SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ending March 31, 1995
------------------------------------------------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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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 No.)
111 Great Neck Road, Suite 401, Great Neck, New York 11021
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
516-466-6464
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, $.10 par value -- 5,973,483 shares outstanding
as of May 5, 1995.
Page 1 of 17
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
INDEX
PAGE
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as
of March 31,1995 and December 31, 1994 3
Consolidated Statements of Income for
the Three Months Ended March 31, 1995 and
1994 4
Consolidated Statements of Cash Flows for
the Three Months Ended March 31, 1995 and
1994 5-6
Notes to Consolidated Financial Statements 7-11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11-16
PART II OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 17
Page 2 of 17
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1995 AND DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $2,176,694 $1,656,688
Marketable Securities 405,104 594,070
Notes and accounts receivable, net 17,283,212 18,994,192
Inventories 13,456,202 13,114,559
Prepaid expenses and other current assets 2,153,256 5,579,896
Deferred income taxes 768,975 784,849
------------ ------------
Total current assets 36,243,443 40,724,254
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, net 12,564,988 12,496,911
REAL PROPERTY HELD FOR RENTAL, net 70,974,393 75,071,300
NONCURRENT NOTES RECEIVABLE 3,340,476 696,228
OTHER ASSETS 6,915,008 7,004,709
DEFERRED INCOME TAXES 537,785 348,086
------------ ------------
Total assets $130,576,093 $136,341,488
============ ============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
- ------------------------------------ ---------- ----------
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $8,894,405 $9,755,590
Borrowings under revolving credit facilities 7,854,790 10,614,889
Accounts payable and accrued liabilities 20,996,304 21,828,149
Income taxes payable 3,773,946 3,719,570
------------ ------------
Total current liabilities 41,519,445 45,918,198
LONG-TERM LIABILITIES:
Long-term debt 47,416,610 49,379,813
Other long-term liabilities 8,258,827 8,262,403
------------ ------------
Total liabilities 97,194,882 103,560,414
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock 602,157 605,127
Additional paid-in capital 14,276,268 14,531,320
Retained Earnings 18,409,387 17,582,764
Net unrealized gain on marketable
securities, net of tax 93,399 61,863
------------ ------------
Total stockholders' equity 33,381,211 32,781,074
------------ ------------
Total liabilities and stockholders'
equity $130,576,093 $136,341,488
============ ============
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS ARE AN INTEGRAL PART OF THESE BALANCE SHEETS.
Page 3 of 17
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------
MARCH 31, 1995 MARCH 31, 1994
--------------- --------------
<S> <C> <C>
REVENUES:
Net sales $23,554,444 $15,642,662
Rental revenues from real estate operations 5,448,635 5,713,248
----------------- ------------
Total revenues 29,003,079 21,355,910
----------------- ------------
COSTS AND EXPENSES:
Cost of sales 18,806,581 11,354,597
Real estate operations -
Mortgage interest expense 1,213,723 1,338,790
Depreciation expense 1,584,153 1,591,732
Other operating expenses 1,300,111 1,152,645
General and administrative expenses 2,453,227 1,879,227
Selling expenses 2,887,810 1,796,264
----------------- ------------
Total costs and expenses 28,245,605 19,113,255
----------------- ------------
Income from operations 757,474 2,242,655
----------------- ------------
OTHER INCOME (EXPENSE):
Interest expense, net of dividend and interest income ( 281,183) ( 211,740)
Other income and expense, net 1,076,332 496,496
----------------- ------------
Total other income (expense) 795,149 284,756
----------------- ------------
Income before income taxes 1,552,623 2,527,411
Provision for income taxes 726,000 1,085,000
----------------- ------------
Net income $ 826,623 $ 1,442,411
================= ============
Earnings per share:
Net income per common share $ .14 $ .23
================= ============
Weighted average number of common shares outstanding 6,116,596 6,196,509
================= ============
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE STATEMENTS
Page 4 of 17
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
------------- ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 826,623 $ 1,442,411
---------- ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,090,772 2,044,576
Net realized (gains) losses
on marketable securities (66,555) ----
Changes in assets and liabilities, net of
effects from business acquisitions (A) 3,709,163 (1,327,449)
---------- ------------
Total adjustments 5,733,380 717,127
---------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,560,003 2,159,538
---------- ------------
Cash Flows From Investing Activities:
Purchase of marketable securities ---- (258,866)
Proceeds from sale of marketable securities 302,931 ----
Acquisition of property, plant and equipment (500,419) (2,551,973)
Cash paid in acquisition of operating business,
net of cash acquired ---- (2,673,000)
---------- ------------
NET CASH USED IN INVESTING ACTIVITIES (197,488) (5,483,839)
---------- ------------
Cash Flows From Financing Activities:
Principal payments on mortgage commitments, notes and loans (2,824,388) (1,909,282)
Net borrowings under lines of credit (2,760,099) 3,393,000
Purchase and retirement of common shares (258,022) (131,246)
Proceeds from exercise of stock options ---- 222,500
---------- ------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (5,842,509) 1,574,972
---------- ------------
Net increase (decrease) in cash and cash equivalents 520,006 (1,749,329)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,656,688 3,749,301
---------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,176,694 $ 1,999,972
=========== ============
</TABLE>
Page 5 of 17
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994 (Continued)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period For:
Interest $1,662,465 $1,580,194
Taxes 840,467 1,182,399
========== ==========
Supplemental Schedule of Noncash Investing
and Financing Activities:
Acquisition of operating business -
Purchase price $ - $ 9,607,000
Cash paid - (3,140,000)
------------- -----------
Assumption of debt $ - $ 6,467,000
============= ===========
</TABLE>
See Notes to Consolidated Financial Statements -
"Business Acquisitions"
(A) Changes in assets and liabilities, net of effects from business
acquisitions, for the three months ended March 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Decrease in notes and accounts receivable, net $ 1,710,980 $ 794,936
Increase in inventories (341,643) (671,070)
Decrease (increase) in prepaid expenses
and other current assets 3,426,640 (192,977)
Increase in deferred income taxes (189,699) (196,132)
Increase in real property held for rental, net (215,021) (349,843)
Decrease in noncurrent notes receivable 9,250 7,993
Decrease (increase) in other assets 89,701 (6,922,980)
Decrease in accounts payable and accrued liabilities (831,845) (887,744)
Increase in income taxes payable 54,376 94,829
Increase (decrease) increase in other long-term liabilities (3,576) 6,995,539
----------- -----------
Total $ 3,709,163 ($1,327,449)
=========== ============
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS
Page 6 of 17
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q used for quarterly
reports under Section 13 or 15(d) of the Securities Exchange Act of 1934, and
therefore, do not include all information and footnotes necessary for a fair
presentation of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles.
The consolidated financial information included in this report has been
prepared in conformity with the accounting principles and methods of applying
those accounting principles, reflected in the consolidated financial statements
included in the Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1994.
All adjustments necessary for a fair statement of the results for the
interim periods presented have been recorded.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year.
BUSINESS ACQUISITIONS
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 includes $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.
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 Floor's
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 Floor's bankruptcy proceedings, no value was
assigned to the equity interest acquired by the Registrant.
Page 7 of 17
<PAGE>
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 & 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.
The following unaudited pro-forma consolidated results of operations of
the Registrant for the three months ended March 31, 1994, assume that the
acquisition of Kentile had occurred at the beginning of such period. In addition
to combining historical results of operations of the two companies, 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
Three Months Ended
March 31, 1994
------------------
(In thousands except per share amounts)
Revenues $ 28,420
========
Net Income $ 560
========
Net Income Per Common Share $ .09
========
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 period presented or of future operations of
the combined companies.
In February 1994, the Registrant also acquired the underlying mortgage
secured by Kentile Floor's South Plainfield facility for $2,250,000. This note
has a face amount outstanding of approximately $6.5
Page 8 of 17
<PAGE>
million plus delinquent accrued interest. The Registrant has accounted for this
mortgage as an in-substance foreclosure in 1994 and accordingly recorded the
purchase price as a component of real property held for rental in the
accompanying consolidated balance sheet at December 31, 1994. In accordance with
Statement of Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan" ("SFAS 114"), effective January 1, 1995, the
Registrant has revised its accounting for this acquisition to include such
amounts in noncurrent notes receivable in the accompanying March 31, 1995
consolidated balance sheet.
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.
The aggregate market value of marketable securities, which were all
available-for-sale, was $405,104 and $594,070 at March 31, 1995 and December 31,
1994 respectively, while gross unrealized holding gains of the Registrant's
marketable security portfolio were $93,399 and $61,863 on a net of tax basis as
of March 31, 1995 and December 31, 1994, respectively.
DEFERRED TAXES
The components of the net deferred tax asset (liability) at March 31, 1995 are
as follows:
Realization allowances related to
accounts receivable and inventories $ 588,407
Net unrealized (gain) loss on
marketable securities (15,874)
Basis differences relating to real
property held for rental 1,945,509
Accrued expenses, deductible when paid 1,609,260
Deferred revenue and profit (for
tax purposes) (291,168)
Basis differences relating to certain
investments obtained in the BMG merger (1,858,912)
Property, plant & equipment 137,769
Pensions (814,171)
Other, net 5,940
-------------
Net deferred tax asset 1,306,760
Current portion 768,975
-------------
Noncurrent portion $ 537,785
=============
Page 9 of 17
<PAGE>
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.
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.
Page 10 of 17
<PAGE>
Effective January 1, 1994 the Registrant has 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.
COMMON STOCK
During the first three months of 1995, the Registrant purchased and
retired 29,700 shares of its common stock at a cost of $258,022. During the same
period in 1994, 13,500 shares of the Registrant's common stock were purchased
and retired at a cost of $131,246.
EARNINGS PER SHARE
Earnings per share computations for each quarterly period presented are
based on the weighted average number of common shares 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. Earnings per share data is neither restated nor adjusted currently to
obtain quarterly amounts which equal the amount computed for the year-to-date.
RECLASSIFICATIONS
Certain amounts have been reclassified in the prior year consolidated
financial statements to present them on a basis consistent with the current
year.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
Revenues for the three month period ended March 31, 1995 were
$29,003,000, a $7,647,000 increase from comparable 1994 revenues. Net income for
the period was $827,000 or $.14 per share as compared to net income of
$1,442,000 or $.23 per share for the same period in 1994.
REAL ESTATE OPERATIONS
Rental revenues from real estate operations decreased $265,000 for the
three month period ended March 31, 1995, as compared to such revenues in the
comparable period of 1994. This decrease is primarily the result of the
collection of certain retroactive rental payments in the first quarter of 1994,
which
Page 11 of 17
<PAGE>
were not previously accrued, offset by higher rents from the renewal of existing
leases in the current year period.
Mortgage interest expense decreased $125,000 during the current quarter
ended March 31, 1995, versus such expense of the corresponding period in 1994.
This decrease of approximately 9% is due to continuing mortgage amortization
resulting from the repayment of approximately $5.5 million in mortgage
indebtedness during the last 12 months.
Depreciation expense associated with rental properties was virtually
unchanged during the three month period ended March 31, 1995, as compared to
such costs during the corresponding period of 1994.
Operating expenses associated with the management of real estate
properties increased approximately $147,000 or 13% for the three month period
ended March 31, 1995, versus the comparable period in 1994. The timing of
certain maintenance costs in the current and prior year periods account for this
increase.
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 three
month period ended March 31, 1995 and 1994 are as follows:
Three Months
Ended March 31,
-----------------------
(In thousands) 1995 1994
------- ------
Net Sales $ 4,992 $5,304
======= =====
Cost of Sales $ 3,769 $3,787
======= =====
Selling, General and
Administrative Expenses $ 1,192 $1,264
======= =====
Income from Operations $ 31 $ 253
======= ======
Net sales of the antenna systems segment decreased $312,000 or 6%
during the first quarter of 1995 versus such sales generated during the
respective 1994 period. Reductions in sales continue to effect this segment of
the Registrant's business. Many changes have been implemented to reverse this
trend which are beginning to take hold, including a 31% increase in backlog
compared to a year earlier.
Cost of sales as a percentage of net sales increased from the prior
year by 4.1%, for the three month period just ended. This increase is the result
of changes in the mix of products sold and from incurring additional
manufacturing costs of certain D&M/Chu products that are now being manufactured
at Dorne & Margolin. This is not expected to continue in the future as
experience is gained in the production of these products.
Page 12 of 17
<PAGE>
Selling, general and administrative costs of the antenna systems
segment decreased by approximately $72,000 during the first three months of 1995
as compared to such costs of the comparable 1994 period. This decrease is the
result of administrative savings resulting from the consolidation of the Dorne &
Margolin and D&M/Chu operations and from the reduction in sales, noted above.
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 three
month period ending March 31, 1995 and 1994 are as follows:
Three Months
Ended March 31,
---------------------
(In thousands) 1995 1994
------ ------
Net Sales $10,906 $8,453
======= =====
Cost of Sales $ 8,175 $6,215
======= =====
Selling, General and
Administrative Expenses $ 1,725 $1,355
======= =====
Income from Operations $ 1,006 $ 883
======= ======
Net sales of the engineered products segment increased $2,453,000 for
the three month period ending March 31, 1995, versus such results of the
comparable three month period in 1994. This increase is primarily the result of
higher airbag and automotive related sales at Metex' Technical Products Division
as well as higher sales generated by AFP Transformers.
Cost of sales as a percentage of net sales increased by approximately
1.5% in the three month period ended March 31, 1995, as compared to the
respective period in 1994 primarily as a result of changes in the mix of product
sales.
Selling, general and administrative expenses of the engineered products
segment increased by $370,000 during the first three months of 1995 versus such
costs of the comparable 1994 period. This increase is primarily the result of
additional selling costs associated with the increased sales volume noted above.
Page 13 of 17
<PAGE>
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 operations of Kentile have been included here and in the accompanying
consolidated statements of income since the acquisition date, as outlined below.
Three Months
Ended March 31,
-----------------------
(In thousands) 1995 1994
------- ------
Net Sales $ 7,656 $1,886
======= =====
Cost of Sales $ 6,862 $1,352
======= ======
Selling, General and
Administrative Expenses $ 1,993 $ 478
======= ======
Income from operations ($1,199) $ 56
======== ======
The overall increase in net sales and operating expenses of the
resilient vinyl flooring segment during the current quarter is primarily
attributable to the inclusion of three full months of operations in the current
year as compared to less than one month during the first quarter of 1994.
Cost of sales as a percentage of net sales increased by approximately
18% in the three months ended March 31, 1995 versus that of the comparable 1994
period. This increase is the result of increased raw material costs, which have
not been fully passed on to the customer, and the seasonal impact of lower
production and accordingly higher manufacturing costs, in the first two months
of the year, which were not consolidated in 1994 as a result of the mid-March
acquisition.
Selling, general and administrative expenses increased as a result of
the 1994 mid-quarter acquisition, noted above, however, as a percentage of net
sales such expenses increased by less than 1% from the first quarter of 1994.
See Notes to Consolidated Financial Statements for a further explanation of the
acquisition and pro-forma financial information.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses not associated with the
manufacturing operations decreased by $147,000 for the three month period ended
March 31, 1995 versus that of the same period in 1994. This decrease in general
and administrative expenses is the result of lower professional fees incurred in
the current year period.
Page 14 of 17
<PAGE>
OTHER INCOME AND EXPENSE
The components of other income and expense in the accompanying
consolidated statements of income for the three month period ended March 31,
1995 and 1994 are as follows:
Three Months
Ended March 31,
----------------------------
(In thousands) 1995 1994
-------- --------
Gain on sales of real estate assets $777,772 $ 286,496
Gain (loss) on sale of marketable securities 66,555 -
Income from equity investments 3,676 35,000
Other 228,329 175,000
---------- --------
$1,076,332 $496,496
========== ========
LIQUIDITY AND CAPITAL RESOURCES
At March 31,1995 the Registrant's current liabilities exceeded current
assets by approximately $5,276,000. This shortfall primarily results from
financing the purchase of long-term assets utilizing short-term borrowings
during 1994, 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 come 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
March 31, 1995, $2,750,000 was outstanding under this facility. This demand
facility is reviewed by the bank annually on May 31.
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 March 31, 1995 approximately $5.1 million was outstanding under this
facility.
The Registrant has undertaken the completion of environmental studies
and/or 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. See notes to
Consolidated Financial Statements.
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
Page 15 of 17
<PAGE>
acquisitions will come from the sale, financing and refinancing of the
Registrant's properties and from the third party mortgages and purchase money
notes obtained in connection with specific acquisitions.
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 $7,647,000 or 36% for the
first quarter of 1995 versus such results of the comparable 1994 period. Of
these additional revenues, approximately $6 million was generated by Kentile
during the three month period ending March 31, 1995. Kentile was acquired by the
Registrant in March 1994. The Registrant's engineered products segment also
contributed to the increased revenues.
Kentile contributed approximately $8 million to first quarter 1995
revenues, up substantially from the prior year period due to the 1994 mid-March
acquisition. The operating results of Kentile reflect a loss of approximately
$1.2 million in the current year period, reflecting the operating difficulties
still facing this segment of the Registrant's business. Management is
concentrated on reversing this trend.
The results of the Registrant's real estate operations reflect a slight
decrease in sales, primarily as a result of the collection of certain
retroactive rental payments in the first quarter of 1994, which were not
previously accrued, offset by higher rents from the renewal of existing leases
in the current year period.
The Registrant's engineered products segment continues to reflect sales
growth in virtually all market segments. This has resulted in an increase of
$2,453,000 in revenues during the first quarter of 1995 versus comparable 1994
results. With continued increases in U.S. automobile demand and as more vehicles
are outfitted with air bags, demand for these products should continue. In
addition, the results of this segments' transformer operations reflect
improvements over the prior year and management is hopeful to continue this
trend.
The results of the Registrant's antenna systems segment reflect lower
sales during the first quarter of 1995 than during the comparable 1994 period.
Although U.S. military spending still remains low, the decrease in spending
appears to have leveled off. In addition, concentrated efforts to increase sales
have been implemented and is evident by a 31% increase in backlog from the same
period a year ago.
Although there can be no assurances as to how the events discussed
above, or other changes in the economy will impact the future financial
conditions or results of operations of the Registrant, management continues to
monitor these developments and has implemented measures to minimize the possible
negative effects they may have upon these businesses.
Page 16 of 17
<PAGE>
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 -- Financial Data Schedule
(b) Reports on Form 8-K. None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNITED CAPITAL CORP.
Dated: MAY 12, 1995 By:/S/ DENNIS S. ROSATELLI
--------------------------------------
Dennis S. Rosatelli
Vice President, Chief Financial Officer
Secretary of the Registrant
<TABLE> <S> <C>
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This schedule contains summary financial information extracted from the
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
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