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 September 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-----------------------
Commission File Number: 1-10104
-------------
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 5,606,079 shares outstanding
as of November 10, 1995.
Page 1 of 16
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UNITED CAPITAL CORP. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION
PAGE
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as
of September 30, 1995 and December 31, 1994 3
Consolidated Statements of Operations for
the Three Months Ended September 30, 1995 and
1994 4
Consolidated Statements of Operations for
the Nine Months Ended September 30, 1995 and
1994 5
Consolidated Statements of Cash Flows for
the Nine Months Ended September 30, 1995 and
1994 6 - 7
Notes to Consolidated Financial Statements 8 - 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11 - 15
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 15
SIGNATURES 16
Page 2 of 16
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
(UNAUDITED)
ASSETS 1995 1994
------ ---- ----
CURRENT ASSETS:
Cash and cash equivalents $1,420,590 $1,584,744
Marketable securities 85,829 594,070
Notes and accounts receivable, net 16,098,959 16,146,086
Inventories 8,552,687 8,955,097
Prepaid expenses and other current assets 616,753 4,564,311
Deferred income taxes
771,030 768,343
---------- ----------
Total current assets 27,545,848 32,612,651
PROPERTY, PLANT AND EQUIPMENT, net 9,730,400 8,658,417
REAL PROPERTY HELD FOR RENTAL, net 68,448,299 75,071,300
NONCURRENT NOTES RECEIVABLE 3,327,876 696,228
OTHER ASSETS 4,607,959 4,964,593
DEFERRED INCOME TAXES 1,087,560 421,241
NET NONCURRENT ASSETS OF DISCONTINUED
OPERATIONS -- 5,290,055
------------ ------------
Total assets $114,747,942 $127,714,485
============ ============
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
- ------------------------------------ ---- ----
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $8,279,301 $9,597,459
Borrowings under revolving credit facilities 6,435,000 6,000,000
Accounts payable and accrued liabilities 17,324,842 15,068,108
Net current liabilities of discontinued operations - 3,421,458
Income taxes payable 2,482,706 3,719,570
---------- ----------
Total current liabilities 34,521,849 37,806,595
LONG-TERM LIABILITIES:
Long-term debt 45,618,614 48,864,413
Other long-term liabilities 8,294,438 8,262,403
---------- ----------
Total liabilities 88,434,901 94,933,411
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock 560,609 605,127
Additional paid-in capital 10,101,146 14,531,320
Retained earnings 15,595,639 17,582,764
Net unrealized gain on marketable securities, net
of tax 55,647 61,863
------------ ----------
Total stockholders' equity 26,313,041 32,781,074
Total liabilities and stockholders' equity $114,747,942 $127,714,485
============ ============
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE BALANCE SHEETS.
Page 3 of 16
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
------------------
September 30, 1995 September 30, 1994
------------------ ------------------
<S> <C> <C>
REVENUES:
Net sales $13,567,104 $13,675,574
Rental revenues from real estate operations 5,740,559 5,474,211
------------- ---------------
Total revenues 19,307,663 19,149,785
------------ --------------
COSTS AND EXPENSES:
Cost of sales 10,956,127 10,552,741
Real estate operations -
Mortgage interest expense 1,154,275 1,287,336
Depreciation expense 1,569,251 1,582,762
Other operating expenses 1,511,610 1,530,532
General and administrative expenses 2,104,211 1,865,780
Selling expenses 1,391,368 1,512,719
----------- --------------
Total costs and expenses 18,686,842 18,331,870
------------ -------------
Operating income 620,821 817,915
------------ ---------------
OTHER INCOME (EXPENSE):
Interest income and expense, net (66,571) (142,087)
Other income and expense, net 200,338 1,499,475
------------ ---------------
Total other income (expense) 133,767 1,357,388
------------ --------------
Income from continuing operations before income taxes 754,588 2,175,303
Provision for income taxes 261,000 955,000
------------ ---------------
Income from continuing operations 493,588 1,220,303
DISCONTINUED OPERATIONS:
Loss from discontinued operations, net of tax benefit $225,000
and $45,000, respectively (436,077) (88,449)
Provision for disposition, net of tax benefit of $2,040,000 (3,960,000) -
--------------- ---------------
Loss from discontinued operations, net of tax (4,396,077) (88,449)
--------------- ---------------
Net income (loss) ($3,902,489) $ 1,131,854
============== ===============
Earnings (loss) per share:
Income from continuing operations $ .08 $ .19
Loss from discontinued operations, net of tax (.77) (.01)
-------------- ---------------
Net income (loss) $ (.69) .18
============== ===============
Weighted average number of common shares outstanding 5,688,029 6,170,971
============= =================
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE STATEMENTS
Page 4 of 16
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
September 30, 1995 September 30, 1994
------------------ ------------------
<S> <C> <C>
REVENUES:
Net sales $46,010,697 $42,000,125
Rental revenues from real estate operations 16,787,683 16,544,981
---------------- -------------
Total revenues 62,798,380 58,545,106
------------ -------------
COSTS AND EXPENSES:
Cost of sales 35,062,028 31,386,198
Real estate operations -
Mortgage interest expense 3,433,127 3,814,853
Depreciation expense 4,739,862 4,766,306
Other operating expenses 4,205,956 3,958,180
General and administrative expenses 6,093,364 5,547,859
Selling expenses 4,390,710 4,285,386
-------------- --------------
Total costs and expenses 57,925,047 53,758,782
-------------- --------------
Operating income 4,873,333 4,786,324
------------ --------------
OTHER INCOME (EXPENSE):
Interest income and expense, net (309,075) (452,148)
Other income and expense, net 1,506,579 2,758,945
------------ ---------------
Total other income (expense) 1,197,504 2,306,797
------------ ---------------
Income from continuing operations before income taxes 6,070,837 7,093,121
Provision for income taxes 2,585,000 3,020,000
------------ --------------
Income from continuing operations 3,485,837 4,073,121
DISCONTINUED OPERATIONS:
Loss from discontinued operations, net of tax benefit of
$780,000 and $45,000, respectively (1,512,961) (88,449)
Provision for disposition, net of tax benefit of $2,040,000 (3,960,000) -
------------ -------------
Loss from discontinued operations, net of tax (5,472,961) (88,449)
-------------- -------------
Net income (loss) ($1,987,124) $ 3,984,672
============== ============
Earnings (loss) per share:
Income from continuing operations $ .59 $ .66
Loss from discontinued operations, net of tax (.93) (.01)
-------------- -------------
Net income (loss) $ (.34) $ .65
============== =============
Weighted average number of common shares outstanding 5,899,615 6,174,946
============ ==============
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE STATEMENTS
Page 5 of 16
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
-------------- -------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) ($1,987,124) $3,984,672
------------ -------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 5,925,306 6,101,119
Disposal of discontinued operations 1,868,597 -
Net realized and unrealized (gains) losses
on marketable securities (229,979) (1,149,654)
Changes in assets and liabilities, net of
effects from business acquisitions and disposals (A) 4,131,086 (5,343,878)
----------- --------------
Total adjustments 11,695,010 (392,413)
----------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 9,707,886 3,592,259
----------- ---------------
Cash Flows From Investing Activities:
Purchase of marketable securities - (551,024)
Proceeds from sale of marketable securities 729,318 2,722,840
Acquisition of property, plant and equipment (1,997,709) (3,684,190)
Cash paid in acquisition of operating business - (2,673,000)
Investing activities of discontinued operations - (598,632)
----------- --------------
NET CASH USED IN INVESTING ACTIVITIES (1,268,391) (4,784,006)
------------- --------------
Cash Flows From Financing Activities:
Principal payments on mortgage commitments, notes and loans (7,713,957) (6,713,383)
Proceeds from mortgage commitments, notes and loans 3,150,000 -
Net borrowings under lines of credit 435,000 6,400,000
Purchase and retirement of common shares (4,478,192) (870,632)
Proceeds from exercise of stock options 3,500 628,254
Financing activities of discontinued operations - (306,189)
------------ --------------
NET CASH USED IN FINANCING ACTIVITIES (8,603,649) (861,950)
------------- --------------
Net decrease in cash and cash equivalents (164,154) (2,053,697)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,584,744 3,749,301
----------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,420,590 $ 1,695,604
= =========== ==============
</TABLE>
Page 6 of 16
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 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 $4,276,210 $4,546,893
Taxes 1,029,946 1,994,190
========== ==========
</TABLE>
Supplemental Schedule of Noncash Investing
and Financing Activities:
See Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
(A) Changes in assets and liabilities, net of effects from business
acquisitions and disposals, for the nine months ended September 30, 1995 and
1994 are as follows:
<S> <C> <C>
Decrease (increase) in notes and accounts receivable, net $47,127 ($2,018,184)
Decrease (increase) in inventories 402,410 (772,131)
Decrease (increase) in prepaid expenses
and other current assets 3,947,558 (184,293)
Increase in deferred income taxes (666,320) (628,570)
Increase in real property held for rental, net (1,030,078) (2,971,607)
Decrease (increase) in noncurrent notes receivable 21,850 (6,979,708)
Decrease in other assets 356,634 504,904
Increase in accounts payable and accrued liabilities 2,256,734 1,589,979
Decrease in income taxes payable (1,236,864) (1,159,938)
Increase in other long-term liabilities 32,035 6,995,644
Discontinued operations - noncash charges and working
capital changes - 280,026
---------- ------------
Total $4,131,086 ($5,343,878)
========== ============
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS
Page 7 of 16
<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, the operations of the Registrant's Kentile subsidiary
ceased when its raw material stocks were exhausted resulting from an
unwillingness of major trade suppliers of Kentile to extend further credit. In
connection with the write-off of the Registrant's investment in Kentile it has
recorded a pre-tax charge of approximately $6 million in the third quarter of
1995, including estimated costs of disposition. Additional costs could be
incurred by the Registrant as a result of this matter. Management will continue
to monitor this situation very closely, including the values received by Kentile
as a result of the disposition of its assets. 1995 net sales of Kentile through
the measurement date were $18,945,000 as compared to $22,001,000 for the period
from acquisition to September 30, 1994.
Page 8 of 16
<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 $85,829 and $594,070 at September 30, 1995 and December
31, 1994 respectively, while gross unrealized holding gains of the Registrant's
marketable security portfolio were $55,647 and $61,863 on a net of tax basis as
of September 30, 1995 and December 31, 1994, respectively.
DEFERRED TAXES
The components of the net deferred tax asset (liability) at September 30, 1995
are as follows:
Realization allowances related to
accounts receivable and inventories $537,407
Net unrealized (gain) loss on
marketable securities 2,686
Basis differences relating to real
property held for rental 2,422,129
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 1,858,590
Current portion 771,030
----------
Noncurrent portion $1,087,560
==========
Page 9 of 16
<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 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.
Page 10 of 16
<PAGE>
COMMON STOCK
During the first nine months of 1995, the Registrant purchased and
retired 445,887 shares of its common stock at a cost of $4,478,192. In addition,
during this period 700 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, 112,421 shares of
the Registrant's common shares were issued pursuant to the exercise of options
during the first nine 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
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Revenues for the nine month period ended September 30, 1995 were
$62,798,000, a $4,253,000 increase from comparable 1994 revenues. Income from
continuing operations for the period was $3,486,000 or $.59 per share as
compared to income from continuing operations of $4,073,000 or $.66 per share
for the same period in 1994.
Revenues for the three month period ended September 30, 1995 were
$19,308,000, an increase of $158,000 from revenues in the comparable 1994
period. Income from continuing operations for the second quarter of 1995 was
$494,000 or $.08 per share as compared to $1,220,000 or $.19 per share during
the comparable 1994 period.
REAL ESTATE OPERATIONS
Rental revenues from real estate operations increased $266,000 and
$243,000, respectively for the three and nine month periods ended September 30,
1995 as compared to the same periods in 1994. These increases are primarily the
result of additional revenues related to 1994 property acquisitions offset by
the collection of certain retroactive payments in the first quarter of 1994,
which were not previously accrued.
Mortgage interest expense decreased $133,000 during the current quarter
and $382,000 during the nine month period ended September 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 nine month periods ended September 30, 1995, as
compared to such costs during the corresponding periods of 1994.
Operating expenses associated with the management of real estate
properties increased $248,000 for the nine month period ending September 30,
1995 while decreasing $19,000 during the current quarter as compared to the same
Page 11 of 16
<PAGE>
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 nine month periods ended September 30, 1995 and 1994
are as follows:
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- ------------------
(In thousands) 1995 1994 1995 1994
---- ---- ---- ----
Net Sales $4,082 $4,395 $14,871 $15,468
====== ====== ======= =======
Cost of Sales $3,749 $3,426 $11,723 $11,381
====== ====== ======= =======
Selling, General and
Administrative
Expenses $1,175 $1,366 $ 3,641 $ 3,996
====== ====== ======== ========
Income (Loss) from Operations ($ 842) ($ 397) ($ 493) $ 91
======= ======= ======== ========
Net sales of the antenna systems segment decreased $313,000 or 7%
during the third quarter of 1995 and decreased $597,000 or 4% for the nine month
period ended September 30, 1995, versus such sales generated during the
respective 1994 periods. Continuing reductions in military and commercial sales
continue to seriously effect this segment of the Registrant's business. However
backlog of this segment increased 39% compared to a year earlier.
Cost of sales as a percentage of net sales increased from the prior
year by 14% and 5%, respectively for the three and nine month periods ended
September 30, 1995. These increases are the result of changes in the mix of
products sold and from start-up costs associated with a new product line.
Selling, general and administrative costs of the antenna systems
segment decreased by approximately $355,000 and $191,000 during the nine and
three month period just ended as compared to such costs of the comparable 1994
periods. 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.
Page 12 of 16
<PAGE>
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 nine month periods ended September 30, 1995 and 1994
are as follows:
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
(In thousands) 1995 1994 1995 1994
------ ------ ----- ----
Net Sales $ 9,484 $ 9,281 $ 31,139 $ 26,532
======= ======= ======== ========
Cost of Sales $ 7,207 $ 7,126 $ 23,339 $ 20,005
======= ======= ======== ========
Selling, General and
Administrative Expenses $ 1,516 $ 1,536 $ 4,741 $ 4,260
======= ======= ========= =========
Income from Operations $ 761 $ 619 $ 3,059 $ 2,267
======== ======== ========= =========
Net sales of the engineered products segment increased $4,607,000 and
$203,000, respectively for the year-to-date and the three month periods ended
September 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 less than 1% in
each of the three and nine month periods ended September 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 $481,000 during the nine month period just ended while
dropping $20,000 during the third quarter of 1995 versus such costs of the
comparable 1994 periods. These fluctuations correspond to changes in the levels
of sales, as noted above, and represent approximately 1% changes as a percentage
of sales in each period
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.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses not associated with the
manufacturing operations increased by $329,000 and $525,000 for the three and
nine month periods ended September 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.
Page 13 of 16
<PAGE>
OTHER INCOME AND EXPENSE
The components of other income and expense in the accompanying
consolidated statements of income for the three and nine month periods ended
September 30, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
(In thousands 1995 1994 1995 1994
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Gain on sale of real estate assets $10,338 $316,218 $854,595 $1,390,638
Net realized and unrealized gains
(losses) on marketable securities - 1,179,580 229,979 1,149,654
Income from equity investments - 3,677 3,676 42,353
Other 190,000 418,329 176,300
-------- ---------- ---------- ----------
-
$200,338 $1,499,475 $1,506,579 $2,758,945
======== ========== ========== ==========
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
At September 30,1995 the Registrant's current liabilities exceeded
current assets by approximately $6,976,000. 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
September 30, 1995, $6,435,000 was outstanding under this facility. This demand
facility is reviewed by the bank annually on May 31. 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 accompanying
consolidated financial statements at September 30, 1995.
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.
Page 14 of 16
<PAGE>
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 $4,253,000 or 7% for the
first nine months of 1995 versus such results of the comparable 1994 period.
Income from continuing operations for the first nine months of 1995 was
$3,486,000 or $.59 per share versus $4,073,000 or $.66 per share during the same
period in 1994.
The results of the Registrant's real estate operations reflect a slight
increase in sales for the first nine months of 1995, primarily as a result of
additional revenues realted to 1994 acquisitions, offset by the collection of
certain retroactive rental payments in the first quarter of 1994, which were not
previously accrued.
The Registrant's engineered products segment continues to reflect sales
growth in virtually all market segments. This has resulted in a 17% increase in
revenues during the first nine months 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 lower
sales during the first nine months of 1995 than during the comparable 1994
period. U.S. military sales, as well as commercial sales remain below prior year
levels and management is focused on reversing this trend. Concentrated efforts
to increase sales have been implemented and has produced a 39% 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 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27. Financial Data Schedule
(b) Reports on Form 8K. The Registrant filed a report on Form 8-K with
the Securities and Exchange Commission on August 4, 1995 in response to Item 7.
Financial Statements, Proforma Financial Information and Exhibits.
The Registrant filed a report on Form 8-K/A with the Securities and Exchange
Commission on October 18, 1995 in response to Item 7. Financial Statements,
Proforma Financial Information and Exhibits.
Page 15 of 16
<PAGE>
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: November 14, 1995 By: /s/ Dennis S. Rosatelli
-----------------------
Dennis S. Rosatelli
Vice President, Chief Financial
Officer and Secretary of the
Registrant
Page 16 of 16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 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> SEP-30-1995
<CASH> 1,421
<SECURITIES> 86
<RECEIVABLES> 16,593
<ALLOWANCES> 494
<INVENTORY> 8,553
<CURRENT-ASSETS> 27,546
<PP&E> 15,479
<DEPRECIATION> 5,749
<TOTAL-ASSETS> 114,748
<CURRENT-LIABILITIES> 34,552
<BONDS> 0
<COMMON> 561
0
0
<OTHER-SE> 25,752
<TOTAL-LIABILITY-AND-EQUITY> 114,748
<SALES> 13,567
<TOTAL-REVENUES> 19,308
<CGS> 10,956
<TOTAL-COSTS> 18,687
<OTHER-EXPENSES> (200)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67
<INCOME-PRETAX> 755
<INCOME-TAX> 261
<INCOME-CONTINUING> 494
<DISCONTINUED> (4,396)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,902)
<EPS-PRIMARY> (.69)
<EPS-DILUTED> (.69)
</TABLE>
