<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1998
Commission File Number: 0-9969
CENTURY INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
District of Columbia 54-1666769
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer incorporation or
organization) Identification No.)
45034 Underwood Lane
Sterling, Va. 20166
(Mail) P.O. Box 319
Sterling, Va. 20167
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 471-7606.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 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.
(1) Yes X No
----- -----
(2) Yes X No
----- -----
At September 30, 1998, 3,300,798 shares of the Registrant's $.001 par value
Class A common stock were issued and outstanding after deducting 269,202 Class A
shares classified as treasury stock, and 4,630,428 shares of the Registrant's
$.001 par value Class B common stock were issued and outstanding. Both the Class
A and Class B shares are registered pursuant to Section 12(b) and Section 12(g).
The Registrant's Class A and Class B shares currently trade on the Philadelphia
Stock Exchange (PHLX) under the symbols CII.A and CII.B. The Class A also trades
on the NASDAQ Bulletin Board under the symbol CNTI.
<PAGE> 2
FINANCIAL STATEMENTS
In the opinion of the management of Century Industries, Inc. and subsidiaries
(the Company), the accompanying unaudited interim consolidated financial
statements contain all adjustments necessary of a fair presentation of the
Company's financial condition as of September 30, 1998 and December 31, 1997,
and the results of its operations and cash flows for the nine month periods
ended September 30, 1998 and 1997.
The accompanying unaudited consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations, although
the Company's management believes that the disclosures and information presented
are adequate and not misleading. Reference is made to the detailed financial
statement disclosures which should be read in conjunction with this report and
are contained in the notes to consolidated financial statements included in the
Company's Annual Report Form 10-KSB/A for the year ended December 31, 1997.
Certain items in prior period consolidated financial statements have been
reclassified, where appropriate, to conform with the September 30, 1998
presentation.
F-1
<PAGE> 3
CENTURY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
CURRENT ASSETS 9/30/98 12/31/97
- -------------- ------- --------
<S> <C> <C>
Cash and Cash Equivalents $ 423,640 $ 282,009
Accounts Receivable-Trade (Net of allowance
for doubtful accounts of
$120,000 in 1998 and 1997) 2,131,939 1,907,446
Inventory 223,742 256,695
Marketable Securities 450,025 106,952
Other Current Assets 262,587 572,462
------------ ------------
Total Current Assets 3,491,933 3,125,564
------------ ------------
Property and Equipment
- ----------------------
Land and Building 378,269 -------
Software and Computer Equipment 2,088,699 1,997,743
Furniture and Fixtures 816,924 779,941
Machinery and Equipment 50,508 15,875
Transportation Equipment 215,429 215,429
Leasehold Improvements 159,251 151,878
------------ ------------
3,709,080 3,160,866
Less: Accumulated Depreciation (1,331,954) (1,083,443)
------------ ------------
Net Property and Equipment 2,377,126 2,077,423
------------ ------------
Other Assets
- ------------
Investments 793,151 991,842
Deferred Costs 1,930,977 726,666
Security Deposits 108,305 106,779
Goodwill, Net 1,916,465 1,949,035
Due from Related Parties 793,476 128,422
Other Assets 473,265 337,316
------------ ------------
Total Other Assets 6,015,639 4,240,060
------------ ------------
Total Assets $ 11,884,698 $ 9,443,047
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
F-2
<PAGE> 4
CENTURY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
6/30/98 12/31/97
------- --------
Current Liabilities
- -------------------
<S> <C> <C>
Accounts Payable - Trade $ 1,524,192 $ 1,732,486
Current Maturities - Long Term Debt and
Capital Lease Obligations 459,846 475,652
Advances from Stockholders 31,809 179,601
Accrued Expenses 1,431,032 1,442,004
Dividends Payable 14,439 16,389
------------ ------------
Total Current Liabilities 3,461,318 3,846,132
Long Term Notes and Mortgages Payable, Less Current Portion 893,269 555,926
- -----------------------------------------------------------
Capital Lease Obligations, Less Current Portion 530,216 155,848
- ----------------------------------------------- ------------ ------------
Total Liabilities 4,884,803 4,557,906
------------ ------------
Minority Interest 31,250 38,250
------------ ------------
Stockholders' Equity
- --------------------
Preferred Stock, Convertible, $.001 par value, 1,200,000 shares
authorized, 1,000,000 issued and outstanding 1,000 1,000
Common Stock, Class A, $.001 par value, 25,000,000 shares
authorized, 3,573,000 issued 3,573 3,373
Common Stock, Class B, $.001 par value, 25,000,000 shares
authorized, 4,430,000 and 4,173,000 issued and outstanding 4,630 4,173
Additional Paid in Capital 9,228,088 6,917,089
Retained Deficit (1,636,020) (1,216,189)
------------ ------------
7,601,271 5,709,446
Less: Class A common stock in treasury, 269,202
shares in 1998 and 1997 (632,555) (862,555)
------------ ------------
Total Stockholders' Equity 5,381,750 4,846,891
------------ ------------
Total Liabilities and Stockholders' Equity $ 10,024,945 $ 9,443,047
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE> 5
CENTURY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Sales $ 9,476,450 $ 11,226,839
Cost of Sales 5,701,349 6,309,382
------------ ------------
Gross Profit on Sales 3,775,101 4,917,457
------------ ------------
Operating Costs
- ---------------
Payroll Expense 1,519,837 1,718,518
Professional Fees 430,996 222,580
Auto, Travel and Entertainment 428,974 228,163
Amortization and Depreciation 183,320 223,017
Other 1,446,178 1,702,372
------------ ------------
Total Operating Costs 4,009,305 4,094,650
------------ ------------
Income (Loss) From Operations (234,204) 822,807
------------ ------------
Other Income (Expense)
- ----------------------
Interest Expense (73,529) (115,994)
Other Income (Expense)-Net (336,295) 101,185
Total Other Income (Expense) - Net (409,824) (14,809)
------------ ------------
Income (Loss) Before Taxes (644,028) 807,998
Income Tax Provision (Benefit) --------- 15,900
Net Income (Loss) $ (644,028) $ 792,098
Preferred Stock Dividends of Subsidiaries --------- (200,030)
------------ ------------
Net Income (Loss) Available for Common Stockholders $ (644,028) $ 592,068
============ ============
Earnings (Loss) Per Share:
Basic and Diluted Earnings (Loss) Per Share $ (0.07) $ 0.10
======== =======
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE> 6
CENTURY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Sales $ 3,039,637 $ 3,376,555
Cost of Sales 1,706,968 1,960,071
----------- -----------
Gross Profit on Sales 1,332,669 1,416,484
----------- -----------
Operating Costs
- ---------------
Payroll Expense 454,277 369,192
Professional Fees 65,974 83,222
Auto, Travel and Entertainment 59,414 48,054
Amortization and Depreciation 127,252 71,856
Other 590,925 639,251
----------- -----------
Total Operating Costs 1,297,842 1,211,575
----------- -----------
Income (Loss) From Operations 34,827 204,909
----------- -----------
Other Income (Expense)
- ----------------------
Interest Expense (24,625) (35,921)
Other Income (Expense)-Net (258,435) 33,719
----------- -----------
Total Other Income (Expense) - Net (283,060) (2,202)
----------- -----------
Income (Loss) Before Taxes (248,233) 202,707
Income Tax Provision (Benefit) ------- (54,300)
----------- -----------
Net Income (Loss) $ (248,233) $ 257,007
Preferred Stock Dividends of Subsidiaries -------- (32,330)
----------- -----------
Net Income (Loss) Available for Common Stockholders $ (248,233) $ 224,677
=========== ===========
Earnings (Loss) Per Share:
Basic and Diluted Earnings (Loss) Per Share $ (0.02) $ 0.04
======= ======
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE> 7
CENTURY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30,1998
(Unaudited)
<TABLE>
<CAPTION>
COMMON COMMON ADDITIONAL
PREFERRED STOCK STOCK PAID-IN
STOCK CLASS A CLASS B CAPITAL
---------------------------------------------------------
<S> <C> <C> <C> <C>
Balance December 31, 1997 $ 1,000 $ 3,373 $ 4,173 $ 8,317,678
- -------------------------
Issuance of common stock and limited 137 120 881,704
partnership units
Unrealized gain on marketable securities
Net loss for six months ended 6/30/98
----------- ----------- ----------- -----------
Balance June 30,1998 $ 1,000 $ 3,373 $ 4,430 $ 9,199,382
Issuance of common stock and limited
partnership units 120 28,906
Unrealized gain on marketable securities
Net loss for three months ended 9/30/98
Balance September 30, 1998
----------- ----------- ----------- -----------
$ 1,000 $ 3,373 $ 4,430 $ 9,228,288
=========== =========== =========== ===========
<CAPTION>
RETAINED TOTAL
EARNINGS TREASURY STOCKHOLDERS'
(DEFICIT) STOCK EQUITY
------------------------------------------------------
<S> <C> <C> <C>
Balance December 31, 1997 $ (1,033,724) $ (632,626) $ 6,659,874
- -------------------------
Issuance of common stock and limited 881,961
partnership units
Unrealized gain on marketable securities 10,802 10,802
Net loss for six months ended 6/30/98 (372,434) (372,434)
------------ ----------- ------------
Balance June 30,1998 $ (1,395,356) $ (632,626) $ 7,180,203
Issuance of common stock and limited
partnership units 28,906
Unrealized gain on marketable securities 7,569 7,569
Net loss for three months ended 9/30/98 (248,233) (248,233)
Balance September 30, 1998
------------- ----------- ------------
$ (1,636,020) $ (632,626) $ 6,968,645
============= =========== ============
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE> 8
CENTURY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
9/30/98 9/30/97
------- -------
<S> <C> <C>
Cash Flows from Operating Activities:
- -------------------------------------
Cash received from customers $ 9,332,451 $ 10,269,583
Cash paid to suppliers and employees (9,337,279) (10,274,896)
Interest paid (73,529) (115,994)
Income taxes paid -------- (15,900)
------------ ------------
Net cash used for operating activities (78,357) (137,207)
------------ ------------
Cash Flows from Investing Activities:
- -------------------------------------
Purchases of fixed assets (512,427) (272,000)
Purchases of marketable securities and investments (163,846) (1,222,159)
------------ ------------
Net cash used for investing activities (676,273) (1,494,159)
------------ ------------
Cash Flows from Financing Activities:
- -------------------------------------
Proceeds from stock and limited partnership units 1,097,200 3,096,632
Preferred dividends paid --------- (278,122)
Receipts of (payments on) notes 339,679 (233,925)
Net advances from affiliates-stockholders (540,618) (342,593)
------------ ------------
Net cash provided by financing activities 896,261 2,241,992
------------ ------------
Net Increase In Cash and Cash Equivalents 141,631 610,626
- -----------------------------------------
Cash and Cash Equivalents - January 1 $ 282,009 $ 382,548
- ------------------------------------- ------------ ------------
Cash and Cash Equivalents - June 30 $ 423,640 $ 993,174
- ----------------------------------- ============ ============
Net (Loss) Income $ (644,028) $ 792,098
Amortization and depreciation 428,974 228,163
Minority interest 6,300 42,185
Increase in accounts receivable 89,277 (957,256)
(Increase) decrease in inventory (2,971) (61,816)
(Increase) decrease in other current assets and other assets 4,750 (569,727)
Decrease in accounts payable (346,835) 220,759
Increase in accrued expenses 386,176 168,387
------------ ------------
Net cash used for operating activities $ (78,357) $ (137,207)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
F-7
<PAGE> 9
CENTURY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
For the purpose of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
Non-cash investing and financing activities:
During the quarters ended and for the nine months ended September 30, 1998 and
1997, the Company recognized unrealized gains of ($17,763) and $14,530 and
($8,657) and $25,332, respectively, on marketable securities available for sale.
In accordance with Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities, the investment
and retained earnings accounts were increased for the quarters ended and for the
nine months ended September 30, 1998 and 1997.
Dividends of $141,950 were accrued and charged to retained earnings for the
quarter ended September 30, 1997.
See accompanying notes to consolidated financial statements
F-8
<PAGE> 10
CENTURY INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1-BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Century
Industries, Inc. and Subsidiaries (the Company) have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations, although
the Company's management believes that disclosures and information presented are
adequate and not misleading. Reference is made to the detailed financial
statement disclosures which should be read in conjunction with this report and
are contained in the notes to consolidated financial statements included in the
Company's Annual Report on Form 10-KSB/A for the year ended December 31, 1997.
Certain items in prior period consolidated financial statements have been
reclassified, where appropriate, to conform with the September 30, 1998
presentation. The December 31, 1997 balance sheet was derived from audited
consolidated financial statements, but does not include all disclosures required
by generally accepted accounting principles.
NOTE 2- INTERIM PERIODS
In the opinion of the management of the Company, the accompanying unaudited
interim consolidated financial statements contain all adjustments (which are of
a normal recurring nature) necessary for a fair presentation of the Company's
financial condition as of a September 30, 1998 and December 31, 1997, and the
results of its operations and cash flows for the nine month periods ended
September 30, 1998 and 1997. The results of operations for the three and nine
months ended September 30,1998 are not necessarily indicative of the results to
be expected for the full year.
NOTE 3-PER SHARE DATA
Per share data was computed by dividing net income (loss) as adjusted by the
preferred dividends by the weighted average number of shares outstanding during
the period.
NOTE 4- BUILDING AND RELATED MORTGAGES
The Company closed on an office condo building located in Reston, Virginia
during the first quarter of 1998. This facility, which cost approximately
$360,000, will house the Company's corporate office and USIB and USIB Holdings
insurance operations.
The facility was financed with a $281,250 first trust mortgage loan from a bank.
The first trust mortgage loan bears a 9% interest rate and has a three year
maturity with monthly principal and interest payments based on a fifteen year
amortization. Additional financing of $37,500 was provided through a second
trust mortgage loan from a financial institution. The second trust mortgage
bears interest at 13% and has a term of three years. The second trust loan
carries monthly interest payments only until the loan is paid in full. Monthly
interest will be adjusted accordingly for any partial repayments of principal.
F-9
<PAGE> 11
NOTE 5 - SALE OF STOCK
On July 2, 1998 the Company announced that its placement agent, Security Capital
Trading, Inc., has commenced a Private Placement of $10 million of Senior
Callable Convertible Preferred Stock, the proceeds of which will be utilized to
capitalize the Company's proposed property and casualty insurance subsidiary in
Florida. The insurance company subsidiary will participate in the State of
Florida's Joint Underwriting Association (JUA) depopulation of its homeowners
program. To date, Security Capital Trading, Inc. has not completed this
offering.
NOTE 6 - LOAN PROCEEDS
In September, the Company obtained a secured loan in the amount of $600,000
(less fees) for (1) the license application fee for the proposed Florida
property and casualty insurance company and (2) working capital needs. The loan
is secured by the trade accounts receivable of Century Steel Products and Scibal
Associates.
F-10
<PAGE> 12
CENTURY INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Page
<S> <C> <C>
PART 1. FINANCIAL INFORMATION
Item 1 Consolidated Financial Statements F1
Consolidated Balance Sheets as of September 30, 1998
and December 31, 1997 F2-3
Consolidated Statements of Operations for the nine
months ended September 30, 1998 and 1997 and for the three
months ended September 30, 1998 and 1997 F4 -5
Consolidated Statement of Changes in Stockholders'
Equity for the three months ended June 30, 1998 and
September 30, 1998 F6
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1998 and 1997 F7-8
Notes to Consolidated Financial Statements F9-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
</TABLE>
<PAGE> 13
ITEM 2. Management's Discussion and Analysis
Century Industries, Inc. In Consolidation
with its Subsidiaries
Past Development
The following discussion and analysis of the Company's consolidated financial
condition and results of operations should be read in conjunction with the
Company's Condensed Consolidated Financial Statements and Notes thereto. This
document may contain forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements.
Current Operations
The Registrant, as the parent holding company for Century Steel Products, Inc.,
US Insurance Brokers, Inc., and Scibal Associates, Inc., has no operations of
its own, other than its functions in shareholders' relations, accounting, and
the formation and capitalization of its proposed Florida property and casualty
insurance company. The operations of each subsidiary can be found hereinbelow.
Third Quarter Consolidated Operating Results
Third quarter 1998 revenues have decreased from $3,376,555 at September 30, 1997
to $3,039,637 at September 30, 1998, which is a $336,918 decrease, or 10%. Third
quarter consolidated operating income decreased from $204,909 at September 30,
1997 to $34,827 at September 30, 1998. Third quarter 1998 income before taxes
decreased from $202,727 at September 30, 1997 to ($248,233).
Year to Date Consolidated Operating Results
The Company's consolidated year to date 1998 revenues totaled $9,476,450
compared to the same period 1997 of $11,226,839 for a decrease of $1,750,389 or
16%. Consolidated operating costs through the third quarter 1998 decreased from
$4,094,650 in 1997 to $4,009,305 for the same period in 1998. Consolidated gross
profit through the third quarter decreased from $4,917,457 in 1997 to $3,775,101
for the same period in 1998, a decrease of $1,789,546 or 36%. Consolidated
operating income through the third quarter 1998 was ($644,028), a decrease of
$1,066,011, from the nine months in 1997, which was $822,807. Consolidated
income before taxes was from $807,998 through the third quarter 1997 to
($644,028) in the same period of 1998.
Year to Date Consolidated Assets and Capital Growth
The Company's year to date consolidated assets have increased from $9,443,047 at
December 31, 1997, to $11,884,698 as of September 30, 1998, an increase of
$2,441,651 or 26%. Consolidated capital has increased from $6,659,874 at
December 31, 1997 to $6,968,645 for the third quarter of 1998, for an increase
of $308,771.
-2-
<PAGE> 14
Earnings year to date per common share are ($.07). Earnings for the third
quarter were ($.02) per common share.
Outstanding shares increased to 8,203,000 at third quarter 1998 from 6,226,533
in the third quarter 1997.
The following is a discussion and analysis of each subsidiary's results of
operations.
Century Steel Products, Inc.
Century Steel Products, Inc.'s (CSP's) sales of $1,017,321 for the third quarter
were 6% less than the third quarter of 1997 sales of $1,084,273.
Cost of goods sold was $849,730 for the third quarter 1998, as opposed to
$883,589 for the same period 1997.
CSP's third quarter operating income of ($36,000) was less than the 1997 third
quarter's operating income of $123,014.
CSP's revenues year to date for the first 9 months were $3,582,708 for 1997, as
compared to $3,311,099 for the same period in 1997, an increase of $271,609, or
8%. CSP's year to date 1998 operating income of $53,061 was less than operating
income for the first nine months of 1997 of $368,287.
Trade debt was $768,653. Trade receivables were $1,425,114.
U.S. Insurance Brokers, Inc. (USIB)
In the third quarter, 1998, USIB, working in conjunction with Scibal Associates,
placed the excess workers compensation and corresponding bond insurance for
Temple University and its affiliated health care operations. USIB was able to
negotiate a 30% reduction in premium and a 50% reduction in the deductible for
Temple University and its affiliated health care operations. In addition,
several key coverage conditions were broadened.
USIB, organized in April 1995 under the laws of the District of Columbia, has
offices at 1155 Connecticut Ave., NW, Suite 300, Washington, D.C., 20036. It
also has administrative offices at 11708 Bowman Green Drive, Reston, VA 20190.
USIB will be the managing general agency for the proposed Century Property &
Casualty. Its primary function will be the marketing of insurance products for
Century Property & Casualty, and acting as a licensed agency liaison,
coordinating Century Property & Casualty functions between Century Industries,
Century Property & Casualty and Century Insurance Management, Inc.
-3-
<PAGE> 15
Results of Operations
USIB's third quarter 1998 operating loss was ($21,051), a decrease from the
operating profit of $53,586 in same period of 1997. This loss resulted from
continued operating and development costs related to its national association
marketing programs and its plan to act as the MGA for the proposed Florida
insurance subsidiary.
USIB's year to date 1998 operating loss was ($99,237), a decrease from the
$105,773 operating profit for the same period 1997.
Scibal Associates, Inc.
In 1996, the Company acquired DC Partners, Ltd. (DCP), with a home office
situated in Somers Point, NJ, and branch offices in Edison, NJ, West Chester,
PA, Livonia, MI, and Jacksonville, FL. Scibal Associates, Inc. (Scibal),
formerly the wholly owned subsidiary of DC Partners, Ltd., is a Third Party
Claim Administrator, investigating, adjusting and administering liability,
workers' compensation and property claims on behalf of self-insureds and
insurance companies. Scibal adjusts in excess of $65,000,000 worth of claims
annually.
Scibal began operations in 1953. The Company offers its customers a complete
range of services, including claim administration, adjusting, investigation and
risk management, as well as a full complement of computer reporting required for
program management.
Scibal presently employs over 100 personnel. None of the employees are
represented by labor unions, so Scibal is not vulnerable to union demands or the
threat of strike. Employee turnover is at a rate consistent with or lower than
industry average, with the majority of the employees having been with the
Company for many years.
While competition in the third party administration industry is substantial, it
has evolved in the 90's into an industry where the TPA must be hardware and
software intensive. Scibal's unique software, which was developed internally and
is therefore proprietary, allows for an extremely flexible delivery of reporting
systems to its clientele. This software is supported by an experienced staff of
computer programmers, who are continually improving and enhancing the
proprietary claims handling software. Additionally, through its computer
programmers, Scibal continues to write "next generation" software, which will
take advantage of Internet access, electronic claims reporting, electronic
medical payment processing, data warehousing, as well as various other
value-added programs. This will enable the Company's personnel to increase
production, thereby increasing profit margins while maintaining competitive
pricing. The features and functionality offered are singular, which should
provide Scibal with a substantial sales advantage in the future. Many of the new
functions will be available for delivery in early 1999. Additionally, internal
computer staff has commenced re-mapping of Scibal's software to ensure Year 2000
compliance, which will be completed prior to June of 1999.
-4-
<PAGE> 16
The third party administration industry is directly affected by the current
"soft" insurance market. This is an industry-wide issue which has, historically,
had a tendency to run in cycles. Although many medium and large public entities
and private corporations have opted to discontinue participation in
self-insured/loss sensitive programs due to substantially reduced insurance
costs, many believe that the market will begin to tighten throughout 1999, which
will encourage both small and large entities to once again revisit insurance
programs involving alternative risk financing, including either self-insurance,
deductibles or retrospective ratings.
Scibal's customer base consists of organizations that participate in either
self-insurance or alternative risk financing programs. A representative list of
Scibal's clients includes hundreds of public entities, as well as many colleges,
universities, health care institutions, real estate holding companies, electric
authorities, various associations and entertainment related business.
Two major customers of Scibal Associates, Inc., which comprised approximately
$2,500,000 in revenues, elected to participate in insurance company based
programs late in 1997. However, Scibal's current customers are long-standing
clients, no one of which amounts to more than 5% of total revenue. Being a
service provider, there is traditionally no dependence on any major supplier.
In the past year, Scibal has signed several new customers to contracts, which
will increase Scibal's revenues on an annualized basis by $960,000. All
contracts which expired through the third quarter of 1998 have been renewed and
adjusted, which should add an additional $200,000 in annualized revenues.
Payroll and other related expenses were reduced substantially again in the third
quarter of 1998 by $293,000 on an annualized basis. These staff reductions and
other expense reductions will realize savings in other areas, including employee
benefits, telephone and fax costs, office supplies and various other soft costs.
Results of Operations
Scibal's revenues of $2,022,316 for the 1998 third quarter were 12% lower than
the third quarter of 1997 revenues of $2,292,282, a reduction of $269,966. This
reduction was due to management's continued objective of replacing less
profitable accounts with accounts where profit margins are greater.
Additionally, the reduction was as a result of two of Scibal's substantial
clients electing to participate in insurance company related programs as opposed
to utilizing the services of a third party administrator.
Operating income for the third quarter of 1998 of $339,380 was 62% higher than
the third quarter of 1997 operating income of $209,620.
Scibal's trade debt was $750,168 in 1998 as compared to $1,042,594 in the same
period of 1997. Scibal's trade receivables were $758,700 in 1998, as compared to
$1,077,330 for the same period 1997.
-5-
<PAGE> 17
Year to date Scibal sales of $5,888,143 for 1998 were 26% lower than the nine
months of 1997 revenues of $7,915,740. This reduction was due to management's
continued objective of replacing less profitable accounts with accounts where
profit margins are greater. Additionally, the reduction was as a result of two
of Scibal's clients electing to participate in insurance company related
programs as opposed to utilizing the services of a third party administrator.
Scibal's year to date 1998 operating income of $610,389 was $208,464 lower than
1997 year to date operating income of $818,853. Operating income decreased as a
result of Scibal's loss of two major customers, which now participate in
insurance company related programs. Although management acted as quickly as
possible to the loss of these accounts, various carryover expenses were
incurred, including payroll and other related benefits, which resulted in less
operating profit year to date.
Scibal's management has substantially decreased expenses in both payroll and
overhead, as well as continued to bring on new business, which amounts to just
under $1,000,000 in new revenue (annualized) written for 1998.
USIB Holdings Limited Partnership
USIB Holdings LP was formed in 1997 for the purpose of acting as an acquisition
entity for the proposed acquisition of Reinsurance Corporation of America, which
management has been in active negotiations to purchase for approximately one
year.
This entity was formed as a Limited Partnership, with USIB as its General
Partner, in order that the Company could utilize David Scibal's 727,273 Class B
warrants, which he contributed as capital to the LP, as consideration for the
proposed property and casualty insurance company formation business plan (as
hereinafter described) as capital. This reduced the potential dilution of the
Company's shares.
The USIB Holdings, LP is being managed and operated by USIB as its General
Partner, and thus the information regarding USIB as explained herein will again
satisfy most of the informational requirements of the USIB Holdings, LP.
Results of Operations
USIB Holdings, LP had a third quarter 1998 development stage operating loss of
($702,142).
This operating earnings loss is attributed to costs associated with running a
shareholders relations office for the Registrant, as well as covering
significant accounting and legal expenses for the Registrant.
-6-
<PAGE> 18
FUTURE PROSPECTS: TRENDS AND EVENTS LIKELY TO MATERIALLY IMPACT REGISTRANT'S
SHORT AND LONG TERM LIQUIDITY, REVENUES AND INCOME FROM CONTINUING OPERATIONS
The Registrant's focus for 1998 is its formation and capitalization of a new
Florida insurance company to take advantage of the State of Florida JUA
Homeowners Insurance TakeOut Program.
USIB Holdings, LP, whose general partner is USIB, has expended funds to cover
legal, auditing and compliance expenses, as well as the go forward expenses
associated with formation and capitalization of the new proposed subsidiary.
In the first quarter of 1998, the Registrant entered into two Letters of Intent
with Security Capital Trading, Inc., an NASD member firm. To date, Security
Capital has not produced any proceeds from either of the previously announced
placements. The Registrant continues to seek alternative sources of funding for
its proposed subsidiary.
The Registrant intends to organize Century Property and Casualty Insurance
Company (the "Insurance Company") under Florida law as a multiple line property
and casualty insurer licensed in the State of Florida. The Registrant will use
approximately $5.3 million to provide the capital and surplus which the
Insurance Company will need in order to be able to participate in the Market
TakeOut Program of the Florida Residential Property and Casualty Joint
Underwriting Association (the "JUA").
The JUA was established by the Florida Legislature in 1992 as a temporary
measure to provide homeowners' insurance coverage for individuals who could not
obtain such coverage from private carriers by reason of the impact that
Hurricane Andrew had on the private insurance market. However, instead of
serving as a temporary source of emergency insurance coverage, as originally
intended, the JUA has become a significant provider of original and renewal
insurance coverage for Florida homeowners.
The proposed Florida insurance company's initial business operations will
consist of providing property and casualty insurance coverage through homeowners
insurance policies that are acquired from the JUA. The Company anticipates that
the proposed Florida insurance company will acquire between 30,000 and 60,000
policies from the JUA within the first year of the proposed Florida insurance
company's operations, representing approximately $40,000,000 in annual renewal
premiums. The Registrant further anticipates that the proposed Florida insurance
company will offer homeowners property and casualty insurance in Florida in the
voluntary insurance market through independent agents.
The Registrant expects to rely on the use of reinsurance to limit the amount of
risk retained under its policies and to increase its ability to write additional
risk. The Registrant's intention is to limit the exposure and therefore protect
its capital, even in the event of catastrophic occurrences, through reinsurance
agreements that transfer the risk of loss in excess of $1,000,000.
-7-
<PAGE> 19
PART II - Other Information
ITEM 1. Legal Proceedings
There are, at present, no material legal proceedings in which the Company is
involved, either as plaintiff or defendant.
ITEM 2. Changes in Securities
NONE
ITEM 3. Defaults
NONE
ITEM 4. Submission of Matters to a Vote of Security Holders
NONE
ITEM 5. Other Information
NONE
ITEM 6. Exhibits and Reports on Form 8-K
NONE
-8-
<PAGE> 20
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
November 23, 1998
Century Industries, Inc.
/s/ Ted L. Schwartzbeck
- ---------------------------
Ted L. Schwartzbeck
Director
/s/ Joel M. Gundersheimer
- ---------------------------
Joel M. Gundersheimer
Director
/s/ A. Jay Pignatello
- ---------------------------
A. Jay Pignatello
Director, Secretary
-9-
<PAGE> 21
INDEX TO EXHIBITS
The following Exhibits are attached as required by Small Business Issuers:
(l) Underwriting agreement. Not applicable.
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession. Not applicable.
(3) Articles of Incorporation and by-laws. Incorporated by reference in
previously filed Form 10-QSB and Form 10-KSB.
(4) Instruments defining rights of holders. Not applicable.
(5) Opinion re legality. Not applicable.
(6) No Exhibit required.
(7) Opinion re liquidation preference. Not applicable.
(8) Opinion re tax matters. Not applicable.
(9) Voting trust agreement. Not applicable.
(10) Material contracts. Not applicable.
(11) Statement re computation of per share earnings. Attached hereto.
(12) No Exhibit required.
(13) Annual or quarterly reports, Form 10-Q or quarterly report to security
holders. Incorporated by reference in previously filed Form 10-QSB and
Form 10-KSB.
(14) Material foreign patents. Not applicable.
(15) Letter on unaudited interim financial information. Not applicable.
(16) Letter on change in certifying accountant. Not applicable.
(17) Letter on director resignation. Not applicable.
(18) Letter re change in accounting principles. Not applicable.
(19) Report furnished to security holders. Not applicable.
(20) Other documents or statements to security holders. Not applicable.
-10-
<PAGE> 22
(21) Subsidiaries of the registrant. Not applicable.
(22) Published report regarding matters submitted to vote of security holders.
Not applicable.
(23) Consents of experts and counsel. Not applicable.
(24) Power of attorney. Not applicable.
(25) Statement of eligibility of trustee. Not applicable.
(26) Invitations for competitive bids. Not applicable.
(27) Financial data schedule. Not applicable.
(28) Information from reports furnished to state insurance authorities. Not
applicable.
(29) Through (98) [RESERVED]
(99) Additional Exhibits. None.
-11-
<PAGE> 1
EXHIBIT 11
CENTURY INDUSTRIES, INC., AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
NINE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares Outstanding....................................... 8,203,000 6,096,000
Weighted average shares outstanding...................... 7,600,000 6,000,000
Net Income (Loss)........................................($ 644,028) $ 792,098
Preferred Dividends ------- (167,700)
----------- ----------
Total Net Income (Loss) Available
for Common Stockholders' $ (644,028) $ 592,068
=========== =========
Basic and Diluted Earnings (Loss) Per Share:
Earnings (Loss) Per Share $ (0.07) $0.10
------ -----
</TABLE>
-13-
<PAGE> 2
EXHIBIT 11
CENTURY INDUSTRIES, INC., AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
THREE MONTHS THREE MONTHS
ENDED SEPTEMBER, ENDED SEPTEMBER 30,
1998 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares Outstanding.......................................... 8,203,000 6,096,000
Weighted average shares outstanding......................... 7,600,000 6,000,000
Net Income (Loss)...........................................$ (248,233) $ 257,007
Preferred Dividends -------- (32,330)
---------- ----------
Total Net Income (Loss) Available
for Common Stockholders' $ (248,233) $ 224,677
=========== =========
Basic and Diluted Earnings (Loss) Per Share:
Earnings (Loss) Per Share $(0.03) $0.04
------ -----
</TABLE>
-14-
<PAGE> 1
Exhibit 21
21. A list of all subsidiaries, the State or other jurisdiction of
incorporation or organization of each, and the names under which the
subsidiaries do business.
<TABLE>
<CAPTION>
Name of Subsidiary State of Incorporation Does Business As
- --------------------------------- --------------------------- ------------------------------
<S> <C> <C>
Century Steel Products, Virginia Century Steel Products,
Inc. Inc.
US Insurance Brokers, District of Columbia US Insurance Brokers,
Inc. Inc.
Scibal Associates, Inc. New Jersey Scibal Associates, Inc.
USIB Holdings, LP District of Columbia USIB Holdings, LP
</TABLE>
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 423,640
<SECURITIES> 450,025
<RECEIVABLES> 2,131,939
<ALLOWANCES> 120,000
<INVENTORY> 223,742
<CURRENT-ASSETS> 3,491,933
<PP&E> 3,709,080
<DEPRECIATION> (1,331,954)
<TOTAL-ASSETS> 2,377,126
<CURRENT-LIABILITIES> 3,461,318
<BONDS> 0
0
1,000
<COMMON> 8,203
<OTHER-SE> 5,381,750
<TOTAL-LIABILITY-AND-EQUITY> 10,024,945
<SALES> 3,039,637
<TOTAL-REVENUES> 3,039,637
<CGS> 1,706,968
<TOTAL-COSTS> 1,297,842
<OTHER-EXPENSES> (283,060)
<LOSS-PROVISION> 120,000
<INTEREST-EXPENSE> (24,625)
<INCOME-PRETAX> (248,233)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> (248,233)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (248,233)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
