SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ending March 31, 1996
----------------------------------
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ------------ to ----------------------
Commission File Number: 1-10104
-------
United Capital Corp.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2294493
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9 Park Place, Great Neck, New York 11021
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
516-466-6464
- - --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- - --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. /X/ Yes / / No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common stock, $.10 par value -- 5,546,079 shares outstanding
as of May 8, 1996.
Page 1 of 15
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION
PAGE
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as
of March 31, 1996 and December 31, 1995 3
Consolidated Statements of Income for
the Three Months Ended March 31, 1996 and
1995 4
Consolidated Statements of Cash Flows for
the Three Months Ended March 31, 1996 and
1995 5-6
Notes to Consolidated Financial Statements 7-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10-14
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES 15
Page 2 of 15
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS 1996 1995
------ ---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $2,341,641 $3,527,925
Marketable securities 113,760 83,760
Notes and accounts receivable, net 16,165,316 16,253,100
Inventories 8,475,629 7,764,873
Prepaid expenses and other current assets 792,019 687,535
Deferred income taxes 1,882,665 1,893,205
---------- ----------
Total current assets 29,771,030 30,210,398
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, net 7,763,353 9,957,648
REAL PROPERTY HELD FOR RENTAL, net 68,289,132 68,063,502
NONCURRENT NOTES RECEIVABLE 3,616,845 3,624,188
OTHER ASSETS 4,278,678 4,387,064
DEFERRED INCOME TAXES 1,168,118 956,991
============ ============
Total assets $114,887,156 $117,199,791
============ ============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
- - ------------------------------------ ---- ----
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $9,760,509 $10,085,227
Borrowings under revolving credit facilities 11,500,000 7,785,000
Accounts payable and accrued liabilities 17,571,326 19,144,363
Income taxes payable 4,031,611 3,680,639
---------- ----------
Total current liabilities 42,863,446 40,695,229
---------- ----------
LONG-TERM LIABILITIES:
Long-term debt 36,828,571 41,899,690
Other long-term liabilities
8,600,697 8,375,643
---------- ----------
Total liabilities 88,292,714 90,970,562
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock 554,608 560,608
Additional paid-in capital 9,507,147 10,101,147
Retained earnings 16,624,263 15,678,511
Minimum pension liability, net of tax (165,659) (165,659)
Net unrealized gain on marketable securities, net
of tax 74,083 54,622
------------ ------------
Total stockholders' equity 26,594,442 26,229,229
------------ ------------
Total liabilities and stockholders' equity $114,887,156 $117,199,791
============ ============
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE BALANCE SHEETS.
Page 3 of 15
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
REVENUES:
Net sales $15,644,353 $15,897,871
Rental revenues from real estate operations 5,917,448 5,448,635
------------ -------------
Total revenues 21,561,801 21,346,506
------------ -------------
COSTS AND EXPENSES:
Cost of sales 12,023,279 11,944,408
Real estate operations -
Mortgage interest expense 1,072,656 1,213,723
Depreciation expense 1,638,725 1,584,153
Other operating expenses 1,988,551 1,300,111
General and administrative expenses 2,083,117 2,003,341
Selling expenses 1,575,466 1,567,600
------------ -------------
Total costs and expenses 20,381,794 19,613,336
------------ -------------
Operating income 1,180,007 1,733,170
------------ -------------
OTHER INCOME (EXPENSE):
Interest income 215,726 131,821
Interest expense (273,594) (274,325)
Other income and expense, net 498,613 1,076,332
------------ -------------
Total other income (expense) 440,745 933,828
------------ -------------
Income from continuing operations before income taxes 1,620,752 2,666,998
Provision for income taxes 675,000 1,105,000
------------ -------------
Income from continuing operations 945,752 1,561,998
DISCONTINUED OPERATIONS:
Operating loss, net of tax benefit of $0
and $379,000, respectively - (735,375)
------------ -------------
Loss from discontinued operations, net of tax - (735,375)
------------ --------------
Net income $945,752 $ 826,623
============= =============
Earnings (loss) per share:
Income from continuing operations $ .17 $ .26
Loss from discontinued operations, net of tax - (.12)
------------- --------------
Net income (loss) $ .17 $ .14
============= =============-
Weighted average number of common shares outstanding 5,633,935 6,116,596
============= ==============
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE STATEMENTS
Page 4 of 15
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $945,752 $826,623
------------ -------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,050,151 1,971,655
Net realized and unrealized (gains) losses
on marketable securities - (66,555)
Changes in assets and liabilities (A) (1,722,160) 3,852,985
------------ -------------
Total adjustments 327,991 5,758,085
----------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,273,743 6,584,708
----------- ------------
Cash Flows From Investing Activities:
Proceeds from sale of marketable securities - 302,931
Acquisition of property, plant and equipment (179,190) (438,921)
Investing activities of discontinued operations - (61,498)
----------- --------------
NET CASH USED IN INVESTING ACTIVITIES (179,190) (197,488)
------------- --------------
Cash Flows From Financing Activities:
Principal payments on mortgage commitments, notes and loans (5,395,837) (2,783,558)
Net borrowings under revolving credit facilities 3,715,000 (3,250,000)
Purchase and retirement of common shares (600,000) (258,022)
Financing activities of discontinued operations - 449,071
------------ -------------
NET CASH USED IN FINANCING ACTIVITIES (2,280,837) (5,842,509)
------------- --------------
Net increase (decrease) in cash and cash equivalents (1,186,284) 544,711
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 3,527,925 1,584,744
------------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,341,641 $ 2,129,455
============== ========-===
</TABLE>
Page 5 of 15
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (Continued)
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------- ----------
<S> <C> <C>
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period For:
Interest $1,468,000 $1,434,000
Taxes 608,000 840,000
========== ==========
</TABLE>
Supplemental Schedule of Noncash Investing
and Financing Activities:
See Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
(A) Changes in assets and liabilities for the three months ended
March 31, 1996 and 1995 are as follows:
<S> <C> <C>
Decrease in notes and accounts receivable, net $87,784 $2,307,879
Decrease (increase) in inventories (710,756) 627,670
Decrease (increase) in prepaid expenses
and other current assets (104,484) 2,656,187
Increase in deferred income taxes (211,126) (189,699)
Decrease (increase) in real property held for rental, net 97,704 (215,021)
Decrease in noncurrent notes receivable 7,343 9,250
Decrease in other assets 108,386 78,404
Decrease in accounts payable and accrued liabilities (1,573,037) (1,388,922)
Increase in income taxes payable 350,972 54,376
Increase (decrease) in other long-term liabilities 225,054 (3,576)
Discontinued operations - noncash charges and working
capital changes - (83,563)
----------- -----------
Total ($1,722,160) $3,852,985
=========== ==========-
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE STATEMENTS
Page 6 of 15
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q used for quarterly
reports under Section 13 or 15(d) of the Securities Exchange Act of 1934, and
therefore, do not include all information and footnotes necessary for a fair
presentation of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles.
The consolidated financial information included in this report has been
prepared in conformity with the accounting principles and methods of applying
those accounting principles, reflected in the consolidated financial statements
included in the Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1995.
All adjustments necessary for a fair statement of the results for the
interim periods presented have been recorded.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year.
DISCONTINUED OPERATIONS
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 the third quarter of 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 income for the first
quarter of 1995 include operating losses of Kentile, incurred prior to its
closure, of approximately $1.1 million, on a pre-tax basis.
MARKETABLE SECURITIES
Investments in debt securities are classified as held-to-maturity and
measured at amortized cost in the consolidated balance sheet only if the
Registrant has the positive intent and ability to hold those securities to
maturity. Debt and equity securities that are purchased and held principally for
the purpose of selling in the near term will be measured at fair value and
classified as trading securities. For the purpose of calculating realized gains
and losses, the cost of investments sold is determined using the first-in,
first-out method. Unrealized gains and losses on trading securities are included
in current earnings. All securities not classified as trading or
held-to-maturity are classified as available-for-sale and measured at fair
value.
Page 7 of 15
<PAGE>
Unrealized gains and losses on securities available-for-sale are recorded net,
as a separate component of stockholders' equity until realized. Management
determines the appropriate classification of securities at the time of purchase
and reassesses the appropriateness of the classification at each reporting date.
The aggregate market value of marketable securities, which were all
equity securities and available-for-sale, was $113,760 and $83,760 at March 31,
1996 and December 31, 1995, respectively, while gross unrealized holding gains
of the Registrant's marketable security portfolio were $74,083 and $54,622 on a
net of tax basis, respectively.
DEFERRED TAXES
The components of the net deferred tax asset (liability) at March 31, 1996 are
as follows:
<TABLE>
<CAPTION>
<S> <C>
Realization allowances related to accounts receivable and inventories $585,046
Net unrealized (gain) loss on marketable securities (38,678)
Basis differences relating to real property held for rental 2,457,255
Accrued expenses, deductible when paid 2,683,819
Deferred revenue and profit (for tax purposes) (221,486)
Basis differences relating to business acquisitions (1,858,912)
Property, plant & equipment (579,619)
Pensions 7,959
Other, net 15,399
--------
Net deferred tax asset (liability) 3,050,783
Less-Current portion 1,882,665
----------
Noncurrent portion $1,168,118
==========
</TABLE>
CONTINGENCIES
The Registrant has undertaken the completion of environmental studies
and/or remedial action at Metex' two New Jersey facilities.
The process of remediation has begun at one facility pursuant to a plan
filed with the New Jersey Department of Environmental Protection and Energy
("NJDEPE"). Environmental experts engaged by the Registrant estimate that under
the most probable remediation scenario the remediation of this site is
anticipated to require initial expenditures of $860,000, including the cost of
capital equipment, and $86,000 in annual operating and maintenance costs over a
15-year period.
Environmental studies at the second facility indicate that remediation
may be necessary. Based upon the facts presently available, environmental
experts have advised the Registrant that under the most probable remediation
scenario, the estimated cost to remediate this site is anticipated to require
$2.3 million in initial costs, including capital equipment expenditures, and
$258,000 in annual operating and maintenance costs over a 10-year period. The
Registrant may revise such estimates in the future due to the uncertainty
regarding the nature, timing and extent of any remediation efforts that may be
required at this site, should an appropriate regulatory agency deem such efforts
to be necessary.
Page 8 of 15
<PAGE>
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.
Management believes that recoveries in excess of the amounts reflected
in the accompanying consolidated financial statements, which were $2.9 million
at March 31, 1996 and December 31, 1995, 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 has adopted the provisions of
Staff Accounting Bulletin 92 and accordingly has recorded the expected liability
associated with remediation efforts as a component of other long-term
liabilities and the anticipated insurance recoveries as a component of other
assets in the Registrant's consolidated financial statements.
The Registrant is involved in various other litigation and legal
matters which are being defended and handled in the ordinary course of business.
None of these matters are expected to result in a judgment having a material
adverse effect on the Registrant's consolidated financial position or results of
operations.
COMMON STOCK
During the first three months of 1996, the Registrant purchased and
retired 60,000 shares of its common stock at a cost of $600,000. During the same
period in 1995, 29,700 shares of the Registrant's common stock were purchased
and retired at a cost of $258,022.
Page 9 of 15
<PAGE>
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per share computations for each quarterly period
presented are based on the weighted average number of common shares and dilutive
common equivalent shares outstanding during the period. Fully diluted and
primary earnings per common share are the same amounts for each of the periods
presented. Earnings per share data is neither restated nor adjusted currently to
obtain quarterly amounts which equal the amount computed for the year-to-date.
RECLASSIFICATIONS
Certain amounts have been reclassified in the prior year consolidated
financial statements and notes thereto to present them on a basis consistent
with the current year.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Revenues for the three month period ended March 31, 1996 were
$21,562,000, a $215,000 increase from comparable 1995 revenues. Net income for
the period was $946,000 or $.17 per share as compared to net income of $827,000
or $.14 per share for the same period in 1995.
REAL ESTATE OPERATIONS
Rental revenues from real estate operations increased $468,000 or 9%,
for the three month period ended March 31, 1996 as compared to the same period
in 1995. This increase is primarily the result of a 45% increase in revenues
from the Registrant's hotel operations together with a 2% increase in rental
revenues.
Mortgage interest expense decreased $141,000 during the current
quarter, versus such expense of the corresponding period in 1995. This decrease
of approximately 12% is due to continuing mortgage amortization resulting from
the repayment of approximately $9.4 million in mortgage indebtedness during the
last 12 months.
Depreciation expense associated with rental properties increased
$55,000 or 3% during the three month period ended March 31, 1996 as compared to
such costs during the corresponding period of 1995. This increase is primarily
the result of additional depreciation associated with mid-1995 property
additions.
Operating expenses associated with the management of real estate
properties increased $689,000 for the three month period ending March 31, 1996
as compared to the same period in 1995. Operating costs associated with mid-1995
property acquisitions as well as the reclassification of prior manufacturing
facilities to real property held for rental are the primary cause of this
increase.
Page 10 of 15
<PAGE>
ANTENNA SYSTEMS
The operating results of the antenna systems segment for the three
month periods ended March 31, 1996 and 1995 as follows:
Three Months
Ended March 31,
---------------
(In thousands) 1996 1995
---- ----
Net Sales $4,594 $4,992
====== ======
Cost of Sales $3,738 $3,769
====== ======
Selling, General and
Administrative
Expenses $1,283 $1,192
====== ======
Income (Loss) from Operations ($ 427) $ 31
========= ========
Net sales of the antenna systems segment decreased $398,000 or 8% from
such sales generated during the first quarter of 1995. This decline continues to
result from reductions in demand for military products. Management is
concentrated on expanding the commercial portion of the business to offset this
decline.
Cost of sales as a percentage of net sales increased approximately 6%
resulting from the shift in product mix toward commercial sales.
Selling, general and administrative (S,G & A) expenses of the antenna
systems group increased $91,000 or 1.4% as a percentage of sales. This is a
result of administrative cost increases primarily related to additional salary
expenses.
ENGINEERED PRODUCTS
The Registrant's engineered products segment includes Metex Corporation
and AFP Transformers, Inc. The operating results of the engineered products
segment for the three month periods ended March 31, 1996 and 1995 follows:
Three Months
Ended March 31,
---------------
(In thousands) 1996 1995
------ -----
Net Sales $11,050 $10,906
======= =======
Cost of Sales $ 8,285 $ 8,175
========= ========
Selling, General and
Administrative Expenses $ 1,762 $ 1,725
========= ========
Income from Operations $ 1,003 $ 1,006
========= ========
Page 11 of 15
<PAGE>
Net sales of the engineered products segment increased $144,000 during
the three-month period ended March 31, 1996 versus such sales of the comparable
1995 period. This increase is primarily the result of additional sales from the
knitted wire mesh component of this business, offset by a decline in revenues of
the transformer component.
Cost of sales as a percentage of net sales was unchanged between the
first quarter of 1996 and the same period in 1995.
SG&A expenses increased $37,000 during the first quarter of 1996 versus
that of the comparable 1995 period. As a percentage of sales such costs were
virtually unchanged between periods.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative ("G&A") expenses not associated with the
manufacturing operations decreased by $40,000 for the three month period ended
March 31, 1996 versus that of the same period in 1995. This decrease primarily
results from the reclassification, in 1996, of prior manufacturing facilites to
real property held for rental and accordingly the reclassification of related
costs from G&A to real estate operating expenses.
OTHER INCOME AND EXPENSE
The components of other income and expense in the accompanying
consolidated statements of income for the three month periods ended March 31,
1996 and 1995 are as follows:
Three Months
Ended March 31,
---------------
1996 1995
---------- -----------
Gain on sale of real estate assets $478,487 $777,772
Net realized and unrealized gains
(losses) on marketable securities - 66,555
Income from equity investments - 3,676
Other 20,126 228,329
-------- -----------
$498,613 $1,076,332
======== ==========
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996 the Registrant's current liabilities exceeded current
assets by approximately $13.1 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 believes 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.
Page 12 of 15
<PAGE>
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
March 31, 1996 there was $11.5 million outstanding under this facility. This
demand facility is reviewed by the bank annually on May 31.
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
Notes to consolidated financial statements.
The Registrant has undertaken the completion of environmental studies
and/or remedial action at Metex' two New Jersey facilities and has filed an
action against certain insurance carriers seeking recovery of costs incurred and
to be incurred in these matters. Based upon the advice of counsel, management
believes such recovery is probable and therefore should not have a material
effect on the liquidity or capital resources of the Registrant. However, the
ultimate outcome of litigation cannot be predicted. To date settlements have
been reached with several carriers in this matter. See Notes to consolidated
financial statements.
Management believes that recoveries in excess of the amounts reflected
in the accompanying consolidated financial statements, which were $2.9 million
at March 31, 1996 and December 31, 1995, 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 the third party mortgages and purchase money
notes obtained in connection with specific acquisitions.
In addition to the acquisition of properties for consideration
consisting of cash and mortgage financing proceeds, the Registrant may acquire
real properties in exchange for the issuance of the Registrant's equity
securities. The Registrant may also finance acquisitions of other companies in
the future with borrowings from institutional lenders and/or the public or
private offerings of debt or equity securities.
Funds of the Registrant in excess of that needed for working capital,
purchasing real estate and arranging financing for real estate acquisitions are
invested by the Registrant in corporate equity securities, corporate notes,
other financial instruments, certificates of deposit and government securities.
BUSINESS TRENDS
Total revenues of the Registrant increased $215,000 or 1% for the first
three months of 1996 versus such results of the comparable 1995 period. Net
income for the first three months of 1996 was $946,000 or $.17 per share versus
$827,000 or $.14 per share during the same period in 1995. The 1995 results
include operating losses from discontinued operations of $735,000, net of tax
during the first quarter of 1995. No such costs were incurred in the 1996
period.
Page 13 of 15
<PAGE>
The results of the Registrant's real estate operations reflect a 9%
increase in revenues for the first three months of 1996, primarily as a result
of a 45% increase in revenues from the Registrant's hotel operations. This
segment was also favorably impacted by a 12% reduction in mortgage interest
expense resulting from the repayment of $9.4 million in mortgage indebtedness
during the last 12 months. Continuing mortgage amortization will continue to
have a favorable impact on these operations and will reduce our current mortgage
obligations to virtually zero in less than 10 years.
The results of the Registrant's engineered products segment reflect a
2% increase in revenues during the first three months of 1996 versus comparable
1995 results. This results from additional sales by the knitted wire component
of this segment, offset by a decline in the transformer component revenues. With
continued increases in automobile demand and as more vehicles are outfitted with
air bags, demand for these products should continue.
The results of the Registrant's antenna systems segment reflect lower
sales during the first three months of 1996 than during the comparable 1995
period. U.S. military sales, as well as commercial sales remain below prior year
levels and management is focused on reversing this trend.
Although there can be no assurances as to how such events discussed
above, or other changes in the economy will impact the future financial
conditions or results of operations of the Registrant, management continues to
monitor these developments and has implemented measures to minimize the possible
negative effects they may have upon these businesses.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
DAVISON VS. FIRST PENNCO, ET AL.
In March 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 sought actual, punitive and
treble damages in a total unspecified amount. In addition, several amended
complaints were subsequently filed by the plaintiffs.
While management continues to believe that the Registrant could have
eventually prevailed on the plaintiffs claims against it, as a result of
escalating defense costs and the likelihood of extended future litigation, the
Registrant settled all of the claims against it in this matter, in April 1996,
for approximately $425,000 after taxes. This charge will be recorded by the
Registrant in the second quarter of 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
None
Page 14 of 15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNITED CAPITAL CORP.
Dated: May 15, 1996 By: /s/Dennis S. Rosatelli
----------------------
Dennis S. Rosatelli
Vice President, Chief Financial Officer
and Secretary of the Registrant
Page 15 of 15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNITED
CAPITAL CORP.'S FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES, THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,342
<SECURITIES> 114
<RECEIVABLES> 16,622
<ALLOWANCES> 457
<INVENTORY> 8,476
<CURRENT-ASSETS> 29,771
<PP&E> 13,985
<DEPRECIATION> 6,222
<TOTAL-ASSETS> 114,887
<CURRENT-LIABILITIES> 42,863
<BONDS> 0
0
0
<COMMON> 555
<OTHER-SE> 26,039
<TOTAL-LIABILITY-AND-EQUITY> 114,887
<SALES> 15,644
<TOTAL-REVENUES> 21,562
<CGS> 12,023
<TOTAL-COSTS> 20,382
<OTHER-EXPENSES> (499)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 274
<INCOME-PRETAX> 1,621
<INCOME-TAX> 675
<INCOME-CONTINUING> 946
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 946
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
