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 June 30, 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
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(Address of principal executive offices) (Zip Code)
516-466-6464
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(Registrant's telephone number, including area code)
N/A
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(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 -- 5,606,079 shares outstanding
as of August 7, 1995.
Page 1 of 17
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION
PAGE
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as
of June 30,1995 and December 31, 1994 3
Consolidated Statements of Income for
the Three Months Ended June 30, 1995 and
1994 4
Consolidated Statements of Income for
the Six Months Ended June 30, 1995 and
1994 5
Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1995 and
1994 6 - 7
Notes to Consolidated Financial Statements 8 - 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 16
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 JUNE 30, 1995 AND DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,356,426 $ 1,584,744
Marketable securities 81,691 594,070
Notes and accounts receivable, net 16,378,660 16,146,086
Inventories 8,109,640 8,955,097
Prepaid expenses and other current assets 643,570 4,564,311
Deferred income taxes 772,777 768,343
------------ ------------
Total current assets 28,342,764 32,612,651
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, net 8,892,370 8,658,417
REAL PROPERTY HELD FOR RENTAL, net 69,311,768 75,071,300
NONCURRENT NOTES RECEIVABLE 3,334,362 696,228
OTHER ASSETS 4,730,157 4,964,593
DEFERRED INCOME TAXES 844,785 421,241
NET NONCURRENT ASSETS OF DISCONTINUED
OPERATIONS 5,351,027 5,290,055
------------ ------------
Total assets $120,807,233 $127,714,485
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
------------------------------------ ---- ----
CURRENT LIABILITIES:
Current maturities of long-term debt $ 9,429,317 $ 9,597,459
Borrowings under revolving credit facilities 6,000,000 6,000,000
Accounts payable and accrued liabilities 12,159,630 15,068,108
Net current liabilities of discontinued operations 2,513,449 3,421,458
Income taxes payable 4,425,910 3,719,570
------------ ------------
Total current liabilities 34,528,306 37,806,595
LONG-TERM LIABILITIES:
Long-term debt 47,561,168 48,864,413
Other long-term liabilities
8,357,983 8,262,403
------------ ------------
Total liabilities 90,447,457 94,933,411
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock 562,459 605,127
Additional paid-in capital 10,245,932 14,531,320
Retained earnings 19,498,129 17,582,764
Net unrealized gain on marketable securities, net
of tax 53,256 61,863
------------ ------------
Total stockholders' equity 30,359,776 32,781,074
------------ ------------
Total liabilities and stockholders' equity $120,807,233 $127,714,485
============ ============
</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
------------------
JUNE 30, 1995 JUNE 30, 1994
------------- -------------
<S> <C> <C>
REVENUES:
Net sales $16,545,722 $14,567,889
Rental revenues from real estate operations 5,598,489 5,357,522
----------- -----------
Total revenues 22,144,211 19,925,411
----------- -----------
COSTS AND EXPENSES:
Cost of sales 12,161,493 10,830,860
Real estate operations -
Mortgage interest expense 1,065,129 1,188,727
Depreciation expense 1,586,458 1,591,812
Other operating expenses 1,394,235 1,275,003
General and administrative expenses 1,985,812 1,890,852
Selling expenses 1,431,742 1,366,403
----------- -----------
Total costs and expenses 19,624,869 18,143,657
----------- -----------
Income from continuing operations 2,519,342 1,781,754
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense, net of dividend and interest income (100,000) (139,321)
Other income and expense, net 229,909 762,974
----------- -----------
Total other income (expense) 129,909 623,653
----------- -----------
Income from continuing operations before income taxes 2,649,251 2,405,407
Provision for income taxes 1,219,000 985,000
----------- -----------
Net income from continuing operations 1,430,251 1,420,407
Loss from discontinued operations, net of tax (341,509) (10,000)
------------ ------------
Net income $1,088,742 $ 1,410,407
========== ===========
Earnings per share:
Net income from continuing operations $ .24 $ .23
Loss from discontinued operations, net of tax (.06) -
----------- -----------
Net income $ .18 $ .23
========== ===========
Weighted average number of common shares outstanding 5,898,255 6,212,540
========== ===========
</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 INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------
JUNE 30, 1995 JUNE 30, 1994
------------- -------------
<S> <C> <C>
REVENUES:
Net sales $32,443,593 $28,324,551
Rental revenues from real estate operations 11,047,124 11,070,770
----------- -----------
Total revenues 43,490,717 39,395,321
----------- -----------
COSTS AND EXPENSES:
Cost of sales 24,105,901 20,833,457
Real estate operations -
Mortgage interest expense 2,278,852 2,527,517
Depreciation expense 3,170,611 3,183,544
Other operating expenses 2,694,346 2,427,648
General and administrative expenses 3,989,153 3,682,079
Selling expenses 2,999,342 2,772,667
----------- -----------
Total costs and expenses 39,238,205 35,426,912
----------- -----------
Income from continuing operations 4,252,512 3,968,409
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense, net of dividend and interest income (242,504) (310,061)
Other income and expense, net 1,306,241 1,259,470
----------- -----------
Total other income (expense) 1,063,737 949,409
----------- -----------
Income from continuing operations before income taxes 5,316,249 4,917,818
Provision for income taxes 2,324,000 2,065,000
----------- -----------
Net income from continuing operations 2,992,249 2,852,818
Loss from discontinued operations, net of tax (1,076,884) -
------------ ----------
Net income $ 1,915,365 $ 2,852,818
=========== ===========
Earnings per share:
Net income from continuing operations $ .50 $ .46
Loss from discontinued operations, net of tax (.18) -
------------ ----------
Net income $ .32 $ .46
=========== ===========
Weighted average number of common shares outstanding 6,006,982 6,199,225
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE STATEMENTS
Page 5 of 17
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $1,915,365 $2,852,818
---------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,946,275 4,065,794
Net realized and unrealized (gains) losses
on marketable securities (229,979) -
Changes in assets and liabilities, net of
effects from business acquisitions and disposals (A) 734,305 (5,226,229)
---------- ----------
Total adjustments 4,450,601 (1,160,435)
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,365,966 1,692,383
---------- ----------
Cash Flows From Investing Activities:
Purchase of marketable securities - (411,892)
Proceeds from sale of marketable securities 729,318 1,280,350
Acquisition of property, plant and equipment (834,345) (2,852,358)
Cash paid in acquisition of operating business - (3,140,000)
Investing activities of discontinued operations (223,742) (328,000)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (328,769) (5,451,900)
----------- -----------
Cash Flows From Financing Activities:
Principal payments on mortgage commitments, notes and loans (4,621,387) (4,830,195)
Proceeds from mortgage commitments, notes and loans 3,150,000 -
Net borrowings under lines of credit - 6,650,000
Purchase and retirement of common shares (4,330,556) (870,632)
Proceeds from exercise of stock options 2,500 360,000
Financing activities of discontinued operations 533,928 357,000
---------- ----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (5,265,515) 1,666,173
----------- ----------
Net increase (decrease) in cash and cash equivalents 771,682 (2,093,344)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,584,744 3,749,301
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,356,426 $1,655,957
========== ==========
</TABLE>
Page 6 of 17
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 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 $2,718,989 $3,147,922
Taxes 1,302,222 1,329,951
========== ==========
Supplemental Schedule of Noncash Investing
and Financing Activities:
See Notes to Consolidated Financial Statements
(A) Changes in assets and liabilities, net of effects from business
acquisitions and disposals, for the six months ended June 30,
1995 and 1994 are as follows:
Increase in notes and accounts receivable, net ($232,574) ($2,709,231)
Decrease (increase) in inventories 845,457 (598,224)
Decrease (increase) in prepaid expenses
and other current assets 3,920,741 (307,449)
Increase in deferred income taxes (423,544) (420,413)
Increase in real property held for rental, net (239,850) (1,525,210)
Decrease in noncurrent notes receivable 15,364 12,630
Decrease (increase) in other assets 234,436 (6,583,138)
Decrease in accounts payable and accrued liabilities (2,908,478) (1,366,349)
Increase in income taxes payable 706,340 1,105,551
Increase in other long-term liabilities 95,580 6,988,104
Discontinued operations - noncash charges and working
capital changes (1,279,167) 177,500
----------- -----------
Total $734,305 ($5,226,229)
========== ============
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE STATEMENTS
Page 7 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 AND DISPOSITIONS
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.
In August 1995, as a result of an unwillingness of major trade
suppliers of Kentile to extend further credit, Kentile's operations will close
in August 1995, when current raw material stocks are exhausted. In connection
with the write-off of the Registrant's investment in Kentile it will record a
pre-tax charge of approximately $6 million in the third quarter of 1995,
including estimated costs of disposition. Additional costs could be incurred as
the Registrant moves forward in this matter and management will continue to
monitor these developments. Kentile's net sales for the three month periods
ended June 30, 1995 and 1994 were $8,614,000 and $10,136,000 respectively. Net
sales of Kentile during the six months ended June 30, 1995 were $16,271,000 as
compared to $12,022,000 for the period from acquisition to June 30, 1994.
The assets and liabilities of the discontinued operations have been
reclassified in the accompanying consolidated balance sheets from their historic
classification to separately identify them as net current liabilities and net
noncurrent assets of discontinued operations. Net current liabilities of
discontinued operations at June 30, 1995 consist primarily of the following:
receivables $3,239,000, inventories $5,750,000, accounts payable and accrued
expenses $6,671,000, and borrowings under revolving credit facilities
$5,240,000. Net noncurrent assets of discontinued operations at June 30, 1995
consist primarily of property, plant and equipment, net $3,824,000, and pension
assets $1,961,000.
Page 8 of 17
<PAGE>
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 $81,691 and $594,070 at June 30, 1995 and December 31,
1994 respectively, while gross unrealized holding gains of the Registrant's
marketable security portfolio were $53,256 and $61,863 on a net of tax basis as
of June 30, 1995 and December 31, 1994, respectively.
DEFERRED TAXES
The components of the net deferred tax asset (liability) at June 30,
1995 are as follows:
Realization allowances related to
accounts receivable and inventories $537,407
Net unrealized (gain) loss on
marketable securities 4,434
Basis differences relating to real
property held for rental 2,179,353
Accrued expenses, deductible when paid 1,609,260
Deferred revenue and profit (for
tax purposes) (256,673)
Basis differences relating to certain
investments obtained in the BMG merger (1,858,912)
Property, plant & equipment (455,685)
Pensions (147,562)
Other, net 5,940
---------
Net deferred tax asset 1,617,562
Current portion 772,777
---------
Noncurrent portion $844,785
=========
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.
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
Page 10 of 17
<PAGE>
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 six months of 1995, the Registrant purchased and
retired 427,183 shares of its common stock at a cost of $4,330,556. In addition,
during this period 500 shares of the Registrant's common shares were issued
pursuant to the exercise of options under the Registrant's stock option plans.
During the same period in 1994, 107,316 shares of the Registrant's common stock
were purchased and retired at a cost of $870,632. In addition, 65,500 shares of
the Registrant's common shares were issued pursuant to the exercise of options
during the first six months of 1994.
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
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Revenues for the six month period ended June 30, 1995 were $43,491,000,
a $4,095,000 increase from comparable 1994 revenues. Net income from continuing
operations for the period was $2,992,000 or $.50 per share as compared to net
income from continuing operations of $2,853,000 or $.46 per share for the same
period in 1994.
Revenues for the three month period ended June 30, 1995 were
$22,144,000 an increase of $2,219,000 from revenues in the comparable 1994
period. Net income from continuing operations for the second quarter of 1995 was
$1,430,000 or $.24 per share as compared to $1,420,000 or $.23 per share during
the comparable 1994 period.
Page 11 of 17
<PAGE>
REAL ESTATE OPERATIONS
Rental revenues from real estate operations increased $240,000 for the
three month period ending June 30, 1995 as compared to the same period in 1994.
This increase is primarily the result of additional revenues related to 1994
property acquisitions. Rental revenues for the six month period ended June 30,
1995 decreased slightly as compared to such revenues in the comparable period of
1994. This decrease is primarily the result of the collection of certain
retroactive payments in the first quarter of 1994, which were not previously
accrued, offset by additional revenues from property acquisitions.
Mortgage interest expense decreased $124,000 during the current quarter
and $249,000 during the six month period ended June 30, 1995, versus such
expense of the corresponding periods in 1994. These decreases of approximately
10% each, are due to continuing mortgage amortization resulting from the
repayment of approximately $6 million in mortgage indebtedness during the last
12 months.
Depreciation expense associated with rental properties was virtually
unchanged during the three and six month periods ended June 30, 1995, as
compared to such costs during the corresponding periods of 1994.
Operating expenses associated with the management of real estate
properties increased $119,000 and $266,000 for the three and six month periods
ending June 30, 1995 and as compared to the same periods in 1994. The timing of
certain maintenance costs in the current quarter 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 and six month periods ended June 30, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
(In thousands) 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $5,797 $5,769 $10,789 $11,073
====== ====== ======= =======
Cost of Sales $4,205 $4,168 $ 7,974 $ 7,955
====== ====== ======= =======
Selling, General and
Administrative Expenses $1,274 $1,366 $ 2,466 $ 2,630
====== ====== ======= =======
Income from Operations $ 318 $ 235 $ 349 $ 488
====== ====== ======= =======
</TABLE>
Net sales of the antenna systems segment increased $28,000 during the
second quarter of 1995 and decreased $284,000 or 2.6% for the six month period
ended June 30, 1995, versus such sales generated during the respective 1994
periods. Reductions in sales continue to effect this segment on a year-to-date
basis, however as a result of many changes which have been implemented, a
reverse to this trend is beginning to take hold and is evident by the second
quarter results, as well as by a 47% increase in backlog compared to a year
earlier.
Page 12 of 17
<PAGE>
Cost of sales as a percentage of net sales increased from the prior
year by less than 1% and 2%, respectively for the three and six month periods
just ended. These increases are 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 increase is
not expected to continue in the future as experience is gained in the production
of these products.
Selling, general and administrative costs of the antenna systems
segment decreased by approximately $164,000 and $92,000 during the six and three
month period as compared to such costs of the comparable 1994 period. These
decreases are 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 and six month periods ending June 30, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
(In thousands) 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $10,749 $8,798 $21,655 $17,251
======= ====== ======= =======
Cost of Sales $ 7,957 $6,664 $16,132 $12,879
======= ====== ======= =======
Selling, General and
Administrative Expenses $ 1,500 $1,369 $ 3,225 $ 2,724
======= ====== ======= =======
Income from Operations $ 1,292 $ 765 $ 2,298 $ 1,648
======= ====== ======= =======
</TABLE>
Net sales of the engineered products segment increased $4,404,000 and
$1,951,000, respectively for the year-to-date and the three month period ended
June 30, 1995, versus such results of the corresponding prior year periods.
These increases are 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 decreased by 2% and less
than 1% in each of the three and six month periods ended June 30, 1995, as
compared to the respective periods 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 $131,000 and $501,000, respectively during the quarter and
year-to-date periods just ended versus such costs of the comparable 1994
periods. These increases are 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, 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. These
operations were discontinued in August 1995, see notes to consolidated financial
statements and "Business Trends."
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses not associated with the
manufacturing operations increased by $122,000 and $196,000 for the three and
six month periods ended June 30, 1995 versus that of the same periods in 1994.
These increases primarily result from additional costs in the current year
periods incurred in connection with properties whose mortgages were purchased by
the Registrant during 1994 and which remain in default. Additional salary costs
also contributed to the increases.
OTHER INCOME AND EXPENSE
The components of other income and expense in the accompanying
consolidated statements of income for the three and six month periods ended June
30, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
(In thousands) 1995 1994 1995 1994
--------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Gain on sale of real estate assets $66,485 $787,924 $844,257 $1,074,420
Net realized and unrealized gains
(losses) on marketable securities 163,424 (29,926) 229,979 (29,926)
Income from equity investments - 3,676 3,676 38,676
Other - 1,300 228,329 176,300
------- -------- ---------- ----------
$229,909 $762,974 $1,306,241 $1,259,470
======== ======== ========== ==========
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
At June 30,1995 the Registrant's current liabilities exceeded current
assets by approximately $6,186,000. 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
June 30, 1995, $9,150,000 was outstanding under this facility. This demand
facility is reviewed by the bank annually on May 31, and was recently renewed by
the bank.
Page 14 of 17
<PAGE>
In August, the Registrant converted $3,150,000 outstanding under this facility
to a five-year term note bearing interest at 7.94%. These terms have been
reflected in the accompany consolidated financial statements at June 30, 1995.
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 June 30, 1995 approximately $5.2 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 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 $4,095,000 or 10% for the
first half of 1995 versus such results of the comparable 1994 period. Net income
from continuing operations for the first six months of 1995 was $2,992,000 or
$.50 per share versus $2,853,000 or $.46 per share during the same period in
1994.
As a result of an unwillingness on the part of major Kentile suppliers
to continue to extend further trade credit the operations of Kentile will close
in August of 1995 when current raw material stocks are exhausted. These
operations generated an after-tax loss of approximately $1.1 million during the
first six months of 1995 which is classified as loss from discontinued
operations in the accompanying consolidated financial statements.
The results of the Registrant's real estate operations reflect a slight
decrease in sales for the first half of 1995, 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.
Page 15 of 17
<PAGE>
The Registrant's engineered products segment continues to reflect sales
growth in virtually all market segments. This has resulted in a 26% increase in
revenues during the first half of 1995 versus comparable 1994 results. With
continued increases in 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
slightly lower sales during the first half 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 47% increase in backlog
from the same period a year ago.
Although there can be no assurances as to how much events discussed
above, or other changes in the economy will impact the future financial
conditions of 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.
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 13, 1995, the Registrant held its Annual Meeting of
Stockholders (the "Meeting"), whereby the stockholders elected Directors and
approved proposals to (i) provide performance criteria for the payment of
bonuses to the Chief Executive Officer for the Company, and (ii) ratify the
appointment of Arthur Andersen LLP as the Company's independent auditors for the
year ending December 31, 1995. The vote on such matters was as follows:
1. Election of Directors:
For Withhold
--- --------
Howard M. Lorber 4,111,511 13,213
Arnold S. Penner 4,111,049 13,675
A.F. Petrocelli 4,108,383 16,341
Dennis S. Rosatelli 4,111,049 13,675
2. BONUS CRITERIA: To approve the proposal to provide performance criteria
for the payment of a bonus to the Chief Executive Officer.
For Against Abstain
--- ------- -------
3,551,781 90,333 482,610
3. RATIFICATION OF APPOINTMENT OF AUDITORS: To ratify the appointment of
Arthur Andersen LLP as the independent auditors of the Registrant for
the year ending December 31, 1995.
For Against Abstain
--- ------- -------
4,092,765 9,176 22,783
Page 16 of 17
<PAGE>
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: AUGUST 14, 1995 By:/S/ DENNIS S. ROSATELLI
---------------- -----------------------
Dennis S. Rosatelli
Vice President, Chief Financial Officer
Secretary of the Registrant
Page 17 of 17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Form 10-Q for the quarter ended June 30, 1995 and is qualified in its
entirety by reference to such Financial Statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,356
<SECURITIES> 82
<RECEIVABLES> 16,863
<ALLOWANCES> 484
<INVENTORY> 8,110
<CURRENT-ASSETS> 28,343
<PP&E> 14,316
<DEPRECIATION> 5,424
<TOTAL-ASSETS> 120,807
<CURRENT-LIABILITIES> 34,528
<BONDS> 0
<COMMON> 562
0
0
<OTHER-SE> 29,798
<TOTAL-LIABILITY-AND-EQUITY> 120,807
<SALES> 16,546
<TOTAL-REVENUES> 22,144
<CGS> 12,161
<TOTAL-COSTS> 19,625
<OTHER-EXPENSES> (230)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100
<INCOME-PRETAX> 2,649
<INCOME-TAX> 1,219
<INCOME-CONTINUING> 1,430
<DISCONTINUED> (342)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,089
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
