion and analysis describes
changes in the Company's financial condition from December 31, 1995, and the
Company's financial position at that date. Trends are discussed to the extent
known and considered relevant. The analysis of results of operations compares
the three and nine-month periods ended September 30, 1996, with the
corresponding period of 1995.
Results of Operations
Third quarter of 1996 versus Third quarter of 1995:
Net sales from continuing operations increased 27.0% to $41.9 million from
$33.0 million in the prior year. This increase is due, in part, to increases in
the build-out of Personal Communications Services (PCS) infrastructure.
Selling, general and administrative expenses were $3.8 million or 9.1% of
sales for 1996 versus $2.6 million or 7.9% of sales in 1995. The higher
percentage of sales for 1996, is due to a gain on a real estate sale in 1995
that was an offset to these expenses.
Operating income was $8.8 million for the third quarter of 1996 versus $7.4
million for the same period last year or an increase of 17.9%. This increase is
due, in part, to increases in build-out of PCS systems.
Net interest in both periods includes the interest earned on short-term
investments reduced by interest paid on secured debt. Net interest income for
the third quarter of 1996 versus net interest income for the third quarter of
1995
6
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is due to greater levels of cash available this year versus last year.
Income from discontinued operations declined from $2.5 million in the third
quarter of 1995 to $.4 million in the third quarter of 1996. This decrease is
due to the sales of the discontinued operations described in Note 9.
First nine months of 1996 versus first nine months of 1995:
Net sales from continuing operations decreased .5% to $110.7 million from
$111.3 million in the prior year. Net sales in 1995 included approximately $15
million of one-time sales for a stand-alone communications network. Sales in
1996 reflect improved third quarter volume, primarily due to the increase in the
(PCS) system build-out.
Selling, general and administrative expenses were $11.1 million or 9.9% of
sales in 1996 versus $10.3 million or 9.2% of sales in 1995. The higher
percentage of sales for 1996 is due to a gain on a real estate sale in 1995 that
was an offset to these expenses.
Operating income was $22.3 million for the first nine months of 1996 versus
$23.2 million for the same period last year or a decrease of 3.9%. This decline
is due largely to the offset to selling, general and administrative expenses
described above.
Net interest in both periods includes the interest earned on short-term
investments reduced by interest paid on secured debt. Lower net interest income
for the first nine months of 1996 versus net interest income for the first nine
months of 1995 is due to lower levels of cash in 1996.
Income from discontinued operations declined from $8.0 million in the first
nine months of 1995 to $3.9 million in the first nine months of 1996, or 51.5%.
This decrease is due to the sale of the discontinued operations described in
Note 9.
LIQUIDITY AND CAPITAL RESOURCES
The following is a comparison of the working capital at September 30,
1996, and December 31, 1995:
September 30, 1996 December 31, 1995
------------------ -----------------
Working Capital (in millions) $55.8 $31.0
Working Capital Ratio 2.3 to 1 2.1 to 1
The Company's financial condition continues to be strong at the end of the
third quarter of 1996, with working capital of $55.8 million at September 30,
1996, as compared to $31.0 million at December 31, 1995. The Company's working
capital ratio at September 30, 1996, was 2.3 to 1 versus 2.1 to 1 at December
31, 1995; both are considered strong measures of liquidity. The Company expects
that it will meet its ongoing working capital and capital expenditure
requirements from operating cash flows, borrowings through industrial revenue
bonds and under a $20.0 million short-term credit facility. In addition, the
Company's strong unleveraged balance sheet allows it access to funds, if needed,
from the capital markets.
SALE OF DISCONTINUED BUSINESSES
See Item 5, Part II of this report.
7
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PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 26, 1996, the UNR Asbestos-Disease Claims Trust, holder of 56.1% of
the outstanding common stock of the Company, delivered to the Company a written
consent adopting a resolution approving the plan of the Board of Directors to
take all action necessary to receive proposals for the sale of the Company's
Leavitt Tube, Unarco Commercial Products, UNR Home Products, and Real Time
Solutions, Inc., divisions and authorizing the sale of the Leavitt Tube Division
pursuant to a definitive agreement for its sale.
ITEM 5. OTHER INFORMATION
DISPOSITION OF ASSETS
On January 26, 1996, the Company announced that it would begin discussions
with multiple parties regarding the sale of four of its five operating
divisions. See Note (9) of Notes to Financial Statements in Part I hereof. The
Company engaged J.P. Morgan Securities Inc. to act as its financial advisor and
to provide other services, including assistance in identifying qualified
purchasers, soliciting acquisition proposals and negotiating financial aspects
of proposed acquisitions. As a result of this process, the Company entered into
a definitive agreement on May 15, 1996, to sell the assets and business of its
UNR Leavitt Division to Chase Brass Industries, Inc. for $95.0 million in cash,
subject to certain closing adjustments. On August 30, 1996 the sale of the
UNR-Leavitt Division was consumated. On June 18, 1996, the Company entered into
a definitive agreement to sell the assets and business of its Unarco Commercial
Products Division to Richards Capital Fund, L.P. for $41.0 million cash, subject
to certain closing adjustments. On July 26, 1996, the sale of the Unarco
Commercial Products Division was consummated. On August 23, 1996, the
Company entered into a definitive agreement to sell the assets and business of
its UNR Home Products Division to Franke, Inc. for $21.4 million cash, subject
to certain closing adjustments. On September 27, 1996, the sale of the UNR Home
Products Division was consumated. The purchase prices were determined by
arms-length negotiations with the purchasers. The Company is engaged in
continuing discussions with possible purchasers of its Real Time Solutions
division which is expected to be sold by the end of 1996.
J.P. Morgan Securities, Inc., the Company's financial advisor, has also
been requested to conduct a review of strategic options for the Company,
including the possibility of a sale, merger, consolidation or other business
combination involving all or a portion of the stock or assets of the Company.
8
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
2. Plan of Reorganization incorporated herein by reference from
Exhibit A of the 1989 first quarter Form 10-Q.
10. Sale and purchase agreement dated May 15, 1996, between Chase
Brass Industries, Inc. and UNR Industries, Inc. (incorporated by
reference to Exhibit 2 to the Company's current report on Form
8-K filed July 24, 1996).
Sale and purchase agreement dated June 18, 1996, between Richards
Capital Fund, L.P. and UNR Industries, Inc. (incorporated by
reference to Exhibit 2 to the Company's current report on Form
8-K filed July 24, 1996).
11. The computation can be determined from the report.
15. None
18. None
19. None
22. Information Statement dated August 23, 1996 (incorporated by
reference to the Company's report on Form 14C filed July 29,
1996).
23. None
24. None
27. Financial data schedule.
(B) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements 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.
UNR INDUSTRIES, INC.
Dated: November 14, 1996 /s/ Henry Grey
----------------------------------------
Henry Grey
Senior Vice President-Finance, Treasurer
& Chief Financial Officer
Dated: November 14, 1996 /s/ John A. Saladino
----------------------------------------
John A. Saladino
Vice President & Controller
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 44366
<SECURITIES> 0
<RECEIVABLES> 28542
<ALLOWANCES> 2373
<INVENTORY> 28002
<CURRENT-ASSETS> 99436
<PP&E> 34016
<DEPRECIATION> 18759
<TOTAL-ASSETS> 121226
<CURRENT-LIABILITIES> 43682
<BONDS> 10540
0
0
<COMMON> 528
<OTHER-SE> 66476
<TOTAL-LIABILITY-AND-EQUITY> 121226
<SALES> 110724
<TOTAL-REVENUES> 110724
<CGS> 77413
<TOTAL-COSTS> 11051
<OTHER-EXPENSES> 0
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</TABLE>
