FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
-----------------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 1-10104
UNITED CAPITAL CORP.
--------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2294493
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9 Park Place, Great Neck, New York 11021
- ---------------------------------------- ------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (516) 466-6464
--------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
- -------------------------------------- -----------------------------------------
Common Stock (Par Value $.10 Per Share) American Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X].
The aggregate market value of the shares of the voting stock held by
nonaffiliates of the Registrant as of March 21, 1996 was approximately
$14,822,000.
The number of shares of the Registrant's $.10 par value common stock outstanding
as of March 21, 1996 was 5,546,079.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of Form 10-K will be incorporated by
reference to certain portions of a definitive proxy statement which is expected
to be filed by the Registrant pursuant to Regulation 14A within 120 days after
the close of its fiscal year.
<PAGE>
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PART I
ITEM 1. BUSINESS
GENERAL
United Capital Corp. (the "Registrant"), incorporated in 1980 in the State of
Delaware, currently has three industry segments:
1. Real Estate Investment and Management.
2. Manufacture and Sale of Antenna Systems.
3. Manufacture and Sale of Engineered Products.
The Registrant also invests excess available cash in marketable securities and
other financial instruments.
DESCRIPTION OF BUSINESS
REAL ESTATE INVESTMENT AND MANAGEMENT
The Registrant is engaged in the business of investing in and managing real
estate properties. Most real estate properties owned by the Registrant are
leased under net leases pursuant to which the tenants are responsible for all
expenses relating to the leased premises, including taxes, utilities, insurance
and maintenance. The Registrant also owns properties that it manages which are
operated by the City of New York as day-care centers and offices and other
properties leased as department stores or shopping centers around the country.
In addition, the Registrant owns properties available for sale and lease with
the assistance of a consultant or a realtor working in the locale of the
premises.
The majority of properties are leased to single tenants. Approximately 97% of
the total square footage of the Registrant's properties are currently leased.
ANTENNA SYSTEMS
The Registrant designs and manufactures antenna systems marketed internationally
under the Dorne & Margolin trade name. Its products include airborne, naval and
ground-based navigation, communication and satellite communication antennas for
military, commercial transport and general aviation aircraft. These products are
sold internationally to military, commercial and general aviation original
equipment manufacturers as well as to the end user as replacement and spare
antenna systems.
Approximately 59% and 69% of the antenna systems sold by the Registrant in 1995
and 1994, respectively, were for use by the United States Government and
purchased by the United States Government or its contractors.
ENGINEERED PRODUCTS
The Registrant's engineered products are manufactured through the Technical
Products Division of Metex Corporation ("Metex") and AFP Transformers, Inc.
("AFP Transformers"), wholly-owned
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subsidiaries of the Registrant. The knitted wire products and components
manufactured by Metex must function in adverse environments and meet rigid
performance requirements. The principal areas in which these products have
application are as high temperature gaskets, seals, components for use in
airbags, shock and vibration isolators, noise reduction elements and air, liquid
and solid filtering devices.
Metex has been an original equipment manufacturer for the automobile industry
since 1974 and presently supplies several automobile manufacturers with exhaust
seals and components for use in exhaust emission control devices.
The Registrant's transformer products are marketed under several brandnames
including Field Transformer, ISOREG and EPOXYCAST for a wide variety of
industrial and research applications. AFP Transformers also provides a full line
of power conditioners and uninterruptible power supplies, as well as its
Spectrum line of specialty transformers for high powered ultraviolet lamps used
in the printing and chemical industries.
Sales by the Engineered Products segment to its three largest customers (each in
excess of 10% of the segment's net sales) accounted for approximately 35% of the
segment's sales for 1995. During 1994 sales to its two largest customers
accounted for approximately 23% of the segment's sales.
SUMMARY FINANCIAL INFORMATION
The following table sets forth the revenues, operating income (loss) and
identifiable assets of each continuing business segment of the Registrant for
1995, 1994 and 1993.
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
(in thousands)
<S> <C> <C> <C>
Real Estate Investment and Management-
Rental revenues $22,652 $21,988 $20,815
============ ============ ============
Operating income $5,129 $5,009 $3,946
============ ============ ============
Identifiable assets $88,954 $92,479 $86,668
============ ============ ============
Antenna Systems-
Net sales $20,307 $19,495 $21,098
============ ============ ============
Operating income (loss) ($1,103) ($1,527) $769
============ ============ ============
Identifiable assets $15,291 $15,580 $17,686
============ ============ ============
Engineered Products-
Net sales $41,687 $35,511 $27,643
============ ============ ============
Operating income $3,779 $2,477 $1,585
============ ============ ============
Identifiable assets $12,955 $14,365 $10,528
============ ============ ============
</TABLE>
<PAGE>
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DISTRIBUTION
The Registrant's manufactured products are distributed by a direct sales force
and through distributors to industrial consumers, original equipment
manufacturers and the United States Government.
PRODUCT METHODS AND SOURCES OF RAW MATERIALS
The Registrant's products are manufactured at its own facilities. The Registrant
purchases raw materials, including drawn wire, castings and electronic
components from a wide range of suppliers of such materials. Most raw materials
purchased by the Registrant are available from several suppliers. The Registrant
has not had and does not expect to have any problems fulfilling its raw material
requirements during 1996.
PATENTS AND TRADEMARKS
The Registrant owns several patents, patent licenses and trademarks. While the
Registrant considers that in the aggregate its patents and trademarks used in
the antenna systems and engineered products operations are significant to those
businesses, it does not believe that any of these patents or trademarks are of
such importance that the loss of one or more of such patents or trademarks would
materially affect its consolidated financial condition or results of operations.
EMPLOYEES
At March 21, 1996, the Registrant employed approximately 625 persons. Certain of
the Registrant's employees are represented by unions. The Registrant believes
that its relationships with its employees are good.
COMPETITION
The Registrant competes with at least 20 other companies in the sale of antenna
systems; and at least 19 other companies in the sale of engineered products. The
Registrant stresses product performance and service in connection with the sale
of antenna systems and engineered products. The principal competition faced by
the Registrant results from the sales price of the products sold by its
competitors.
BACKLOG
The dollar value of unfilled orders of the Registrant's antenna systems segment
was approximately $12,945,000 at December 31, 1995, as compared with $12,331,000
at December 31, 1994. The Registrant anticipates that approximately 84% of the
1995 year-end backlog will be filled in 1996.
The dollar value of unfilled orders of the Registrant's engineered products
segment was approximately $2,190,000 at December 31, 1995, as compared with
$2,823,000 at December 31, 1994. It is anticipated that substantially all such
backlog will be filled in 1996. The order backlog referred to above does not
include any order backlog with respect to sales of knitted wire mesh components
for exhaust emission control devices or exhaust seals because of the manner in
which customer orders are received.
<PAGE>
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ENVIRONMENTAL REGULATIONS
Federal, state and local requirements regulating the discharge of materials into
the environment or otherwise relating to the protection of the environment, have
had and will continue to have a significant impact upon the operations of the
Registrant. It is the policy of the Registrant to manage, operate and maintain
its facilities in compliance, in all material respects, with applicable
standards for the prevention, control and abatement of environmental pollution
to prevent damage to the quality of air, land and resources.
The Registrant has undertaken the completion of environmental studies and/or
remedial action at Metex' two New Jersey facilities.
The process of remediation has begun at one facility pursuant to a plan filed
with the New Jersey Department of Environmental Protection and Energy
("NJDEPE"). Environmental experts engaged by the Registrant estimate that under
the most probable remediation scenario the remediation of this site is
anticipated to require initial expenditures of $860,000, including the cost of
capital equipment, and $86,000 in annual operating and maintenance costs over a
15-year period.
Environmental studies at the second facility indicate that remediation may be
necessary. Based upon the facts presently available, environmental experts have
advised the Registrant that under the most probable remediation scenario, the
estimated cost to remediate this site is anticipated to require $2.3 million in
initial costs, including capital equipment expenditures, and $258,000 in annual
operating and maintenance costs over a 10-year period. The Registrant may revise
such estimates in the future due to the uncertainty regarding the nature, timing
and extent of any remediation efforts that may be required at this site, should
an appropriate regulatory agency deem such efforts to be necessary.
The foregoing estimates may also be revised by the Registrant as new or
additional information in these matters become available or should the NJDEPE or
other regulatory agencies require additional or alternative remediation efforts
in the future. It is not currently possible to estimate the range or amount of
any such liability.
Although the Registrant believes that it is entitled to full defense and
indemnification with respect to environmental investigation and remediation
costs under its insurance policies, the Registrant's insurers have denied such
coverage. Accordingly, the Registrant has filed an action against certain
insurance carriers seeking defense and indemnification with respect to all prior
and future costs incurred in the investigation and remediation of these sites
(see Item 3, "Legal Proceedings"). Upon the advice of counsel, the Registrant
believes that based upon a present understanding of the facts and the present
state of the law in New Jersey, it is probable that the Registrant will prevail
in the pending litigation and thereby access all or a very substantial portion
of the insurance coverage it claims; however, the ultimate outcome of litigation
cannot be predicted.
As a result of the foregoing, the Registrant has not recorded a charge to
operations for the environmental remediation, noted above, in the Consolidated
Financial Statements, as anticipated proceeds from insurance recoveries are
expected to offset such liabilities. The Registrant has reached settlements with
several insurance carriers in this matter.
<PAGE>
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At December 31, 1994 a total of $7 million in anticipated insurance recoveries
is recorded in the accompanying consolidated financial statements, including
approximately $4.1 million in prepaid expenses and other current assets since
such amounts were anticipated to be settled and received within 12 months. Such
amounts were in fact received during 1995. The remaining balance of $2.9 million
at December 31, 1995 is in dispute with the Registrant's insurance carriers as
more fully discussed in Item 3 "Legal Proceedings" and Note 17, to Consolidated
Financial Statements, "Contingencies." Management believes that recoveries in
excess of the amounts reflected in the accompanying Consolidated Financial
Statements are available under the insurance policies but have not been
recorded. There can be no assurances, however, that the Registrant will prevail
in its efforts to obtain amounts at or in excess of the estimated recoveries.
In the opinion of management, these matters will be resolved favorably and such
amounts, if any, not recovered under the Registrant's insurance policies will be
paid gradually over a period of years and, accordingly, should not have a
material adverse effect upon the business, liquidity or financial position of
the Registrant. However, adverse decisions or events, particularly as to the
merits of the Registrant's factual and legal basis could cause the Registrant to
change its estimate of liability with respect to such matters in the future.
Effective January 1, 1994 the Registrant adopted the provisions of Staff
Accounting Bulletin 92 and accordingly has recorded the expected liability
associated with remediation efforts as a component of other long-term
liabilities and the anticipated insurance recoveries as a component of prepaid
expenses and other current assets and other assets in the Registrant's
consolidated financial statements.
ITEM 2. PROPERTIES
REAL PROPERTY HELD FOR RENTAL
As of March 21, 1996 the Registrant owned 212 properties strategically located
throughout the United States. The properties are primarily leased under
long-term net leases. The Registrant's classification and gross carrying value
of its properties at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Gross
Carrying Number of
Description Value Percentage Properties
------------------ --------------- -----------------
<S> <C> <C> <C>
Shopping centers and retail outlets $79,988,598 63.5% 33
Commercial properties 29,575,751 23.5 150
Day-care centers and offices 7,561,636 6.0 12
Hotel properties 2,867,703 2.3 2
Other 5,989,533 4.7 17
------------------ ------------ --------
Total $125,983,221 100.0% 214
================== ============ ========
</TABLE>
SHOPPING CENTERS AND RETAIL OUTLETS
Shopping centers and retail outlets include 26 department stores and other
properties which are primarily leased under net leases. Taxes, maintenance of
the properties and all other expenses are the responsibility of the tenants. The
leases for certain shopping centers and retail outlets provide for additional
rents based on sales volume and renewal options at higher rents. The department
stores
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include 11 K-Mart stores, five Carter Hawley Hale stores and an IKEA store with
a total of approximately 1,064,000, 824,000 and 160,000 square feet,
respectively. The K-Mart stores are primarily located in the Midwest region of
the United States. The Carter Hawley Hale and IKEA stores are primarily located
in the Pacific Coast and Southwest regions of the United States.
COMMERCIAL PROPERTIES
Commercial properties consist of properties leased as 101 restaurants, 30 Midas
Muffler Shops, three convenience stores, six office buildings and miscellaneous
other properties. Commercial properties are primarily leased under net leases
which in certain cases, have renewal options at higher rents. Certain of these
leases also provide for additional rents based on sales volume. The 101
restaurants, located throughout the United States, include properties leased as
Boston Chicken, Roy Rogers, Pizza Huts, Hardee's, Wendy's and Kentucky Fried
Chicken.
DAY-CARE CENTERS AND OFFICES
The 12 day-care centers and offices are located in New York City and are leased
to the City of New York. The Registrant has been negotiating with the City of
New York to extend, on a long-term basis, many of these leases which expired in
years through 1993. To date, 11 leases have been signed and the remaining lease
has been extended. Although there can be no assurance that the Registrant will
in fact receive the remaining lease, the Registrant believes that with continued
negotiations with the City of New York, such lease should be forthcoming.
HOTEL PROPERTIES
The Registrant's two hotel properties are located in Georgia and California
which are managed through a local on-site management company that is responsible
for all day-to-day operations of the hotels.
The following summarizes real property held for rental by geographic area at
December 31, 1995:
<TABLE>
<CAPTION>
Number Gross
of Carrying
Properties Value
--------------- ------------------
<S> <C> <C>
Northeast 94 $29,502,093
Southeast 45 24,739,447
Midwest 45 25,890,372
Southwest 9 9,810,790
Pacific Coast 9 30,437,330
Pacific Northwest 6 2,098,197
Rocky Mountain 6 3,504,992
--------- ------------------
214 $125,983,221
========= ==================
</TABLE>
MANUFACTURING FACILITIES
The Registrant maintains facilities located at 2950 Veterans Memorial Highway,
Bohemia, New York, on a ten-acre site approximately two miles from MacArthur
Airport on Long Island for use in its antenna systems business. This site
contains four one-story buildings aggregating approximately 90,000 square feet
of floor space, an outdoor antenna testing area, several pattern ranges and
airframe
<PAGE>
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mock-ups. Approximately 30,000 square feet was added during 1994 to accommodate
the consolidation of the D&M/Chu operations into this facility. The Registrant
owns the site together with the structures.
The Registrant has leased the 35,000 square foot facility in Littleton,
Massachusetts, formerly used in the operations of D&M/Chu and expects to cease
operations at the remaining D&M/Chu facility in Massachusetts during early 1996
and anticipates renting the facility at that time. Accordingly, the Registrant
intends to reclassify such property to real property held for rental in 1996.
The Registrant owns these facilities together with the sites.
The Registrant's engineered products are manufactured at 970 New Durham Road,
Edison, New Jersey, in a one-story building having approximately 53,000 square
feet of floor space and also in a second facility at 206 Talmadge Road in
Edison, New Jersey which has approximately 54,500 square feet of space. The
Registrant owns these facilities together with the sites.
ITEM 3. LEGAL PROCEEDINGS
METEX CORPORATION VS. AFFILIATED FM INSURANCE CO., ET AL.
On June 27, 1990, Metex filed an action in the Superior Court of New Jersey,
Chancery Division, Middlesex County, against several insurance companies that
provided Metex with liability insurance between 1967 and 1986. To date Metex has
reached settlements with several carriers. The action seeks both declaratory
relief and monetary damages in connection with reimbursement of the costs
incurred and to be incurred by Metex in connection with the completion of
environmental studies and remedial action required at its two Edison, New Jersey
facilities. The declaratory relief sought is a determination that the terms of
the liability insurance policies at issue obligate the defendants to defend and
indemnify Metex with respect to all costs and expenses related to these
environmental matters. Metex also seeks monetary damages in an unspecified
amount for breach of the defendants' duty to indemnify Metex.
In June 1995 the court dismissed, without prejudice, the New Durham site from
this action. The court ruled that without a governmental directive to remediate
the site no third-party liability exists and accordingly no coverage is
available under the policies. The Registrant appealed the decision to the New
Jersey Appellate Division which heard the case in February 1996. In March 1996,
the Appellate Division ruled in favor of the Registrant reinstating the action
regarding both sites. This action is in the final stages of pretrial discovery.
The Registrant intends to continue to vigorously pursue this action.
DAVISON VS. FIRST PENNCO, ET AL.
On March 24, 1991, plaintiffs, including 55 investors and limited partners in
three limited partnerships, commenced a civil action in United States District
Court for the Southern District of New York against 31 defendants, including the
Registrant, asserting causes of action under the Racketeer Influenced and
Corrupt Organizations Act. The action seeks actual, punitive and treble damages
in a total unspecified amount. On July 16, 1991, plaintiffs filed an amended
complaint that did not substantially alter the claims made against the
Registrant or the recovery sought.
In December 1991 the Registrant filed a motion to dismiss the complaint on the
grounds that, among other things, the claims are the subject of a release
granted in the Registrant's favor and also that the complaint was filed outside
the statute of limitations. In August 1992 the Court granted the motion to
dismiss on the grounds that the complaint failed to set out sufficient detail in
regard to the acts alleged
<PAGE>
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to have been engaged in by the defendants. The dismissal was "without prejudice"
and allowed the plaintiffs to file an amended complaint setting out more detail
concerning the alleged acts.
In January 1993 two separate amended complaints were filed on behalf of two
separate groups of the same plaintiffs. The Registrant filed motions to dismiss
each of the amended complaints. In October 1993 the Court again granted the
motion to dismiss these complaints on the grounds that the complaints failed to
state a legal claim against the Registrant but again granted plaintiff's the
right to file an amended complaint against the Registrant. In December 1993 the
plaintiffs filed new amended complaints. In February 1994 the Registrant filed a
motion to dismiss all claims set out in the amended complaints. In February 1995
the court denied such motion. Discovery is ongoing and the Court has ordered all
non-exempt discovery to be concluded by March 29, 1996.
OTHER LITIGATION
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 the foregoing is expected to result in a judgment having a material
adverse effect on the Registrant's consolidated financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS
The Registrant's Common Stock is traded on the American Stock Exchange under the
symbol AFP. The table below shows the high and low sales prices as reported in
the composite transactions for the American Stock Exchange.
High Low
------------- -------------
1995
- ---- First quarter $9-1/4 $8-3/8
Second quarter 9-7/8 9-1/8
Third quarter 9-1/2 7-5/8
Fourth quarter 8-1/8 6-5/8
1994
- ---- First quarter $11 $9
Second quarter 12-5/8 9-3/4
Third quarter 11-7/8 10-1/4
Fourth quarter 10-3/8 8-3/8
As of March 21, 1996, there were approximately 625 record holders of the
Registrant's Common Stock. The closing sales price for the Registrant's Common
Stock on such date was $7-3/8. The Registrant has never paid any cash dividends
on its Common Stock. The payment of dividends is within the discretion of the
Registrant's Board of Directors, however in view of potential working capital
needs and in order to finance future growth, it is unlikely that the Registrant
will pay any cash dividends on its Common Stock in the near future.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below should be read in
conjunction with, and is qualified in its entirety by reference to, the
Consolidated Financial Statements and the Notes thereto.
<TABLE>
<CAPTION>
1995 1994 1993 1992 (2) 1991
-------------- ------------ ------------ ------------ ------------
(in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Total revenues (1) $84,646 $76,994 $69,556 $70,875 $62,857
============== ============ ============ ============ ============
Income from continuing operations $3,569 $3,621 $4,367 $2,866 $3,481
============== ============ ============ ============ ============
Income from continuing operations
per common share $.61 $.59 $.70 $.44 $.40
============== ============ ============ ============ ============
Total assets, end of year $117,200 $127,714 $114,882 $116,849 $115,801
Total liabilities, end of year 90,971 94,933 84,704 89,684 90,396
Stockholders' equity, end of year 26,229 32,781 30,178 27,165 25,405
============== ============ ============ ============ ============
Weighted average number of
common shares outstanding 5,893,246 6,169,031 6,267,540 6,569,215 8,645,416
============== ============ ============ ============ ============
</TABLE>
NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA
(1) Certain reclassifications have been reflected in the financial data to
conform prior years' data to the current classifications.
(2) Operating results for 1992 include the results of D&M/Chu Technology, Inc.
and AFP Transformers, Inc. since April 2, and October 23, 1992,
respectively.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS 1995 AND 1994
GENERAL
The following discussion of the Registrant's financial condition and results of
operations should be read in conjunction with the description of the
Registrant's business and properties contained in Items 1 and 2 of Part I and
the Consolidated Financial Statements and Notes thereto, included elsewhere in
this report.
Total revenues generated by the Registrant during 1995 were $84,646,000 an
increase of $7,652,000 from total 1994 revenues of $76,994,000. Net loss for the
current year was ($1,904,000) or ($.32) per share versus net income of
$2,933,000 or $.48 per share for 1994. The 1995 results include losses from
discontinued operations of ($5,473,000) on a net of tax basis or ($.93) per
share. See Note 2 to Consolidated Financial Statements, "Acquisition and
Disposal of Operating Companies."
<PAGE>
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REAL ESTATE OPERATIONS
Rental revenues from real estate operations during 1995 increased $664,000 or 3%
over those of the prior year primarily as a result of additional revenues
generated from the operations of the Registrant's two hotel properties, and the
signing of leases on properties acquired during 1995. Of the total increase,
$635,000 results from additional hotel related revenues.
Mortgage interest expense for 1995 decreased by $531,000 as compared to such
expense incurred during 1994. This decrease of 11% results from the continuing
amortization of mortgages which approximated $6.7 million during the current
year. No new encumbrances were added to the Registrant's real estate portfolio
during 1995.
Depreciation expense associated with real properties held for rental increased
approximately $18,000 or less than 1% from such expense incurred in the
preceding year. This increase primarily results from depreciation associated
with additional properties purchased and improvements to existing properties
added during 1995 and is offset by depreciation associated with the sale of
several properties in 1995 and 1994.
Other operating expenses associated with the management of real properties
increased approximately $483,000 or 8% during 1995 versus such expenses incurred
during 1994. This increase primarily results from additional operating costs
incurred in connection with the operation of the Registrant's hotel properties
of approximately $358,000 and the balance from the operating costs of additional
properties added by the Registrant in the current year.
ANTENNA SYSTEMS
The Registrant's antenna systems segment includes Dorne & Margolin, Inc. ("Dorne
& Margolin") and D&M/Chu Technology, Inc. ("D&M/Chu"). The operating results of
the antenna systems segment for the years ended December 31, 1995 and 1994 are
as follows:
<TABLE>
<CAPTION>
1995 1994
------------- ------------
(in thousands)
<S> <C> <C>
Net sales $20,307 $19,495
============= ============
Cost of sales $16,658 $15,665
============= ============
Selling, general and administrative expenses $4,752 $5,357
============= ============
Loss from operations ($1,103) ($1,527)
============= ============
</TABLE>
Net sales of the antenna systems segment increased approximately $812,000 or 4%
during 1995 as compared to such sales in 1994. Increased emphasis on commercial
product applications and exploring new market niches, have favorably impacted
this segment of the Registrant's business.
Cost of sales as a percentage of net sales of the antenna systems segment
increased approximately 2% from that of 1994. This increase results primarily
from additional costs incurred as the Registrant moved to consolidate production
of its two manufacturing facilities.
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Selling, general and administrative expenses ("SG&A") of the antenna systems
segment decreased by approximately $605,000 during 1995 as compared to such
costs incurred in the previous year. Continuing savings from the consolidation
of D&M/Chu's operations into Dorne & Margolin principally accounted for this
reduction. The integration of D&M/Chu into Dorne & Margolin has been
substantially completed and further reductions in SG&A costs are not anticipated
from this consolidation.
ENGINEERED PRODUCTS
The Registrant's engineered products segment includes Metex Corporation and AFP
Transformers, Inc. The operating results of the engineered products segment for
the years ended December 31, 1995 and 1994 are as follows-
<TABLE>
<CAPTION>
1995 1994
------------- ------------
(in thousands)
<S> <C> <C>
Net sales $41,687 $35,511
============= ============
Cost of sales $31,237 $27,043
============= ============
Selling, general and administrative expenses $6,671 $5,991
============= ============
Income from operations $3,779 $2,477
============= ============
</TABLE>
Net sales of the engineered products segment were $41,687,000, an increase of
$6,176,000 or 17% versus such sales in 1994. This growth is a result of stronger
demand and increased marketing efforts which produced an 18% increase in the
sale of knitted wire products and a 13% increase in the sale of transformer
products.
Cost of sales as a percentage of net sales decreased approximately 1% between
1995 and 1994. This decline is primarily a result of the mix of product sales.
SG&A expenses of the engineered products segment increased $680,000 or 11%
during 1995, as compared to such costs in 1994. This increase primarily results
from additional selling related expenses associated with the 17% rise in sales
noted above and from additional administrative personnel in the current year.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses not associated with the manufacturing
operations increased approximately $719,000 during 1995 as compared to such
expenses incurred in the preceding year. This represents less than 1% of
consolidated revenues and is primarily a result of additional salaries and
professional fees incurred in 1995.
OTHER INCOME AND EXPENSES, NET
Other income and expense, net for 1995 of approximately $1.6 million is
comprised of approximately $865,000 in gains from the sales of real estate
assets, $230,000 from realized gains on the sale of marketable securities and
approximately $549,000 in miscellaneous other income.
<PAGE>
-12-
The 1994 components of other income and expense, net were as follows: $1.4
million in gains from the sales of real estate assets, $1.2 million from
realized gains on the sale of marketable securities, $46,000 in income from
equity investments which represents nonrecurring cash distributions, and
$171,000 in miscellaneous other income.
RESULTS OF OPERATIONS 1994 AND 1993
REAL ESTATE OPERATIONS
Rental revenues from real estate operations during 1994 increased $1,173,000 or
6% over those of the prior year primarily as a result of the renewal of existing
leases at higher rents and additional revenues generated from the operations of
the Registrant's two hotel properties. Of the total increase, $726,000 results
from the renewal of existing leases at higher rents while the remaining increase
of $447,000 results from additional hotel related revenues.
Mortgage interest expense for 1994 decreased by $436,000 as compared to such
expense incurred during 1993. This decrease of 8% results from the continuing
amortization of mortgages which approximated $4.7 million during the current
year. No new encumbrances were added to the Registrant's real estate portfolio
during 1994.
Depreciation expense associated with real properties held for rental increased
approximately $34,000 or less than 1% from such expense incurred in the
preceding year. This increase primarily results from depreciation associated
with additional properties purchased and improvements to existing properties
added in 1994 and is offset by depreciation associated with the sale of several
properties in 1994 and 1993.
Other operating expenses associated with the management of real properties
increased approximately $292,000 during 1994 versus such expenses incurred
during 1993. This increase primarily results from additional operating costs
incurred in connection with the operation of the Registrant's hotel properties
of approximately $246,000.
ANTENNA SYSTEMS
The Registrant's antenna systems segment includes Dorne & Margolin and D&M/Chu.
The operating results of the antenna systems segment for the years ended
December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
------------- ------------
(in thousands)
<S> <C> <C>
Net sales $19,495 $21,098
============= ============
Cost of sales $15,665 $14,290
============= ============
Selling, general and administrative expenses $5,357 $6,039
============= ============
Income (loss) from operations ($1,527) $769
============= ============
</TABLE>
<PAGE>
-13-
Net sales of the antenna systems segment decreased approximately $1,603,000 or
8% during 1994 as compared to such sales of the preceding year. Reductions in
military and commercial sales continued to seriously effect this segment of the
Registrant's business. Further emphasis has been placed on expanding commercial
product applications and existing market niches. Several management changes took
place, including naming a new President to the antenna systems segment with a
primary focus on reversing the trend in sales and profits.
Cost of sales as a percentage of net sales of the antenna systems segment
increased approximately 12% from that of 1993. This increase is the result of
the following factors: changes in the mix of product sold between years (4%);
additional overhead incurred as the company moved to consolidate production of
its two manufacturing facilities (4%); the recording of certain realization
allowances for inventory as a result of the continuing decline in military sales
and the uncertainty that such sales will increase in the future (3%); and from
incurring additional manufacturing costs as a result of the transition of
certain D&M/Chu products which are now being manufactured at Dorne & Margolin
(1%).
SG&A of the antenna systems segment decreased by approximately $682,000 during
1994 as compared to such costs incurred in the previous year. Administrative
savings from the consolidation of the Dorne & Margolin and D&M/Chu operations
and from previously implemented cost containment measures are the primary cause
of this decline.
ENGINEERED PRODUCTS
The Registrant's engineered products segment includes Metex Corporation and AFP
Transformers, Inc. The operating results of the engineered products segment for
the years ended December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
------------- ------------
(in thousands)
<S> <C> <C>
Net sales $35,511 $27,643
============= ============
Cost of sales $27,043 $20,958
============= ============
Selling, general and administrative expenses $5,991 $5,100
============= ============
Income from operations $2,477 $1,585
============= ============
</TABLE>
Net sales of the engineered products segment increased approximately $7,868,000
or 28% during 1994 versus such results for the preceding year. This is the
result of substantially higher sales at Metex' Technical Products Division and
is offset by slightly lower sales generated by AFP Transformers. Virtually all
of Metex' markets showed sales growth. However, overall results of this segment
continue to be negatively impacted by the results of the segment's transformer
operations, which posted a loss of approximately $1 million during 1994.
Cost of sales as a percentage of net sales was virtually unchanged between 1994
and 1993. This percentage remained at 76% despite fluctuations in the mix of
products sold.
SG&A expenses of the engineered products segment increased approximately
$891,000 or 17% during 1994, as compared to such costs in the preceding year.
This increase primarily results from additional selling related expenses
associated with the 28% rise in sales noted above.
<PAGE>
-14-
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses not associated with the manufacturing
operations decreased approximately $758,000 during 1994 as compared to such
expenses incurred in the preceding year. This represents a decrease of less than
1% of consolidated revenues and is primarily the result of lower professional
costs incurred in 1994.
OTHER INCOME AND EXPENSE, NET
Other income and expense, net for 1994 of approximately $2.8 million is
comprised of $1.4 million in gains from the sales of real estate assets, $1.2
million from realized gains on the sale of marketable securities, $46,000 in
income from equity investments which represents nonrecurring cash distributions,
and $171,000 in miscellaneous other income.
The 1993 components of other income and expense, net were as follows:
approximately $1.1 million in gains from the sale of real estate; the recovery
of $744,000 in previously recorded unrealized losses on marketable securities;
$578,000 in income from equity investments; and $1.7 million in other income.
During 1993, the Registrant received a $2 million settlement from Metex'
insurance carrier in connection with the class action civil suit brought by the
former shareholders of Metex. This settlement is included in other income in
1993, net of approximately $450,000 of costs incurred in the defense of this
action incurred during 1993. All such defense costs incurred prior to 1993 were
included in general and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, the Registrant's current liabilities exceeded current
assets by approximately $10.5 million. This shortfall in working capital results
from financing the purchase of long-term assets utilizing short-term borrowings
and from the classification of current mortgage obligations without the benefit
of a corresponding current asset for such properties. Management is confident
that through cash flow generated from operations, the sale of select assets and
the refinancing of certain current liabilities on a long-term basis, all
obligations will be satisfied as they become due.
The Registrant has an unsecured line of credit with a bank which provides for
borrowings up to $15 million at the bank's prime lending rate or LIBOR (London
Inter-Bank Offered Rate) plus 2%, at the Registrant's option. At December 31,
1995 there was approximately $7.8 million outstanding under this facility. The
maximum amount outstanding under this facility during 1995 was approximately
$9.2 million. This demand facility is reviewed by the bank annually on May 31.
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 for approximately $9.6 million, of which approximately
$6.5 million consisted of new bank financing. 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. See Note 2 to Consolidated Financial Statements,
"Acquisition and Disposal of Operating Companies."
<PAGE>
-15-
The Registrant has undertaken the completion of environmental studies and
remedial action at Metex' two New Jersey facilities and has filed an action
against certain insurance carriers seeking recovery of costs incurred and to be
incurred in these matters. Based upon the advice of counsel, management believes
such recovery is probable and therefore should not have a material effect on the
liquidity or capital resources of the Registrant. However, the ultimate outcome
of litigation cannot be predicted. To date settlements have been reached with
several carriers in this matter.
At December 31, 1994 a total of $7 million in anticipated insurance recoveries
is recorded in the accompanying Consolidated Financial Statements, including
approximately $4.1 million in prepaid expenses and other current assets since
such amounts were anticipated to be settled and received within 12 months. Such
amounts were in fact received during 1995. The remaining balance of $2.9 million
at December 31, 1995 is in dispute with the Registrant's insurance carriers as
more fully discussed in Item 3 "Legal Proceedings" and Note 17 to Consolidated
Financial Statements, "Contingencies." Management believes that recoveries in
excess of the amounts reflected in the accompanying Consolidated Financial
Statements are available under the insurance policies but have not been
recorded. There can be no assurances, however, that the Registrant will prevail
in its efforts to obtain amounts at or in excess of the estimated recoveries.
The cash needs of the Registrant have been satisfied from funds generated by
current operations and additional borrowings. It is expected that future
operational cash needs will also be satisfied from ongoing operations and
additional borrowings. The primary source of capital to fund additional real
estate acquisitions will come from the sale, financing and refinancing of the
Registrant's properties and from third party mortgages and purchase money notes
obtained in connection with specific acquisitions.
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, other financial instruments,
certificates of deposit and government securities.
BUSINESS TRENDS
Total 1995 revenues of the Registrant increased $7.7 million or 10% from 1994
levels to $84.6 million. Income from continuing operations declined by $52,000
or 1% during 1995 while operating income increased $1.1 million or 26% in the
current year versus such results of 1994.
The results of the Registrant's real estate operations reflect a 3% increase in
sales for the year, primarily as a result of additional hotel revenues.
Operating income from this segment was $5.1 million, up slightly from the prior
year. Continuing lease renewals and mortgage amortization will continue to have
a positive effect upon the revenues and operating profit of this segment.
<PAGE>
-16-
The Registrant's engineered products segment continues to reflect sales growth
in virtually all markets. This has resulted in a 17% increase in revenues during
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. Operating income from this segment increased 53% to
$3.8 million primarily as a result of a dramatic turnaround in the transformer
component of this segment which had lost approximately $1 million in each of the
last two years and has attained a break even position in the current year.
Management is hopeful this trend will continue.
The results of the Registrant's antenna systems segment reflect a 4% increase in
sales during 1995 versus the prior year. Although military sales remain weak
this segment is beginning to experience a higher mix of commercial product
sales. Operating results reflect a loss of approximately $1.1 million in the
current year compared to a loss of $1.5 million in 1994. Management is
concentrated on reversing this situation by expanding the Registrant's
commercial product base and reducing operating costs.
Although there can be no assurance as to how the events discussed above, or
other changes in the economy, will impact the future financial condition or
results of operations of the Registrant, management continues to monitor such
developments and has implemented measures to minimize any possible negative
effects they may have upon these businesses.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary information filed as part of this
Item 8 are listed under Part IV, Item 14, "Exhibits, Financial Statements and
Schedules and Reports on Form 8-K" and are contained in this Form 10-K at page
F-1.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
This information will be contained in the Proxy Statement of the Registrant for
the 1996 Annual Meeting of Stockholders under the captions "Election of
Directors" and "Executive Officers" and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
This information will be contained in the Proxy Statement of the Registrant for
the 1996 Annual Meeting of Stockholders under the caption "Executive
Compensation and Compensation of Directors" and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information will be contained in the Proxy Statement of the Registrant for
the 1996 Annual Meeting of Stockholders under the captions "Security Ownership"
and "Election of Directors" and is incorporated herein by reference.
<PAGE>
-17-
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information will be contained in the Proxy Statement of the Registrant for
the 1996 Annual Meeting of Stockholders under the caption "Certain Relationships
and Related Transactions" and is incorporated herein by reference. Also see Note
12, "Transactions with Related Parties," of Notes to Consolidated Financial
Statements, contained elsewhere in this report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES AND REPORTS ON
FORM 8-K
(a) (1) CONSOLIDATED FINANCIAL STATEMENTS. The following Consolidated
Financial Statements and Consolidated Financial Statement Schedules of
the Registrant are included in this Form 10-K at the pages indicated:
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Public Accountants F-1
Consolidated Balance Sheets as of December 31, 1995 and 1994 F-2
Consolidated Statements of Operations for the Years F-3
Ended December 31, 1995, 1994 and 1993 to
F-4
Consolidated Statements of Stockholders' Equity for F-5
the Years Ended December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the F-6
Years Ended December 31, 1995, 1994 and 1993 to
F-8
Notes to Consolidated Financial Statements F-9
to
F-25
(2) CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Schedule II -- Allowance for Doubtful Accounts F-26
Schedule III -- Real Property Held for Rental and F-27
Accumulated Depreciation
Schedule IV -- Mortgage Loans on Real Estate F-28
(3) Supplementary Data
Quarterly Financial Data (Unaudited) F-29
Schedules not listed above are omitted as not applicable or the
information is presented in the financial statements or related notes.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the last quarter of
fiscal 1995.
<PAGE>
-18-
(c) Exhibits
3.1. Amended and restated Certificate of Incorporation of the
Registrant (incorporated by reference to exhibit 3.1 filed with the Registrant's
report on Form 10-K for the fiscal year ended December 31, 1993).
3.2. By-laws of the Registrant (incorporated by reference to
exhibit 3 filed with the Registrant's report on Form 10-K for the fiscal year
ended December 31, 1980).
10.1. 1988 Incentive Stock Option Plan of the Registrant, as
amended (incorporated by reference to exhibit 10.1 filed with the Registrant's
report on Form 10-K for the fiscal year ended December 31, 1994).
10.2. 1988 Joint Incentive and Non-Qualified Stock Option
Plan, as amended (incorporated by reference to exhibit 10.2 filed with the
Registrant's report on Form 10-K for the fiscal year ended December 31, 1994).
10.3. Employment Agreement dated as of January 1, 1990 by and
between the Registrant and A. F. Petrocelli (incorporated by reference to
exhibit 10.9 filed with the Registrant's report on Form 10-K for the fiscal year
ended December 31, 1989).
10.4. Amendment dated as of December 3, 1990 to Employment
Agreement dated as of January 1, 1990, by and between the Registrant and A. F.
Petrocelli (incorporated by reference to exhibit 10.10 filed with the
Registrant's report on Form 10-K for the fiscal year ended December 31, 1990).
10.5. Amendment dated as of June 8, 1993 to Employment
Agreement dated as of January 1, 1990 by and between the Registrant and A. F.
Petrocelli (incorporated by reference to exhibit 10.5 filed with the
Registrant's report on Form 10-K for the fiscal year ended December 31, 1993).
10.6. Employment Agreement dated as of July 1, 1991 by and
between the Registrant and Dennis S. Rosatelli (incorporated by reference to
Exhibit 10.10 filed with the Registrant's report on Form 10-K for the fiscal
year ended December 31, 1991).
10.7. Option Agreement dated June 20, 1991 between the
Registrant and A. F. Petrocelli (incorporated by reference to Exhibit 10.12
filed with the Registrant's report on Form 10-K for the fiscal year ended
December 31, 1991).
10.8. Form of Option Agreements dated July 17, 1991 between
the Registrant and Robert L. Frome, Howard M. Lorber, Arnold S. Penner, Dennis
S. Rosatelli (incorporated by reference to Exhibit 10.13 filed with the
Registrant's report on Form 10-K for the fiscal year ended December 31, 1991).
10.9. Amendment dated as of April 16, 1993 to Option Agreement
dated as of July 17, 1991 by and between the Registrant and Robert L. Frome
(incorporated by reference to exhibit 10.9 filed with the Registrant's report on
Form 10-K for the fiscal year ended December 31, 1993).
<PAGE>
-19-
*21. Subsidiaries of the Registrant
*23. Accountants' consent to the incorporation by reference in
Registrant's Registration Statements on Form S-8 of the Report of Independent
Public Accountants included herein.
*27. Financial Data Schedule.
- -----------------
* Filed herewith
<PAGE>
-20-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
UNITED CAPITAL CORP.
Dated: March 21, 1996 By: /s/ A.F. Petrocelli
-------------- -------------------
A. F. Petrocelli
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
Dated: March 21, 1996 By: /s/ A.F. Petrocelli
-------------- -------------------
A. F. Petrocelli
Chairman, President and
Chief Executive Officer
Dated: March 21, 1996 By: /s/ Howard M. Lorber
-------------- --------------------
Howard M. Lorber
Director
Dated: March 21, 1996 By: /s/ Arnold S. Penner
-------------- --------------------
Arnold S. Penner
Director
Dated: March 21, 1996 By: /s/ Dennis S. Rosatelli
-------------- -----------------------
Dennis S. Rosatelli
Chief Financial Officer,
Chief Accountant, Secretary
and Director
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
and Stockholders of
United Capital Corp.:
We have audited the accompanying consolidated balance sheets of United Capital
Corp. (a Delaware Corporation) and subsidiaries as of December 31, 1995 and
1994, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1995. These financial statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United Capital Corp. and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
As discussed in Note 13 to the consolidated financial statements, effective
January 1, 1993, the Company changed its method of accounting for income taxes.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index to
consolidated financial statements and schedules are presented for purposes of
complying with the Securities and Exchange Commission's rules and are not a part
of the basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
/s/ ARTHUR ANDERSEN LLP
-----------------------
ARTHUR ANDERSEN LLP
Roseland, New Jersey
March 15, 1996
F-1
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ------------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,527,925 $ 1,584,744
Marketable securities 83,760 594,070
Notes and accounts receivable, net of allowance for doubtful
accounts of $471,406 and $542,545, respectively 16,253,100 16,146,086
Inventories 7,764,873 8,955,097
Prepaid expenses and other current assets 687,535 4,564,311
Deferred income taxes 1,893,205 768,343
------------ ------------
Total current assets 30,210,398 32,612,651
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, net 9,957,648 8,658,417
REAL PROPERTY HELD FOR RENTAL, net 68,063,502 75,071,300
NONCURRENT NOTES RECEIVABLE 3,624,188 696,228
OTHER ASSETS 4,387,064 4,964,593
DEFERRED INCOME TAXES 956,991 421,241
NET NONCURRENT ASSETS OF DISCONTINUED OPERATIONS 0 5,290,055
------------ ------------
Total assets $117,199,791 $127,714,485
============ ============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
------------------------------------
------------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 10,085,227 $ 9,597,459
Borrowings under revolving credit facilities 7,785,000 6,000,000
Accounts payable and accrued liabilities 19,144,363 15,068,108
Income taxes payable 3,680,639 3,719,570
Net current liabilities of discontinued operations 0 3,421,458
------------- -------------
Total current liabilities 40,695,229 37,806,595
LONG-TERM LIABILITIES:
Long-term debt 41,899,690 48,864,413
Other long-term liabilities 8,375,643 8,262,403
------------- -------------
Total liabilities 90,970,562 94,933,411
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock $.10 par value, authorized 7,500,000 shares;
issued 5,606,079 and 6,051,266 shares, respectively 560,608 605,127
Additional paid-in capital 10,101,147 14,531,320
Retained earnings 15,678,511 17,582,764
Minimum pension liability, net of tax (165,659) 0
Net unrealized gain on marketable securities, net of tax 54,622 61,863
------------- -------------
Total stockholders' equity 26,229,229 32,781,074
------------- -------------
Total liabilities and stockholders' equity $ 117,199,791 $ 127,714,485
============= =============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
F-2
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ---------------- ----------------
<S> <C> <C> <C>
REVENUES:
Net sales $61,994,021 $55,005,965 $48,740,541
Rental revenues from real estate operations 22,652,430 21,987,956 20,815,113
----------------- ---------------- ----------------
Total revenues 84,646,451 76,993,921 69,555,654
----------------- ---------------- ----------------
COSTS AND EXPENSES:
Cost of sales 47,895,213 42,737,647 35,247,622
Real estate operations-
Mortgage interest expense 4,417,574 4,948,591 5,384,332
Depreciation expense 6,379,775 6,362,426 6,328,192
Other operating expenses 5,932,051 5,449,007 5,157,170
General and administrative expenses 8,295,515 7,128,586 8,709,238
Selling expenses 6,253,362 6,021,789 4,989,382
----------------- ---------------- ----------------
Total costs and expenses 79,173,490 72,648,046 65,815,936
----------------- ---------------- ----------------
Operating income 5,472,961 4,345,875 3,739,718
----------------- ---------------- ----------------
OTHER INCOME (EXPENSE):
Interest income 709,967 567,615 553,718
Interest expense (1,145,076) (1,099,985) (995,161)
Other income and expense, net 1,644,856 2,819,493 4,113,097
----------------- ---------------- ----------------
Total other income (expense) 1,209,747 2,287,123 3,671,654
----------------- ---------------- ----------------
Income from continuing operations before
income taxes 6,682,708 6,632,998 7,411,372
Provision for income taxes 3,114,000 3,012,000 3,044,000
----------------- ---------------- ----------------
Income from continuing operations 3,568,708 3,620,998 4,367,372
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ---------------- ----------------
<S> <C> <C> <C>
DISCONTINUED OPERATIONS:
Operating loss, net of tax benefit of $780,000
and $360,000, respectively ($1,512,961) ($688,354) $0
Provision for disposition, net of tax benefit
of $2,040,000 (3,960,000) 0 0
----------------- ---------------- ----------------
Loss from discontinued operations,
net of tax (5,472,961) (688,354) 0
----------------- ---------------- ----------------
Income (loss) before cumulative effect of
change in accounting principle (1,904,253) 2,932,644 4,367,372
----------------- ---------------- ----------------
Cumulative effect of change in
accounting principle 0 0 702,000
----------------- ---------------- ----------------
Net income (loss) ($1,904,253) $2,932,644 $5,069,372
================= ================ ================
EARNINGS (LOSS) PER SHARE:
Income from continuing operations $.61 $.59 $.70
Loss from discontinued operations, net of tax (.93) (.11) 0
Cumulative effect of change in
accounting principle 0 0 .11
----------------- ---------------- ----------------
Net income (loss) per common share ($.32) $.48 $.81
================= ================ ================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 5,893,246 6,169,031 6,267,540
================= ================ ================
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-4
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Common Stock Issued Additional
------------------------------------- Paid-in Retained
Shares Amount Capital Earnings
---------------- ----------------- ----------------- --------------
<S> <C> <C> <C> <C>
BALANCE -- January 1, 1993 9,766,144 $976,614 $27,208,317 $9,580,748
Purchase and retirement of common shares (3,703,583) (370,358) (12,290,341) 0
Proceeds from the exercise of stock options 700 70 3,430 0
Net income 0 0 0 5,069,372
---------------- ----------------- ----------------- --------------
BALANCE -- December 31, 1993 6,063,261 606,326 14,921,406 14,650,120
---------------- ----------------- ----------------- --------------
Purchase and retirement of common shares (124,916) (12,491) (1,009,548) 0
Proceeds from the exercise of stock options 112,921 11,292 619,462 0
Cumulative effect of change in accounting principle 0 0 0 0
Change in net unrealized gain on marketable
securities, net of tax 0 0 0 0
Net income 0 0 0 2,932,644
---------------- ----------------- ----------------- --------------
BALANCE -- December 31, 1994 6,051,266 605,127 14,531,320 17,582,764
---------------- ----------------- ----------------- --------------
Purchase and retirement of common shares (445,887) (44,589) (4,433,603) 0
Proceeds from the exercise of stock options 700 70 3,430 0
Change in net unrealized gain on marketable
securities, net of tax 0 0 0 0
Change in minimum pension liability, net of tax 0 0 0 0
Net loss 0 0 0 (1,904,253)
---------------- ----------------- ----------------- --------------
BALANCE -- December 31, 1995 5,606,079 $560,608 $10,101,147 $15,678,511
================ ================= ================= ==============
</TABLE>
<TABLE>
<CAPTION>
Net
Unrealized
Minimum Gain on
Pension Marketable Total
Liability, Securities, Treasury Stockholders'
Net of Tax Net of Tax Stock Equity
-------------- -------------- --------------- -----------------
<S> <C> <C> <C> <C>
BALANCE -- January 1, 1993 $0 $0 ($10,600,872) $27,164,807
Purchase and retirement of common shares 0 0 10,600,872 (2,059,827)
Proceeds from the exercise of stock options 0 0 0 3,500
Net income 0 0 0 5,069,372
-------------- -------------- --------------- -----------------
BALANCE -- December 31, 1993 0 0 0 30,177,852
-------------- -------------- --------------- -----------------
Purchase and retirement of common shares 0 0 0 (1,022,039)
Proceeds from the exercise of stock options 0 0 0 630,754
Cumulative effect of change in accounting principle 0 346,825 0 346,825
Change in net unrealized gain on marketable
securities, net of tax 0 (284,962) 0 (284,962)
Net income 0 0 0 2,932,644
-------------- -------------- --------------- -----------------
BALANCE -- December 31, 1994 0 61,863 0 32,781,074
-------------- -------------- --------------- -----------------
Purchase and retirement of common shares 0 0 0 (4,478,192)
Proceeds from the exercise of stock options 0 0 0 3,500
Change in net unrealized gain on marketable
securities, net of tax 0 (7,241) 0 (7,241)
Change in minimum pension liability, net of tax (165,659) 0 0 (165,659)
Net loss 0 0 0 (1,904,253)
-------------- -------------- --------------- -----------------
BALANCE -- December 31, 1995 ($165,659) $54,622 $0 $26,229,229
============== ============== =============== =================
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-5
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ---------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) ($1,904,253) $2,932,644 $5,069,372
----------------- ---------------- -----------------
Adjustments to reconcile net income (loss)
to net cash provided by
operating activities-
Depreciation and amortization 7,938,095 7,493,571 7,913,406
Disposal of discontinued operations 1,868,597 0 0
Cumulative effect of change in
accounting principle 0 0 (702,000)
Net realized and unrealized
(gains) losses on marketable securities (229,979) (1,203,463) (743,636)
Changes in assets and liabilities
net of effects from business
acquisitions and disposals (A) 5,228,219 (3,410,232) 1,445,967
----------------- ---------------- -----------------
Total adjustments 14,804,932 2,879,876 7,913,737
----------------- ---------------- -----------------
Net cash provided by operating
activities 12,900,679 5,812,520 12,983,109
----------------- ---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities 0 (558,584) (307,006)
Proceeds from sale of marketable
securities 729,318 2,979,985 0
Acquisition of property, plant and
equipment (2,520,169) (2,075,975) (1,032,619)
Cash paid in acquisition of operating business 0 (2,688,565) 0
Investing activities of discontinued operations 0 (1,384,920) 0
----------------- ---------------- -----------------
Net cash used in investing
activities (1,790,851) (3,728,059) (1,339,625)
----------------- ---------------- -----------------
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ---------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Principal payments on mortgage
commitments, notes and loans ($9,626,955) ($8,487,381) ($8,109,745)
Proceeds from mortgage commitments,
notes and loans 3,150,000 0 0
Net borrowings under revolving credit facilities 1,785,000 6,000,000 0
Purchase and retirement of common
shares (4,478,192) (1,022,039) (2,059,827)
Proceeds from the exercise of stock options 3,500 630,754 3,500
Financing activities of discontinued operations 0 (1,370,352) 0
----------------- ---------------- -----------------
Net cash used in financing
activities (9,166,647) (4,249,018) (10,166,072)
----------------- ---------------- -----------------
Net increase (decrease) in cash and
cash equivalents 1,943,181 (2,164,557) 1,477,412
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,584,744 3,749,301 2,271,889
----------------- ---------------- -----------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $3,527,925 $1,584,744 $3,749,301
================= ================ =================
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for-
Interest $5,423,000 $5,918,000 $6,232,000
Taxes 1,874,000 2,756,000 2,415,000
================= ================ =================
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
See notes to consolidated financial statements
F-7
<PAGE>
<TABLE>
<CAPTION>
(A) Changes in assets and liabilities,
net of effects from business
acquisitions and disposals for the
years ended December 31, 1995, 1994
and 1993 are as follows:
1995 1994 1993
----------------- ---------------- -----------------
<S> <C> <C> <C>
Increase in notes and accounts
receivable, net ($107,014) ($2,464,223) ($1,484,155)
Decrease (increase) in inventories 1,190,224 (885,822) 65,708
Decrease (increase) in prepaid
expenses and other current assets 3,876,776 (4,017,518) (139,319)
Increase in deferred income taxes (1,571,542) (128,477) (1,153,518)
Increase in real property held for
rental, net (2,362,858) (5,321,617) (182,537)
Decrease (increase) in noncurrent
notes receivable (274,462) 126,313 (32,131)
Decrease (increase) in other assets 366,281 (2,933,952) (259,159)
Increase in accounts payable
and accrued liabilities 4,076,255 2,425,119 3,639,305
Increase (decrease) in income
taxes payable (38,931) (635,612) 1,460,374
Increase (decrease) in other
long-term liabilities 73,490 6,850,316 (468,601)
Discontinued operations - noncash
charges and working capital changes 0 3,575,241 0
----------------- ---------------- -----------------
Total $5,228,219 ($3,410,232) $1,445,967
================= ================ =================
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-8
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
Nature of Business-
United Capital Corp. (the "Registrant") and its subsidiaries are
currently engaged in the investment and management of real estate and
in the manufacture and sale of antenna systems and engineered products.
Principles of Consolidation-
The consolidated financial statements include the accounts of the
Registrant and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Income Recognition --
Real Estate Operations-
The Registrant leases substantially all of its properties to tenants
under net leases. Under this type of lease, the tenant is obligated to
pay all operating costs of the property including real estate taxes,
insurance, repairs and maintenance. Rental income is recognized based
on the terms of the leases. Certain lease agreements provide for
additional rent based on a percentage of tenants' sales. Such
additional rents are recorded as income when they can be reasonably
estimated. Gains on sales of real estate assets are recorded when the
gain recognition criteria under generally accepted accounting
principles have been met.
Revenue Recognition --
Manufacturing Operations-
Generally, sales are recorded when products are shipped to the
customer. In the antenna systems segment, sales and gross profits on
contracts with relatively few deliverable units, when produced over an
extended period, usually in excess of 12 months, are recognized on a
percentage-of-completion basis. For such projects, sales and gross
profit are adjusted prospectively for revisions in estimated total
contract costs and contract values. Estimated losses are recorded when
identified. Sales also include royalties received in connection with
the licensing of certain of the Registrant's products.
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
F-9
<PAGE>
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 Registrant adopted Statement of Financial Accounting Standard
No.115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115") effective January 1, 1994. The effect of the
adoption increased stockholders' equity by $346,825, net of tax at such
date.
Under the previous accounting policy, securities were carried at the
lower of cost or market value with a charge to income for unrealized
holding losses. Unrealized gains were recognized only to the extent
that previously unrealized losses had been recognized. As prescribed,
this new standard was not applied retroactively to prior years.
Inventories-
Inventories are stated at the lower of cost or market and include
material, labor and manufacturing overhead. The first-in, first-out
(FIFO) method is used to determine the cost of inventories in each of
the Registrant's business segments.
The components of inventory at December 31, 1995 and 1994 are as
follows-
1995 1994
----------------- ----------------
Raw materials $3,948,129 $4,135,756
Work in process 2,125,044 1,872,219
Finished goods 1,691,700 2,947,122
----------------- ----------------
$7,764,873 $8,955,097
================= ================
Depreciation and Amortization-
Depreciation and amortization are provided on a straight-line basis
over the estimated useful lives of the related assets as follows-
Real property held for rental-
Buildings 7 to 39 years
Equipment 5 to 7 years
Property, plant and equipment-
Buildings and improvements 18 to 40 years
Machinery and equipment 3 to 10 years
F-10
<PAGE>
Real Property Held for Rental-
Real property held for rental is carried at cost less accumulated
depreciation. Major renewals and betterments are capitalized.
Maintenance and repairs are expensed as incurred.
Certain mortgage obligations assumed by the Registrant contain
provisions whereby the mortgage holder may acquire, under certain
conditions, an interest in the properties securing the obligation, for
a nominal amount. The Registrant considers any costs incurred as a
result of these provisions to be a cost of acquisition and the basis in
such properties is adjusted accordingly.
Research and Development-
The Registrant expenses research, development and product engineering
costs as incurred. Approximately $403,000, $641,000 and $618,000 of
such costs were incurred by the Registrant in 1995, 1994 and 1993,
respectively. Provisions for losses are made for research and
development contracts when the estimated costs under such contracts
exceed the proceeds.
Net Income (Loss) Per Common Share-
Net income (loss) per common share is computed based upon the weighted
average number of common and dilutive common equivalent shares
outstanding during the period. Fully diluted and primary earnings per
common share are the same amounts for each of the periods presented.
Prior Year Financial Statements-
Certain amounts have been reclassified in the December 31, 1994 and
1993 financial statements and notes thereto to present them on a basis
consistent with the current year.
Use of Estimates-
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
New Accounting Pronouncement-
During 1995, Statement of Financial Accounting Standards (SFAS) No.
121-"Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets To Be Disposed Of" was issued. SFAS No. 121 is effective for
fiscal years beginning after December 15, 1995 and is not expected to
have a material impact on the Registrant's results of operations.
F-11
<PAGE>
(2) ACQUISITION AND DISPOSAL OF OPERATING COMPANIES:
On March 14, 1994 the Registrant, through a new wholly-owned subsidiary
known as Kentile, Inc. ("Kentile"), purchased substantially all of the
operating assets of Kentile Floors, Inc. ("Kentile Floors") for
approximately $9.6 million. The purchase price was comprised of
approximately $6.5 million in new bank financing and approximately $3.1
million in cash.
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 December 1995, the assets of Kentile were assigned for the
benefit of creditors and are currently being liquidated. In connection
with the write-off of the Registrant's investment in Kentile, a pretax
charge of approximately $6 million, including estimated costs of
disposition was recorded in 1995. 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 upon
the disposition of the Kentile assets.
In addition, the accompanying consolidated statements of operations
include operating losses of Kentile during 1995, incurred prior to its
closure, of approximately $2.3 million, on a pre-tax basis.
(3) REAL PROPERTY HELD FOR RENTAL:
The Registrant is the lessor of real estate under operating leases which
expire in various years through 2071.
The following is a summary of real property held for rental at
December 31-
1995 1994
----------------- ----------------
Land $12,094,596 $12,244,736
Buildings 113,888,625 114,395,602
----------------- ----------------
125,983,221 126,640,338
Less- Accumulated depreciation (57,919,719) (51,569,038)
----------------- ----------------
$68,063,502 $75,071,300
================= ================
As of December 31, 1995, total minimum future rentals to be received
under noncancellable leases for each of the next five years and
thereafter are as follows-
Year Ended December 31-
1996 $16,821,000
1997 14,680,000
1998 12,344,000
1999 9,909,000
2000 8,250,000
Thereafter 48,997,000
------------------
Total Minimum Future Rentals $111,001,000
==================
F-12
<PAGE>
Minimum future rentals do not include additional rentals that may be
received under certain leases which provide for such rentals based upon a
percentage of lessees' sales. Percentage rents included in the
determination of net income in 1995, 1994 and 1993 were approximately
$1,029,000, $915,000 and $1,037,000, respectively.
(4) PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is principally used in the Registrant's
manufacturing operations and consists of the following at December 31-
1995 1994
------------------ ----------------
Land $992,950 $992,950
Buildings and improvements 4,143,125 3,450,014
Machinery and equipment 10,865,986 9,038,994
------------------ ----------------
16,002,061 13,481,958
Less- Accumulated depreciation (6,044,413) (4,823,541)
------------------ ----------------
$9,957,648 $8,658,417
================== ================
At December 31, 1995 and 1994, property, plant and equipment includes
approximately $2.3 million of land and buildings used in the Registrant's
D&M/Chu antenna business. The Registrant expects to cease operations at
D&M/Chu, Massachusetts during early 1996 and anticipates renting the
facility at that time. Accordingly, the Registrant intends to reclassify
such property to real property held for rental in 1996.
(5) MARKETABLE SECURITIES:
The aggregate market value of marketable securities, which were all
equity securities and available-for-sale, was $83,760 and $594,070 at
December 31, 1995 and 1994, respectively, while gross unrealized holding
gains were $54,622 and $61,863 on a net of tax basis, respectively.
Proceeds from the sales of securities, which were designated as
available-for-sale in 1995 and 1994, and the resulting gross realized
gains and losses included in the determination of net income for the
years ended December 31, 1995, 1994 and 1993 are as follows-
<TABLE>
<CAPTION>
1995 1994 1993
--------------- --------------- ---------
<S> <C> <C> <C>
Proceeds $729,318 $2,979,985 $0
=============== =============== =========
Realized gains $229,979 $1,233,389 $0
=============== =============== =========
Realized losses $0 ($29,926) $0
=============== =============== =========
</TABLE>
F-13
<PAGE>
(6) NOTES RECEIVABLE:
Notes receivable consist of the following at December 31-
<TABLE>
<CAPTION>
1995 1994
-------------- -------------
<S> <C> <C>
Mortgage note receivable (a) $2,958,229 $0
Mortgage note receivable (Note 12) 2,497,000 0
Mortgage note receivable (Note 12) 0 2,253,000
Mortgage notes receivable (b) 695,530 722,913
Mortgage note receivable (Note 12) 0 265,000
Due from related party (Note 12) 415,000 360,000
Other 581,394 0
-------------- -------------
7,147,153 3,600,913
Less- Current portion included in notes
and accounts receivable 3,522,965 2,904,685
-------------- -------------
$3,624,188 $696,228
============== =============
</TABLE>
(a) In February 1994, the Registrant acquired the underlying
mortgage secured by Kentile Floors' South Plainfield, New Jersey
facility for $2.25 million plus the assumption of certain
liabilities in connection with operating and maintaining the
property. The mortgage note has a face amount outstanding of
approximately $6.5 million plus delinquent accrued interest. At
December 31, 1994 the Registrant accounted for this mortgage as
an insubstance foreclosure and, accordingly, recorded the
purchase price as a component of real property held for rental.
In accordance with Statement of Financial Accounting Standard
No. 114, "Accounting by Creditors for Impairment of a Loan," the
Registrant reclassified this to noncurrent notes receivable
effective January 1, 1995. As prescribed, prior year amounts
were not restated. Management believes that the fair value of
the property exceeds the carrying value of the mortgage note.
(b) As partial consideration in the sale of several properties, the
Registrant received mortgage notes in the aggregate amount of
$2,080,000. The notes, which are secured by the properties sold,
bore interest in 1995 and 1994 at various rates ranging between
9% and 15% and bear interest in future periods at rates ranging
between 9% and 11%. Interest under the notes is due monthly.
Principal repayment terms vary with periodic installments
through December 2008. One such note, with an original face
amount of $200,000 was satisfied during 1994.
In accordance with generally accepted accounting principles, the
gains from the sales of certain of these properties are being
recognized under the installment method, and accordingly, the
carrying value of noncurrent notes receivable has been reduced
by deferred gains of approximately $896,000 and $941,000 at
December 31, 1995 and 1994, respectively. The deferred gains are
being recognized as income as payments are received under the
note.
F-14
<PAGE>
(7) OTHER ASSETS:
Other assets consist of the following at December 31-
<TABLE>
<CAPTION>
1995 1994
----------------- ----------------
<S> <C> <C>
Anticipated insurance recoveries (a) $2,943,000 $7,000,000
Pensions - Note 15 0 417,663
Deposits 810,805 832,795
Covenants not to compete 204,889 403,717
Cash surrender value of life insurance policies, net 295,410 294,447
Patents, net of accumulated amortization 176,134 188,646
Other 644,361 162,251
----------------- ----------------
5,074,599 9,299,519
Less- Amounts included in prepaid expenses and
other current assets 687,535 4,334,926
----------------- ----------------
Total other assets $4,387,064 $4,964,593
================= ================
</TABLE>
(a) In accordance with Staff Accounting Bulletin 92, the Registrant
has recorded the anticipated recoveries from its insurance
carriers in connection with the environmental investigation and
remediation costs to be incurred at two of its manufacturing
sites in New Jersey. See Note 17, "Contingencies."
(8) ACCOUNTS PAYABLE
AND ACCRUED LIABILITIES:
Accounts payable and accrued liabilities consist of the following at
December 31-
<TABLE>
<CAPTION>
1995 1994
----------------- ----------------
<S> <C> <C>
Accounts payable $8,658,096 $8,602,027
Accrued wages and benefits 2,477,483 2,143,151
Liabilities for discontinued operations 3,236,311 0
Other accrued expenses 4,772,473 4,322,930
----------------- ----------------
$19,144,363 $15,068,108
================= ================
</TABLE>
F-15
<PAGE>
(9) LONG-TERM DEBT:
Long-term debt consists of the following at December 31-
<TABLE>
<CAPTION>
1995 1994
----------------- ----------------
<S> <C> <C>
First mortgages on real property (a) $43,816,859 $50,516,000
Second mortgages on real property (b) 355,431 390,902
Loan payable to bank (c) 2,010,832 3,280,829
Loan payable to bank (d) 1,575,000 2,756,251
Loan payable to bank (e) 2,992,500 0
Note payable (f) 1,200,000 1,200,000
Other 34,295 317,890
----------------- ----------------
51,984,917 58,461,872
Less- Current maturities 10,085,227 9,597,459
----------------- ----------------
$41,899,690 $48,864,413
================= ================
</TABLE>
(a) First mortgages bearing interest at rates ranging from 4% to 10.5% per
annum are collateralized by the related real property. Such amounts
are scheduled to mature at various dates from September 1996 through
February 2010.
(b) Second mortgages bearing interest at rates of approximately 10.125%
per annum are collateralized by the related real property. Such
amounts are scheduled to mature at various dates from October 2001
through November 2002.
(c) In July 1992, the Registrant borrowed $6,350,000 from a bank to
refinance a note to a former shareholder which was issued in
connection with the merger of BMG Equities, Corp. ("BMG"). This note
bore interest at the bank's prime lending rate plus 1/4% until April
1993 when it was converted to a fixed rate note at 6.2% for the
remainder of the term. The note is due in 60 equal principal
installments, together with accrued interest thereon, through July
1997. The loan agreement contains, among other things, several
financial covenants regarding net worth and debt-to-equity ratios. At
December 31, 1995 the Registrant was not in compliance with certain of
these covenants. The bank has granted a waiver for such noncompliance
and has modified certain covenants through December 30, 1996. The
Registrant believes it will be in compliance with the foregoing
agreements.
(d) In connection with the acquisition of the operating assets of Chu
Associates, Inc., the Registrant entered into a $4,725,000 loan
agreement with a bank. The loan bore interest at the bank's prime
lending rate plus 1/4% until April 1993 when it was converted to a
fixed rate note at 6.3% for the remainder of the term. The note is
payable monthly, with 48 equal monthly principal installments
beginning in May 1993. The loan agreement contains several financial
covenants regarding working capital, net worth, capital expenditures
and debt-to-equity ratios.
F-16
<PAGE>
(e) In August 1995, the Registrant converted $3.15 million outstanding
under its revolving credit facility to a fixed rate note at 7.94% per
annum. The note is due in 60 equal principal installments, together
with accrued interest thereon, through September 2000. The loan
agreement contains, among other things, several financial covenants
regarding net worth and debt-to-equity ratios. At December 31, 1995
the Registrant was not in compliance with certain of these covenants.
The bank has granted a waiver for such noncompliance and has modified
certain covenants through December 30, 1996. The Registrant believes
it will be in compliance with the foregoing agreements.
(f) As partial consideration in the acquisition of D&M/Chu the Registrant
issued a $1,200,000 note to the sellers. The note bore interest at
7.75% between May 1995 and December 1995. The interest rate is
adjusted annually by no more than a 1% increase or decrease from the
rate of the immediately preceding twelve-month period to the published
prime rate charged by U. S. banks. This rate was 6.5% between May 1992
and May 1994 and 6.75% during the 12 month period ending in May 1995.
The note requires quarterly interest payments and matures in May 1997.
Under certain conditions, the Registrant may offset certain amounts
against this note.
The approximate aggregate maturities of these obligations at
December 31, 1995 are as follows-
1996 $10,085,227
1997 8,013,866
1998 5,471,182
1999 5,239,684
2000 5,015,935
Thereafter 18,159,023
------------------
$51,984,917
==================
(10) REVOLVING CREDIT FACILITIES:
The Registrant maintains an unsecured line of credit arrangement with a
bank which provides for borrowings up to $15,000,000. Advances under
this facility accrue interest at the bank's prime lending rate
("Prime"), which was 8.5% at December 31, 1995 and 1994, or at the
London Interbank Offered Rate ("LIBOR") plus 2%, at the Registrant's
option. Borrowings at the LIBOR rate must be fixed for a 1, 2, 3 or 6
month period at the time of the advance. At December 31, 1995
approximately $7.8 million was outstanding under this facility;
approximately $1.8 million at Prime and $6 million at approximately
7.25%. At December 31, 1994, $6 million was outstanding at Prime.
Borrowings under this facility are jointly and severally guaranteed by
both the Registrant and its subsidiaries. Unless extended, any amounts
outstanding are due and payable within 30 days of the expiration of
this facility. This demand facility is reviewed by the bank annually on
May 31.
F-17
<PAGE>
(11) STOCKHOLDERS' EQUITY:
Stock Options-
The Registrant has two stock option plans under which qualified and
nonqualified options may be granted to key employees to purchase the
Registrant's common stock at the fair market value at the date of
grant. Under both plans, the options typically become exercisable in
three equal installments, beginning one year from the date of grant.
The 1988 Incentive Stock Option Plan (the "Incentive Plan") provides
for the granting of incentive stock options not to exceed 325,000
options in the aggregate. The 1988 Joint Incentive and Non-Qualified
Stock Option Plan (the "Joint Plan") provides for the granting of
incentive or nonqualified stock options, also not to exceed 325,000
options in the aggregate.
At December 31, 1995, there were 117,193 and 47,733 options
outstanding under the Joint Plan and Incentive Plan, respectively. At
December 31, 1994, 119,516 and 49,594 options were outstanding under
the Joint Plan and Incentive Plan, respectively.
In addition to options outstanding under the Joint Plan and Incentive
Plan, 180,000 options were outstanding at December 31, 1995 and 1994.
Such options were previously granted to Directors and certain
officers of the Registrant and are presently exercisable at $5.50 per
share, which price was equal to or greater than the market value per
share on the date of grant. If unexercised, these options expire 30
days after the end of a Director's term. During 1994 directors of the
Registrant exercised options to purchase 60,000 of such shares.
Transactions involving stock options are summarized below-
<TABLE>
<CAPTION>
1995 1994
----------------- ----------------
<S> <C> <C>
Outstanding, beginning of year 349,110 506,328
Granted 0 0
Canceled (3,484) (44,297)
Exercised (700) (112,921)
----------------- ----------------
Outstanding, end of year 344,926 349,110
================= ================
Exercisable, end of year 304,926 268,443
================= ================
Price range of options exercised $5.00 $5.00-$8.42
================= ================
Price range of options outstanding $5.00-$16.38 $5.00-$16.38
================= ================
</TABLE>
(12) TRANSACTIONS WITH RELATED PARTIES:
In May 1995, the Registrant participated in a $4.5 million loan
transaction secured by an assignment of a mortgage note covering a
commercial office building in New York City. The Registrant advanced
approximately $2.5 million in connection with this loan. The remaining
amounts were advanced by the following: a Director of the Registrant,
$500,000; the wife of the Board Chairman, $1.45 million; and the
balance by unrelated parties. The note bears interest at
F-18
<PAGE>
14% per annum, payable monthly and matures in May 1996. The
participants also received a commitment fee of 4% in connection with
the loan. Upon maturity, the note can be extended for two six month
periods, each in consideration of 2% of the outstanding balance and an
additional eight month period in consideration of 3% of the outstanding
balance. A Director of the Registrant is a shareholder of the borrower
and also a guarantor under the note.
The Registrant's two hotel properties are managed by a publicly traded
company for which the Board Chairman and another Director of the
Registrant are directors. Fees paid for the management of these
properties is based upon a percentage of revenue and were approximately
$120,000 and $103,000 for 1995 and 1994, respectively. In addition, the
Registrant has committed to loan this Company $4 million over a six
year period. This loan will be secured by a second mortgage on real
property. No amounts have been advanced to date.
In May 1994, the Registrant participated in a $2,650,000 loan
transaction secured by a first mortgage covering a leasehold estate.
The Registrant advanced $265,000 in connection with this loan. The
remaining amount was advanced by a company in which a Director of the
Registrant owns a substantial interest. The note bore interest at 15%
per annum, payable monthly and was fully satisfied together with
accrued interest in May 1995. In addition, the participants received a
commitment fee of 3% on their advances from the borrower.
In April 1994, the Registrant participated in a $5,000,000 loan
transaction secured by a second mortgage covering a leasehold estate.
The Registrant advanced $2,253,000 in connection with this loan. The
remaining amounts were advanced by the following: Directors of the
Registrant, $830,000; the wife of the Board Chairman, $1 million;
Officers of the Registrant, $39,000; and $878,000 by unrelated parties.
The note bore interest at 15% per annum, payable monthly and was fully
satisfied together with accrued interest in February 1995. In addition,
the participants received a commitment fee of 3% on their advances from
the borrower.
In connection with the purchase of an interest in a real estate loan
from a Director in 1992, the Registrant issued a note in the amount of
$198,000. The note bore interest at 10% and was fully satisfied in
February 1995.
During 1995 and 1994 the Registrant advanced, in the aggregate,
$415,000 and $360,000, respectively, to the Chairman of the Board. Such
advances bore interest at the Registrant's borrowing rate under its
revolving credit facility which was 8.5% at December 31, 1995 and 1994.
Amounts outstanding at December 31, 1995 and 1994 of $415,000 and
$360,000, respectively, together with accrued interest thereon were
repaid in January 1996 and 1995, respectively.
(13) INCOME TAXES:
Effective January 1, 1993 the Registrant adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). In prior years, the Registrant accounted for income taxes using
Accounting Principles Board Opinion No. 11 ("APB 11"). Under SFAS 109,
deferred tax assets and liabilities are determined based on the
difference between the tax basis of an asset or liability and its
reported amount in the consolidated financial statements using enacted
tax rates. Future tax benefits attributable to these differences are
recognized to the extent that realization of such benefits is more
likely than not.
F-19
<PAGE>
Under the provisions of SFAS 109, the Registrant has elected not to
restate prior years' consolidated financial statements. The cumulative
effect of this accounting change on years prior to 1993 resulted in a
benefit of $702,000, or $.11 per share which is reflected in the
accompanying consolidated statement of income for 1993. In addition,
the effect of this change on income before cumulative effect of an
accounting change in 1993 was an increase of approximately $700,000 or
$.11 per share.
The cumulative benefit recorded by the Registrant primarily arose from
basis differences of real properties held for rental for financial
statement and income tax purposes. Based upon the Registrant's
historical and projected levels of pretax income, management believes
it is more likely than not that the Registrant will realize such
benefits in the future and accordingly no valuation reserve has been
recorded.
The components of the net deferred tax asset (liability) at
December 31, 1995 and 1994, are as follows-
<TABLE>
<CAPTION>
1995 1994
--------------- ---------------
<S> <C> <C>
Realization allowances related to
accounts receivable and inventories $585,046 $537,407
Net unrealized gain on marketable securities (28,138) 0
Basis differences relating to real
property held for rental 2,246,128 1,755,810
Accrued expenses, deductible when paid 2,683,819 1,609,260
Deferred revenue and profit (for tax purposes) (221,486) (256,673)
Basis differences relating to business acquisitions (1,858,912) (1,858,912)
Property, plant and equipment (579,619) (455,685)
Pensions 7,959 (147,563)
Other, net 15,399 5,940
--------------- ---------------
Net deferred tax asset (liability) 2,850,196 1,189,584
Less- Current portion 1,893,205 768,343
--------------- ---------------
Noncurrent portion $956,991 $421,241
=============== ===============
</TABLE>
Income tax provision (benefit) reflected in the accompanying
consolidated statements of income for the years ended December 31,
1995, 1994 and 1993, is summarized as follows-
<TABLE>
<CAPTION>
1995 1994 1993
--------------- -------------- ---------------
<S> <C> <C> <C>
Current-
Federal $2,572,000 $2,286,000 $2,511,000
State 1,337,000 1,131,000 770,000
Deferred (795,000) (405,000) (237,000)
--------------- -------------- ---------------
$3,114,000 $3,012,000 $3,044,000
=============== ============== ===============
</TABLE>
F-20
<PAGE>
A reconciliation of tax provision computed at statutory rates to the
amounts shown in the accompanying consolidated statements of income for
the years ended December 31, 1995, 1994 and 1993 is as follows-
<TABLE>
<CAPTION>
1995 1994 1993
--------------- -------------- ---------------
<S> <C> <C> <C>
Computed Federal income
tax provision at statutory rates $2,272,000 $2,255,000 $2,520,000
State income taxes, net of
Federal income tax benefit 903,000 767,000 508,000
Other, net (61,000) (10,000) 16,000
--------------- -------------- ---------------
$3,114,000 $3,012,000 $3,044,000
=============== ============== ===============
</TABLE>
(14) OTHER INCOME AND EXPENSE:
The components of other income and expense in the accompanying
consolidated statements of income for the years ended December 31,
1995, 1994 and 1993 are as follows-
<TABLE>
<CAPTION>
1995 1994 1993
--------------- -------------- ---------------
<S> <C> <C> <C>
Gain on sales of real estate assets $865,490 $1,399,495 $1,109,591
Net realized and unrealized
gains (losses) on
marketable securities (a) 229,979 1,203,463 743,636
Income from equity investments (b) 3,676 46,029 578,382
Other (c) 545,711 170,506 1,681,488
--------------- -------------- ---------------
$1,644,856 $2,819,493 $4,113,097
=============== ============== ===============
</TABLE>
(a) In 1995 and 1994 unrealized gains and losses on marketable
securities, which were all available-for-sale, have been recorded
net, as a separate component of stockholders' equity in
accordance with SFAS 115. In prior years, unrealized losses were
included in the determination of net income while unrealized
gains were only recognized to the extent of previously
unrecognized losses. See Note 1.
(b) Income from equity investments principally represents
nonrecurring cash distributions received by the Registrant in
connection with interests held in certain real estate ventures
which were acquired in the 1991 merger with BMG. Such investments
were valued at historical cost at the date of acquisition.
(c) In 1993, the Registrant received a $2 million settlement from
Metex' insurance carrier in connection with the class action
civil suit brought by the former shareholders of Metex. This
settlement is reflected in other income, net of approximately
$450,000 of costs incurred in defense of this action during 1993.
All defense costs incurred prior to 1993 were included in general
and administrative expenses.
(15) RETIREMENT PLAN:
The Registrant has a noncontributory defined benefit pension plan that
covers substantially all full-time employees of the engineered products
segment.
F-21
<PAGE>
The following table sets forth the funded status of the plan and
amounts recognized in the Registrant's consolidated financial
statements as of December 31, 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
----------------- ----------------
<S> <C> <C>
Accumulated benefit obligation:
Vested $1,867,000 $1,719,000
Nonvested 141,000 84,000
----------------- ----------------
$2,008,000 $1,803,000
================= ================
Plan assets at fair value, primarily U. S. bonds,
government-backed mortgage obligations
and stocks $1,968,000 $1,829,000
Projected benefit obligation (2,182,000) (1,968,000)
----------------- ----------------
Projected benefit obligation in excess of plan assets (214,000) (139,000)
Effect of purchase accounting (156,000) (156,000)
Unrecognized net loss, net of amortization 581,000 713,000
Adjustment required to recognize minimum
liability (251,000) 0
----------------- ----------------
Prepaid (accrued) pension obligation ($40,000) $418,000
================= ================
</TABLE>
In accordance with Statement of Financial Accounting Standard No.87,
"Employers' Accounting for Pensions" ("SFAS 87") an additional minimum
liability of approximately $251,000 was recognized at December 31, 1995
for the sum of the excess of the accumulated benefit obligation over
the fair value of plan assets plus prepaid pension contributions. The
liability has been offset by intangible assets to the extent possible
and the balance has been charged as a separate component of
stockholders' equity, net of tax benefits. No pension liability was
provided at December 31, 1994 since the fair value of plan assets
exceeded the accumulated benefit obligation.
Net periodic pension expense for 1995 and 1994 includes the following
components-
<TABLE>
<CAPTION>
1995 1994
-------------- ---------------
<S> <C> <C>
Service cost $197,000 $182,000
Interest cost 145,000 132,000
Actual return on plan assets (199,000) 61,000
Net amortization and deferral 63,000 (222,000)
-------------- ---------------
Net periodic pension expense $206,000 $153,000
============== ===============
</TABLE>
In determining the projected benefit obligation for 1995 and 1994, the
weighted average assumed discount rate was 7.5%, while the rate of
expected increases in future salary levels was 3.5%. The expected
long-term rate of return on assets used in determining net periodic
pension cost was 9%. No contributions were made during 1995 or 1994.
F-22
<PAGE>
(16) BUSINESS SEGMENTS:
At December 31, 1995, the Registrant had three business segments: real
estate investment and management, the manufacturing and sale of
engineered products and the manufacture and sale of antenna systems.
Information on the Registrant's business segments for 1995, 1994 and
1993 is as follows-
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
(in thousands)
<S> <C> <C> <C>
Net revenues and sales-
Rental revenues $22,652 $21,988 $20,815
Antenna systems 20,307 19,495 21,098
Engineered products 41,687 35,511 27,643
------------- ------------- -------------
$84,646 $76,994 $69,556
============= ============= =============
Operating income (loss)-
Real estate investment and management $5,129 $5,009 $3,946
Antenna systems (1,103) (1,527) 769
Engineered products 3,779 2,477 1,585
------------- ------------- -------------
7,805 5,959 6,300
General corporate expenses (2,332) (1,613) (2,561)
Other income (expense), net 1,210 2,287 3,672
------------- ------------- -------------
Income from continuing
operations before income taxes $6,683 $6,633 $7,411
============= ============= =============
Identifiable assets-
Real estate investment and management $88,954 $92,479 $86,668
Antenna systems 15,291 15,580 17,686
Engineered products 12,955 14,365 10,528
Discontinued operations 0 5,290 0
------------- ------------- -------------
$117,200 $127,714 $114,882
============= ============= =============
</TABLE>
Through the Registrant's antenna systems segment, approximately 16%,
17% and 21% of consolidated revenues were derived from sales to the United
States Government or its contractors in 1995, 1994 and 1993, respectively.
Sales by the Registrant's engineered products segment to automobile
original equipment manufacturers accounted for approximately 23%, 23% and 20% of
1995, 1994 and 1993 consolidated revenues, respectively.
(17) CONTINGENCIES:
The Registrant has undertaken the completion of environmental studies
and/or remedial action at Metex' two New Jersey facilities.
F-23
<PAGE>
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.
At December 31, 1994, a total of $7 million in anticipated insurance
recoveries is recorded in the accompanying consolidated financial
statements, including approximately $4.1 million in prepaid expenses
and other current assets since such amounts were anticipated to be
settled and received within 12 months. Such amounts were in fact
received during 1995. The remaining balance of $2.9 million at December
31, 1995 is in dispute with the Registrant's insurance carriers.
Management believes that recoveries in excess of the amounts reflected
in the accompanying Consolidated Financial Statements are available
under the insurance policies but have not been recorded. There can be
no assurances, however, that the Registrant will prevail in its efforts
to obtain amounts at or in excess of the estimated recoveries.
F-24
<PAGE>
In the opinion of management, these matters will be resolved favorably
and such amounts, if any, not recovered under the Registrant's
insurance policies will be paid gradually over a period of years and,
accordingly, should not have a material adverse effect upon the
business, liquidity or financial position of the Registrant. However,
adverse decisions or events, particularly as to the merits of the
Registrant's factual and legal basis could cause the Registrant to
change its estimate of liability with respect to such matters in the
future.
Effective January 1, 1994, the Registrant adopted the provisions of
Staff Accounting Bulletin 92 and accordingly has recorded the expected
liability associated with remediation efforts as a component of other
long-term liabilities and the anticipated insurance recoveries as a
component of prepaid expenses and other current assets and other assets
in the Registrant's consolidated financial statements.
The Registrant is involved in various other litigation and legal
matters which are being defended and handled in the ordinary course of
business. None of these matters are expected to result in a judgment
having a material adverse effect on the Registrant's consolidated
financial position or results of operations.
F-25
<PAGE>
SCHEDULE II
UNITED CAPITAL CORP. AND SUBSIDIARIES
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
Write-offs
Net of
Recoveries
Balance Charged of Accounts Balance
at to Previously at
Beginning Costs and Written End of
of Period Expenses Off Period
-------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts receivable:
Year ended December 31, 1995 $542,545 $54,133 $125,272 $471,406
Year ended December 31, 1994 285,545 257,000 0 542,545
Year ended December 31, 1993 241,000 44,545 0 285,545
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these schedules.
F-26
<PAGE>
SCHEDULE III
UNITED CAPITAL CORP. AND SUBSIDIARIES
REAL PROPERTY HELD FOR RENTAL AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Costs Gross Amount at Which
Mortgage Initial Cost To Registrant Capitalized Carried at Close of Period
Loans -------------------------- Subsequent to ----------------------------------------
Payable Building and Acquisition/ Building and Total
Description (Gross) Land Improvements Improvements Land Improvements (a) (c)
----------- ----------- ----------- ------------- ------------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shopping Centers and Retail Outlets-
Culver, CA $5,351,599 $841,811 $7,576,296 $0 $841,811 $7,576,296 $8,418,107
Northbrook, IL 5,830,075 897,246 8,075,215 0 897,246 8,075,215 8,972,461
Miscellaneous Investments 28,827,513 6,250,592 55,575,449 771,989 6,250,592 56,347,438 62,598,030
----------- ----------- ------------- ------------- ----------- ------------- --------------
40,009,187 7,989,649 71,226,960 771,989 7,989,649 71,998,949 79,988,598
----------- ----------- ------------- ------------- ----------- ------------- --------------
Commercial Properties-
Miscellaneous Investments 3,283,312 2,583,178 26,992,573 0 2,583,178 26,992,573 29,575,751
Day Care Centers and Offices-
Miscellaneous Investments 626,033 642,895 5,786,058 1,132,683 642,895 6,918,741 7,561,636
Hotel Properties-
Miscellaneous Investments 253,758 0 2,867,703 0 0 2,867,703 2,867,703
Other-
Miscellaneous Investments 0 878,874 4,614,413 496,246 878,874 5,110,659 5,989,533
----------- ----------- ------------- ------------- ----------- ------------- --------------
$44,172,290 $12,094,596 $111,487,707 $2,400,918 $12,094,596 $113,888,625 $125,983,221
=========== =========== ============= ============= =========== ============= ==============
</TABLE>
<TABLE>
<CAPTION>
Life on Which
Depreciation
in Latest
Statement of
Accumulated Income is
Depreciation Date of Date Computed
Description (b) Construction Acquired (Years)
----------- ------------------ ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
Shopping Centers and Retail Outlets-
Culver, CA $3,801,304 N/A 1986 18
Northbrook, IL 3,887,315 N/A 1987 18
Miscellaneous Investments 28,026,042 N/A 1986-94 10-39
------------------
35,714,661
------------------
Commercial Properties-
Miscellaneous Investments 13,226,023 N/A 1986-94 12-29
Day Care Centers and Offices-
Miscellaneous Investments 5,366,729 N/A 1986-91 7-39
Hotel Properties-
Miscellaneous Investments 2,646,907 N/A 1986-87 10
Other-
Miscellaneous Investments 965,399 N/A 1986-94 10-39
------------------
$57,919,719
==================
</TABLE>
Notes:
(a) Reconciliations of the carrying value of real property held for rental for
the three years ended December 31, 1995 are as follows-
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ---------------- ---------------
<S> <C> <C> <C>
Real property held for rental at beginning of period $126,640,338 $119,650,430 $119,778,000
Additions during the period-
Acquisitions and improvements 2,679,878 6,643,880 750,000
Transfers from property, plant and equipment 0 1,420,927 0
Transfer to noncurrent notes receivable (2,682,563) 0 0
----------------- ---------------- ---------------
126,637,653 127,715,237 120,528,000
Deductions during period-
Cost of real estate sold 654,432 1,074,899 877,570
----------------- ---------------- ---------------
$125,983,221 $126,640,338 $119,650,430
================= ================ ===============
</TABLE>
(b) Reconciliations of accumulated depreciation for the three years ended
December 31, 1995 are as follows-
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ---------------- --------------
<S> <C> <C> <C>
Accumulated depreciation at beginning of period $51,569,038 $45,257,746 $38,942,798
Additions during the period-
Provision for depreciation 6,717,161 6,660,537 6,626,079
Transfers from property, plant and equipment 0 134,065 0
Transfer to noncurrent notes receivable (29,065) 0 0
----------------- ---------------- --------------
58,257,134 52,052,348 45,568,877
Deductions during period-
Accumulated depreciation of real estate sold 337,415 483,310 311,131
----------------- ---------------- --------------
$57,919,719 $51,569,038 $45,257,746
================= ================ ==============
</TABLE>
(c) The aggregate cost for Federal income tax purposes is approximately
$180,435,000.
The accompanying notes to consolidated financial statements are an integral part
of these schedules.
F-27
<PAGE>
SCHEDULE IV
UNITED CAPITAL CORP. AND SUBSIDIARIES
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Description Interest Rate Final Maturity Date Periodic Payment Terms
----------- ------------- ------------------- ----------------------
<S> <C> <C> <C>
Mortgage note receivable in connection with sale 10.25% through October 1998; November 2001 Principal and interest due
of hotel property in Montgomery, Alabama 11% thereafter monthly; in addition,
principal payments of
$25,000 are due in March
1993 and September 1994 and
$150,000 is due in November
1998
Mortgage note receivable in connection with 8% through January 1993; February 2002 Principal and interest due
sale of hotel property in Beaumont, Texas 9% through January 1994; monthly; in addition
10% through January 2000; principal payments of
11% thereafter $50,000 are due in February
1993 and $773,000 at
maturity
Mortgage note receivable in connection with sale 10% August 1, 2000 Principal and interest due
of land and building in Waterbury, Connecticut monthly
Mortgage note receivable in connection with sale 9% December 31, 2008 Principal and interest due
of land and building in Augusta, Georgia monthly
</TABLE>
<TABLE>
<CAPTION>
Principal Amount of
Loans Subject
Carrying to Delinquent
Prior Face Amount of Amount of Principal
Description Liens Mortgages Mortgages (b) or Interest
----------- --------- --------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Mortgage note receivable in connection with sale $0 $610,000 $231,067 $0
of hotel property in Montgomery, Alabama
Mortgage note receivable in connection with 0 900,000 371,891 0
sale of hotel property in Beaumont, Texas
Mortgage note receivable in connection with sale 0 325,000 79,867 0
of land and building in Waterbury, Connecticut
Mortgage note receivable in connection with sale
of land and building in Augusta, Georgia 0 45,000 12,705 0
----- --------------- --------------- ---------
$0 $1,880,000 $695,530 (a)(c) $0
===== =============== =============== =========
</TABLE>
NOTES:
(a) A reconciliation of mortgage loans on real estate for the year ended
December 31, 1995 is as follows-
Balance at beginning of period $722,913
Additions during period-
New mortgage loans 0
Deductions during period-
Collection of principal (27,383)
----------------
Balance at end of period $695,530
================
(b) In accordance with generally accepted accounting principles the gains
from the sale of these properties are being recognized under the
installment method and, accordingly, notes receivable have been reduced
by the following deferred gains at December 31, 1995:
Mortgage note receivable in connection with sale of property in-
Montgomery, Alabama $252,962
Beaumont, Texas 455,081
Waterbury, Connecticut 160,805
Augusta, Georgia 26,951
----------------
$895,799
================
(c) The carrying value for Federal income tax purposes is substantially equal
to the carrying amount for book purposes.
The accompanying notes to consolidated financial statements are an integral part
of these schedules.
F-28
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
QUARTERLY FINANCIAL DATA
(unaudited)
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
FOR THE YEAR 1995:
Revenues $21,347 $22,144 $19,308 $21,847
============= ============= ============= =============
Costs and expenses $19,613 $19,625 $18,687 $21,248
============= ============= ============= =============
Other income (expenses) $934 $130 $134 $12
============= ============= ============= =============
Income from continuing operations $1,562 $1,430 $494 $83
============= ============= ============= =============
Loss from discontinued operations, net of tax ($735) ($342) ($4,396) $0
============= ============= ============= =============
Net income (loss) $827 $1,088 ($3,902) $83
============= ============= ============= =============
Per share data:
Income from continuing operations $.26 $.24 $.08 $.01
Loss from discontinued operations,
net of tax (.12) (.06) (.77) 0
------------- ------------- ------------- -------------
Net income (loss) per common share $.14 $.18 ($.69) $.01
============= ============= ============= =============
FOR THE YEAR 1994:
Revenues $19,470 $19,925 $19,150 $18,449
============= ============= ============= =============
Costs and expenses $17,283 $18,144 $18,332 $18,889
============= ============= ============= =============
Other income (expenses) $325 $624 $1,357 ($19)
============= ============= ============= =============
Income (loss) from continuing operations $1,433 $1,420 $1,220 ($452)
============= ============= ============= =============
Income (loss) from discontinued operations,
net of tax $10 ($10) ($88) ($600)
============= ============= ============= =============
Net income (loss) $1,443 $1,410 $1,132 ($1,052)
============= ============= ============= =============
Per share data:
Income (loss) from continuing operations $.23 $.23 $.19 ($.07)
Loss from discontinued operations,
net of tax 0 0 (.01) (.10)
------------- ------------- ------------- -------------
Net income (loss) per common share $.23 $.23 $.18 ($.17)
============= ============= ============= =============
</TABLE>
F-29
United Capital Corp.
Subsidiary Listing
140 Corporation HR-Twenty Corp.
147 Corporation Ives Corporation
150 Corporation JKM Corporation
1690 Lex. Corp. Kentile Inc.
2911 Corporation Kings County Corp.
47 Boundary Corp. L C Corporation
521 W. 146 Corp. Land & Leases Corp.
627 Second Corp. Madison Corporation
629 Second Corp. Melancon Corporation
747 Middleneck Corp. Metex Corporation
860 Franklin Associates, Inc Metex European Sales Corp.
9 Park Place Corp. Metex Export Corporation
95 Perry Corp. Metex International Sales Corp.
AFP Financial Corp. Metex Liquidation Co., Inc.
AFP Realty Corp. Nemo Acquisition Corp.
AFP Technologies, Inc. Northbrook Entereprises Corp.
AFP Transformers, Inc. Northwood Corporation
Alba Corporation PDK Corporation
Atwill Corporation Pine Equities Corporation
Avalon Corp. Prospect Center Corp.
Beekman Corp. RBS Realty Corporation
Belmont Corporation Schuller Corporation
BKM Corp. Second CEW Properties, Inc.
BPI Corp. Sunrise Equities Corp.
Busch Realty Corp. Sutton Realty Corporation
C.P. Manufacturing, Inc. Third CEW Properties, Inc.
Cambreleng Corp. Toledo Corporation
Clinton-Bush Corp. Tri-Mart Corporation
Cedar Enterprises Corp. Twenty-M Corporation
CEW Properties, Inc. Twin II Realty Corporation
Cleethorpes Properties, Inc. Various Equities Corp.
Cortland Enterprises Corp. Waverly Corporation
Culver Corporation Wellford Corporation
D&M/Chu Technology, Inc. West 145 Corporation
Dallas Enterprises Corp.
Del-Metex Corporation
Dorne & Margolin, Inc.
Eastside Corporation
EBMO Corporation
EKM Corporation
Fern Corporation
Franklin 850 Corporation
Greenvale Enterprises Corp.
Hadley Corporation
HHKM Realty Corp.
HJA Realty Corporation
HJB Corporation
HJM Corporation
HJSC Corporation
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated March 15, 1996 which is included in this Form 10-K
for the year ended December 31, 1995, into United Capital Corp.'s previously
filed Registration Statements, File Numbers 33-28045 and
33-65140.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Roseland, New Jersey
March 29, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from United
Capital Corp.'s Form 10-K for the year ended December 31, 1995 and is qualified
in its entirety by reference to such Financial Statements and Notes, thereto.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 3,528
<SECURITIES> 84
<RECEIVABLES> 16,725
<ALLOWANCES> 471
<INVENTORY> 7,765
<CURRENT-ASSETS> 30,210
<PP&E> 16,002
<DEPRECIATION> 6,044
<TOTAL-ASSETS> 117,200
<CURRENT-LIABILITIES> 40,695
<BONDS> 0
0
0
<COMMON> 561
<OTHER-SE> 25,668
<TOTAL-LIABILITY-AND-EQUITY> 117,200
<SALES> 61,994
<TOTAL-REVENUES> 84,646
<CGS> 47,895
<TOTAL-COSTS> 79,173
<OTHER-EXPENSES> (1,645)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,145
<INCOME-PRETAX> 6,683
<INCOME-TAX> 3,114
<INCOME-CONTINUING> 3,569
<DISCONTINUED> (5,473)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,904)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> (.32)
</TABLE>
