FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended DECEMBER 31, 1994
-----------------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ------------------- to ------------------------
Commission file number 1-10104
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UNITED CAPITAL CORP.
--------------------
(Exact name of registrant as specified in its charter)
DELAWARE 04-2294493
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
111 GREAT NECK ROAD, GREAT NECK, NEW YORK 11021
----------------------------------------- ---------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (516) 466-6464
----------------------------
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
<S> <C>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
--------------------------------------- -----------------------------------------
Common Stock (Par Value $.10 Per Share) American Stock Exchange
</TABLE>
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X].
The aggregate market value of the shares of the voting stock held by
nonaffiliates of the Registrant as of March 22, 1995 was approximately
$21,515,000.
The number of shares of the Registrant's $.10 par value common stock outstanding
as of March 22, 1995 was 6,027,866.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of Form 10-K will be incorporated by
reference to certain portions of a definitive proxy statement which is expected
to be filed by the Registrant pursuant to Regulation 14A within 120 days after
the close of its fiscal year.
<PAGE>
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PART I
ITEM 1. BUSINESS
GENERAL
United Capital Corp. (the "Registrant"), incorporated in 1980 in the State of
Delaware, has four industry segments:
1. Real Estate Investment and Management.
2. Manufacture and Sale of Resilient Vinyl Flooring.
3. Manufacture and Sale of Antenna Systems.
4. Manufacture and Sale of Engineered Products.
The Registrant also invests excess available cash in marketable securities and
other financial instruments.
DESCRIPTION OF BUSINESS
REAL ESTATE INVESTMENT AND MANAGEMENT
The Registrant is engaged in the business of investing in and managing real
estate properties. Most real estate properties owned by the Registrant are
leased under net leases pursuant to which the tenants are responsible for all
expenses relating to the leased premises, including taxes, utilities, insurance
and maintenance. The Registrant also owns properties that it manages which are
operated by the City of New York as day-care centers and offices and other
properties leased as department stores or shopping centers around the country.
In addition, the Registrant owns properties available for sale and lease with
the assistance of a consultant or a realtor working in the locale of the
premises.
The majority of properties are leased to single tenants. Approximately 98% of
the total square footage of the Registrant's properties are currently leased.
RESILIENT VINYL FLOORING
In March 1994 the Registrant purchased substantially all of the operating assets
of Kentile Floors, Inc. ("Kentile Floors"), a major manufacturer and supplier of
resilient vinyl flooring. This acquisition was completed through a new
wholly-owned subsidiary of the Registrant known as Kentile, Inc. ("Kentile").
Kentile's operations are conducted from a 315,000 square foot manufacturing
facility located in Chicago, Illinois. Kentile's products include resilient
vinyl tile for use in the commercial flooring industry, a line of vinyl wall
base products marketed under the Kencove brandname and other supporting products
which include adhesives, cleaners and waxes. These products are sold through a
nationwide network of distributors which service the regional markets in which
they are located.
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The acquisition of the operating assets of Kentile Floors was accounted for by
the purchase method of accounting and, accordingly, the results of operations of
Kentile have been included with those of the Registrant for periods subsequent
to the date of acquisition. Also see Note 2 of Notes to Consolidated Financial
Statements.
Net sales by the resilient vinyl flooring segment to its largest distributor
(those in excess of 10% of the segment's net sales) accounted for approximately
14% of the segment's net sales for 1994.
ANTENNA SYSTEMS
The Registrant designs and manufactures antenna systems marketed internationally
under the Dorne & Margolin trade name. Its products include airborne and
ground-based navigation, communication and satellite communication antennas for
military, commercial transport and general aviation aircraft. These products are
sold internationally to military, commercial and general aviation original
equipment manufacturers as well as to the end user as replacement and spare
antenna systems.
In April 1992, the Registrant acquired the operating assets of Chu Associates,
Inc. ("Chu Associates") and affiliated companies which broadens the scope of its
antenna systems segment. This addition, which is now known as D&M/Chu
Technology, Inc. ("D&M/Chu"), has been consolidated with the operations of the
Registrant's Dorne & Margolin subsidiary in its Bohemia, New York facility.
Here, it designs and manufactures communication and navigation antenna systems
for land and naval based applications. D&M/Chu's product line, which is marketed
internationally, complements Dorne & Margolin's specialty in airborne
communication and navigation antenna systems.
Approximately 69% and 71% of the antenna systems sold by the Registrant in 1994
and 1993, respectively, were for use by the United States Government and
purchased by the United States Government or its contractors.
ENGINEERED PRODUCTS
The Registrant's engineered products are manufactured through the Technical
Products Division of Metex Corporation ("Metex") and AFP Transformers, Inc.
("AFP Transformers"), wholly-owned subsidiaries of the Registrant. The knitted
wire products and components manufactured by Metex must function in adverse
environments and meet rigid performance requirements. The principal areas in
which these products have application are as high temperature gaskets, seals,
components for use in airbags, shock and vibration isolators, noise reduction
elements and air, liquid and solid filtering devices.
Metex has been an original equipment manufacturer for the automobile industry
since 1974 and presently supplies several automobile manufacturers with exhaust
seals and components for use in exhaust emission control devices.
The Registrant's transformer products are marketed under several brandnames
including Field Transformer, ISOREG and EPOXYCAST for a wide variety of
industrial and research applications. AFP Transformers also provides a full line
of power conditioners and uninterruptible power supplies, as well as its
Spectrum line of specialty transformers for high powered ultraviolet lamps used
in the printing and chemical industries.
Sales by the Engineered Products segment to its two largest customers (each in
excess of 10% of the segment's net sales) accounted for approximately 23% and
26% of the segment's sales for 1994 and 1993, respectively.
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SUMMARY FINANCIAL INFORMATION
The following table sets forth the revenues, income (loss) from operations and
identifiable assets of each business segment of the Registrant for 1994, 1993
and 1992.
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
REAL ESTATE INVESTMENT AND MANAGEMENT-
Rental revenues $ 21,988 $ 20,815 $ 19,543
======== ======== ========
Income from operations $ 5,038 $ 3,946 $ 3,033
======== ======== ========
Identifiable assets $ 92,421 $ 86,668 $ 88,453
======== ======== ========
RESILIENT VINYL FLOORING-
Net sales $ 29,894 $ 0 $ 0
======== ======== ========
Income (loss) from operations ($ 608) $ 0 $ 0
======== ======== ========
Identifiable assets $ 13,975 $ 0 $ 0
======== ======== ========
ANTENNA SYSTEMS-
Net sales $ 19,495 $ 21,098 $ 24,513
======== ======== ========
Income (loss) from operations ($ 1,527) $ 769 $ 3,259
======== ======== ========
Identifiable assets $ 15,580 $ 17,686 $ 18,899
======== ======== ========
ENGINEERED PRODUCTS-
Net sales $ 35,511 $ 27,643 $ 26,819
======== ======== ========
Income from operations $ 2,477 $ 1,585 $ 2,687
======== ======== ========
Identifiable assets $ 14,365 $ 10,528 $ 9,497
======== ======== ========
</TABLE>
DISTRIBUTION
The Registrant's manufactured products are distributed by a direct sales force
and through distributors to dealers, contractors, industrial consumers, original
equipment manufacturers and the United States Government.
PRODUCT METHODS AND SOURCES OF RAW MATERIALS
The Registrant's products are manufactured at its own facilities. The Registrant
purchases raw materials, including resins, drawn wire, castings and electronic
components from a wide range of suppliers of such materials. Most raw materials
purchased by the Registrant are available from several suppliers. The Registrant
has not had and does not expect to have any problems fulfilling its raw material
requirements during 1995.
<PAGE>
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PATENTS AND TRADEMARKS
The Registrant owns several patents, patent licenses and trademarks including
the Kentile trademark which is significant to the Registrant's resilient vinyl
flooring operations. The loss of this trademark could have a material adverse
effect on such operations.
While the Registrant considers that in the aggregate its other patents and
trademarks used in the resilient vinyl flooring, antenna systems and engineered
products operations are significant to those businesses, it does not believe
that any of these patents or trademarks are of such importance that the loss of
one or more of such patents or trademarks would materially affect its
consolidated financial condition or results of operations.
EMPLOYEES
At March 22, 1995, the Registrant employed approximately 900 persons. Certain of
the Registrant's employees are represented by unions. The Registrant believes
that its relationships with its employees are good.
COMPETITION
The Registrant competes with at least five other companies in the sale of
resilient floor tile; at least 20 other companies in the sale of antenna
systems; and at least 19 other companies in the sale of engineered products. The
Registrant stresses product performance and service in connection with the sale
of resilient vinyl floor tile, antenna systems, and engineered products. The
principal competition faced by the Registrant results from the sales price of
the products sold by its competitors.
BACKLOG
The dollar value of unfilled orders of the Registrant's resilient vinyl flooring
segment was approximately $2,283,000 at December 31, 1994. It is anticipated
that substantially all such backlog will be filled in 1995.
The dollar value of unfilled orders of the Registrant's antenna systems segment
was approximately $12,331,000 at December 31, 1994 as compared with $10,324,000
at December 31, 1993. The Registrant anticipates that approximately 90% of the
1994 year-end backlog will be filled in 1995.
The dollar value of unfilled orders of the Registrant's engineered products
segment was approximately $2,823,000 at December 31, 1994, as compared with
$2,141,000 at December 31, 1993. It is anticipated that substantially all such
backlog will be filled in 1995. The order backlog referred to above does not
include any order backlog with respect to sales of knitted wire mesh components
for exhaust emission control devices or exhaust seals because of the manner in
which customer orders are received.
ENVIRONMENTAL REGULATIONS
Federal, state and local requirements regulating the discharge of materials into
the environment or otherwise relating to the protection of the environment, have
had and will continue to have a significant impact upon the operations of the
Registrant. It is the policy of the Registrant to manage, operate and maintain
its facilities in compliance, in all material respects, with applicable
standards for the prevention, control and abatement of environmental pollution
to prevent damage to the quality of air, land and resources.
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The Registrant has undertaken the completion of environmental studies and/or
remedial action at Metex' two New Jersey facilities.
The process of remediation has begun at one facility pursuant to a plan filed
with the New Jersey Department of Environmental Protection and Energy
("NJDEPE"). Environmental experts engaged by the Registrant estimate that under
the most probable remediation scenario the remediation of this site is
anticipated to require initial expenditures of $860,000, including the cost of
capital equipment, and $86,000 in annual operating and maintenance costs over a
15-year period.
Environmental studies at the second facility indicate that remediation may be
necessary. Based upon the facts presently available, environmental experts have
advised the Registrant that under the most probable remediation scenario, the
estimated cost to remediate this site is anticipated to require $2.3 million in
initial costs, including capital equipment expenditures, and $258,000 in annual
operating and maintenance costs over a 10-year period. The Registrant may revise
such estimates in the future due to the uncertainty regarding the nature, timing
and extent of any remediation efforts that may be required at this site, should
an appropriate regulatory agency deem such efforts to be necessary.
The foregoing estimates may also be revised by the Registrant as new or
additional information in these matters become available or should the NJDEPE or
other regulatory agencies require additional or alternative remediation efforts
in the future. It is not currently possible to estimate the range or amount of
any such liability.
Although the Registrant believes that it is entitled to full defense and
indemnification with respect to environmental investigation and remediation
costs under its insurance policies, the Registrant's insurers have denied such
coverage. Accordingly, the Registrant has filed an action against certain
insurance carriers seeking defense and indemnification with respect to all prior
and future costs incurred in the investigation and remediation of these sites
(see Item 3, "Legal Proceedings"). Upon the advice of counsel, the Registrant
believes that based upon a present understanding of the facts and the present
state of the law in New Jersey, it is probable that the Registrant will prevail
in the pending litigation and thereby access all or a very substantial portion
of the insurance coverage it claims; however, the ultimate outcome of litigation
cannot be predicted.
As a result of the foregoing, the Registrant has not recorded a charge to
operations for the environmental remediation, noted above, in the consolidated
financial statements, as anticipated proceeds from insurance recoveries are
expected to offset such liabilities. The Registrant has reached settlements with
several insurance carriers in this matter. Those recoveries anticipated to be
received within twelve months are included in prepaid expenses and other current
assets in the accompanying consolidated balance sheet.
In the opinion of management, these matters will be resolved favorably and such
amounts, if any, not recovered under the Registrant's insurance policies will be
paid gradually over a period of years and, accordingly, should not have a
material adverse effect upon the business, liquidity or financial position of
the Registrant. However, adverse decisions or events, particularly as to the
merits of the Registrant's factual and legal basis could cause the Registrant to
change its estimate of liability with respect to such matters in the future.
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Effective January 1, 1994 the Registrant adopted the provisions of Staff
Accounting Bulletin 92 and accordingly has recorded the expected liability
associated with remediation efforts as a component of other long-term
liabilities and the anticipated insurance recoveries as a component of prepaid
expenses and other current assets and other assets in the Registrant's
consolidated financial statements.
ITEM 2. PROPERTIES
REAL PROPERTY HELD FOR RENTAL
As of March 22, 1995 the Registrant owned 217 properties strategically located
throughout the United States. The properties are primarily leased under
long-term net leases. The Registrant's classification and gross carrying value
of its properties at December 31, 1994 are as follows:
<TABLE>
<CAPTION>
Gross
Carrying Number of
DESCRIPTION Value Percentage Properties
----------- ------------ ---------- ----------
<S> <C> <C> <C>
Shopping centers and retail outlets $ 79,981,473 63.1% 33
Commercial properties 28,708,518 22.7 155
Day-care centers and offices 7,557,946 6.0 12
Hotel properties 2,867,703 2.3 2
Other 7,524,698 5.9 18
------------ ----- ----
Total $126,640,338 100.0% 220
============ ====== ===
</TABLE>
SHOPPING CENTERS AND RETAIL OUTLETS
Shopping centers and retail outlets include 26 department stores and other
properties which are primarily leased under net leases. Taxes, maintenance of
the properties and all other expenses are the responsibility of the tenants. The
leases for certain shopping centers and retail outlets provide for additional
rents based on sales volume and renewal options at higher rents. The department
stores include 16 K-Mart stores, five Carter Hawley Hale stores and an IKEA
store with a total of approximately 1,600,000, 715,000 and 160,000 square feet,
respectively. The K-Mart stores are primarily located in the Midwest region of
the United States. The Carter Hawley Hale and IKEA stores are primarily located
in the Pacific Coast and Southwest regions of the United States.
COMMERCIAL PROPERTIES
Commercial properties consist of properties leased as 102 restaurants, 30 Midas
Muffler Shops, three convenience stores, seven office buildings and
miscellaneous other properties. Commercial properties are primarily leased under
net leases which in certain cases, have renewal options at higher rents. Certain
of these leases also provide for additional rents based on sales volume. The 102
restaurants, located throughout the United States, include properties leased as
Boston Chicken, Roy Rogers, Pizza Huts, Hardee's, Wendy's and Kentucky Fried
Chicken.
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DAY-CARE CENTERS AND OFFICES
The 12 day-care centers and offices are located in New York City and are leased
to the City of New York. The Registrant has been negotiating with the City of
New York to extend, on a long-term basis, many of these leases which expired in
years through 1993. To date, one such long-term lease has been signed and the
remainder have received numerous short-term extensions. Although there can be no
assurance that the Registrant will in fact receive such leases the Registrant
believes that with continued negotiations with the City of New York, such leases
should be forthcoming.
HOTEL PROPERTIES
The Registrant's two hotel properties are located in Georgia and California. In
February 1992, upon the expiration of an existing lease, the Registrant began
operating its California hotel and in May 1992 the Registrant began operating
its Georgia hotel. The Registrant's hotel properties are managed through a local
on-site management company which is responsible for all day-to-day operations of
the hotels.
The following summarizes real property held for rental by geographic area at
December 31, 1994:
Gross
Number of Carrying
Properties Value
---------- ------------
Northeast 98 $ 30,090,809
Southeast 46 24,734,188
Midwest 46 25,964,029
Southwest 9 9,810,792
Pacific Coast 9 30,437,330
Pacific Northwest 6 2,098,198
Rocky Mountain 6 3,504,992
--- ------------
220 $126,640,338
=== ============
MANUFACTURING FACILITIES
The Registrant's resilient vinyl flooring operations, which were acquired in
March 1994, are located on 12.4 acres in Chicago, Illinois. This facility is
comprised of seven contiguous one and two story buildings totaling approximately
309,000 square feet and an adjacent building of approximately 6,000 square feet.
The Registrant maintains facilities located at 2950 Veterans Memorial Highway,
Bohemia, New York, on a ten-acre site approximately two miles from MacArthur
Airport on Long Island for use in its antenna systems business. This site
contains four one story buildings aggregating approximately 90,000 square feet
of floor space, an outdoor antenna testing area, several pattern ranges and
airframe mock-ups. Approximately 30,000 square feet was added during 1994 to
accommodate the consolidation of the D&M/Chu operations into this facility. The
Registrant owns the site together with the structures.
The Registrant has leased the 35,000 square foot facility in Littleton,
Massachusetts, formerly used in the operations of D&M/Chu, at market rates,
which is sufficient to cover the carrying costs of the property, and is
exploring possibilities to lease the remaining 60,000 square foot facility and
develop
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the unused land at the Whitcomb Avenue site. The Registrant owns the
sites together with the structures.
The Registrant's engineered products are manufactured at 970 New Durham Road,
Edison, New Jersey, in a one-story building having approximately 53,000 square
feet of floor space and also in a second facility at 206 Talmadge Road in
Edison, New Jersey which has approximately 54,500 square feet of space. The
Registrant owns these facilities together with the sites.
ITEM 3. LEGAL PROCEEDINGS
METEX CORPORATION VS. VIC MANUFACTURING CO.
On April 17, 1991, Metex filed an action in the Superior Court of New Jersey,
Middlesex County, against VIC Manufacturing Co., the manufacturer of a vapor
absorption system used by Metex in its operations. The complaint sought damages
caused by improper design, instruction and installation of the VIC unit
resulting in the discharge of contaminants to the New Durham Road facility in
Edison, New Jersey.
In January 1995 this suit was settled favorably by Metex.
METEX CORPORATION VS. AFFILIATED FM INSURANCE CO., ET AL.
On June 27, 1990, Metex filed an action in the Superior Court of New Jersey,
Chancery Division, Middlesex County, against several insurance companies that
provided Metex with liability insurance between 1967 and 1986. These companies
are: Affiliated FM Insurance Co., Atlanta International Insurance Co., The
Camden Fire Insurance Association, Cigna Property and Casualty Company,
Continental Casualty Company, Eric Reinsurance Company, Federal Insurance Co.,
General Accident Insurance Company of America, Hudson Insurance Company,
Insurance Company of North America, New Jersey Manufacturers Insurance Co., The
North River Insurance Company, North Star Reinsurance Corporation, and Puritan
Insurance Company. To date Metex has reached settlements with Atlanta
International Insurance Co., New Jersey Manufacturers Insurance Co., General
Accident Insurance Company of America and The North River Insurance Company. The
action seeks both declaratory relief and monetary damages in connection with
reimbursement of the costs incurred and to be incurred by Metex in connection
with the completion of environmental studies and remedial action required at its
two Edison, New Jersey facilities. The declaratory relief sought is a
determination that the terms of the liability insurance policies at issue
obligate the defendants to defend and indemnify Metex with respect to all costs
and expenses related to these environmental matters. Metex also seeks monetary
damages in an unspecified amount for breach of the defendants' duty to indemnify
Metex. This action is in the final stages of pretrial discovery. It is
anticipated that this matter will go to trial in mid-1995. The Registrant
intends to continue to vigorously pursue this action.
DAVISON VS. FIRST PENNCO, ET AL.
On March 24, 1991, plaintiffs, including 55 investors and limited partners in
three limited partnerships, commenced a civil action in United States District
Court for the Southern District of New York against 31 defendants, including the
Registrant, asserting causes of action under the Racketeer Influenced and
Corrupt Organizations Act. The action seeks actual, punitive and treble damages
in a total unspecified amount. On July 16, 1991, plaintiffs filed an amended
complaint that did not substantially alter the claims made against the
Registrant or the recovery sought.
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In December 1991 the Registrant filed a motion to dismiss the complaint on the
grounds that, among other things, the claims are the subject of a release
granted in the Registrant's favor and also that the complaint was filed outside
the statute of limitations. In August 1992 the Court granted the motion to
dismiss on the grounds that the complaint failed to set out sufficient detail in
regard to the acts alleged to have been engaged in by the defendants. The
dismissal was "without prejudice" and allowed the plaintiffs to file an amended
complaint setting out more detail concerning the alleged acts.
In January 1993 two separate amended complaints were filed on behalf of two
separate groups of the same plaintiffs. The Registrant filed motions to dismiss
each of the amended complaints. In October 1993 the Court again granted the
motion to dismiss these complaints on the grounds that the complaints failed to
state a legal claim against the Registrant but again granted plaintiff's the
right to file an amended complaint against the Registrant. In December 1993 the
plaintiffs filed new amended complaints. In February 1994 the Registrant filed a
motion to dismiss all claims set out in the amended complaints. In February 1995
the court denied such motion. Discovery is now underway in this matter. The
Registrant continues to believe that the material allegations in this matter are
without merit and intends to vigorously defend this action.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS
The Registrant's Common Stock is traded on the American Stock Exchange under the
symbol AFP. The table below shows the high and low sales prices as reported in
the composite transactions for the American Stock Exchange.
High Low
------ ------
1994
---- First quarter $11 $9
Second quarter 12-5/8 9-3/4
Third quarter 11-7/8 10-1/2
Fourth quarter 10-3/8 8-3/8
1993
---- First quarter $7-1/2 $3-1/4
Second quarter 11-1/2 6-1/2
Third quarter 10 8-3/4
Fourth quarter 11 8-3/4
As of March 22, 1995, there were approximately 675 record holders of the
Registrant's Common Stock. The closing sales price for the Registrant's Common
Stock on such date was $8 5/8. The Registrant has never paid any cash dividends
on its Common Stock. The payment of dividends is within the discretion of the
Registrant's Board of Directors, however in view of potential working capital
needs and in order to finance future growth, it is unlikely that the Registrant
will pay any cash dividends on its Common Stock in the near future.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below should be read in
conjunction with, and is qualified in its entirety by reference to, the
Consolidated Financial Statements and the Notes thereto.
<TABLE>
<CAPTION>
1994(6) 1993(5) 1992(4) 1991 1990
--------- --------- --------- --------- ---------
(in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Total revenues (1) $ 106,888 $ 69,556 $ 70,875 $ 62,857 $ 65,929
========= ========= ========= ========= =========
Net income (loss) (2) $ 2,933 $ 5,069 $ 2,866 $ 3,481 ($ 4,161)
========= ========= ========= ========= =========
Net income (loss) per common
share (3) $ .48 $ .81 $ .44 $ .40 ($ .39)
========= ========= ========= ========= =========
Total assets, end of year $ 136,341 $ 114,882 $ 116,849 $ 115,801 $ 112,778
Total liabilities, end of year 103,560 84,704 89,684 90,396 73,304
Stockholders' equity, end of year 32,781 30,178 27,165 25,405 39,474
========= ========= ========= ========= =========
</TABLE>
NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA
(1) Certain reclassifications have been reflected in the financial data to
conform prior years' data to the current classifications.
(2) Included in the 1990 net loss is approximately $10,949,000 of realized
losses from the sale of substantially all of the Registrant's holdings in
General Development Corporation.
(3) The weighted average number of common shares outstanding was 10,744,477 in
1990, 8,645,416 in 1991, 6,569,215 in 1992, 6,267,540 in 1993 and 6,169,031
in 1994.
(4) Operating results for 1992 include the results of D&M/Chu Technology, Inc.
and AFP Transformers, Inc. since April 2, and October 23, 1992,
respectively.
(5) The 1993 financial results include the cumulative effect of an accounting
change of $702,000 or $.11 per share resulting from the adoption of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."
(6) Operating results for 1994 include the results of Kentile, Inc. since March
14, 1994.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS 1994 AND 1993
GENERAL
The following discussion of the Registrant's financial condition and results of
operations should be read in conjunction with the description of the
Registrant's business and properties contained in Items 1 and 2 of Part I and
the Consolidated Financial Statements and Notes thereto, included elsewhere in
this report.
Total revenues generated by the Registrant during 1994 were $106,888,000, an
increase of $37,332,000 from total 1993 revenues of $69,556,000. Net income for
the current year was $2,933,000 or $.48 per share versus $5,069,000 or $.81 per
share for 1993.
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REAL ESTATE OPERATIONS
Rental revenues from real estate operations during 1994 increased $1,173,000 or
6% over those of the prior year primarily as a result of the renewal of existing
leases at higher rents and additional revenues generated from the operations of
the Registrant's two hotel properties. Of the total increase, $726,000 results
from the renewal of existing leases at higher rents while the remaining increase
of $447,000 results from additional hotel related revenues.
Mortgage interest expense for 1994 decreased by $436,000 as compared to such
expense incurred during 1993. This decrease of 8% results from the continuing
amortization of mortgages which approximated $4.7 million during the current
year. No new encumbrances were added to the Registrant's real estate portfolio
during 1994.
Depreciation expense associated with real properties held for rental increased
approximately $34,000 or less than 1% from such expense incurred in the
preceding year. This increase primarily results from depreciation associated
with additional properties purchased and improvements to existing properties
added in the current year and is offset by depreciation associated with the sale
of several properties in the current and prior year.
Other operating expenses associated with the management of real properties
increased approximately $292,000 during 1994 versus such expenses incurred
during 1993. This increase primarily results from additional operating costs
incurred in connection with the operation of the Registrant's hotel properties
of approximately $246,000.
ANTENNA SYSTEMS
The Registrant's antenna systems segment includes Dorne & Margolin, Inc. and
D&M/Chu Technology, Inc. The operating results of the antenna systems segment
for the years ended December 31, 1994 and 1993 are as follows:
1994 1993
-------- --------
(in thousands)
Net sales $ 19,495 $ 21,098
======== ========
Cost of sales $ 15,665 $ 14,290
======== ========
Selling, general and administrative expenses $ 5,357 $ 6,039
======== ========
Income (loss) from operations ($ 1,527) $ 769
======== ========
Net sales of the antenna systems segment decreased approximately $1,603,000 or
8% during 1994 as compared to such sales of the preceding year. Reductions in
military and commercial sales continued to seriously effect this segment of the
Registrant's business. Further emphasis has been placed on expanding commercial
product applications and existing market niches. Several management changes have
taken place, including naming a new President to the antenna systems segment
with a primary focus on reversing the current trend in sales and profits.
<PAGE>
-12-
Cost of sales as a percentage of net sales of the antenna systems segment
increased approximately 12% from that of 1993. This increase is the result of
the following factors: incurring additional manufacturing costs as a result of
the transition of certain D&M/Chu products which are now being manufactured at
Dorne & Margolin; the recording of certain realization allowances for inventory
as a result of the continuing decline in military sales and the uncertainty that
such sales will increase in the future; changes in the mix of product sold
between years; and from additional overhead incurred as the company moved to
consolidate production of its two manufacturing facilities. These factors are
not expected to continue in the future as experience is gained in the production
of these products and operations are completely consolidated.
Selling, general and administrative expenses ("SG&A") of the antenna systems
segment decreased by approximately $682,000 during 1994 as compared to such
costs incurred in the previous year. Administrative savings from the
consolidation of the Dorne & Margolin and D&M/Chu operations and from previously
implemented cost containment measures are the primary cause of this decline.
ENGINEERED PRODUCTS
The Registrant's engineered products segment includes Metex Corporation and AFP
Transformers, Inc. The operating results of the engineered products segment for
the years ended December 31, 1994 and 1993 are as follows:
1994 1993
------- -------
(in thousands)
Net sales $35,511 $27,643
======= =======
Cost of sales $27,043 $20,958
======= =======
Selling, general and administrative expenses $ 5,991 $ 5,100
======= =======
Income from operations $ 2,477 $ 1,585
======= =======
Net sales of the engineered products segment increased approximately $7,868,000
or 28% during 1994 versus such results for the preceding year. This is the
result of substantially higher sales at Metex' Technical Products Division and
is offset by slightly lower sales generated by AFP Transformers. Virtually all
of Metex' markets showed sales growth. However, overall results of this segment
continue to be negatively impacted by the results of the segment's transformer
operations, which posted a loss of approximately $1 million during the current
year.
Cost of sales as a percentage of net sales was virtually unchanged between the
current and prior year. This percentage remained at 76% despite fluctuations in
the mix of products sold.
SG&A expenses of the engineered products segment increased approximately
$891,000 or 17% during 1994, as compared to such costs in the preceding year.
This increase primarily results from additional selling related expenses
associated with the 28% rise in sales noted above.
<PAGE>
-13-
RESILIENT VINYL FLOORING
The Registrant's resilient vinyl flooring segment, which is now known as
Kentile, Inc. ("Kentile"), was acquired on March 14, 1994 through the
acquisition of substantially all of the operating assets of Kentile Floors, Inc.
The operating results of Kentile have been included in the accompanying
consolidated statements of income since the date of acquisition. The following
unaudited pro forma results of Kentile assume that the acquisition had occurred
at the beginning of each period presented. In addition to combining historical
results of operations, the pro forma calculations include adjustments to
historical assets, liabilities and results of operations which occur in a
purchase.
Unaudited Pro Forma
Results of Operations
---------------------
1994 1993
-------- --------
(in thousands)
Net sales $ 36,958 $ 50,314
======== ========
Cost of sales $ 29,826 $ 38,988
======== ========
Selling, general and administrative expenses $ 8,452 $ 11,357
======== ========
Loss from operations ($ 1,320) ($ 31)
======== ========
On a pro forma basis, net sales of the resilient vinyl flooring segment
decreased over $13 million or 27% from such sales of the previous year. This
decline is the result of substantial changes in the Company's distribution
network and from the continued effect of Kentile Floors' transition from Chapter
11, prior to the Registrant's acquisition of the operating assets. Actual 1994
sales generated by this segment and included in the accompanying consolidated
statements of income, since acquisition, were approximately $29.9 million.
Cost of sales as a percentage of net sales increased approximately 3.2% on a pro
forma basis over 1993 levels. This increase is primarily attributable to
comparable raw material price increases experienced by this segment during 1994.
SG&A expenses were down approximately $2.9 million dollars on a pro forma basis
during 1994 as compared to such expenses in the preceding year. However, as a
percentage of net sales such costs were virtually unchanged, reflecting the
corresponding decline in sales noted above.
The above financial information is not necessarily indicative of the actual
results that would have occurred had the acquisition of Kentile been consummated
at the beginning of the periods presented or of future operations of the
company. See Note 2 of Notes to Consolidated Financial Statements, contained
elsewhere in this report, for a further explanation of the acquisition.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses not associated with the manufacturing
operations decreased approximately $758,000 during 1994 as compared to such
expenses incurred in the preceding year. This represents a decrease of less than
1% of consolidated revenues and is primarily the result of lower professional
costs incurred in the current year.
<PAGE>
-14-
OTHER INCOME AND EXPENSE, NET
Other income and expense, net for 1994 of approximately $2.8 million is
comprised of $1.4 million in gains from the sales of real estate assets, $1.2
million from realized gains on the sale of marketable securities, $46,000 in
income from equity investments which represents nonrecurring cash distributions,
and $171,000 in miscellaneous other income.
The 1993 components of other income and expense, net were as follows:
approximately $1.1 million in gains from the sale of real estate; the recovery
of $744,000 in previously recorded unrealized losses on marketable securities;
$578,000 in income from equity investments; and $1.7 million in other income.
During 1993, the Registrant received a $2 million settlement from Metex'
insurance carrier in connection with the class action civil suit brought by the
former shareholders of Metex. This settlement is included in other income in
1993, net of approximately $450,000 of costs incurred in the defense of this
action incurred during 1993. All such defense costs incurred prior to 1993 were
included in general and administrative expenses.
RESULTS OF OPERATIONS 1993 AND 1992
REAL ESTATE OPERATIONS
Rental revenues from real estate operations increased $1,272,000 or 7% during
1993 primarily as a result of additional revenues generated from two hotel
properties that the Registrant began operating in February and May 1992,
respectively. Of the total increase in revenues, $950,000 is from additional
hotel related revenues while the remaining increase of $322,000 results from the
renewal of existing leases at higher rents, increased percentage rents and
additional revenues associated with mid-1992 property acquisitions.
1992 rental revenues include approximately $520,000 in percentage rents
collected by the Registrant in 1992 as a result of a favorable arbitration
award. These amounts were earned over a four-year period but not previously
accrued.
Mortgage interest expense associated with the Registrant's real estate portfolio
decreased by $543,000 during 1993 versus that incurred during 1992. This
decrease of 9% results from mortgage amortization of approximately $5 million as
well as the maturity of certain mortgages and is offset by a full year of
interest associated with mortgages secured by properties acquired by the
Registrant in mid-1992.
Depreciation expense for 1993 decreased by approximately $165,000 or 3% from
such expense in 1992. This decrease results from the reclassification of
depreciation on the Registrant's hotel properties to operating expenses and from
the sale of several properties in 1993 and 1992.
Other operating expenses associated with those properties managed by the
Registrant increased by approximately $1,068,000 during 1993 versus such
expenses incurred in 1992. This increase primarily results from a full year of
operating costs incurred in connection with the leasing of two hotel properties
which accounts for $880,000 of this increase, while the timing of certain
maintenance costs and additional lease renewal costs incurred in 1993 account
for the remaining increase of approximately $188,000.
<PAGE>
-15-
ANTENNA SYSTEMS
The Registrant's antenna systems segment includes Dorne & Margolin, Inc. and
D&M/Chu Technology, Inc. The operating results of D&M/Chu have been included
here and in the accompanying consolidated statements of income since its
acquisition by the Registrant in April 1992. See Note 2 of Notes to Consolidated
Financial Statements, contained elsewhere in this report, for pro forma results
of operations.
The operating results of the antenna systems segment for the years ended
December 31, 1993 and 1992 are as follows:
1993 1992
------- -------
(in thousands)
Net sales $21,098 $24,513
======= =======
Cost of sales $14,290 $16,197
======= =======
Selling, general and administrative expenses $ 6,039 $ 5,057
======= =======
Income from operations $ 769 $ 3,259
======= =======
Net sales of the antenna systems segment decreased by $3,415,000 or 14% during
1993 as compared to such sales in 1992. This decrease is the result of continued
weakness in the U. S. Military and commercial aviation markets. Sales by Dorne &
Margolin during 1993 were 23% lower than those of 1992. As a result of the
mid-1992 acquisition of D&M/Chu by the Registrant and therefore a full year of
sales in 1993, sales of D&M/Chu increased by 9% during this period. The
reductions in military and commercial sales continue to seriously effect the
Registrant's antenna systems segment and management is concentrating on
reversing this trend.
Cost of sales as a percentage of net sales of the antenna systems segment
increased in 1993 by approximately 2% from 1992 levels. This increase is
primarily the result of changes in the mix of product sales and differences in
the gross margins of Dorne & Margolin and D&M/Chu product lines.
SG&A expenses of the antenna systems segment have increased by $982,000 in 1993.
This is a result of a full year of SG&A costs associated with D&M/Chu in 1993
versus only nine months of such costs in 1992 and from approximately $365,000 in
costs incurred in 1993 as a result of the decision to consolidate the operations
of D&M/Chu into that of Dorne & Margolin.
ENGINEERED PRODUCTS
The Registrant's engineered products segment includes Metex Corporation and AFP
Transformers, Inc. The operating results of AFP Transformers have been included
here and in the accompanying consolidated statements of income since October
1992. Pro forma results of operations have not been separately disclosed as
amounts are not material.
<PAGE>
-16-
The operating results of the engineered products segment for the years ended
December 31, 1993 and 1992 are as follows:
1993 1992
------- -------
(in thousands)
Net sales $27,643 $26,819
======= =======
Cost of sales $20,958 $19,412
======= =======
Selling, general and administrative expenses $ 5,100 $ 4,720
======= =======
Income from operations $ 1,585 $ 2,687
======= =======
Net sales generated by the engineered products segment increased by $824,000
during 1993 versus that of 1992. Sales of Metex decreased by $1,540,000 during
this period, while sales of AFP Transformers increased $2,364,000. This increase
in the sales of AFP Transformers is primarily the result of the Registrant's
acquisition of the operating assets of Isoreg Corporation, a manufacturer of
Epoxycast transformers, in October 1992.
Cost of sales as a percentage of net sales increased approximately 3% during
1993. This increase is primarily the result of lower profit margins on knitted
wire sales resulting from lower automotive and European sales.
SG&A expenses of the engineered products segment increased $380,000 during 1993,
as compared to such costs in 1992. This increase of approximately 1% as a
percentage of net sales results from additional SG&A costs of AFP Transformers
including the costs associated with the relocation of operations of Isoreg,
which was acquired in October 1992, from Massachusetts to New Jersey.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses not associated with the manufacturing
operations decreased $270,000 in 1993 from a year earlier. This decrease is
primarily the result of lower professional fees incurred in 1993 and represents
a change of less than 1% of consolidated revenues.
OTHER INCOME AND EXPENSE, NET
Other income and expense, net for 1993 of approximately $4.1 million is
comprised of $1.1 million in gains from the sale of real estate, the recovery of
$744,000 in previously recorded unrealized losses on marketable securities,
$578,000 in income from equity investments which represent nonrecurring cash
distributions and $1.7 million in other income. The Registrant received a $2
million settlement in 1993 from Metex' insurance carrier in connection with the
class action civil suit brought by the former shareholders of Metex. This
settlement is included in other income in 1993, net of approximately $450,000 of
current year costs incurred in the defense of this action. All defense costs
incurred prior to 1993 were included in general and administrative expenses.
The components of other income and expense, net in 1992 include approximately
$449,000 in gains from the sale of real estate, $723,000 in unrealized losses on
marketable securities, $142,000 in income from equity investments and $249,000
in other income.
<PAGE>
-17-
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1994, the Registrant's current liabilities exceeded current
assets by approximately $5.2 million. The change in working capital since
December 31, 1993 has resulted from financing the purchase of long-term assets
utilizing short-term borrowings primarily in connection with the acquisition of
Kentile. Management is confident that through cash flow generated from
operations, the sale of select assets and the refinancing of certain current
liabilities on a long-term basis, all obligations will be satisfied as they
become due.
The Registrant has an unsecured line of credit with a bank which provides for
borrowings up to $15 million at the bank's prime lending rate. At December 31,
1994 there was $6 million outstanding under this facility. The maximum amount
outstanding under this facility during 1994 was approximately $6.6 million. This
demand facility is reviewed by the bank annually on May 31.
On March 14, 1994, the Registrant purchased substantially all of the operating
assets of Kentile Floors for approximately $9.6 million, of which approximately
$6.5 million consists of new bank financing. See Note 2 to Consolidated
Financial Statements, "Acquisition of Operating Companies."
Kentile maintains a revolving credit facility with a bank which provides for
maximum borrowings of the lessor of $7 million or the borrowing base, as
defined, at the bank's prime lending rate plus 1 1/2%. Such borrowings are
collateralized by all accounts receivable, inventory and equipment of Kentile.
At December 31, 1994 approximately $4.6 million was outstanding under this
facility, which matures in April 1996 and includes, among other things, several
financial covenants regarding capital expenditures and debt-to-equity ratios. At
December 31, 1994 the Registrant was not in compliance with certain of these
covenants. The bank has granted a waiver of the debt-to-equity covenant through
March 31, 1996 and the capital expenditure covenant through December 31, 1995.
The Registrant has undertaken the completion of environmental studies and
remedial action at Metex' two New Jersey facilities and has filed an action
against certain insurance carriers seeking recovery of costs incurred and to be
incurred in these matters. Based upon the advice of counsel, management believes
such recovery is probable and therefore should not have a material effect on the
liquidity or capital resources of the Registrant. To date settlements have been
reached with several carriers in this matter. Those recoveries anticipated to be
received within twelve months are included in prepaid expenses and other current
assets in the accompanying consolidated balance sheet. See Item 1,
"Business-Environmental Regulations," Item 3, "Legal Proceedings" and Note 16 to
Consolidated Financial Statements, "Contingencies."
The cash needs of the Registrant have been satisfied from funds generated by
current operations and additional borrowings. It is expected that future
operational cash needs will also be satisfied from ongoing operations and
additional borrowings. The primary source of capital to fund additional real
estate acquisitions will come from the sale, financing and refinancing of the
Registrant's properties and from third party mortgages and purchase money notes
obtained in connection with specific acquisitions.
<PAGE>
-18-
In addition to the acquisition of properties for consideration consisting of
cash and mortgage financing proceeds, the Registrant may acquire real properties
in exchange for the issuance of the Registrant's equity securities. The
Registrant may also finance acquisitions of other companies in the future with
borrowings from institutional lenders and/or the public or private offerings of
debt or equity securities.
Funds of the Registrant in excess of that needed for working capital, purchasing
real estate and arranging financing for real estate acquisitions are invested by
the Registrant in corporate equity securities, corporate notes, certificates of
deposit and government securities.
BUSINESS TRENDS
Total revenues of the Registrant increased over $37 million or 54% during 1994
as compared to such results of the preceding year. Of these additional revenues
approximately $30 million, were generated by Kentile, since its acquisition by
the Registrant in March 1994. The Registrant's real estate and engineered
products segments also contributed to the increased revenues during the year,
while sales of the antenna systems segment continued to decline.
The improved results of the Registrant's real estate operations reflect the
renewal of existing leases at higher rents and improved results from the
Registrant's hotel properties. These results can be expected to continue in the
future as older leases are renewed with current market rates.
The Registrant's engineered products segment continues to reflect sales growth
in virtually all market segments. This has resulted in an increase of $7,868,000
or 28% in revenues during the year versus comparable 1993 results. With
continued increases in U.S. automobile demand and as more vehicles are outfitted
with air bags, demand for these products should continue.
As noted above, the acquisition of Kentile has contributed approximately $30
million in sales during 1994. However, the operating results of Kentile, since
acquisition, reflect a loss of $608,000. This is primarily attributable to lower
than anticipated sales, changes in the Company's distribution network and higher
raw material costs. Management is focusing on these issues and reversing the
negative impact that they have on the operating results of the Registrant.
The results of the Registrant's antenna systems segment reflect an 8% decline in
sales as compared to 1993. This segment experienced a $1.5 million loss from
operations during the year primarily as a result of the following: reductions in
sales; the recording of inventory realization allowances as a result of the
continuing decline in military sales and the uncertainty that such sales will
increase in the future; and additional costs incurred in the manufacture of
certain products as a result of the transition of personnel and the
consolidation of facilities. Several management changes have recently been made
including naming a new President for this segment. The business is focused on
reversing the declining revenue and profit trend and is seeking new markets and
new applications for its products.
Although there can be no assurance as to how the events discussed above, or
other changes in the economy, will impact the future financial condition or
results of operations of the Registrant, management continues to monitor such
developments and has implemented measures to minimize any possible negative
effects they may have upon these businesses.
<PAGE>
-19-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary information filed as part of this
Item 8 are listed under Part IV, Item 14, "Exhibits, Financial Statements and
Schedules and Reports on Form 8-K" and are contained in this Form 10-K at page
F-1.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
This information will be contained in the Proxy Statement of the Registrant for
the 1995 Annual Meeting of Stockholders under the captions "Election of
Directors" and "Executive Officers" and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
This information will be contained in the Proxy Statement of the Registrant for
the 1995 Annual Meeting of Stockholders under the caption "Executive
Compensation and Compensation of Directors" and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information will be contained in the Proxy Statement of the Registrant for
the 1995 Annual Meeting of Stockholders under the captions "Security Ownership"
and "Election of Directors" and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information will be contained in the Proxy Statement of the Registrant for
the 1995 Annual Meeting of Stockholders under the caption "Certain Relationships
and Related Transactions" and is incorporated herein by reference. Also see Note
11, "Transactions with Related Parties," of Notes to Consolidated Financial
Statements, contained elsewhere in this report.
<PAGE>
-20-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES AND REPORTS ON
FORM 8-K
(a) (1) CONSOLIDATED FINANCIAL STATEMENTS. The following Consolidated
Financial Statements and Consolidated Financial Statement Schedules of
the Registrant are included in this Form 10-K at the pages indicated:
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Report of Independent Public Accountants F-1
Consolidated Balance Sheets as of December 31, 1994 and 1993 F-2
Consolidated Statements of Income for the Years F-3
Ended December 31, 1994, 1993 and 1992 to
F-4
Consolidated Statements of Stockholders' Equity for F-5
the Years Ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows for the F-6
Years Ended December 31, 1994, 1993 and 1992 to
F-8
Notes to Consolidated Financial Statements F-9
to
F-26
(2) CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Schedule II -- Allowance for Doubtful Accounts F-27
Schedule III -- Real Property Held for Rental and F-28
Accumulated Depreciation
Schedule IV -- Mortgage Loans on Real Estate F-29
(3) Supplementary Data
Quarterly Financial Data (Unaudited) F-30
Schedules not listed above are omitted as not applicable or the
information is presented in the financial statements or related notes.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the last quarter of
fiscal 1994.
(c) Exhibits
3.1. Amended and restated Certificate of Incorporation of the
Registrant (incorporated by reference to exhibit 3.1 filed with the Registrant's
report on Form 10-K for the fiscal year ended December 31, 1993).
<PAGE>
-21-
3.2. By-laws of the Registrant (incorporated by
reference to exhibit 3 filed with the Registrant's report on Form 10-K for the
fiscal year ended December 31, 1980).
*10.1. 1988 Incentive Stock Option Plan of the
Registrant, as amended.
*10.2. 1988 Joint Incentive and Non-Qualified Stock Option
Plan, as amended.
10.3. Employment Agreement dated as of January 1, 1990 by
and between the Registrant and A. F. Petrocelli (incorporated by reference to
exhibit 10.9 filed with the Registrant's report on Form 10-K for the fiscal year
ended December 31, 1989).
10.4. Amendment dated as of December 3, 1990 to
Employment Agreement dated as of January 1, 1990, by and between the Registrant
and A. F. Petrocelli (incorporated by reference to exhibit 10.10 filed with the
Registrant's report on Form 10-K for the fiscal year ended December 31, 1990).
10.5. Amendment dated as of June 8, 1993 to Employment
Agreement dated as of January 1, 1990 by and between the Registrant and A. F.
Petrocelli (incorporated by reference to exhibit 10.5 filed with the
Registrant's report on Form 10-K for the fiscal year ended December 31, 1993).
10.6. Employment Agreement dated as of July 1, 1991 by
and between the Registrant and Dennis S. Rosatelli (incorporated by reference to
Exhibit 10.10 filed with the Registrant's report on Form 10-K for the fiscal
year ended December 31, 1991).
10.7. Option Agreement dated June 20, 1991 between the
Registrant and A. F. Petrocelli (incorporated by reference to Exhibit 10.12
filed with the Registrant's report on Form 10-K for the fiscal year ended
December 31, 1991).
10.8. Form of Option Agreements dated July 17, 1991
between the Registrant and Robert L. Frome, Howard M. Lorber, Arnold S. Penner,
Dennis S. Rosatelli (incorporated by reference to Exhibit 10.13 filed with the
Registrant's report on Form 10-K for the fiscal year ended December 31, 1991).
10.9. Amendment dated as of April 16, 1993 to Option
Agreement dated as of July 17, 1991 by and between the Registrant and Robert L.
Frome (incorporated by reference to exhibit 10.9 filed with the Registrant's
report on Form 10-K for the fiscal year ended December 31, 1993).
10.10. Amended and Restated Asset Purchase Agreement dated
as of July 9, 1993 by and between the Registrant and Kentile Floors, Inc.
(incorporated by reference to Exhibit 99(a) filed with the Registrant's Current
Report on Form 8-K dated March 28, 1994).
<PAGE>
-22-
*21. Subsidiaries of the Registrant
*23. Accountants' consent to the incorporation by
reference in Registrant's Registration Statements on Form S-8 of the Report of
Independent Public Accountants included herein.
-----------------
* Filed herewith
<PAGE>
-23-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
UNITED CAPITAL CORP.
Dated: MARCH 22, 1995 By:/s/ A. F. Petrocelli
-----------------------------
A. F. Petrocelli
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
Dated: MARCH 22, 1995 By:/s/ A. F. Petrocelli
-----------------------------
A. F. Petrocelli
Chairman, President and
Chief Executive Officer
Dated: MARCH 22, 1995 By:/s/ Howard M. Lorber
-----------------------------
Howard M. Lorber
Director
Dated: MARCH 22, 1995 By:/s/ Arnold S. Penner
-----------------------------
Arnold S. Penner
Director
Dated: MARCH 22, 1995 By:/s/ Dennis S. Rosatelli
-----------------------------
Dennis S. Rosatelli
Chief Financial Officer,
Chief Accountant, Secretary
and Director
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
and Stockholders of
United Capital Corp.:
We have audited the accompanying consolidated balance sheets of United Capital
Corp. (a Delaware Corporation) and subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1994. These financial statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United Capital Corp. and
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
As discussed in Note 12 to the consolidated financial statements, effective
January 1, 1993, the Company changed its method of accounting for income taxes.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index of
financial statements and schedules are presented for purposes of complying with
the Securities and Exchange Commission's rules and are not a part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
March 22, 1995
F-1
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
ASSETS 1994 1993
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,656,688 $ 3,749,301
Marketable securities 594,070 1,718,277
Notes and accounts receivable, net of allowance for doubtful
accounts of $667,545 and $285,545, respectively 18,994,192 13,681,863
Inventories 13,114,559 8,069,275
Prepaid expenses and other current assets 5,579,896 634,056
Deferred income taxes 784,849 609,078
------------ ------------
Total current assets 40,724,254 28,461,850
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, net 12,496,911 8,913,186
REAL PROPERTY HELD FOR RENTAL, net 75,071,300 74,392,684
NONCURRENT NOTES RECEIVABLE 696,228 822,541
OTHER ASSETS 7,004,709 2,030,641
DEFERRED INCOME TAXES 348,086 261,062
------------ ------------
Total assets $136,341,488 $114,881,964
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 9,755,590 $ 8,309,052
Borrowings under revolving credit facilities 10,614,889 0
Accounts payable and accrued liabilities 21,828,149 11,987,590
Income taxes payable 3,719,570 4,355,182
------------ ------------
Total current liabilities 45,918,198 24,651,824
LONG-TERM LIABILITIES:
Long-term debt 49,379,813 58,640,201
Other long-term liabilities 8,262,403 1,412,087
------------ ------------
Total liabilities 103,560,414 84,704,112
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock $.10 par value, authorized 7,500,000 shares;
issued 6,051,266 and 6,063,261 shares, respectively 605,127 606,326
Additional paid-in capital 14,531,320 14,921,406
Retained earnings 17,582,764 14,650,120
Net unrealized gain on marketable securities, net of tax 61,863 0
------------ ------------
Total stockholders' equity 32,781,074 30,177,852
------------ ------------
Total liabilities and stockholders' equity $136,341,488 $114,881,964
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
F-2
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES:
Net sales $ 84,900,410 $ 48,740,541 $ 51,332,283
Rental revenues from real estate operations 21,987,956 20,815,113 19,542,737
------------- ------------- -------------
Total revenues 106,888,366 69,555,654 70,875,020
------------- ------------- -------------
COSTS AND EXPENSES:
Cost of sales 66,578,014 35,247,622 35,608,915
Real estate operations-
Mortgage interest expense 4,948,591 5,384,332 5,927,741
Depreciation expense 6,362,426 6,328,192 6,492,761
Other operating expenses 5,449,007 5,157,170 4,089,095
General and administrative expenses 8,560,088 8,709,238 7,533,190
Selling expenses 11,223,631 4,989,382 5,075,225
------------- ------------- -------------
Total costs and expenses 103,121,757 65,815,936 64,726,927
------------- ------------- -------------
Income from operations 3,766,609 3,739,718 6,148,093
------------- ------------- -------------
OTHER INCOME (EXPENSE):
Interest income and expense, net (1,001,458) (441,443) (460,691)
Other income and expense, net 2,819,493 4,113,097 117,510
------------- ------------- -------------
Total other income (expense) 1,818,035 3,671,654 (343,181)
------------- ------------- -------------
Income before income taxes 5,584,644 7,411,372 5,804,912
Provision for income taxes 2,652,000 3,044,000 2,939,000
------------- ------------- -------------
Income before cumulative effect of
change in accounting principle 2,932,644 4,367,372 2,865,912
Cumulative effect of change in
accounting principle 0 702,000 0
------------- ------------- -------------
Net income $ 2,932,644 $ 5,069,372 $ 2,865,912
============= ============= =============
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
EARNINGS PER SHARE:
Income before cumulative effect of
change in accounting principle $ .48 $ .70 $ .44
Cumulative effect of change in
accounting principle 0 .11 0
--------- --------- ---------
Net income per common share $ .48 $ .81 $ .44
========= ========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 6,169,031 6,267,540 6,569,215
========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-4
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
Net Un-
realized
Gain on
Market-
able
Securi-
Common Stock Issued Additional ties, Total
------------------------ Paid-in Retained Net Treasury Stockholders'
Shares Amount Capital Earnings of Tax Stock Equity
----------- ----------- ------------ ----------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE -- January 1, 1992 10,079,305 $ 1,007,931 $ 28,283,446 $ 6,714,836 $ 0 ($10,600,872) $ 25,405,341
Purchase and retirement of
common shares (313,161) (31,317) (1,075,129) 0 0 0 (1,106,446)
Net income 0 0 0 2,865,912 0 0 2,865,912
----------- ----------- ------------ ----------- ------- ------------ ------------
BALANCE -- December 31, 1992 9,766,144 976,614 27,208,317 9,580,748 0 (10,600,872) 27,164,807
Purchase and retirement of
common shares (3,703,583) (370,358) (12,290,341) 0 0 10,600,872 (2,059,827)
Proceeds from the exercise
of stock options 700 70 3,430 0 0 0 3,500
Net income 0 0 0 5,069,372 0 0 5,069,372
----------- ----------- ------------ ----------- ------- ------------ ------------
BALANCE -- December 31, 1993 6,063,261 606,326 14,921,406 14,650,120 0 0 30,177,852
----------- ----------- ------------ ----------- ------- ------------ ------------
Purchase and retirement of
common shares (124,916) (12,491) (1,009,548) 0 0 0 (1,022,039)
Proceeds from the exercise of
stock options 112,921 11,292 619,462 0 0 0 630,754
Change in net unrealized gain
on marketable securities,
net of tax 0 0 0 0 61,863 0 61,863
Net income 0 0 0 2,932,644 0 0 2,932,644
----------- ----------- ------------ ----------- ------- ------------ ------------
BALANCE -- December 31, 1994 6,051,266 $ 605,127 $ 14,531,320 $17,582,764 $61,863 $ 0 $ 32,781,074
=========== =========== ============ =========== ======= ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-5
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
----------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 2,932,644 $ 5,069,372 $ 2,865,912
----------- ------------ ------------
Adjustments to reconcile net income
to net cash provided by
operating activities-
Depreciation and amortization 7,647,510 7,913,406 7,815,440
Cumulative effect of change in
accounting principle 0 (702,000) 0
Net realized and unrealized
(gains) losses on marketable
securities (1,203,463) (743,636) 723,040
Changes in assets and liabilities
net of effects from business
acquisitions (A) (3,492,227) 1,445,967 (522,622)
----------- ------------ ------------
Total adjustments 2,951,820 7,913,737 8,015,858
----------- ------------ ------------
Net cash provided by operating
activities 5,884,464 12,983,109 10,881,770
----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (558,584) (307,006) (318,955)
Proceeds from sale of marketable
securities 2,979,985 0 1,005
Acquisition of property, plant and
equipment (3,460,895) (1,032,619) (1,336,823)
Cash paid in business acquisitions,
net of cash acquired (B) (2,688,565) 0 (3,043,075)
----------- ------------ ------------
Net cash used in investing
activities (3,728,059) (1,339,625) (4,697,848)
----------- ------------ ------------
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992
----------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Principal payments on mortgage
commitments, notes and loans ($8,605,981) ($ 8,109,745) ($19,624,906)
Proceeds from mortgage commitments,
notes and loans 0 0 14,814,426
Net borrowings under lines of credit 4,748,248 0 0
Purchase and retirement of common
shares (1,022,039) (2,059,827) (1,106,446)
Proceeds from the exercise of
stock options 630,754 3,500 0
----------- ------------ ------------
Net cash used in financing
activities (4,249,018) (10,166,072) (5,916,926)
----------- ------------ ------------
Net increase (decrease) in cash and
cash equivalents (2,092,613) 1,477,412 266,996
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 3,749,301 2,271,889 2,004,893
----------- ------------ ------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 1,656,688 $ 3,749,301 $ 2,271,889
=========== ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for-
Interest $ 6,381,748 $ 6,232,273 $ 7,179,036
Taxes 2,756,291 2,415,213 4,474,294
=========== ============ ============
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING
ACTIVITIES (B):
Acquisition of businesses and real
properties held for rental-
Purchase price $ 9,607,000 $ 0 $ 5,807,500
Cash paid (3,140,000) 0 (3,635,526)
----------- ------------ ------------
Assumption of debt $ 6,467,000 $ 0 $ 2,171,974
=========== ============ ============
</TABLE>
F-7
<PAGE>
(A) Changes in assets and liabilities, net
of effects from business acquisitions
for the years ended December 31, 1994,
1993 and 1992 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Decrease (increase) in notes
and accounts receivable, net ($ 359,743) ($1,484,155) $ 2,135,313
Decrease (increase) in inventories (461,966) 65,708 1,340,038
Decrease (increase) in prepaid
expenses and other current assets (4,084,920) (139,319) 136,960
Decrease (increase) in deferred income
taxes 523,049 (1,153,518) (672,806)
Increase in real property held for
rental, net (5,321,617) (182,537) (106,371)
Decrease (increase) in noncurrent
notes receivable 126,313 (32,131) (511,505)
Decrease (increase) in other assets (3,105,846) (259,159) 632,869
Increase (decrease) in accounts
payable and accrued liabilities 2,977,799 3,639,305 (2,823,652)
Increase (decrease) in income
taxes payable (635,612) 1,460,374 (680,611)
Increase (decrease) in other
long-term liabilities 6,850,316 (468,601) 27,143
----------- ----------- -----------
Total ($3,492,227) $ 1,445,967 ($ 522,622)
=========== =========== ===========
</TABLE>
(B) Acquisition of Chu Associates, Inc. and
Isoreg Corporation in 1992 and Kentile,
Inc. in 1994 -- See Note 2 to
Consolidated Financial Statements.
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-8
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
(1) SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
NATURE OF BUSINESS-
United Capital Corp. (the "Registrant") and its subsidiaries are
currently engaged in the investment and management of real estate and
in the manufacture and sale of resilient vinyl flooring, antenna
systems, and engineered products.
PRINCIPLES OF CONSOLIDATION-
The consolidated financial statements include the accounts of the
Registrant and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Income Recognition --
REAL ESTATE OPERATIONS-
The Registrant leases substantially all of its properties to tenants
under net leases. Under this type of lease, the tenant is obligated to
pay all operating costs of the property including real estate taxes,
insurance, repairs and maintenance. Rental income is recognized based
on the terms of the leases. Certain lease agreements provide for
additional rent based on a percentage of tenants' sales. Such
additional rents are recorded as income when they can be reasonably
estimated. Gains on sales of real estate assets are recorded when the
gain recognition criteria under generally accepted accounting
principles have been met.
MARKETABLE SECURITIES-
Investments in debt securities are classified as held-to-maturity and
measured at amortized cost in the consolidated balance sheet only if
the Registrant has the positive intent and ability to hold those
securities to maturity. Debt and equity securities that are purchased
and held principally for the purpose of selling in the near term will
be measured at fair value and classified as trading securities. For the
purpose of calculating realized gains and losses, the cost of
investments sold is determined using the first-in, first-out method.
Unrealized gains and losses on trading securities are included in
current earnings. All securities not classified as trading or
held-to-maturity are classified as available-for-sale and measured at
fair value. Unrealized gains and losses on securities
available-for-sale are recorded net, as a separate component of
stockholders' equity until realized. Management determines the
appropriate classification of securities at the time of purchase and
reassesses the appropriateness of the classification at each reporting
date.
F-9
<PAGE>
The Registrant adopted Statement of Financial Accounting Standard
No.115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115") effective January 1, 1994. The effect of the
adoption increased stockholders' equity by approximately $350,000, net
of tax at such date.
Under the previous accounting policy, securities were carried at the
lower of cost or market value with a charge to income for unrealized
holding losses. Unrealized gains were recognized only to the extent
that previously unrealized losses had been recognized. As prescribed,
this new standard was not applied retroactively to prior years.
INVENTORIES-
Inventories are stated at the lower of cost or market and include
material, labor and manufacturing overhead.
The first-in, first-out (FIFO) method is used to determine the cost of
inventories in all of the Registrant's business segments, except the
resilient vinyl flooring operations, which utilizes the last-in,
first-out (LIFO) method. Approximately 32% of the Registrant's December
31, 1994 inventories are valued using the LIFO method. Had the FIFO
method been used to cost all inventories, the amount at which
inventories are stated would have been approximately $306,000 less at
December 31, 1994.
The components of inventory at December 31, 1994 and 1993 are as
follows-
1994 1993
----------- ----------
Raw materials $ 4,813,658 $4,261,991
Work in process 2,628,595 2,195,927
Finished goods 5,672,306 1,611,357
----------- ----------
$13,114,559 $8,069,275
=========== ==========
DEPRECIATION AND AMORTIZATION-
Depreciation and amortization are provided on a straight-line basis
over the estimated useful lives of the related assets as follows-
Real property held for rental-
Buildings 7 to 39 years
Equipment 5 to 7 years
Property, plant and equipment-
Buildings and improvements 18 to 40 years
Machinery and equipment 3 to 10 years
F-10
<PAGE>
PREPAID EXPENSES AND OTHER CURRENT ASSETS-
The Registrant capitalizes certain promotional materials in connection
with its resilient vinyl flooring operations. These costs are
classified as prepaid assets until the materials are distributed to the
market place. Selling expense is recorded when materials are
distributed.
REAL PROPERTY HELD FOR RENTAL-
Real property held for rental is carried at cost less accumulated
depreciation. Major renewals and betterments are capitalized.
Maintenance and repairs are expensed as incurred.
Certain mortgage obligations assumed by the Registrant contain
provisions whereby the mortgage holder may acquire, under certain
conditions, an interest in the properties securing the obligation, for
a nominal amount. The Registrant considers any costs incurred as a
result of these provisions to be a cost of acquisition and the basis in
such properties is adjusted accordingly.
RESEARCH AND DEVELOPMENT-
The Registrant expenses research, development and product engineering
costs as incurred. Approximately $814,000, $618,000 and $713,000 of
such costs were incurred by the Registrant in 1994, 1993 and 1992,
respectively. Provisions for losses are made for research and
development contracts when the estimated costs under such contracts
exceed the proceeds.
NET INCOME (LOSS) PER COMMON SHARE-
Net income (loss) per common share is computed based upon the weighted
average number of common and dilutive common equivalent shares
outstanding during the period. Fully diluted and primary earnings per
common share are the same amounts for each of the periods presented.
PRIOR YEAR FINANCIAL STATEMENTS-
Certain amounts have been reclassified in the December 31, 1993 and
1992 financial statements and notes thereto to present them on a basis
consistent with the current year.
(2) ACQUISITION OF OPERATING COMPANIES:
On March 14, 1994 the Registrant, through a new wholly-owned subsidiary
known as Kentile, Inc. ("Kentile"), purchased substantially all of the
operating assets of Kentile Floors, Inc. ("Kentile Floors") for
approximately $9.6 million. The purchase price was comprised of
approximately $6.5 million in new bank financing and approximately $3.1
million in cash.
The $3.1 million cash payment included $775,000 that was advanced to
Kentile Floors by the Registrant during 1993 and was also partially
derived from a total of $4 million in short-term borrowings by the
Registrant during the first quarter of 1994. These funds were used by
Kentile Floors to repay amounts outstanding under its asset-based lending
agreement, thereby relieving the Registrant of its obligation under the
letter of credit, discussed below.
F-11
<PAGE>
In November 1992, Kentile Floors filed for protection under Chapter 11 of
the United States Bankruptcy Code. Subsequent thereto, the Registrant
acquired a 1/3 equity interest in Kentile Floors together with an option
to purchase an additional equity interest in the future. In consideration
for this interest and option in Kentile Floors, the Registrant provided a
$2 million letter of credit to partially guarantee borrowings under
Kentile Floors' asset-based lending agreement. The letter of credit
arrangement was made pursuant to Bankruptcy Court approval on a priority
basis. In light of the uncertain outcome of Kentile Floors' bankruptcy
proceedings, no value was assigned to the equity interest acquired by the
Registrant.
The acquisition of Kentile has been accounted for under the purchase
method of accounting and, accordingly, the purchase price, including
associated costs of the acquisition, was allocated to assets acquired and
liabilities assumed based on their fair value at the date of acquisition
as follows (in thousands)-
Net current assets and liabilities $ 4,690
Property, plant and equipment 2,608
Noncurrent assets 2,463
Long-term liabilities (154)
-------
Allocated purchase price $ 9,607
=======
The results of operations of Kentile have been included in the
accompanying consolidated statements of income from the date of
acquisition, March 14, 1994.
Included in prepaid expenses and other current assets in the accompanying
December 31, 1994 consolidated financial statements is approximately
$800,000 related to unutilized equipment acquired in the acquisition of
Kentile, which is to be sold under a contract entered into in March 1995.
The Registrant has valued the equipment in accordance with this agreement
and included this transaction in the allocation of the purchase price,
noted above. Accordingly, no gain has been recognized in the accompanying
consolidated financial statements.
In February 1994, the Registrant also acquired the underlying mortgage
secured by Kentile Floors' South Plainfield facility for $2,250,000. This
note has a face amount outstanding of approximately $6.5 million plus
delinquent accrued interest. The Registrant has accounted for this
mortgage as an insubstance foreclosure and, accordingly, recorded the
purchase price as a component of real property held for rental in the
accompanying consolidated balance sheet.
As of April 2, 1992, the Registrant, through a wholly-owned subsidiary of
Metex Corporation ("Metex"), purchased the net operating assets of Chu
Associates, Inc. and affiliated companies, a manufacturer of antenna
systems for naval and land-based applications, now known as D&M/Chu
Technology, Inc. ("D&M/Chu"), for $3,675,000. The purchase price was
satisfied by $2,475,000 in cash and a $1,200,000 note to the sellers. The
$2,475,000 cash payment was derived from a total of $4,750,000 in bank
borrowings by the Registrant in connection with the acquisition and the
refinancing of certain of the existing debt of Chu Associates, Inc.
F-12
<PAGE>
The acquisition has been accounted for under the purchase method of
accounting and, accordingly, the purchase price, including associated
costs of the acquisition, was allocated to assets acquired and
liabilities assumed based on their fair value at the date of acquisition
as follows (in thousands)-
Net current assets and liabilities ($ 157)
Property, plant and equipment 5,181
Noncurrent assets 860
Long-term liabilities (2,054)
-------
Allocated purchase price $ 3,830
=======
The results of operations of D&M/Chu have been included in the
accompanying consolidated statements of income from the date of
acquisition.
The following unaudited pro forma consolidated results of operations of
the Registrant assume that the acquisition of D&M/Chu had occurred at the
beginning of 1992 and that the acquisition of Kentile had occurred at the
beginning of 1993 and 1994. In addition to combining historical results
of operations of the companies, the pro forma calculations include
adjustments to historical assets, liabilities and results of operations
which occur in a purchase.
UNAUDITED PRO FORMA CONSOLIDATED RESULTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1994 1993 1992
-------- -------- -------
Revenues $113,952 $119,870 $73,083
======== ======== =======
Net income $ 2,051 $ 4,117 $ 2,758
======== ======== =======
Net income per common share $ .33 $ .66 $ .42
======== ======== =======
The above financial information is not necessarily indicative of the
actual results that would have occurred had the acquisitions of D&M/Chu
or Kentile been consummated at the beginning of the periods presented or
of future operations of the combined companies.
In October 1992, AFP Transformers, Inc. ("AFP Transformers"), a
wholly-owned subsidiary of the Registrant, purchased the operating assets
of Isoreg Corporation in a foreclosure sale from a bank for approximately
$761,000, including all costs associated with the acquisition. The
results of operations of AFP Transformers have been included in the
accompanying consolidated statements of income from the date of
acquisition. Pro forma results have not been separately disclosed as
amounts are not material.
(3) REAL PROPERTY HELD FOR RENTAL:
The Registrant is the lessor of real estate under operating leases which
expire in various years through 2070.
F-13
<PAGE>
The following is a summary of real property held for rental at December
31-
1994 1993
------------ ------------
Land $ 12,244,736 $ 11,703,007
Buildings 114,395,602 107,947,423
------------ ------------
Total 126,640,338 119,650,430
------------ ------------
Less- Accumulated depreciation (51,569,038) (45,257,746)
------------ ------------
$75,071,300 $74,392,684
============ ============
As of December 31, 1994, total minimum future rentals to be received
under noncancellable leases for each of the next five years and
thereafter are as follows-
Year Ended December 31-
1995 $13,725,000
1996 11,843,000
1997 10,604,000
1998 9,337,000
1999 8,390,000
Thereafter 50,786,000
-------------
Total Minimum Future Rentals $104,685,000
=============
Minimum future rentals do not include additional rentals that may be
received under certain leases which provide for such rentals based upon a
percentage of lessees' sales. Percentage rents included in the
determination of net income in 1994, 1993 and 1992 were approximately
$915,000, $1,037,000, and $1,271,000, respectively.
Included in 1992 percentage rents are approximately $520,000 collected
from a tenant as a result of an arbitration award. These amounts were
earned over a four-year period but not previously accrued.
(4) PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is principally used in the Registrant's
manufacturing operations and consists of the following at December 31-
1994 1993
------------ ------------
Land $ 1,189,369 $ 1,132,950
Buildings and improvements 5,276,556 3,888,953
Machinery and equipment 11,008,466 7,731,628
------------ ------------
17,474,391 12,753,531
Less- Accumulated depreciation (4,977,480) (3,840,345)
------------ ------------
$ 12,496,911 $ 8,913,186
============ ============
F-14
<PAGE>
At December 31, 1994 property, plant and equipment includes approximately
$2.3 million of land and buildings used in the Registrant's D&M/Chu
antenna business. These operations are being consolidated with those of
the Registrant's Dorne & Margolin subsidiary. The Registrant has leased
one of the D&M/Chu facilities (which is classified as real property held
for rental at December 31, 1994) at rates which are sufficient to cover
the carrying costs of the property, and is exploring possibilities to
lease the remaining facility and to develop the unused land at the site.
(5) MARKETABLE SECURITIES:
The aggregate market value of marketable securities, which were all
available-for-sale, was $594,070 at December 31, 1994, while gross
unrealized holding gains were $61,863 on a net of tax basis. At December
31, 1993 the aggregate market value and the gross unrealized holding
gains of the Registrant's marketable security portfolio were $2,296,318
and $578,041, respectively.
Proceeds from the sales of securities, which were designated as
available-for-sale in 1994, and the resulting gross realized gains and
losses included in the determination of net income for the years ended
December 31, 1994, 1993 and 1992 are as follows-
1994 1993 1992
----------- ----------- -----------
Proceeds $ 2,979,985 $ 0 $ 1,005
=========== =========== ===========
Realized gains $ 1,233,389 $ 0 $ 20,596
=========== =========== ===========
Realized losses ($ 29,926) $ 0 $ 0
=========== =========== ===========
(6) NOTES RECEIVABLE:
Notes receivable consist of the following at December 31-
1994 1993
---------- ----------
Mortgage notes receivable (a) $ 722,913 $ 908,509
Advances to affiliate (b) 0 775,000
Due from related party (Note 11) 360,000 628,494
Loan receivable (Note 11) 0 88,333
---------- ----------
1,082,913 2,400,336
Less- Current portion included in
notes and accounts receivable 386,685 1,577,795
---------- ----------
$ 696,228 $ 822,541
========== ==========
(a) As partial consideration in the sale of several properties, the
Registrant received mortgage notes in the aggregate amount of
$2,080,000. The notes, which are secured by the properties sold,
bore interest in 1993 and 1994 at various rates ranging between 8%
and 15% and bear interest in future periods at rates ranging
between 9% and 11%. Interest under the notes is due monthly.
Principal repayment terms vary with periodic installments through
December 2008. One such note, with an original face amount of
$200,000 was satisfied during 1994.
F-15
<PAGE>
In accordance with generally accepted accounting principles, the
gains from the sales of certain of these properties are being
recognized under the installment method, and accordingly, the
carrying value of noncurrent notes receivable has been reduced by
deferred gains of approximately $941,000 and $991,000 at December
31, 1994 and 1993, respectively. The deferred gains are being
recognized as income as payments are received under the note.
(b) During 1993 the Registrant advanced $775,000 to Kentile Floors.
Such advances were made on a priority basis pursuant to Bankruptcy
Court approval granted in this matter. In 1992 the Registrant
acquired a one-third interest in Kentile Floors subsequent to
Kentile Floors' filing for protection under Chapter 11 of the
U.S. Bankruptcy Code. In March 1994 the Registrant acquired the
operating assets of Kentile Floors and such advances were included
in the determination of the purchase price of this acquisition.
See Note 2, "Acquisition of Operating Companies."
(7) OTHER ASSETS:
Other assets consist of the following at December 31-
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Anticipated insurance recoveries (a) $ 7,000,000 $ 0
Pensions - Note 14 2,378,000 570,000
Deposits 848,744 396,584
Equipment held for sale - Note 2 800,000 0
Covenants not to compete 403,717 602,545
Cash surrender value of life insurance policies, net 294,447 342,427
Patents, net of accumulated amortization 188,646 217,801
Other 235,962 228,206
----------- -----------
12,149,516 2,357,563
Less- Amounts included in prepaid expenses and
other current assets 5,144,807 326,922
----------- -----------
Total other assets $ 7,004,709 $ 2,030,641
=========== ===========
</TABLE>
(a) In accordance with Staff Accounting Bulletin 92 the Registrant has
recorded the anticipated recoveries from its insurance carriers in
connection with the environmental investigation and remediation
costs to be incurred at two of its manufacturing sites in New
Jersey. See Note 16, "Contingencies."
F-16
<PAGE>
(8) LONG-TERM DEBT:
Long-term debt consists of the following at December 31-
1994 1993
----------- -----------
First mortgages on real property (a) $50,516,000 $55,044,727
Second mortgages on real property (b) 390,902 585,074
Loan payable to bank (c) 3,280,829 4,550,832
Loan payable to bank (d) 2,756,251 3,937,501
Loan payable to bank (e) 520,000 0
Note payable (f) 1,200,000 1,200,000
Note payable (g) 0 1,158,335
Other 471,421 472,784
----------- -----------
59,135,403 66,949,253
Less- Current maturities 9,755,590 8,309,052
----------- -----------
$49,379,813 $58,640,201
=========== ===========
(a) First mortgages bearing interest at rates ranging from 7.875% to
11% per annum are collateralized by the related real property.
Such amounts are scheduled to mature at various dates from
September 1995 through February 2010.
(b) Second mortgages bearing interest at rates of approximately
10.125% per annum are collateralized by the related real property.
Such amounts are scheduled to mature at various dates from October
2001 through November 2002.
(c) In July 1992, the Registrant borrowed $6,350,000 from a bank to
refinance a note to a former shareholder which was issued in
connection with the merger of BMG Equities, Corp. ("BMG"). This
note bore interest at the bank's prime lending rate plus 1/4%
until April 1993 when it was converted to a fixed rate note at
6.2% for the remainder of the term. The note is due in 60 equal
principal installments, together with accrued interest thereon,
through July 1997. The loan agreement contains, among other
things, several financial covenants regarding net worth and
debt-to-equity ratios. At December 31, 1994 the Registrant was not
in compliance with certain of these covenants. The bank has
granted a waiver for such noncompliance and has modified certain
covenants through December 31, 1995. The Registrant believes it
will be in compliance with the foregoing agreements.
(d) In connection with the acquisition of the operating assets of Chu
Associates, Inc., the Registrant entered into a $4,725,000 loan
agreement with a bank. The loan bore interest at the bank's prime
lending rate plus 1/4% until April 1993 when it was converted to a
fixed rate note at 6.3% for the remainder of the term. The note is
payable monthly, with 48 equal monthly principal installments
beginning in May 1993. The loan agreement contains several
financial covenants regarding working capital, net worth, capital
expenditures and debt-to-equity ratios. At December 31, 1994 the
Registrant was not in compliance with certain of these covenants.
The bank has granted a waiver for such noncompliance and has
modified certain covenants through December 31, 1995. The
Registrant believes it will be in compliance with the foregoing
agreements.
F-17
<PAGE>
(e) In connection with the acquisition of the operating assets of
Kentile Floors the Registrant entered into a $600,000 term loan
with a bank. The loan bears interest at the bank's prime lending
rate plus 2% which was 10.5% at December 31, 1994. The loan is due
in 60 equal principal installments, together with accrued interest
thereon, through March 1999. Amounts outstanding are guaranteed by
the Registrant and secured by the accounts receivable, inventory
and equipment of Kentile. The loan contains, among other things,
several financial covenants regarding capital expenditures and
debt-to-equity ratios. At December 31, 1994 the Registrant was not
in compliance with certain of these covenants. The bank has
granted a waiver of the debt-to-equity covenant through March 31,
1996 and the capital expenditure covenant through December 31,
1995.
(f) As partial consideration in the acquisition of D&M/Chu the
Registrant issued a $1,200,000 note to the sellers. The note bore
interest at 6.5% between May 1992 and May 1994. Thereafter the
interest rate is adjusted annually by no more than a 1% increase
or decrease from the rate of the immediately preceding
twelve-month period to the published prime rate charged by U. S.
banks. This rate was 6.75% between May and December 1994. The note
requires quarterly interest payments and matures in May 1997.
Under certain conditions, the Registrant may offset certain
amounts against this note.
(g) In connection with the acquisition of D&M/Chu the Registrant
assumed a note held by the Massachusetts Industrial Finance Agency
which was secured by one of D&M/Chu's manufacturing facilities.
The note bore interest at 8.75% and was fully satisfied during
1994.
The approximate aggregate maturities of these obligations at
December 31, 1994 are as follows-
1995 $9,755,590
1996 9,608,669
1997 7,563,472
1998 4,962,717
1999 4,649,138
Thereafter 22,595,817
-----------
$59,135,403
===========
(9) REVOLVING CREDIT FACILITIES:
The Registrant maintains an unsecured line of credit arrangement with a
bank which provides for borrowings up to $15,000,000 at the bank's prime
lending rate, which was 8.5% at December 31, 1994 and 6% at December 31,
1993. This demand facility is reviewed by the bank annually on May 31.
At December 31, 1994 there was $6 million outstanding under this
facility. There were no borrowings outstanding under this facility at
December 31, 1993.
Borrowings under this facility are jointly and severally guaranteed by
both the Registrant and its subsidiaries. Unless extended, any amounts
outstanding are due and payable within 30 days of the expiration of this
facility.
F-18
<PAGE>
Kentile maintains a revolving credit facility with a bank which provides
for maximum borrowings of the lessor of $7 million or the borrowing
base, as defined, at the bank's prime lending rate plus 1 1/2% which was
10% at December 31, 1994. Such borrowings are collateralized by all
accounts receivable, inventory and equipment of Kentile. At December 31,
1994 approximately $4.6 million was outstanding under this facility
which is due on demand and matures in April 1996. This facility
includes, among other things, several financial covenants regarding
capital expenditures and debt-to-equity ratios. At December 31, 1994 the
Registrant was not in compliance with certain of these covenants. The
bank has granted a waiver of the debt-to-equity covenant through March
31, 1996 and the capital expenditure covenant through December 31, 1995.
(10) STOCKHOLDERS' EQUITY:
AUTHORIZED CAPITAL AND TREASURY STOCK-
The stockholders of the Registrant ratified a plan during the 1993
Annual Meeting of Stockholders to reduce the authorized capital of the
Registrant to 7,500,000 shares of $.10 par value common stock. In
addition, the Registrant has retired all shares of common stock
previously held in treasury.
STOCK OPTIONS-
The Registrant has two stock option plans under which qualified and
nonqualified options may be granted to key employees to purchase the
Registrant's common stock at the fair market value at the date of
grant. Under both plans, the options become exercisable in three equal
installments, beginning one year from the date of grant. The 1988
Incentive Stock Option Plan (the "Incentive Plan") provides for the
granting of incentive stock options not to exceed 325,000 options in
the aggregate. The 1988 Joint Incentive and Non-Qualified Stock Option
Plan (the "Joint Plan") provides for the granting of incentive or
nonqualified stock options, also not to exceed 325,000 options in the
aggregate.
During 1993 employees of the Registrant were granted 83,000 and 43,000
options pursuant to the Joint Plan and Incentive Plan, respectively.
Such options are exercisable at $11 per share subject to the vesting
period noted above. Included in the 1993 grants are 70,000 and 30,000
options granted to the Chairman of the Board pursuant to the Joint
Plan and Incentive Plan, respectively.
At December 31, 1994, there were 119,516 and 49,594 options
outstanding under the Joint Plan and Incentive Plan, respectively. At
December 31, 1993, 149,088 and 117,240 options were outstanding under
the Joint Plan and Incentive Plan, respectively.
In addition to options outstanding under the Joint Plan and Incentive
Plan, 180,000 and 240,000 options were outstanding at December 31,
1994 and 1993, respectively. Such options were previously granted to
Directors and certain officers of the Registrant and are presently
exercisable at $5.50 per share, which price was equal to or greater
than the market value per share on the date of grant. If unexercised,
these options expire 30 days after the end of a Director's term.
During 1994 directors of the Registrant exercised options to purchase
60,000 of such shares.
F-19
<PAGE>
Transactions involving stock options are summarized below-
1994 1993
------------ ------------
Outstanding, beginning of year 506,328 391,017
Granted 0 126,000
Canceled (44,297) (9,989)
Exercised (112,921) (700)
------------ ------------
Outstanding, end of year 349,110 506,328
============ ============
Exercisable, end of year 268,443 380,328
============ ============
Price range of options outstanding $5.00-$16.38 $5.00-$16.38
============ ============
(11) TRANSACTIONS WITH RELATED PARTIES:
In April 1994, the Registrant participated in a $5 million loan
transaction secured by a second mortgage covering a leasehold estate.
The Registrant advanced $2,253,000 in connection with this loan. The
remaining amounts were advanced by the following: Directors of the
Registrant, $830,000; the wife of the Board Chairman, $1 million;
Officers of the Registrant, $39,000; and $878,000 by unrelated parties.
The note bore interest at 15% per annum, payable monthly and was fully
satisfied together with accrued interest in February 1995. In addition,
the participants received a commitment fee of 3% on their advances from
the borrower.
In February 1993, the Registrant participated in a $7.5 million loan
transaction secured by a second mortgage covering the leasehold estate
on a prime hotel property in New York City. During 1993 a total of
$6,250,000 had been advanced, including approximately $1,652,000 by the
Registrant, $2,532,000 by certain Directors, $200,000 by the wife of the
Board Chairman, $100,000 by two adult daughters of a director, $100,000
by a trust under will in which a Director has a partial remainder
interest and approximately $1,666,000 by unrelated parties.
In connection with this loan, a commitment fee in the net amount of
$270,000 was prorated among the participants in relation to the
principal amount advanced and committed to be advanced by each
participant. The note bore interest at 15% per annum, payable monthly
and was fully satisfied together with accrued interest in December 1993.
In June 1993 the Registrant advanced approximately $89,000 in connection
with a $265,000 loan transaction secured by a first mortgage on a
Brooklyn, New York property. The loan bore interest at 15% per annum,
payable monthly, and matured and was fully satisfied in June 1994. A
Director of the Registrant and an unrelated party also held 1/3
interests in this loan.
In connection with the purchase of an interest in a real estate loan
from a Director in 1992 the Registrant issued a note in the amount of
$198,000. The note bore interest at 10% and was fully satisfied in
February 1995.
F-20
<PAGE>
During 1994 and 1993 the Registrant advanced, in the aggregate, $360,000
and $3,411,833, respectively, to the Chairman of the Board. Such
advances bore interest at 1% over the Registrant's borrowing rate under
its revolving credit facility which was 8.5% at December 31, 1994 and 6%
at December 31, 1993. Amounts outstanding at December 31, 1994 and 1993
of $360,000 and $628,494, respectively, together with accrued interest
thereon were repaid in January 1995 and 1994, respectively.
(12) INCOME TAXES:
Effective January 1, 1993 the Registrant adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). In prior years, the Registrant accounted for income taxes using
Accounting Principles Board Opinion No. 11 ("APB 11"). Under SFAS 109,
deferred tax assets and liabilities are determined based on the
difference between the tax basis of an asset or liability and its
reported amount in the consolidated financial statements using enacted
tax rates. Future tax benefits attributable to these differences are
recognized to the extent that realization of such benefits is more
likely than not.
Under the provisions of SFAS 109, the Registrant has elected not to
restate prior years' consolidated financial statements. The cumulative
effect of this accounting change on years prior to 1993 resulted in a
benefit of $702,000, or $.11 per share which is reflected in the
accompanying consolidated statement of income for 1993. In addition, the
effect of this change on income before cumulative effect of an
accounting change in 1993 was an increase of approximately $700,000 or
$.11 per share.
The cumulative benefit recorded by the Registrant primarily arises from
basis differences of real properties held for rental for financial
statement and income tax purposes. Based upon the Registrant's
historical and projected levels of pretax income, management believes it
is more likely than not that the Registrant will realize such benefits
in the future and accordingly no valuation reserve has been recorded.
The components of the net deferred tax asset (liability) at December 31,
1994 and 1993, are as follows-
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Realization allowances related to
accounts receivable and inventories $ 588,407 $ 433,199
Basis differences relating to real
property held for rental 1,755,810 1,250,538
Accrued expenses, deductible when paid 1,609,260 1,496,393
Deferred revenue and profit (for tax purposes) (291,168) (247,422)
Basis differences relating to business acquisitions (1,858,912) (1,642,060)
Property, plant and equipment 137,769 (199,685)
Pensions (814,171) (199,465)
Other, net 5,940 (21,358)
----------- -----------
Net deferred tax asset (liability) 1,132,935 870,140
Less- Current portion 784,849 609,078
----------- -----------
Noncurrent portion $ 348,086 $ 261,062
=========== ===========
</TABLE>
F-21
<PAGE>
Income tax provision (benefit) reflected in the accompanying
consolidated statements of income for the years ended December 31, 1994,
1993 and 1992, is summarized as follows-
1994 1993 1992
----------- ----------- -----------
Current-
Federal $ 1,926,000 $ 2,511,000 $ 2,390,000
State 1,131,000 770,000 705,000
Deferred (405,000) (237,000) (156,000)
----------- ----------- -----------
$ 2,652,000 $ 3,044,000 $ 2,939,000
=========== =========== ===========
A reconciliation of tax provision computed at statutory rates to the
amounts shown in the accompanying consolidated statements of income for
the years ended December 31, 1994, 1993 and 1992 is as follows-
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- -----------
<S> <C> <C> <C>
Computed Federal income
tax provision at statutory rates $1,899,000 $2,520,000 $ 1,974,000
State income taxes, net of
Federal income tax benefit 767,000 508,000 465,000
Effect of basis differences arising from
purchase accounting adjustments
on pretax income 0 0 572,000
Effect of difference between tax
and book basis of properties sold 0 0 (106,000)
Other, net (14,000) 16,000 34,000
---------- ---------- -----------
$2,652,000 $3,044,000 $ 2,939,000
========== ========== ===========
</TABLE>
(13) OTHER INCOME AND EXPENSE:
The components of other income and expense in the accompanying
consolidated statements of income for the years ended December 31, 1994,
1993 and 1992 are as follows-
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ---------
<S> <C> <C> <C>
Gain on sales of real estate assets $1,399,495 $1,109,591 $ 449,408
Net realized and unrealized
gains (losses) on
marketable securities (a) 1,203,463 743,636 (723,040)
Income from equity investments (b) 46,029 578,382 142,059
Other (c) 170,506 1,681,488 249,083
---------- ---------- ---------
$2,819,493 $4,113,097 $ 117,510
========== ========== =========
</TABLE>
(a) In 1994 unrealized gains and losses on marketable securities,
which were all available-for-sale, have been recorded net, as a
separate component of stockholders' equity in accordance with
SFAS 115. In prior years unrealized losses were included in the
determination of net income while unrealized gains were only
recognized to the extent of previously unrecognized losses. See
Note 1.
F-22
<PAGE>
(b) Income from equity investments principally represents
nonrecurring cash distributions received by the Registrant in
connection with interests held in certain real estate ventures
which were acquired in the 1991 merger with BMG. Such investments
were valued at historical cost at the date of acquisition.
(c) In 1993, the Registrant received a $2 million settlement from
Metex' insurance carrier in connection with the class action
civil suit brought by the former shareholders of Metex. This
settlement is reflected in other income, net of approximately
$450,000 of costs incurred in defense of this action during 1993.
All defense costs incurred prior to 1993 were included in general
and administrative expenses.
(14) RETIREMENT PLAN:
Certain of the Registrant's subsidiaries have noncontributory defined
benefit pension plans that cover substantially all full-time employees
of the engineered products segment and all hourly employees of the
resilient vinyl flooring segment.
The following table sets forth the funded status of the plans and
amounts recognized in the Registrant's consolidated financial
statements as of December 31, 1994 and 1993. The defined benefit plan
covering the employees of the resilient vinyl flooring segment has been
included here and in the accompanying consolidated financial statements
since the acquisition of Kentile in March, 1994.
<TABLE>
<CAPTION>
1994 1993
------------ -----------
<S> <C> <C>
Accumulated benefit obligation:
Vested $ 8,527,000 $ 1,565,000
Nonvested 138,000 131,000
------------ -----------
$ 8,665,000 $ 1,696,000
============ ===========
Plan assets at fair value, primarily U. S. bonds,
government-backed mortgage obligations
and stocks $ 11,663,000 $ 2,055,000
Projected benefit obligation (8,830,000) (1,845,000)
------------ -----------
Plan assets in excess of projected benefit obligation 2,833,000 210,000
Effect of purchase accounting (1,873,000) (156,000)
Unrecognized net loss, net of amortization 1,418,000 516,000
------------ -----------
Pension benefit included in other assets $ 2,378,000 $ 570,000
============ ===========
</TABLE>
Net periodic pension (income) expense for 1994 and 1993 includes the
following components-
<TABLE>
<CAPTION>
1994 1993
----------- ---------
<S> <C> <C>
Service cost $ 249,000 $ 171,000
Interest cost 524,000 122,000
Actual return on plan assets 242,000 (142,000)
Net amortization and deferral (1,048,000) (25,000)
----------- ---------
Net periodic pension (income) expense ($ 33,000) $ 126,000
=========== =========
</TABLE>
F-23
<PAGE>
In determining the projected benefit obligation for 1994 and 1993, the
weighted average assumed discount rate was 7.5% for both plans, while
the rate of expected increases in future salary levels was 3.5% for
those employees of the engineered products segment. No such escalation
is required under the plan covering the employees of the resilient
vinyl flooring segment. The expected long-term rate of return on assets
used in determining net periodic pension cost was 9% and 8% for the
engineered products and resilient vinyl flooring plans, respectively.
No contributions were made during 1994 or 1993.
(15) BUSINESS SEGMENTS:
At December 31, 1994, the Registrant had four business segments: real
estate investment and management, the manufacture and sale of resilient
vinyl flooring, the manufacturing and sale of engineered products and
the manufacture and sale of antenna systems. Information on the
Registrant's business segments for 1994, 1993 and 1992 is as follows-
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
(in thousands)
<S> <C> <C> <C>
Net revenues and sales-
Rental revenues $ 21,988 $ 20,815 $ 19,543
Resilient vinyl flooring 29,894 0 0
Antenna systems 19,495 21,098 24,513
Engineered products 35,511 27,643 26,819
--------- --------- ---------
$ 106,888 $ 69,556 $ 70,875
========= ========= =========
Operating income (loss)-
Real estate investment and management $ 5,038 $ 3,946 $ 3,033
Resilient vinyl flooring (608) 0 0
Antenna systems (1,527) 769 3,259
Engineered products 2,477 1,585 2,687
--------- --------- ---------
5,380 6,300 8,979
General corporate expenses (1,613) (2,561) (2,831)
Other income (expense), net 1,818 3,672 (343)
--------- --------- ---------
Income before income taxes $ 5,585 $ 7,411 $ 5,805
========= ========= =========
Identifiable assets-
Real estate investment and management $ 92,421 $ 86,668 $ 88,453
Resilient vinyl flooring 13,975 0 0
Antenna systems 15,580 17,686 18,899
Engineered products 14,365 10,528 9,497
--------- --------- ---------
$ 136,341 $ 114,882 $ 116,849
========= ========= =========
</TABLE>
Through the Registrant's antenna systems segment, approximately 13%,
21% and 23% of consolidated revenues were derived from sales to the
United States Government or its contractors in 1994, 1993 and 1992,
respectively.
F-24
<PAGE>
Sales by the Registrant's engineered products segment to automobile
original equipment manufacturers accounted for approximately 16%, 20%
and 23% of 1994, 1993 and 1992 consolidated revenues, respectively.
(16) CONTINGENCIES:
The Registrant has undertaken the completion of environmental studies
and/or remedial action at Metex' two New Jersey facilities.
The process of remediation has begun at one facility pursuant to a plan
filed with the New Jersey Department of Environmental Protection and
Energy ("NJDEPE"). Environmental experts engaged by the Registrant
estimate that under the most probable remediation scenario the
remediation of this site is anticipated to require initial expenditures
of $860,000, including the cost of capital equipment, and $86,000 in
annual operating and maintenance costs over a 15-year period.
Environmental studies at the second facility indicate that remediation
may be necessary. Based upon the facts presently available,
environmental experts have advised the Registrant that under the most
probable remediation scenario, the estimated cost to remediate this
site is anticipated to require $2.3 million in initial costs, including
capital equipment expenditures, and $258,000 in annual operating and
maintenance costs over a 10-year period. The Registrant may revise such
estimates in the future due to the uncertainty regarding the nature,
timing and extent of any remediation efforts that may be required at
this site, should an appropriate regulatory agency deem such efforts to
be necessary.
The foregoing estimates may also be revised by the Registrant as new or
additional information in these matters become available or should the
NJDEPE or other regulatory agencies require additional or alternative
remediation efforts in the future. It is not currently possible to
estimate the range or amount of any such liability.
Although the Registrant believes that it is entitled to full defense
and indemnification with respect to environmental investigation and
remediation costs under its insurance policies, the Registrant's
insurers have denied such coverage. Accordingly, the Registrant has
filed an action against certain insurance carriers seeking defense and
indemnification with respect to all prior and future costs incurred in
the investigation and remediation of these sites. Upon the advice of
counsel, the Registrant believes that based upon a present
understanding of the facts and the present state of the law in New
Jersey, it is probable that the Registrant will prevail in the pending
litigation and thereby access all or a very substantial portion of the
insurance coverage it claims; however, the ultimate outcome of
litigation cannot be predicted.
As a result of the foregoing, the Registrant has not recorded a charge
to operations for the environmental remediation, noted above, in the
consolidated financial statements, as anticipated proceeds from
insurance recoveries are expected to offset such liabilities. The
Registrant has reached settlements with several insurance carriers in
this matter. Those recoveries anticipated to be received within twelve
months are included in prepaid expenses and other current assets in the
accompanying consolidated balance sheet.
F-25
<PAGE>
In the opinion of management, these matters will be resolved favorably
and such amounts, if any, not recovered under the Registrant's
insurance policies will be paid gradually over a period of years and,
accordingly, should not have a material adverse effect upon the
business, liquidity or financial position of the Registrant. However,
adverse decisions or events, particularly as to the merits of the
Registrant's factual and legal basis could cause the Registrant to
change its estimate of liability with respect to such matters in the
future.
Effective January 1, 1994 the Registrant adopted the provisions of
Staff Accounting Bulletin 92 and accordingly has recorded the expected
liability associated with remediation efforts as a component of other
long-term liabilities and the anticipated insurance recoveries as a
component of prepaid expenses and other current assets and other assets
in the Registrant's consolidated financial statements.
The Registrant is involved in various other litigation and legal
matters which are being defended and handled in the ordinary course of
business. None of these matters are expected to result in a judgment
having a material adverse effect on the Registrant's consolidated
financial position or results of operations.
F-26
<PAGE>
SCHEDULE II
UNITED CAPITAL CORP. AND SUBSIDIARIES
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
Write-offs
Net of
Recoveries
Balance Charged of Accounts Balance
at to Previously at
Beginning Costs and Written End of
of Period Expenses Off Period
-------------- -------------- --------------- --------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts receivable:
Year ended December 31, 1994 $285,545 $382,000 $ 0 $667,545
Year ended December 31, 1993 241,000 44,545 0 285,545
Year ended December 31, 1992 228,000 13,000 0 241,000
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these schedules.
F-27
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES SCHEDULE III
REAL PROPERTY HELD FOR RENTAL AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Costs
Mortgage Initial Cost To Registrant Capitalized
Loans --------------------------------- Subsequent to
Payable Building and Acquisition/
DESCRIPTION (Gross) Land Improvements Improvements
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shopping Centers and Retail Outlets-
Culver, CA $ 5,662,369 $ 841,811 $ 7,576,296 $ 0
Northbrook, IL 6,138,104 897,246 8,075,215 0
Miscellaneous Investments 31,997,356 6,250,592 55,575,449 764,864
------------ ------------ ------------ ------------
43,797,829 7,989,649 71,226,960 764,864
------------ ------------ ------------ ------------
Commercial Properties-
Miscellaneous Investments 5,443,595 2,491,993 26,216,525 0
Day Care Centers and Offices-
Miscellaneous Investments 1,054,785 642,895 5,786,058 1,128,993
Hotel Properties-
Miscellaneous Investments 416,403 0 2,867,703 0
Other-
Miscellaneous Investments 194,290 1,120,199 6,381,814 22,685
------------ ------------ ------------ ------------
$ 50,906,902 $ 12,244,736 $112,479,060 $ 1,916,542
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Life on Which
Depreciation
Gross Amount at Which in Latest
Carried at Close of Period Statment of
------------------------------------ Accumulated Income is
Building and Total Depreciation Date of Date Computed
DESCRIPTION Land Improvements (a) (c) (b) Construction Acquired (Years)
----------- ----------- ------------ ------------ ----------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shopping Centers and Retail Outlets-
Culver, CA $ 841,811 $ 7,576,296 $ 8,418,107 $ 3,390,352 N/A 1986 18
Northbrook, IL 897,246 8,075,215 8,972,461 3,443,051 N/A 1987 18
Miscellaneous Investments 6,250,592 56,340,313 62,590,905 24,677,894 N/A 1986-94 10-39
----------- ------------ ----------- ----------
7,989,649 71,991,824 79,981,473 31,511,297
----------- ------------ ----------- ----------
Commercial Properties-
Miscellaneous Investments 2,491,993 26,216,525 28,708,518 11,916,543 N/A 1986-94 12-29
Day Care Centers and Offices-
Miscellaneous Investments 642,895 6,915,051 7,557,946 4,957,250 N/A 1986-91 7-39
Hotel Properties-
Miscellaneous Investments 0 2,867,703 2,867,703 2,349,800 N/A 1986-87 10
Other-
Miscellaneous Investments 1,120,199 6,404,499 7,524,698 834,148 N/A 1986-94 10-39
----------- ------------ ------------ ---------
$12,244,736 $114,395,602 $126,640,338 $51,569,038
=========== ============ ============ ===========
</TABLE>
Notes:
(a) Reconciliations of the carrying value of real property held for rental
for the three years ended December 31, 1994 are as follows-
<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Real property held for rental at beginning of period $119,650,430 $119,778,000 $119,059,092
Additions during the period-
Acquisitions and improvements 6,643,880 750,000 2,070,468
Transfers from property, plant and equipment 1,420,927 0 0
------------ ------------ ------------
127,715,237 120,528,000 121,129,560
Deductions during period-
Cost of real estate sold 1,074,899 877,570 1,351,560
------------ ------------ ------------
$126,640,338 $119,650,430 $119,778,000
============ ============ ============
</TABLE>
(b) Reconciliations of accumulated depreciation for the three years ended
December 31, 1994 are as follows-
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Accumulated depreciation at beginning of period $45,257,746 $38,942,798 $32,587,172
Additions during the period-
Provision for depreciation 6,660,537 6,626,079 6,715,064
Transfers from property, plant and equipment 134,065 0 0
----------- ----------- -----------
52,052,348 45,568,877 39,302,236
Deductions during period-
Accumulated depreciation of real estate sold 483,310 311,131 359,438
----------- ----------- -----------
$51,569,038 $45,257,746 $38,942,798
=========== =========== ===========
</TABLE>
(c) The aggregate cost for Federal income tax purposes is approximately
$182,860,000.
The accompanying notes to consolidated financial statements are an integral part
of these schedules.
F-28
<PAGE>
SCHEDULE IV
UNITED CAPITAL CORP. AND SUBSIDIARIES
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1994
<TABLE>
<CAPTION>
DESCRIPTION INTEREST RATE FINAL MATURITY DATE PERIODIC PAYMENT TERMS
----------- ------------- ------------------- ----------------------
<S> <C> <C> <C>
Mortgage note receivable in connection with sale 10.25% through October 1998; November 2001 Principal and interest due
of hotel property in Montgomery, Alabama 11% thereafter monthly; in addition, principal
payments of $25,000 are due in
March 1993 and September 1994
and $150,000 is due in November
1998
Mortgage note receivable in connection with 8% through January 1993; February 2002 Principal and interest due
sale of hotel property in Beaumont, Texas 9% through January 1994; monthly; in addition principal
10% through January 2000; payments of $50,000 are due in
11% thereafter February 1993 and $773,000
at maturity
Mortgage note receivable in connection with sale 10% August 1, 2000 Principal and interest due
of land and building in Waterbury, Connecticut monthly
Mortgage note receivable in connection with sale 9% December 31, 2008 Principal and interest due
of land and building in Augusta, Georgia monthly
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Loans Subject
Carrying to Delinquent
Prior Face Amount Amount of Principal or
DESCRIPTION Liens of Mortgages Mortgages (b) Interest
----------- ----- ------------ ------------ -----------------
<S> <C> <C> <C> <C>
Mortgage note receivable in connection with sale $0 $610,000 $242,588 $0
of hotel property in Montgomery, Alabama
Mortgage note receivable in connection with 0 900,000 374,457 0
sale of hotel property in Beaumont, Texas
Mortgage note receivable in connection with sale 0 325,000 92,677 0
of land and building in Waterbury, Connecticut
Mortgage note receivable in connection with sale 0 45,000 13,191 0
of land and building in Augusta, Georgia -- ---------- -------- --
$0 $1,880,000 $722,913 (a)(c) $0
== ========== ======== ==
</TABLE>
NOTES:
(a) A reconciliation of mortgage loans on real estate for the year ended
December 31, 1994 is as follows-
Balance at beginning of period $ 908,509
Additions during period-
New mortgage loans 0
Deductions during period-
Collection of principal (185,596)
---------
Balance at end of period $ 722,913
=========
(b) In accordance with generally accepted accounting principles the gains
from the sale of these properties are being recognized under the
installment method and, accordingly, notes receivable have been reduced
by the following deferred gains at December 31, 1994:
Mortgage note receivable in connection with sale of property in-
Montgomery, Alabama $265,575
Beaumont, Texas 458,221
Waterbury, Connecticut 186,536
Augusta, Georgia 30,491
--------
$940,823
========
(c) The carrying value for Federal income tax purposes is substantially equal
to the carrying amount for book purposes.
The accompanying notes to consolidated financial statements are an integral part
of these schedules.
F-29
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
QUARTERLY FINANCIAL DATA
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
FOR THE YEAR 1994:
Revenues $ 21,356 $ 30,061 $ 29,128 $ 26,343
======== ======== ======== ========
Costs and expenses $ 19,113 $ 28,185 $ 28,296 $ 27,528
======== ======== ======== ========
Other income (expenses) $ 285 $ 514 $ 1,210 ($ 191)
======== ======== ======== ========
Net income $ 1,442 $ 1,410 $ 1,132 ($ 1,051)
======== ======== ======== ========
Per share data:
Net income $ .23 $ .23 $ .18 ($ .17)
======== ======== ======== ========
FOR THE YEAR 1993:
Revenues $ 17,832 $ 17,194 $ 16,838 $ 17,692
======== ======== ======== ========
Costs and expenses $ 16,513 $ 16,188 $ 16,097 $ 17,018
======== ======== ======== ========
Other income (expense) $ 312 $ 1,021 $ 1,567 $ 772
======== ======== ======== ========
Income before cumulative effect of change
in accounting principle $ 970 $ 1,228 $ 1,328 $ 841
Cumulative effect of change in accounting
principle 702 0 0 0
-------- -------- -------- --------
Net income $ 1,672 $ 1,228 $ 1,328 $ 841
======== ======== ======== ========
Per share data:
Income before cumulative effect of change
in accounting principle $ .16 $ .20 $ .21 $ .14
Cumulative effect of change in accounting
principle .11 0 0 0
-------- -------- -------- --------
Net income $ .27 $ .20 $ .21 $ .14
======== ======== ======== ========
</TABLE>
F-30
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated March 22, 1995, included in this Form 10-K, into the Company's
previously filed Registration Statements, File Numbers 33-28045 and 33-65140.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
March 30, 1995
UNITED CAPITAL CORP.
111 GREAT NECK ROAD
GREAT NECK, NY 11021
LIST OF CORPORATIONS
140 CORP. HJM CORP.
147 CORP. HJR CORP.
150 CORP. HJSC CORP.
1690 LEXINGTON CORP. HJSP CORP.
2911 CORP. HORIZON CORP.
47 BOUNDARY CORP. HR-TWENTY CORP.
521 WEST 146 CORP. IVES CORP.
627 SECOND CORP. JKM CORP.
629 SECOND CORP KENTILE, INC.
747 MIDDLENECK CORP. KINGS COUNTY CORP.
860 FRANKLIN ASSOCIATES, INC. LC CORP.
9 PARK PLACE CORP. LAND & LEASE CORP.
95 PERRY CORP. MADISON CORP.
AFP FINANCIAL CORP. MELANCON CORP.
AFP REALTY CORP. METEX EXPORT CORP.
AFP TRANSFORMERS, INC. METEX INTERNATIONAL SALES CORP.
AFP TECHNOLOGIES, INC. METEX LIQUIDATION CO., INC.
AKM CORP. METEX CORPORATION
ALBA CORP. METEX EUROPEAN SALES CORP.
ATWILL CORPORATION METROMATIC PARTNERS INC.
AVALON CORP. METROPOLITAN MANAGEMENT SERVICES, INC.
BEEKMAN CORP. NEMO ACQUISITION CORP.
BELMONT CORP. NORTHBROOK CORP.
BKM CORP. NORTHWOOD CORP.
BPI CORP. PDK CORP.
BROADWAY CORP. PINE EQUITIES CORP.
BUSCH REALTY CORP. PROSPECT CENTER CORP.
C.P. MANUFACTURING, INC. RBS REALTY CORP.
CAMBRELENG CORP. SCHULLER CORP.
CEDAR ENTERPRISES CORP. SECOND CEW PROPERTIES, INC.
CEW PROPERTIES, INC. SIXTH CLEETHORPS PROPERTIES, INC.
CLEETHORPES, PROPERTIES, INC. SUNRISE EQUITIES CORP.
COLUMBIA CONTRACT CONSULTANTS, INC. SUTTON REALTY CORP.
CORTLAND ENTERPRISES CORP. THIRD CEW PROPERTIES, INC.
CULVER CORP. TOLEDO CORP.
D&M ANTENNAS, INC. TOWN REALTY CORP.
D&M/CHU TECHNOLOGY, INC. TRI-MART CORP.
DALLAS ENTERPRISE CORP. TWENTY-M CORP.
DEL-METEX CORPORATION TWIN CORP.
DIESEL CORP. TWIN II REALTY CORP.
DORNE & MARGOLIN, INC. VARIOUS EQUITIES CORP.
DYNAPORT ELECTRONICS, INC. WAVERLY CORP.
EASTSIDE CORP. WELLFORD CORP.
EBMO CORP. WEST 145 CORP.
EKM CORP.
EROICA CORP.
FERN CORP.
FRANKLIN 850 CORP.
GENH CORP.
GREENVALE ENTERPRISES CORP.
HADLEY CORP.
HHKM CORP.
HJA REALTY CORP.
HJB CORP.
1988 INCENTIVE STOCK OPTION PLAN
METROPOLITAN CONSOLIDATED INDUSTRIES, INC.
This is a Stock Option Plan (the "Plan") of Metropolitan Consolidated
Industries, Inc., a Delaware corporation (the "Corporation"), under which
options may be granted from time to time to eligible employees of the
Corporation or any of its subsidiary corporations to purchase shares of common
stock of the Corporation, par value $.10 per share, subject to the limitations,
provisions and requirements hereinafter stated.
The Plan is as follows:
1. PURPOSE OF PLAN
The general purpose of the Plan is to aid in maintaining and
developing a management capable of assuring the future success of the
Corporation. The Plan is designed to aid the Corporation and its subsidiaries in
retaining the services of executives and key employees and in attracting new
management personnel; to offer such personnel additional incentives to put forth
maximum efforts for the success of the business; and to afford them
opportunities to obtain or increase a proprietary interest in the Corporation on
a favorable basis and, thereby, to have an opportunity to share in its success.
Furthermore, the Plan will enable the Corporation to grant "incentive
stock options" as provided in Section 422A of the Internal Revenue of 1986, as
amended, in substitution for "incentive stock options" previously granted by
Metex Corporation, a Delaware corporation ("Metex"), which corporation will be a
wholly-owned subsidiary of the Corporation upon consummation of the merger of
Metex with and into MTX Merger Corporation, a Delaware corporation and a
wholly-owned subsidiary of the Corporation, pursuant to the terms and provisions
of an Amended and Restated Agreement and Plan of Reorganization, dated as of
November 3, 1988 and amended on January 24, 1989. The substituted options to be
granted by the Corporation shall be substantially similar to, but not more
favorable than, the terms of the options previously granted by Metex, to the
extent practicable.
2. AUTHORITY TO GRANT OPTIONS
The Board of Directors, or a stock option committee (hereinafter the
"Committee") designated by it, may from time to time, in its discretion, grant
to eligible employees, options (hereinafter the "Options") to purchase an
aggregate number not to exceed 325,000 shares of Common Stock ($.10 par value)
of the Corporation (hereinafter the "Stock"), on the terms and subject to the
conditions hereinafter provided. The stock shall
<PAGE>
be made from authorized and unissued Stock or from Stock issued and held in the
Treasury of the Corporation, as shall be determined by the Board of Directors.
Notwithstanding anything contained in the 1988 Plan to the contrary, no
recipient of options may be granted options to purchase in excess of ninety
percent of the maximum number of shares of stock authorized to be issued under
the 1988 Plan.
3. ADMINISTRATION
This Plan shall be administered by the Board of Directors or, at their
discretion, by a Committee consisting of not less than three members of the
Board of Directors, a majority of whom shall not be eligible to participate in
the Plan. Decisions and designations of the Committee shall be made by a
majority of its members. Subject to the provisions of this Plan, the Board of
Directors or the Committee, as the case may be, shall have full power and
authority to construe, interpret and administer this Plan and to make
determinations which shall be final, conclusive and binding upon all persons,
including, without limitation, the Corporation, the stockholders, the directors
(if the Committee shall act) and any Option Holder, as hereinafter defined, and,
by a resolution or resolutions providing for the creation and issuance of any
Option, to fix the terms upon which, the time or times at or within which, and
the price or prices at which any Stock may be purchased from the Corporation
upon the exercise of such Option, which terms, time or times and price or prices
shall, in every case, be set forth or incorporated by reference in the
instrument or instruments evidencing such Option.
4. ELIGIBILITY
Full-time employees of the Corporation and its subsidiaries shall be
eligible to participate in this Plan and receive Options and will hereinafter be
referred to as "Eligible Employees".
5. ALLOTMENT OF STOCK
Options may be allotted to such Eligible Employees (sometimes
individually referred to as an "Option Holder" and collectively as "Option
Holders"), and in such amounts, as the Board of Directors or the Committee, as
the case may be, in its discretion, may from time to time determine.
6. TERM OF PLAN
No Option shall be granted or modified pursuant to this Plan after
December 31, 1998, but the expiration of the Options theretofore granted may
extend beyond that date.
-2-
<PAGE>
7. TERMS AND CONDITIONS OF OPTIONS
Subject to the terms and conditions of this Plan, all Options granted
under this Plan shall be in such form and upon such terms and conditions as the
Board of Directors or the Committee, as the case may be, in its discretion, may
from time to time determine, except that:
(a) Option Price - The Option price per share of
Stock with respect to each Option shall be determined by the
Board of Directors or the Committee, as the case may be, on
the date the Option is granted; provided, however, that such
price shall not be less than the fair market value of a share
of Stock on the date of grant; and provided, further, that
such price shall not be less than 110% of the fair market
value of a share of Stock on the date of grant for an employee
who, such date, is the owner of more than 10% of the total
combined voting power of all classes of stock of the
Corporation.
(b) Period of Option - In no event (including those
specified in paragraphs (f) and (g) hereof), shall the period
of an Option exceed ten (10) years from the date on which the
Option is granted.
(c) Payment - Payment for all Stock shall be made in
cash at the time that an Option, or any part thereof, is
exercised, and no Stock shall be issued until full payment
therefor has been made.
(d) Exercise of Option - An Option Holder must remain
in the continuous employ of the Corporation or any subsidiary
of the Corporation for one (1) year from the date on which the
Option is granted before he may exercise any part of the
Option; thereafter and during the life of the Option, the
Option may be exercised as follows:
(i) After one (1) year of continuous
employment from the date on which the Option is
granted, not exceeding one-third (1/3) of the Stock
subject to the Option;
(ii) After two (2) years of continuous
employment from the date on which the Option is
granted, not exceeding one-third (1/3) of the shares
subject to the Option, plus any Stock not purchased
under (i);
(iii) After three (3) years of continuous
employment from the date on which the Option is
-3-
<PAGE>
granted, not exceeding one-third (1/3) of the Stock
subject to the Option, plus any shares not purchased
under (i) and (ii).
At the expiration of the third (3rd) year of
continuous employment from the date on which the Option is
granted, the Option may be exercised at any time and from time
to time within its terms in whole or in part, but it shall not
be exercisable after the expiration of ten (10) years from the
date on which it was granted.
(e) Non-Transferability of Options - During an Option
Holder's lifetime, an Option shall be exercisable only by him.
An Option shall not be transferable except for exercise as
provided in paragraph (g) hereof.
(f) Termination of Employment - In the event of the
termination of an Option Holder's employment (for any reason
other than death or discharge for cause) any Option granted to
him or unexercised portion thereof which was otherwise
exercisable on the date of termination of employment shall
terminate unless, such Option to the extent otherwise
exercisable, is exercised within thirty (30) days of the date
on which he ceases to be an employee, provided such time may
be extended by the Board of Directors or the Committee, as the
case may be, to a date no later than the date of expiration of
the Option. If an Option Holder's employment is terminated for
cause, as determined by the Board of Directors or the
Committee, as the case may be, any Option or unexercised
portion thereof granted to him shall terminate and be of no
further force and effect from the date of discharge.
(g) Death of Option Holder - Upon the death of an
Option Holder, any Option granted to him or the unexercised
portion thereof, which was otherwise exercisable on his date
of death, shall terminate unless such Option to the extent
exercisable is exercised by the executor or administrator of
his estate, within six months after the date of his death,
provided such time may be extended by the Board of Directors
or the Committee, as the case may be, to a date no later than
the date of the expiration of the Option.
(h) Restriction on Issuance of Stock - The
Corporation shall be obligated to sell and issue the Stock
pursuant to any Option granted under the Plan and in
accordance with the terms thereof but not before the Stock
with respect to which the Option is being
-4-
<PAGE>
exercised is effectively registered or exempt from
registration under the Securities Act of 1933, as amended, in
the opinion of counsel for the Corporation and the Stock is
listed on any exchange upon which it is traded.
(i) Rights as a Stockholder - The Option Holder shall
have no rights as a stockholder with respect to any Stock
covered by his Option until the date of issuance of a stock
certificate to him for such Stock.
(j) Time of Granting an Option - Nothing contained in
the Plan shall constitute the granting of any Option
hereunder. An Option shall be granted only pursuant to a
resolution of the Board of Directors or the Committee, as the
case may be, and shall not be effective until there has been
executed by both the Corporation and the optionee an Option
Agreement in such form as shall be required by the Board of
Directors or the Committee, as the case may be.
(k) Miscellaneous - The Board of Directors or the
Committee, as the case may be, may require, as a condition to
the sale of Stock on the exercise of any Option, that the
person exercising such Option give to the Company such
documents, including such appropriate investment
representations as may be required by counsel for the
Corporation, and such representations, additional agreements
and documents as the Board of Directors or the Committee, as
the case may be, shall determine to be in the best interest of
the Corporation.
8. ADJUSTMENT IN EVENT OF RECAPITALIZATION
(a) If the outstanding shares of the Stock of the
Corporation are increased, decreased, changed into or
exchanged for a different number or kind of stock or
securities of the Corporation or stock of a different par
value or without par value, through reorganization,
recapitalization, reclassification, stock dividend, stock
split, amendment to the Corporation's Certificate of
Incorporation or reverse stock split, an appropriate and
proportionate adjustment shall be made in the maximum number
and/or kind of securities allocated to the Options theretofore
and thereafter granted under the Plan, without change in the
aggregate purchase price applicable to the unexercised portion
of the outstanding options but with a corresponding adjustment
in the price for each share of Stock or other unit of any
security covered by the Options.
-5-
<PAGE>
(b) Upon the effective date of the dissolution or
liquidation of the Corporation, or of a reorganization, merger
or consolidation of the Corporation with one or more
corporations in which the Corporation is not the surviving
corporation, or of a transfer of substantially all the
property or more than eighty percent of the then outstanding
shares of the Stock of the Corporation to another corporation,
the Plan and any Option theretofore granted hereunder shall
terminate unless provision be made in writing in connection
with such transaction for the continuance of the Plan and for
the assumption of Options theretofore granted, or the
substitution for such Options of new options covering the
shares of a successor employer corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to number
and kind of stock and prices in which event the Plan and the
Options theretofore granted or the new options substituted
therefor, shall continue in the manner and under the terms so
provided. In the event of such dissolution, liquidation,
reorganization, merger, consolidation, transfer of assets or
transfer of Stock, and if provision is not made in such
transaction for the continuance of the Plan and for the
assumption of Options theretofore granted or the substitution
for such Options of new Options covering the shares of a
successor employer corporation or a parent or subsidiary
thereof, then each Option Holder under the Plan shall be
entitled, prior to the effective date of any such transaction,
to purchase the full number of shares of Stock under his
Option which he would otherwise have been entitled to purchase
during the remaining term of such Option.
(c) Adjustments under this Section shall be made by
the Board of Directors, whose determination as to what shall
be made, and the extent thereof, shall be final, binding and
conclusive. No fractional shares of Stock shall be issued
under the Plan or any such adjustment.
9. REALLOCATION OF LAPSED OPTIONS
Stock covered by Options which have lapsed may be reallocated by the
Board of Directors or the Committee, as the case may be, at any time during the
term of the Plan.
10. GOVERNMENTAL REGULATIONS
This Plan, and the grant and exercise of Options hereunder, shall be
subject to all applicable rules and regulations of government or other
authorities.
-6-
<PAGE>
11. DISCONTINUANCE OR AMENDMENT OF THE PLAN AND
MODIFICATION OF OPTIONS
The Board of Directors of the Corporation may suspend, terminate,
modify or amend the Plan, provided that any amendment that would increase the
aggregate number of shares which may be issued under the Plan; materially
increase the benefits accruing to participants under the Plan; or materially
modify the requirements as to eligibility for participation in the Plan; shall
be subject to the approval of the Corporation's stockholders, except that any
such increase or modification that may result from adjustments authorized by
paragraph 8 does not require such approval. No suspension, termination,
modification or amendment of the Plan may, without the consent of the employee
to whom an option shall theretofore have been granted, affect the rights of such
employee under such option.
12. EMPLOYMENT
Nothing in the Plan or in any option agreement under the Plan shall
confer on any employee any right to continue in the employ of the Corporation or
effect in any way the right of the Corporation to terminate his employment at
any time.
13. EFFECTIVE DATE OF PLAN
The Plan shall become effective on January 1,1989, provided it is
approved by the stockholders of the Corporation, within a period of not to
exceed twelve (12) months from the latter date.
-7-
1988 JOINT INCENTIVE AND
NON-QUALIFIED STOCK OPTION PLAN
OF METROPOLITAN CONSOLIDATED INDUSTRIES, INC.
1. PURPOSE
The Corporation desires to attract and retain the best available
employee talent and encourage the highest level of employee performance in order
to continue to serve the best interests of the Corporation and its stockholders.
By affording key employees the opportunity to acquire proprietary interests in
the Corporation and by providing them incentives to put forth maximum efforts
for the success of the business, the 1988 Joint Incentive and Non-Qualified
Stock Option Plan (the "1988 Plan") is expected to contribute to the attainment
of those objectives.
Furthermore, the 1988 Plan will enable the Corporation to grant
"incentive stock options" as provided in Section 422A of the Internal Revenue of
1986, as amended, and "non-qualified stock options" in substitution for
"incentive stock options" and "non-qualified stock options", respectively,
previously granted by Metex Corporation, a Delaware corporation ("Metex"), which
corporation will be a wholly-owned subsidiary of the Corporation upon
consummation of the merger of Metex with and into MTX Merger Corporation, a
Delaware corporation and a wholly-owned subsidiary of the Corporation, pursuant
to the terms and provisions of an Amended and Restated Agreement and Plan of
Reorganization, dated as of November 3, 1988 and amended on January 24,1989. The
substituted options to be granted by the Corporation shall be substantially
similar to, but not more favorable than, the terms of the options previously
granted by Metex, to the extent practicable.
2. Scope and Duration
Options under the 1988 Plan may be granted in the form of incentive
stock options ("incentive stock options") as provided in Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code"), or in the form of
nonqualified stock options ("nonqualified options"). (Unless otherwise
indicated, references in the 1988 Plan to "options" include incentive stock
options and nonqualified options). The maximum aggregate number of shares as to
which options may be granted from time to time under the 1988 Plan is 325,000
shares of Common Stock of the Corporation ("Common Stock"), which shares may be,
in whole or in part, authorized but unissued shares or shares reacquired by the
Corporation. If an option shall expire, terminate or be surrendered for
cancellation for any reason without having been exercised in full, the shares
represented by the option or portion thereof not so exercised shall (unless the
1988 Plan shall have been terminated) become available for subsequent option
grants under the 1988 Plan. As provided in paragraph 14,
<PAGE>
the 1988 Plan shall become effective on January 1, 1989, and unless terminated
sooner pursuant to paragraph 15, the 1988 Plan shall terminate on December 31,
1998, and no option shall be granted hereunder after the date. Notwithstanding
anything contained in the 1988 Plan to the contrary, no recipient of options may
be granted options to purchase in excess of ninety percent of the maximum number
of shares of stock authorized to be issued under the 1988 Plan.
3. ADMINISTRATION
The 1988 Plan shall be administered by the Board of Directors, or by a
committee which is appointed by the Board of Directors to perform such function
(the "Committee"). The Committee shall consist of not less than three members of
the Board of Directors, none of whom shall be employees of the Corporation who
are or who shall have been for at least one year prior to such appointment
eligible to participate in the 1988 Plan or any similar plan of the Corporation.
The Board of Directors or the Committee, as the case may be, shall have plenary
authority in its discretion, subject to and not inconsistent with the express
provisions of the 1988 Plan, to grant options, to determine the purchase price
of the Common Stock covered by each option, the term of each option, the
employees to whom, and the time or times at which, options shall be granted and
the number of shares to be covered by each option; to designate options as
incentive stock options or nonqualified options; to interpret the 1988 Plan; to
prescribe, amend and rescind rules and regulations relating to the 1988 Plan; to
determine the terms and provisions of the option agreements (which need not be
identical) entered into in connection with options under the 1988 Plan; and to
make all other determinations deemed necessary or advisable for the
administration of the 1988 Plan. The Board of Directors or the Committee, as the
case may be, may delegate to one or more of its members or to one or more agents
such administrative duties as it may deem advisable, and the Board of Directors
or the Committee, as the case may be, or any person to whom it has delegated
duties as aforesaid may employ one or more persons to render advice with respect
to any responsibility the Board of Directors or the Committee, as the case may
be, or such person may have under the 1988 Plan.
4. ELIGIBILITY; FACTORS TO BE CONSIDERED IN GRANTING
OPTIONS
Incentive stock options shall be limited to persons who are regular
full-time employees of the Corporation and its present and future subsidiaries.
A director of the Corporation or of a subsidiary who is not also a regular
full-time employee shall only be eligible to receive nonqualified options. An
optionee who has been granted an option or options under the 1988 Plan may be
granted an additional option or options, subject, in the case of incentive stock
options, to such limitations as may be imposed by the Code on such options. In
determining the persons to whom options shall be granted and the number of
shares to be covered by each option, the Board of Directors or the
-2-
<PAGE>
Committee, as the case may be, shall take into account the nature of such
person's duties, their present and potential contributions to the success of the
Corporation and such other factors as it shall deem relevant in connection with
accomplishing the purposes of the 1988 Plan.
5. OPTION PRICE
The purchase price of the Common Stock covered by each option shall be
determined by the Board of Directors or the Committee, as the case may be, but
in no event shall be less than 100% of the Fair Market Value (as defined in
paragraph 17 below) of a share of the Common Stock on the date on which the
option is granted. Such price shall be subject to adjustment as provided in
paragraph 13 below. The Board of Directors or the Committee, as the case may be,
shall determine the date on which an option is granted; in the absence of such a
determination, the date on which the Board of Directors or the Committee, as the
case may be, adopts a resolution granting an option shall be considered the date
on which such option is granted.
6. TERMS OF OPTIONS
The term of each option shall be not more than ten years from the date
of grant, as the Board of Directors or the Committee, as the case may be, shall
determine, subject to earlier termination as provided in paragraphs 11 and 12
below.
7. EXERCISE OF OPTIONS
(a) In no case shall an option granted under the 1988 Plan be
exercisable prior to the expiration of the first year of its term. Thereafter,
subject to the provisions of the 1988 Plan and unless otherwise provided in the
option agreement, an option granted under the 1988 Plan shall become exercisable
in full at the earliest of the employee's 65th birthday, the employee's death or
the third anniversary of the date of the grant. Prior thereto, each option shall
become exercisable in cumulative installments as follows: to the extent of
33-1/3% of the number of shares originally covered thereby on the first
anniversary of the date of grant of the option; and to the extent of an
additional 33-1/% of the number of shares originally covered thereby on the
second anniversary of the date of grant of the option. In its discretion, the
Board of Directors or the Committee, as the case may be, may, in any case or
cases, prescribe different installments. Notwithstanding the installments set
forth above, the Board of Directors or the Committee, as the case may be, may,
in its sole discretion, provide that an option shall immediately become
exercisable in full upon the happening of any of the following events: (i) the
first purchase of shares of Common Stock pursuant to a tender offer or exchange
offer (other than an offer by the Corporation)
-3-
<PAGE>
for all, or any part of, the Common Stock, (ii) a change of control of the
Corporation or (iii) the approval by the stockholders of the Corporation of any
agreement for a merger in which the Corporation will not survive as an
independent, publicly owned corporation, a consolidation, or a sale, exchange or
other disposition of all or substantially all of the Corporation's assets. In
the event of a question or controversy as to whether or not any of the events
hereinabove described has taken place, a determination by the Board of Directors
or the Committee, as the case may be, that such event has or has not occurred
shall be conclusive and binding upon the Corporation and participants in the
1988 Plan.
(b) An option may be exercised, at any time or from time to time
(subject, in the case of incentive stock options, to such restrictions as may be
imposed by the Code), as to any or all full shares as to which the option has
become exercisable provided that an option may not be exercised at any one time
as to fewer than 200 shares (or fewer than the number of shares as to which the
option is then exercisable, if that number is fewer than 200 shares).
(c) The purchase price of the shares as to which an option is
exercised shall be paid in full at the time of exercise. Payment shall be made
in cash, which may be paid by check or other instrument acceptable to the
Corporation; in addition, subject to compliance with applicable laws and
regulations and such conditions as the Board of Directors or the Committee, as
the case may be, may impose, the Board of Directors or the Committee, as the
case may be, in its sole discretion, may on a case by case basis elect to accept
payment in shares of Common Stock of the Corporation which are already owned by
the option holder, valued at the Fair Market Value thereof (as defined in
paragraph 17 below) on the date of exercise. In addition, any amount necessary
to satisfy applicable federal, state or local tax requirements shall be paid by
the option holder at the time of exercise of the option.
(d) Except as provided in paragraphs 11 and 12 below, no option may be
exercised at any time unless the holder thereof is then a regular full-time
employee of the Corporation or a subsidiary and unless the employee has remained
in the continuous employ of the Corporation, any of its subsidiaries or any
combination thereof for one year from the date of its grant.
(e) Upon the exercise of an option or portion thereof in accordance
with the 1988 Plan, the option agreement and such rules and regulations as may
be established by the Board of Directors or the Committee, as the case may be,
the holder thereof shall have the rights of a stockholder with respect to the
shares covered by such option or portion thereof so exercised.
-4-
<PAGE>
8. SUBSTITUTION OF OPTIONS
During the term of the 1988 Plan, the Board of Directors or the
Committee, as the case may be, in its discretion, may offer one or more option
holders the opportunity to surrender any or all unexpired options for
cancellation or replacement. If any options are so surrendered, the Board of
Directors or the Committee, as the case may be, may then grant new nonqualified
or incentive stock options to such holders for the same or different numbers of
shares at higher or lower exercise prices than the surrendered options. Such new
options may have a different term and shall be subject to the provisions of the
1988 Plan the same as any other option.
9. INCENTIVE STOCK OPTIONS
(a) The aggregate Fair Market Value, when granted (determined in
accordance with the provisions of paragraph 17 below at the time of grant) of
the Common Stock for which any employee may be granted incentive stock options
in any calendar year (under the 1988 Plan and any other plan of the Corporation
or its subsidiaries) and exercisable for the first time by such employee shall
not in any calendar year exceed $100,000.
(b) The exercise price of any incentive stock option granted hereunder
to an employee who, at the time of the grant of such option, is the owner of
more than 10% of the total combined voting power of all classes of stock of the
Corporation may not be less than 110% of the Fair Market Value of a share of the
Common Stock on the date of the grant.
(c) In the event of amendments to the Code or applicable regulations
relating to incentive stock options subsequent to the date hereof, the
Corporation may amend the provisions of the 1988 Plan, and the Corporation and
the employees holding options may agree to amend outstanding option agreements,
to conform to such amendments.
10. NON-TRANSFERABILITY OF OPTIONS
Options granted under the 1988 Plan shall not be transferable
otherwise than by will or the laws of descent and distribution, and options may
be exercised during the lifetime of the employee only by the employee.
11. TERMINATION OF EMPLOYMENT
In the event that the employment of an employee to whom an option has
been granted under the 1988 Plan shall be terminated (except as set forth in
paragraph 12 below), such option may be, subject to the provisions of the 1988
Plan, exercised (to the extent that the employee was entitled to do so
-5-
<PAGE>
at the termination of his employment) at any time within 30 days after such
termination, but not later than the date on which the option terminates;
provided, however, that any option which is held by an employee whose employment
is terminated for cause shall, to the extent not theretofore exercised,
automatically terminate as of the date of termination of employment. Options
granted under the 1988 Plan shall not be affected by any change of duties or
position so long as the holder continues to be a regular full-time employee of
the Corporation or any of its subsidiaries. Any option agreement or any rules
and regulations relating to the 1988 Plan may contain such provisions as the
Board of Directors or the Committee, as the case may be, shall approve with
reference to the determination of the date employment terminates and the effect
of leaves of absence. Nothing in the 1988 Plan or in any option granted pursuant
to the 1988 Plan shall confer upon any employee any right to continue in the
employ of the Corporation or any of its subsidiaries or interfere in any way
with the right of the Corporation or any such subsidiary to terminate such
employment at any time.
12. DEATH OF EMPLOYEE
If an employee to whom an option has been granted under the 1988 Plan
dies while employed by the Corporation or a subsidiary or within 30 days after
termination of such employment (other than termination for cause), such option
may be exercised, to the extent exercisable by the employee on the date of
death, by a legatee or legatees of the employee under the employee's last will,
or by the employee's personal representatives or distributees, at any time
within six months after the date of the employee's death, but no later than the
date on which the option terminates.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC.
Any other provision of the 1988 Plan notwithstanding, the Board of
Directors or the Committee, as the case may be, may at any time make or provide
for such adjustments to the 1988 Plan, to the number and class of shares
issuable thereunder or to any outstanding options as it shall deem appropriate
to prevent dilution or enlargement of rights, including adjustments in the event
of changes in the outstanding Common Stock by reason of stock dividends,
split-ups, recapitalizations, mergers, consolidations, combinations or exchanges
of shares, separations, reorganizations, liquidations, and the like. In the
event of any offer to holders of Common Stock generally relating to the
acquisition of their shares, the Board of Directors or the Committee, as the
case may be, may make such adjustments as it deems equitable in respect of
outstanding options and rights, including in its discretion revision of
outstanding options and rights so that they may be exercisable for the
consideration payable in the acquisition transaction. Any such determination by
-6-
<PAGE>
the Board of Directors or the Committee, as the case may be, shall be conclusive
and binding on the Corporation and all participants in the 1988 Plan. Any
fractional shares resulting from such adjustments shall be eliminated.
14. EFFECTIVE DATE
The 1988 Plan shall become effective on January 1, 1989, provided that
the stockholders of the Corporation shall approve the 1988 Plan. Subject to such
approval, the 1988 Plan is effective at once. Options may be granted under the
1988 Plan prior to such approval, but each such option shall be subject to the
approval of the 1988 Plan by the stockholders of the Corporation. If the 1988
Plan shall not be so approved, all options granted thereunder shall be of no
effect. The date of grant of any option granted prior to such approval by the
stockholders shall be determined for all purposes as if the options had not been
subject to such approval; provided, however, no option granted under the 1988
Plan may be exercised prior to the approval of the 1988 Plan by the stockholders
of the Corporation.
15. TERMINATION AND AMENDMENT
The Board of Directors of the Corporation may suspend, terminate,
modify or amend the 1988 Plan, provided that any amendment that would increase
the aggregate number of shares which may be issued under the 1988 Plan;
materially increase the benefits accruing to participants under the 1988 Plan;
or materially modify the requirements as to eligibility for participation in the
1988 Plan; shall be subject to the approval of the Corporation's stockholders,
except that any such increase or modification that may result from adjustments
authorized by paragraph 13 does not require such approval. No suspension,
termination, modification or amendment of the 1988 Plan may, without the consent
of the employee to whom an option shall theretofore have been granted, affect
the rights of such employee under such option.
16. EFFECT ON PRIOR OPTION PLANS
The adoption of the 1988 Plan shall have no effect on options made or
to be made pursuant to stock option plans previously approved by the
stockholders.
17. MISCELLANEOUS
As said term is used in the 1988 Plan, the "Fair Market Value" of a
share of Common Stock on any day means: (a) if the principal market for the
Common Stock is a national securities exchange, the mean between the high and
low sales prices of the Common Stock on such day as reported by such exchange or
on a
-7-
<PAGE>
consolidated tape reflecting transactions on such exchange, or (b) if the
principal market for the Common Stock is not a national securities exchange and
the Common Stock is quoted on the National Association of Securities Dealers
Automated Quotations System, the mean between the closing bid and the closing
asked prices for the Common Stock on such day as quoted on such system, or (c)
if the principal market for the Common Stock is not a national securities
exchange and the Common Stock is not quoted on the National Association of
Securities Dealers Automated Quotations System, the mean between the highest bid
and lowest asked prices for the Common Stock on such day as reported by the
National Quotation Bureau, Inc.; provided that if clauses (a), (b) and (c) of
this paragraph are all inapplicable, or if no trades have been made or no quotes
are available for such day, the Fair Market Value of the Common Stock shall be
determined by the Board of Directors or the Committee, as the case may be, by
any method which it deems to be appropriate. The determination of the Board of
Directors or the Committee, as the case may be, shall be conclusive and binding
as to the Fair Market Value of the Common Stock. The Board of Directors or the
Committee, as the case may be, may require, as a condition to the exercise of
any options granted under the 1988 Plan, that to the extent required at the time
of exercise, (i) the shares of Common Stock reserved for purposes of the 1988
Plan shall be duly listed, upon official notice of issuance, upon the American
Stock Exchange or such other stock exchange(s) on which the Common Stock is
listed, (ii) a Registration Statement under the Securities Act of 1933, as
amended, with respect to such shares shall be effective, and/or (iii) the person
exercising such option shall deliver to the Corporation such documents,
agreements and investment and other representations as the Board of Directors or
the Committee, as the case may be, shall determine to be in the best interests
of the Corporation.
-8-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from United
Capital Corp.'s Form 10-K for the year ended December 31, 1994 and is qualified
in its entirety by reference to such Financial Statements and Notes, thereto.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 1,657
<SECURITIES> 594
<RECEIVABLES> 19,662
<ALLOWANCES> 668
<INVENTORY> 13,115
<CURRENT-ASSETS> 40,724
<PP&E> 17,474
<DEPRECIATION> 4,977
<TOTAL-ASSETS> 136,341
<CURRENT-LIABILITIES> 45,918
<BONDS> 0
<COMMON> 605
0
0
<OTHER-SE> 32,176
<TOTAL-LIABILITY-AND-EQUITY> 136,341
<SALES> 84,900
<TOTAL-REVENUES> 106,888
<CGS> 66,578
<TOTAL-COSTS> 103,122
<OTHER-EXPENSES> (2,819)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,001
<INCOME-PRETAX> 5,585
<INCOME-TAX> 2,652
<INCOME-CONTINUING> 2,933
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,933
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
</TABLE>
