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, 1997
--------------------------------------------
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 Identification No.)
incorporation or organization)
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 5,280,723 shares outstanding
as of May 9, 1997.
Page 1 of 16
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION
PAGE
----
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as
of March 31, 1997 and December 31, 1996 3
Consolidated Statements of Income for
the Three Months Ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows for
the Three Months Ended March 31, 1997 and 1996 5 - 6
Notes to Consolidated Financial Statements 7 - 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10 - 15
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 16
SIGNATURES 16
Page 2 of 16
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS 1997 1996
------ ---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,836,176 $ 3,177,878
Marketable securities 302,973 313,294
Notes and accounts receivable, net 22,441,180 22,443,743
Inventories 7,349,196 7,853,229
Prepaid expenses and other current assets 709,070 801,639
Deferred income taxes 1,835,277 1,831,768
------------ ------------
Total current assets 36,473,872 36,421,551
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, net 7,963,927 7,694,438
REAL PROPERTY HELD FOR RENTAL, net 59,156,020 63,842,891
NONCURRENT NOTES RECEIVABLE 5,910,863 5,931,744
OTHER ASSETS 11,359,860 5,912,647
DEFERRED INCOME TAXES 2,160,911 2,017,247
------------ ------------
Total assets $123,025,453 $121,820,518
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
- ------------------------------------ ---- ----
CURRENT LIABILITIES:
Current maturities of long-term debt $ 7,340,015 $ 7,711,408
Current portion of borrowings under revolving credit facilities 12,240,000 10,031,000
Accounts payable and accrued liabilities 15,910,572 17,286,927
Income taxes payable 8,481,704 7,212,520
------------ ------------
Total current liabilities 43,972,291 42,241,855
------------ ------------
LONG-TERM LIABILITIES:
Borrowings under revolving credit facilities 8,880,000 9,789,000
Long-term debt 30,110,941 31,670,258
Other long-term liabilities 8,516,357 8,544,581
------------ ------------
Total liabilities 91,479,589 92,245,694
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock 527,972 534,612
Additional paid-in capital 6,765,334 7,415,664
Retained earnings 24,150,584 21,515,762
Net unrealized gain on marketable securities, net of tax 101,974 108,786
------------ ------------
Total stockholders' equity 31,545,864 29,574,824
------------ ------------
Total liabilities and stockholders' equity $123,025,453 $121,820,518
============ ============
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE BALANCE SHEETS.
Page 3 of 16
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1997 March 31, 1996
------------ ------------
<S> <C> <C>
REVENUES:
Net sales $ 14,779,980 $ 15,644,353
Rental revenues from real estate operations 5,625,668 5,917,448
------------ ------------
Total revenues 20,405,648 21,561,801
------------ ------------
COSTS AND EXPENSES:
Costs of sales 10,861,224 12,023,279
Real estate operations -
Mortgage interest expense 811,290 1,072,656
Depreciation expense 1,476,775 1,638,725
Other operating expenses 1,559,131 1,988,551
General and administrative expenses 2,207,810 2,083,117
Selling expenses 1,478,217 1,575,466
------------ ------------
Total costs and expenses 18,394,447 20,381,794
------------ ------------
Operating income 2,011,201 1,180,007
------------ ------------
OTHER INCOME (EXPENSE):
Interest income 685,975 215,726
Interest expense (430,745) (273,594)
Other income and expense, net 2,523,391 498,613
------------ ------------
Total other income (expense) 2,778,621 440,745
------------ ------------
Income before income taxes 4,789,822 1,620,752
Provision for income taxes 2,155,000 675,000
------------ ------------
Net income $ 2,634,822 $ 945,752
============ ============
Earnings per share:
Net income per common share $ .50 $ .17
============ ============
Weighted average number of common shares outstanding 5,322,345 5,633,935
============ ============
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE STATEMENTS
Page 4 of 16
</TABLE>
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
----------- ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 2,634,822 $ 945,752
----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,847,198 2,050,151
Loss from equity investments 60,506 --
Changes in assets and liabilities (A) 3,450,334 (1,722,160)
----------- -----------
Total adjustments 5,358,038 327,991
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,992,860 1,273,743
----------- -----------
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment (639,728) (179,190)
Investment in and advances to affiliates (5,407,154) --
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (6,046,882) (179,190)
----------- -----------
Cash Flows from Financing Activities:
Principal payments on mortgage commitments, notes and loans (1,930,710) (5,395,837)
Net borrowings under revolving credit facilities 1,300,000 3,715,000
Purchase and retirement of common shares (656,970) (600,000)
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (1,287,680) (2,280,837)
----------- -----------
Net increase (decrease) in cash and cash equivalents 658,298 (1,186,284)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,177,878 3,527,925
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,836,176 $ 2,341,641
=========== ===========
</TABLE>
Page 5 of 16
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (Continued)
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
--------------- ------------
<S> <C> <C>
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period For:
Interest $1,432,000 $1,468,000
Taxes 97,000 608,000
=============== ============
</TABLE>
Supplemental Schedule of Noncash Investing
and Financing Activities:
See Notes to Consolidated Financial Statements
(A) Changes in assets and liabilities for the three
months ended March 31, 1997 and 1996, are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Decrease in notes and accounts receivable, net $ 2,563 $ 87,784
Decrease (increase) in inventories 504,033 (710,756)
Decrease (increase) in prepaid expenses
and other current assets 92,569 (104,484)
Increase in deferred income taxes (143,664) (211,126)
Decrease in real property held for rental, net 3,209,912 97,704
Decrease in noncurrent notes receivable 20,881 7,343
Decrease (increase) in other assets (100,565) 108,386
Decrease in accounts payable and
accrued liabilities (1,376,355) (1,573,037)
Increase in income taxes payable 1,269,184 350,972
Increase (decrease) in other long-term liabilities (28,224) 225,054
----------- -----------
Total $3,450,334 ($ 1,722,160)
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE
AN INTEGRAL PART OF THESE STATEMENTS
Page 6 of 16
<PAGE>
UNITED CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
- ---------------------
The accompanying unaudited consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q used for
quarterly reports under Section 13 or 15(d) of the Securities Exchange Act of
1934, and therefore, do not include all information and footnotes necessary for
a fair presentation of financial position, results of operations and cash flows
in conformity with generally accepted accounting principles.
The consolidated financial information included in this report
has been prepared in conformity with the accounting principles and methods of
applying those accounting principles, reflected in the consolidated financial
statements included in the Annual Report on Form 10-K filed with the Securities
and Exchange Commission for the year ended December 31, 1996.
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.
INVENTORIES
- -----------
The components of inventory are as follows:
March 31, 1997 December 31, 1996
-------------- -----------------
Raw materials $3,639,791 $3,893,865
Work in process 2,113,341 2,126,849
Finished goods 1,596,064 1,832,515
--------- ---------
$7,349,196 $7,853,229
========== ==========
Page 7 of 16
<PAGE>
CONTINGENCIES
- -------------
The Registrant has undertaken the completion of environmental
studies and/or remedial action at Metex' two New Jersey facilities.
The process of remediation has begun at one facility pursuant
to a plan filed with the New Jersey Department of Environmental Protection and
Energy ("NJDEPE"). Environmental experts engaged by the Registrant estimate that
under the most probable remediation scenario the remediation of this site is
anticipated to require initial expenditures of $860,000, including the cost of
capital equipment, and $86,000 in annual operating and maintenance costs over a
15-year period.
Environmental studies at the second facility indicate that
remediation may be necessary. Based upon the facts presently available,
environmental experts have advised the Registrant that under the most probable
remediation scenario, the estimated cost to remediate this site is anticipated
to require $2.3 million in initial costs, including capital equipment
expenditures, and $258,000 in annual operating and maintenance costs over a
10-year period. The Registrant may revise such estimates in the future due to
the uncertainty regarding the nature, timing and extent of any remediation
efforts that may be required at this site, should an appropriate regulatory
agency deem such efforts to be necessary.
The foregoing estimates may also be revised by the Registrant
as new or additional information in these matters becomes 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 March 31, 1997 and December 31, 1996, a total of $2.9
million in anticipated insurance recoveries is recorded in the accompanying
consolidated financial statements and is included in other assets. Additionally,
in 1995 the Company received approximately $4.1 million of insurance recoveries.
The remaining balance of $2.9 million at March 31, 1997 (from a total of $7
million ) is
Page 8 of 16
<PAGE>
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 assurance, 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.
The Registrant is involved in various other litigation and
legal matters which are being defended and handled in the ordinary course of
business. See Item 1. Legal Proceedings for discussion of Rosatelli vs. United
Capital Corp. 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.
NET INCOME PER COMMON SHARE
- ---------------------------
Net income 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 approximately 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.
In February 1997, Statement of Financial Accounting Standard
No. 128, Earnings Per Share ("SFAS #128) was issued. SFAS #128 changes the
methodology utilized to compute earnings per share and replaces primary EPS with
basic EPS, which does not include any dilution for potentially dilutive
securities. Fully diluted EPS, which is now called diluted EPS under SFAS #128,
is still required. This standard is effective for periods ending after December
15, 1997 and early application is prohibited. If EPS had been determined
consistent with SFAS #128, earnings per share would have been the proforma
amounts indicated below:
Three Months Ended March 31
---------------------------
1997 1996
---- ----
Primary EPS, as reported .50 .17
Pro Forma Basic EPS .50 .17
Fully Diluted EPS, as reported .49 .17
Pro Forma Diluted EPS .50 .17
Page 9 of 16
<PAGE>
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.
RECLASSIFICATIONS
- -----------------
Certain amounts have been reclassified in the prior year
consolidated financial statements to present them on a basis consistent with the
current year.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
- ------------------------------------------
Revenues for the three month period ended March 31, 1997 were
$20,406,000, a $1,156,000 decrease from comparable 1996 revenues. Net income for
the period was $2,635,000 or $.50 per share as compared to net income of
$946,000 or $.17 per share for the same period in 1996.
REAL ESTATE OPERATIONS
- ----------------------
Rental revenues from real estate operations decreased by
$292,000 for the three months ended March 31, 1997 compared to the same period
in 1996. The decrease is primarily attributable to revenues associated with
properties sold in 1996.
Mortgage interest expense decreased $261,000 or 24% during the
current quarter, versus such expense of the corresponding period in 1996. These
decreases are due to continuing mortgage amortization which approximated $6
million during the last twelve months, including repayments associated with
properties sold.
Depreciation expense associated with rental properties
decreased $162,000, versus such expense of the corresponding period in 1996.
This decrease is primarily due to the impact of properties sold in 1996.
Operating expenses associated with the management of real
properties decreased $429,000 or 22% for the quarter ended March 31, 1997 as
compared to the same period in 1996. The implementation of certain capital
improvements in 1996 and the timing of certain maintenance projects contributed
to these cost savings.
Page 10 of 16
<PAGE>
ENGINEERED PRODUCTS
- -------------------
The Registrant's engineered products segment includes Metex
Corporation and AFP Transformers, Inc. The operating results of the engineered
products segment are as follows:
Three Months
Ended March 31,
---------------
(In thousands) 1997 1996
------ -----
Net Sales $9,574 $ 11,050
====== =======
Cost of Sales $6,970 $ 8,285
====== =======
Selling, General and
Administrative Expenses $1,798 $ 1,762
====== =======
Income from Operations $ 806 $ 1,003
====== =======
Net sales of the engineered products segment decreased
$1,476,000 for the three month period ended March 31, 1997 as compared to the
same period in 1996. The decrease is primarily attributable to continued price
competition and declining worldwide automotive sales for knitted wire products.
The transformer division continues to show growth with a 3% increase in sales
compared to the first quarter of 1996.
Cost of sales as a percentage of net sales decreased by
approximately 2% in the three month period ended March 31, 1997, as compared to
the corresponding period in 1996. This decrease was due to continued management
focus on cost containment as well as product mix.
Selling, general and administrative expenses of the engineered
products segment increased $36,000 during the quarter ended March 31, 1997
versus such costs of the comparable 1996 period. This increase is primarily the
result of additional salary related costs.
Page 11 of 16
<PAGE>
ANTENNA SYSTEMS
- ---------------
The operating results of the antenna systems segment are as
follows:
Three Months
Ended March 31,
---------------
(In thousands) 1997 1996
---- ----
Net Sales $5,206 $4,594
====== ======
Cost of Sales $3,891 $3,738
====== ======
Selling, General and Administrative
Expenses $1,155 $1,283
====== ======
Income (Loss) from Operations $ 160 ($ 427)
====== =====
Net sales of the antenna systems segment increased $612,000 or
13% during the quarter ended March 31, 1997 versus the same period in 1996. The
1996 sales level reflected manufacturing output below planned levels and was
attributable to operational problems experienced in the first half of that year.
Actions initiated by senior management in 1996 increased the sales volume in the
second half of 1996 to a level consistent with the first quarter of 1997.
Cost of sales as a percentage of sales decreased to 75% as
compared to 81% in the prior period, principally due to increased productivity
associated with higher shipment levels.
Selling, general and administrative costs of the antenna
systems segment decreased approximately $129,000 during the current quarter
ended March 31, 1997, versus that of the corresponding prior year period. This
reduction is principally due to reduced selling expenses, primarily salary and
salary related expenses.
GENERAL AND ADMINISTRATIVE EXPENSES
- -----------------------------------
General and administrative ("G&A") expenses not associated with the
manufacturing operations increased by $120,000 or less than 1% of revenues for
the three month period ended March 31, 1997, versus the same period in 1996.
Page 12 of 16
<PAGE>
OTHER INCOME AND EXPENSE
- ------------------------
The components of other income and expense in the accompanying
consolidated statements of income are as follows:
Three Months
Ended March 31,
1997 1996
----- ----
Gain on sale of real estate assets $ 2,583,840 $478,487
(Loss) from equity investments (60,556) --
Other -- 20,126
----------- --------
$ 2,523,391 $498,613
=========== ========
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At March 31, 1997 the Registrant's current liabilities
exceeded current assets by approximately $7.6 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, together with borrowings available under the line of credit
discussed below and the sale of select assets, all obligations will be satisfied
as they become due.
Effective January 15, 1997, the Registrant entered into a
Revolving Credit Agreement ("Revolver") with two banks that provides for
borrowings of up to $40 million and which expires on January 15, 2000.
Borrowings under the Revolver, at the Registrant's option, bear interest at
Prime or LIBOR plus 1.75%. Under the terms of the Revolver, the Registrant will
be provided with eligibility based upon the sum of (i) 50% of the aggregate
annualized and normalized year-to-date net operating income of eligible
properties, as defined, capitalized at 11.5% and (ii) the lesser of $12 million
or the sum of 75% of eligible accounts receivable and 50% of eligible inventory,
as defined. The terms of the Revolver contain certain financial and restrictive
covenants, including minimum consolidated equity, interest coverage, debt
service coverage and capital expenditures (other than for real estate). At March
31, 1997, approximately $19 million was available to be borrowed under the
Revolver. The Registrant classified $8,880,000 of borrowings outstanding under
this facility at March 31, 1997 as long-term debt as the Registrant has both the
ability and the intent to refinance these amounts on a long-term basis under the
new credit facility.
The Registrant has undertaken the completion of environmental
studies and/or remedial action at Metex' two New Jersey facilities and has filed
an action against certain insurance carriers seeking recovery of costs incurred
and to be incurred in these matters. Based upon the advice of counsel,
management believes such recovery is probable and therefore should not have a
material
Page 13 of 16
<PAGE>
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.
At March 31, 1997 and December 31, 1996 a total of $2.9
million in anticipated insurance recoveries has been recorded in the
accompanying consolidated financial statements and is included in other assets.
Additionally, in 1995 the Registrant received approximately $4.1 million of
insurance recoveries. The remaining balance of $2.9 million at March 31, 1997
(from a total of $7 million) 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 assurance,
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 on the Revolver. The primary source of
capital to fund additional real estate acquisitions and to make additional
high-yield mortgage loans 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 decreased $1,156,000 or 5%
for the first three months of 1997 versus such results of the comparable 1996
period. Net income for the first three months of 1997 was $2,635,000 or $.50 per
share versus $946,000 or $.17 per share during the same period in 1996.
Page 14 of 16
<PAGE>
The results of the Registrant's real estate operations reflect
a decrease in revenues for the first three months of 1997, primarily as a result
of revenues associated with properties sold in 1996. The real estate segment was
also favorably impacted by a 24% reduction in mortgage interest expense
resulting from the repayment of $6 million in mortgage indebtedness during the
last twelve months. Continuing mortgage amortization will continue to have
favorable impact on this segment and will reduce current mortgage indebtedness
to virtually zero in less than nine years.
The Registrant's engineered products segment posted a 13%
decrease in revenues during the first three months of 1997 versus comparable
1996 results. With continued decreases in worldwide automobile sales, management
is focused on new sales opportunities including new geographical markets for its
existing products and new applications for its core technologies. In addition,
the results of this segments' transformer operations reflect improvements over
the prior year and management is hopeful to continue this trend.
The results of the Registrant's antenna systems segment
reflect a significant turnaround in the current quarter. The Registrant believes
that actions taken by senior management in 1996 have returned this segment to
profitability and senior management will continue to closely monitor the
operations of this segment.
FORWARD-LOOKING STATEMENTS
- --------------------------
This Form 10-Q contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), which are intended to be covered by the safe harbors created thereby. All
forward-looking statements involve risks and uncertainty, including without
limitation, general economic conditions, competition, potential technology
changes and potential changes in customer spending and purchasing policies and
procedures. Although the Registrant believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward-looking statements included in this Form 10-Q will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Registrant or any other person
that the objectives and plans of the Registrant will be achieved.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Rosatelli vs. United Capital Corp.
- ----------------------------------
In August 1996, Dennis Rosatelli, the Registrant's former Chief Financial
Officer commenced an action in Superior Court of New Jersey, Law Division,
Bergen County, seeking, among other things, payment under his employment
contract, and indemnification for claims against him by the Internal Revenue
Service and other matters in connection with his tenure. The Registrant believes
Page 15 of 16
<PAGE>
that as a result of Mr. Rosatelli's gross negligence, recklessness and/or
willful disregard of his duties and responsibilities, Mr. Rosatelli is not
entitled to the recoveries he seeks. Mr. Rosatelli's employment was terminated
by the Registrant in May, 1996 for cause. The matter has been removed to United
States District Court, District of New Jersey. This action is in the early
stages of pretrial discovery. The Registrant intends to vigorously defend this
action and has asserted counterclaims against Mr. Rosatelli for, among other
things, the set off of amounts by which he has damaged the Registrant against
his claims under his employment contract.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
none
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNITED CAPITAL CORP.
Dated: May 14, 1997 By: /s/ Anthony J. Miceli
--------------------------------
Anthony J. Miceli
Vice President, Chief Financial Officer
and Secretary of the Registrant
Page 16 of 16
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNITED
CAPITAL CORP.'S FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1997 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-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,836
<SECURITIES> 303
<RECEIVABLES> 22,858
<ALLOWANCES> 416
<INVENTORY> 7,349
<CURRENT-ASSETS> 36,474
<PP&E> 15,464
<DEPRECIATION> 7,500
<TOTAL-ASSETS> 123,025
<CURRENT-LIABILITIES> 43,972
<BONDS> 0
0
0
<COMMON> 528
<OTHER-SE> 31,018
<TOTAL-LIABILITY-AND-EQUITY> 123,025
<SALES> 14,780
<TOTAL-REVENUES> 20,406
<CGS> 10,861
<TOTAL-COSTS> 18,394
<OTHER-EXPENSES> (2,523)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 431
<INCOME-PRETAX> 4,790
<INCOME-TAX> 2,155
<INCOME-CONTINUING> 2,635
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,635
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
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