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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-KA
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): MARCH 14, 1994
______________________________UNITED CAPITAL CORP.______________________________
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C> <C>
DELAWARE 1-10104 04-2294493
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
</TABLE>
_111 GREAT NECK ROAD, SUITE 401, GREAT NECK, NEW YORK 11021_
Address of principal executive offices
Registrant's telephone number, including area code: (516) 466-6464
_______________________________________N/A______________________________________
(Former name or former address, if changed since last report.)
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) The Registrant hereby amends Item 7 of this Form 8-K by including
the requisite Financial Statements of Kentile Floors, Inc.
("Kentile").
(b) The requisite pro forma financial information of the Kentile
acquisition was included in the Registrant's Form 10-Q for the
quarter ended March 31, 1994.
<TABLE>
<CAPTION>
Exhibit
(c) No. Exhibits
--------- -------------------------------------------------------------
<S> <C> <C>
99(a) Amended and Restated Asset Purchase Agreement dated as of
July 9, 1993 by and between the Registrant and Kentile
Floors, Inc. (previously filed on this Report on Form 8-K).
99(b) Financial Statements of Kentile (filed herewith).
</TABLE>
SIGNATURE
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 hereunto duly authorized.
UNITED CAPITAL CORP.
Dated: May 27, 1994 By: /S/ DENNIS S. ROSATELLI________________________________
Dennis S. Rosatelli
Vice President and Chief
Financial Officer
2
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THE BUSINESS ACQUIRED FROM KENTILE FLOORS, INC.
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FINANCIAL STATEMENTS AS OF DECEMBER 31, 1993
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TOGETHER WITH
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Stockholder of Kentile, Inc.:
We have audited the accompanying statement of assets and liabilities of The
Business Acquired from Kentile Floors, Inc. as described in Note 1 (the
"Company" or "the Business Acquired") as of December 31, 1993, and the related
statements of income and expenses, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets and liabilities of The Business Acquired from
Kentile Floors, Inc. as of December 31, 1993, and its income and expenses and
cash flows for the year then ended in conformity with generally accepted
accounting principles.
As discussed in Note 2, on November 20, 1992, Kentile Floors, Inc. ("KFI") filed
a voluntary petition for relief under Chapter 11 of the United States Bankruptcy
Code. The accompanying financial statements have been prepared on a going
concern basis, which contemplates continuity of operations, realization of
assets and liquidation of liabilities in the ordinary course of business. On
March 14, 1994, certain assets were acquired and liabilities were assumed from
KFI by Kentile, Inc. ("Kentile"), a wholly-owned subsidiary of United Capital
Corp. The accompanying financial statements of the Business Acquired also
include certain liabilities subject to compromise which arose from the
operations of the Business Acquired prior to the date that KFI filed for
bankruptcy in the manner described in Notes 2 and 4. The accompanying financial
statements do not reflect any adjustments relating to the ultimate disposition
of liabilities subject to compromise or the effect of the acquisition of the
Business Acquired by Kentile.
ARTHUR ANDERSEN & CO.
Roseland, New Jersey
May 27, 1994
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THE BUSINESS ACQUIRED FROM KENTILE FLOORS, INC.
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STATEMENT OF ASSETS AND LIABILITIES -- DECEMBER 31, 1993
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(in thousands)
--------------
<TABLE>
<CAPTION>
ASSETS
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<S> <C>
CURRENT ASSETS:
Cash $209
Accounts and notes receivable, net of allowance for doubtful accounts of
approximately $2,153 4,639
Inventories 4,613
Prepaid expenses and other current assets 302
------
Total current assets 9,763
PROPERTY, PLANT AND EQUIPMENT, net 2,911
PREPAID PENSION COSTS 2,599
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$15,273
-------
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LIABILITIES
-----------
CURRENT LIABILITIES:
Accounts payable and accrued liabilities not subject to compromise $2,565
Revolving line of credit subject to compromise 7,847
Advances from United Capital Corp. not subject to compromise 775
-------
Total current liabilities 11,187
LIABILITIES SUBJECT TO COMPROMISE 13,919
COMMITMENTS AND CONTINGENCIES
EXCESS OF LIABILITIES OVER ASSETS (9,833)
-------
$15,273
-------
-------
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
<PAGE>
THE BUSINESS ACQUIRED FROM KENTILE FLOORS, INC.
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STATEMENT OF INCOME AND EXPENSES
--------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1993
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(in thousands)
--------------
<TABLE>
<CAPTION>
<S> <C>
NET SALES $50,314
-------
COSTS AND EXPENSES:
Cost of goods sold 38,988
Selling expenses 8,012
General and administrative expenses 3,345
-------
Total costs and expenses 50,345
OPERATING LOSS (31)
INTEREST EXPENSE 921
-------
Excess of expenses over income ($952)
-------
-------
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
<PAGE>
THE BUSINESS ACQUIRED FROM KENTILE FLOORS, INC.
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STATEMENT OF CASH FLOWS
-----------------------
FOR THE YEAR ENDED DECEMBER 31, 1993
------------------------------------
(in thousands)
-------------
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Excess of expenses over income ($952)
Adjustments to reconcile excess of expenses over income to
net cash used in operating activities-
Depreciation and amortization 567
(Increase) decrease in assets-
Accounts and notes receivable, net (938)
Inventories 148
Prepaid expenses and other current assets 128
Prepaid pension costs (377)
Increase (decrease) in liabilities-
Accounts payable and accrued liabilities not subject to compromise 269
Liabilities subject to compromise 169
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Net cash used in operating activities (986)
-------
CASH FLOWS USED IN INVESTING ACTIVITIES -- Acquisition of
property, plant and equipment (214)
-------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving line of credit subject to compromise 1,377
Distributions to fund operations not acquired (902)
Advances from United Capital Corp. not subject to compromise 775
-------
Net cash provided by financing activities 1,250
-------
Net decrease in cash (50)
CASH, beginning of year 259
-------
CASH, end of year $209
-------
-------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for-
Interest $715
-------
-------
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
<PAGE>
THE BUSINESS ACQUIRED FROM KENTILE FLOORS, INC.
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NOTES TO FINANCIAL STATEMENTS
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DECEMBER 31, 1993
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(dollars in thousands, except per share data)
---------------------------------------------
(1) FORMATION OF THE COMPANY:
-------------------------
Kentile, Inc. ("Kentile"), formerly known as Kentile Acquisition Corp., was
formed on July 8, 1993 and is a wholly-owned subsidiary of United Capital
Corp. ("UCC"). The authorized capital stock of Kentile consists of 1,000
shares of common stock (par value $.01 per share) and 2,000 shares of
preferred stock (par value $.01 per share, 8% cumulative, convertible) of
which 100 shares of common stock were outstanding at December 31, 1993. On
March 14, 1994, 875 preferred shares were issued.
Pursuant to an order approved by the Bankruptcy Court, on March 14, 1994
Kentile purchased substantially all of the operating assets of Kentile
Floors, Inc. ("KFI") for approximately $9.6 million (the "Acquisition").
The purchase price was comprised of approximately $6.5 million in bank
financing and approximately $3.1 million in cash including cash paid by a
subsidiary of UCC to permit the transfer of ownership of Kentile's Chicago
facility.
Kentile did not assume any liabilities of KFI relating to product liability
claims for asbestos related matters, potential environmental liabilities
that may exist at KFI's manufacturing facilities or other amounts
outstanding prior to KFI's bankruptcy filing, including trade accounts
payable, self-insurance obligations of KFI and certain secured indebtedness
and accrued liabilities.
The accompanying financial statements have been prepared on a basis which
reflects the historical results of KFI's operations which were acquired by
Kentile (the "Business Acquired" or the "Company"). These results do not
include costs of the bankruptcy, discussed in Note 2, incurred by KFI since
future costs are not expected to be significant and will be borne directly
by KFI and are not a part of the future operations of the Business
Acquired. Certain allocations between the Business Acquired and KFI have
been reflected in the historical financial statements based on methods that
management believes to be reasonable. These financial statements do not
give effect to the acquisition of the Business Acquired by Kentile.
<PAGE>
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(2) CHAPTER 11 BANKRUPTCY FILING:
-----------------------------
On November 20, 1992 (the "Petition Date"), KFI filed a voluntary petition
for relief under Chapter 11 of the United States Bankruptcy Code with the
United States Bankruptcy Court for the Southern District of New York. Under
Chapter 11, certain claims against KFI in existence prior to the filing of
the petition for relief are stayed while KFI continues business operations
as Debtors-in-Possession. The estimated portion of these claims related to
the Business Acquired are reflected in the accompanying December 31, 1993
statement of assets and liabilities as "liabilities subject to compromise"
and were not assumed by Kentile in connection with the Acquisition.
Additional claims may arise subsequent to the filing date resulting from
rejection of executory contracts, including leases, and from the
determination by the Court (or agreed to by parties-in-interest) of allowed
claims for contingencies and other disputed amounts. Such additional
claims, if any, will also be considered as liabilities subject to
compromise. Claims secured against KFI's assets (secured claims) are also
stayed, although the holders of such claims are secured primarily by liens
on certain of KFI's accounts receivable, inventories and property, plant
and equipment.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates continuity of operations, realization of assets
and liquidation of liabilities in the ordinary course of business. The
accompanying financial statements do not reflect any adjustments relating
to the ultimate disposition of liabilities subject to compromise.
(3) SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
----------------------
Business-
---------
The Company is a major manufacturer and supplier of resilient
vinyl flooring and is comprised of the operations of KFI which
were acquired in March 1994 (see Note 1). These operations are
presently conducted from a 315,000 square-foot manufacturing and
headquarters facility located in Chicago, Illinois and numerous
sales offices located throughout the United States. The
Company's products include resilient vinyl tile for use in the
commercial flooring industry, a line of vinyl wall base products
marketed under the Kencove brand name and other supporting
products which include adhesives, cleaners and waxes.
Inventories-
------------
Inventories are valued at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.
<PAGE>
-3-
<TABLE>
<CAPTION>
<S> <C>
Inventories, at December 31, 1993, consist of the following-
Finished goods $3,245
Work in process 514
Raw materials 854
------
$4,613
------
------
</TABLE>
Property, Plant and Equipment-
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<TABLE>
<CAPTION>
Property, plant and equipment is stated at cost and is comprised of the
following categories as of December 31, 1993-
<S> <C>
Land $415
Building and improvements 3,648
Machinery and equipment 19,962
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Total 24,025
Less- Accumulated depreciation (21,114)
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$2,911
---------
---------
</TABLE>
Depreciation has been computed by the straight-line method during
1993 and was based upon estimated useful lives as follows-
<TABLE>
<CAPTION>
<S> <C>
Buildings and improvements 20-45 years
Machinery and equipment 5-12 years
</TABLE>
Income Taxes-
- - -------------
At December 31, 1993, KFI has net operating loss carryforwards and
certain tax credits available to offset its future taxable income for
financial reporting purposes. Such tax attributes are not available
to the Business Acquired. Accordingly, no income tax benefit has been
recorded in the accompanying financial statements during 1993 and no
income taxes were paid in 1993.
Prepaid Expenses and Other Current Assets-
- - ------------------------------------------
The Company capitalizes certain promotional materials (i.e., displays,
catalogs, product samples, etc.) as prepaid assets until the materials are
distributed to the market place. Selling expense is recorded when
materials are distributed.
Concentrations of Credit Risk-
- - ------------------------------
The Company manufactures and sells its products to wholesale distributors.
Substantially all end sales are to the commercial real estate industry. All
of the Company's distributors are located in the United States. In terms
of sales, the majority are located on the east coast. Sales to the ten
largest distributors, in terms of sales, accounted for 47% of net sales in
1993. Four of these distributors each account for more than 5% of 1993 net
sales. Sales to these four customers totaled $15,697 in 1993.
<PAGE>
-4-
(4) LIABILITIES SUBJECT TO COMPROMISE:
----------------------------------
As a result of the Chapter 11 filing (see Note 2), enforcement of certain
claims (liabilities subject to compromise) against KFI in existence prior
to the Petition Date are stayed pending a determination of the Bankruptcy
Court.
At December 31, 1993, the Company's liabilities subject to compromise are
stated at management's estimate of the total amount of allowed claims
applicable to the Business Acquired and not at the amounts for which claims
may be settled. Such amounts subject to compromise were not assumed by
Kentile in the Acquisition. The amounts listed below may be subject to
future adjustments depending on further developments with respect to
disputes or unresolved claims.
<TABLE>
<CAPTION>
<S> <C>
Estimated claims-
Trade accounts payable and accrued liabilities $12,104
Amounts due to secured lender (Note 5) 1,815
-------
Liabilities subject to compromise $13,919
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--------
</TABLE>
The amounts due to the secured lender by the Company are comprised of
$1,589 of principal and $226 of accrued and unpaid interest (12% for the
year ended December 31, 1993). Such amounts represent the portion of total
indebtedness which was allocated to the Business Acquired on a basis
management believes to be reasonable. As of December 31, 1993, KFI owed
$6,356 of total principal and interest of $903 to the secured lender
including such amounts apportioned to the Company as noted above. Such
amounts were collateralized by first mortgages on KFI's South Plainfield,
New Jersey facility and the Company's Chicago, Illinois, facility and a
subordinated security interest in the Company's accounts receivable,
inventories and equipment. KFI was not in compliance with certain
provisions of the loan agreement at December 31, 1993. In February 1994,
the secured lender sold its position in such debt to a subsidiary of UCC
for $3 million. As a result, Kentile was able to complete the purchase of
the Chicago facility in connection with the Acquisition discussed in Note
1. UCC has an outstanding claim against KFI in its Chapter 11 bankruptcy
proceedings.
(5) REVOLVING LINE OF CREDIT
SUBJECT TO COMPROMISE:
------------------------
KFI had a revolving credit agreement with Congress Financial Corp.
("Congress") which provided maximum borrowings of up to $10,000,000. Such
borrowings were collateralized by all of KFI's accounts receivable,
inventories and equipment including the assets acquired by Kentile in the
Acquisition. As of December 31, 1993, KFI owed Congress $7,847 in
connection with borrowings outstanding under the loan including amounts
advanced pursuant to the $2 million letter of credit provided by UCC (see
Note 7). Interest expense included in the accompanying statement of income
and expenses was based upon the application of the borrowing formula to the
related assets of the Business Acquired.
As of December 31, 1993, all amounts owed to Congress were related to the
Business Acquired. In connection with the Acquisition, Kentile, Inc.
repaid the full amount due to Congress through new financing from a
financial institution. This new financing is secured by the accounts
receivable, inventories and equipment of Kentile. This revolving facility
provides for maximum borrowings of the lessor of $7,000,000 or the
borrowing base, as defined, at the bank's prime lending rate plus 1-1/2%.
This facility is due in April 1996 and includes, among other things,
several financial covenants regarding capital expenditures and debt-to-
equity ratios.
<PAGE>
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(6) PENSION PLAN:
The Company assumed the responsibilities of KFI's defined benefit pension
plan for hourly employees (the "Plan"). The Company determined its pension
expense and funded status as required under Financial Accounting Standard
No. 87.
The following table sets forth the Plan's funded status and amounts
recognized in the Company's acompanying statement of assets and liabilities
at December 31, 1993 as determined by the Company's actuary-
<TABLE>
<CAPTION>
<S> <C>
Actuarial present value of benefit obligation-
Vested benefit obligation $7,369
Nonvested benefit obligation 282
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Accumulated benefit obligation $7,651
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Plan assets at fair value, primarily stocks and bonds $11,394
Projected benefit obligation (7,651)
Plan assets in excess of projected benefit obligation 3,743
Unrecognized net gain (604)
Unrecognized prior service cost 1,135
Unrecognized transition asset (1,675)
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Prepaid pension costs $2,599
-------
-------
The estimated portion of net pension income in 1993 attributable to the Acquired
Business is comprised of the following-
Service cost -- benefits earned during the period $139
Interest cost on projected benefit obligation 420
Actual return on plan assets (749)
Net amortization and deferral (85)
-------
Net pension income related to the Business Acquired ($275)
-------
-------
</TABLE>
The actuarial assumptions used for determining the present value of accumulated
benefit obligations, as measured on December 31, 1993, are as follows: the
weighted average assumed discount rate used was 7.5%, the weighted average
expected long-term rate of return on plan assets was 10%, and as benefit levels
are fixed and predetermined by the Plan, there is no assumed rate of increase in
future compensation levels. Accordingly, the projected benefit obligation
equals the accumulated benefit obligation.
No contributions were made in 1993.
<PAGE>
-6-
(7) RELATED PARTY TRANSACTIONS:
---------------------------
During 1993, UCC advanced $775,000 to KFI. Such amount was applied to the
purchase price of the Company pursuant to the Acquisition discussed in
Note 1.
Subsequent to KFI's bankruptcy filing in November 1992, UCC acquired a one
third equity interest in KFI together with an option to purchase an
additional interest in the future. In consideration for this interest and
option in KFI, UCC provided a $2 million letter of credit to partially
guarantee borrowings under KFI's revolving line of credit agreement with
Congress. The letter of credit arrangement was made pursuant to Bankruptcy
Court approval on a priority basis. This arrangement was terminated in
conjunction with the Acquisition.
