SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarter ended May 31, 1995
Commission file number 0-14973
UNICO,INC.
(Exact name of Registrant as specified in its charter)
New Mexico 85-0270072
(State of Incorporation) (IRS Employer ID #)
Registrant's telephone number, including area code 505-326-2668
Securities registered pursuant to Section 12(g) of the Act:
$.20 par value common stock
(Title of class)
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[ ].
On June 30, 1995, there were 986,590 shares of registrant's $0.20
par value common stock outstanding.
<PAGE>
INDEX
TO REPORT ON FORM 10-Q
FOR UNICO, INC.
Item in Form 10-Q
PART I: FINANCIAL INFORMATION
Item 1. Financial statements
Consolidated balance sheets as of May 31, 1995
and February 28, 1995
Consolidated statements of operations for the
three months ended May 31, 1995 and 1994
Consolidated statements of cash flows for the
three months ended May 31, 1995 and 1994
Notes to consolidated financial statements
Item 2. Managements discussion and analysis of financial
condition and results of operations.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
<TABLE>
PART I. - Financial Information
UNICO, INC.
Consolidated Balance Sheets
<CAPTION>
May 31, February 28,
1995 1995
---------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 458,950 $ 515,195
Certificate of deposit 308,999 304,549
Accounts receivable 159,541 201,594
Accounts receivable from related parties - 4,570
Inventories 90,786 83,113
Tax refund receivable 55,544 -
----------- -----------
TOTAL CURRENT ASSETS 1,073,820 1,109,021
PROPERTY AND EQUIPMENT
Land, buildings and improvements 434,327 434,327
Equipment 217,349 217,349
Refinery equipment 1,183,333 1,183,333
Co-generation equipment 263,348 263,348
Oil and gas properties 922,710 922,710
----------- -----------
Property, plant and equipment (gross) 3,021,067 3,021,067
Accumulated depreciation & depletion (1,640,266) (1,605,532)
----------- -----------
1,380,801 1,415,535
OTHER ASSETS
Notes receivable 15,318 16,318
Other assets (net) 108,609 108,609
Investment in partnership 928,753 1,188,548
---------- -----------
1,052,680 1,313,475
----------- -----------
$ 3,507,301 $ 3,838,031
=========== ===========
</TABLE>
<PAGE>
<TABLE>
Consolidated Balance Sheets - Continued
<CAPTION>
May 31, February 28,
1995 1995
---------- ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 109,907 $ 75,670
Accounts payable to related parties 15,022 32,508
Credit line payable - -
Taxes other than income 1,793 1,776
Other accrued expenses 4,703 4,703
Current portion of deferred taxes payable 10,800 10,800
Current portion of long-term debt 96,079 96,079
Current portion of convertible subordinated debentures
payable to related parties 178,000 178,000
Income taxes payable - 239,956
---------- -----------
TOTAL CURRENT LIABILITIES 416,304 639,492
LONG-TERM DEBT, net of current portion 100,846 122,222
DEFERRED TAXES PAYABLE, net of current portion 87,400 90,100
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value,
authorized 8,000,000 shares,
none outstanding - -
Common stock, $0.20 par value,
authorized 2,500,000 shares,
issued and outstanding 986,590
shares 197,318 197,318
Additional paid in capital 2,042,576 2,042,576
Retained earnings 662,857 746,323
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 2,902,751 2,986,217
----------- -----------
$ 3,507,301 $ 3,838,031
=========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
UNICO, INC.
Consolidated Statements of Income
<CAPTION>
For the three months ended
May 31, May 31,
1995 1994
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
REVENUES
Refined product sales $ 151,324 $ 154,297
Electrical capacity and energy 203,201 319,489
Processing & terminalling agreements 750 10,838
Natural gas sales 33,767 61,557
Other 126,387 109,532
----------- -----------
515,429 665,713
COSTS AND EXPENSES
Cost of sales 431,051 506,567
General and administrative 80,780 73,490
Loss on investment in partnership 99,557 -
Depreciation, depletion
and amortization 34,734 32,321
Interest, net 1,273 834
----------- -----------
647,395 631,212
----------- -----------
INCOME (LOSS) FROM OPERATIONS
BEFORE INCOME TAXES (131,966) 42,501
Provision for income tax expense (credit):
Current (45,800) -
Deferred (2,700) 1,100
----------- -----------
(48,500) 1,100
----------- -----------
NET INCOME (LOSS) $ (83,466) $ 41,401
=========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 986,590 974,090
EARNINGS PER COMMON SHARE $ (0.0846) $ 0.0425
=========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
UNICO, INC.
Consolidated Statements of Cash Flows
<CAPTION>
For the three months ended
May 31, May 31,
1995 1994
---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (83,466) $ 41,401
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation, depletion and amortization 34,734 32,321
Deferred income taxes (2,700) 1,100
Loss on investment in partnership 99,557 -
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 46,623 (53,936)
(Increase) decrease in inventories and
prepaid expenses (7,673) 122,298
Increase (decrease) in accounts payable
and accrued expenses 16,768 (17,341)
Increase (decrease) in income taxes accrued (295,500) -
---------- ----------
NET CASH FLOW PROVIDED, (USED) BY OPERATING ACTIVITIES (191,657) 125,843
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash distribution received from partnership 160,238 -
Increase in certificates of deposit (4,450) (2,261)
Collections on notes receivable 1,000 3,270
---------- ----------
NET CASH FLOW PROVIDED (USED) BY INVESTING ACTIVITIES 156,788 1,009
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long term debt (21,376) (4,554)
---------- ----------
NET CASH FLOW USED BY FINANCING ACTIVITIES (21,376) (4,554)
---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (56,245) $ 122,298
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 515,195 321,659
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 458,950 $ 433,957
========== ==========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principals have been condensed or omitted. It is suggested that
these consolidated financial statements be read in conjunction with the
Company's Form 10-K, filed with the Securities and Exchange Commission. The
results of operations for the period ended May 31, 1995, are not necessarily
indicative of operating results for the full year.
Reverse Stock Split
Effective on July 28, 1994 the Company implemented a 1:20 reverse
split of its $.01 par value common stock. Earnings per share and the
weighted average number of shares outstanding have been restated for periods
presented prior to the reverse split.
Investment in Partnership
During the three month period ended May 31, 1995, unaudited losses by
SCCLP were approximately $391,936. The company's share of loss allocations
as of that date included $99,557 and $129,952 to Gas Technologies Group,
Inc. ("GTGI"), and Intermountain Chemical, Inc. ("IC") respectively. The
GTGI share is recorded using the equity method and is included in results of
operations for the three month period ended May 31, 1995. IC's investment
in the partnership was previously written off to zero as loss allocations
exceeded its basis in the investment. As of May 31, 1995, loss allocations
in excess of basis attributed to IC and not included in results of
operations totaled approximately $2,184,000.
During the quarter ended May 31, 1995, the Company received cash
distributions of approximately $160,000 from SCCLP representing the
estimated tax liabilities of the Company associated with income allocations
for the year ended December 31, 1994. During July 1995, the Company
anticipates that it will receive additional cash distributions for estimated
tax liabilities associated with income allocations for the two months ended
February 28, 1995.
<PAGE>
Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations.
Business
The Company was incorporated under the laws of the State of New Mexico
in April, 1979. Company resources are segmented into four categories of
business; petroleum product refining and processing, electrical energy
production, natural gas production, and methanol production. Currently,
refining and processing and electrical energy production are performed by
the Company's wholly-owned subsidiary, Intermountain Refining, Co., Inc.
("IRC"), while natural gas production is carried-out by the Company under
the name Unico Resources. Through its wholly-owned subsidiary, Intermountain
Chemical, Inc., the Company manages and operates a methanol production
facility, owned by others, in Commerce City, Colorado. Through its wholly
owned subsidiary GTGI, the Company maintains a limited partnership interest
in the general partner of the methanol production facility.
Refining
The Company refines low-cost, heavy crude oil and other low gravity
refined products into diesel fuel, fuel oils, and asphalt that are generally
marketed on a wholesale basis in the intermountain region. IRC has
experienced a sharp reduction in the availability of crude oil from it's
traditional sources and has operated it's refinery only on a limited basis
during the past two years. The Company is hopeful that a long term solution
to the supply shortage can be resolved but thus far has been unsuccessful in
locating raw materials that would allow the economic operation of the
facility. In addition, IRC provides certain asphalt terminalling services
wherein IRC receives a fixed monthly fee and reimbursement of certain
operating expenses directly related to the service provided.
Co-Generation
The co-generation plant produces up to 3,000 kilowatts of electrical
energy that is sold to an electric company in the local area. Additionally,
the plant produces all electricity and a portion of the steam used in the
refining process thereby contributing some savings in refinery operating
costs.
Natural Gas Production
In July, 1988, the Company acquired an interest in and began operating
20 natural gas wells located in the Hugoton basin in Southwestern Kansas.
Natural gas and helium produced is sold, under exclusive contract, to K.N.
Energy, of Lakewood, Colorado.
Methanol Production
In July, 1988, the Company initiated a project to construct a 250 ton
per day methanol production facility in the Denver, Colorado area. The
facility converts natural gas into chemical grade methanol which is marketed
to refiners and chemical distributors. The Company, through its subsidiary
IC, is the managing general partner of Sand Creek Chemical Limited
Partnership ("SCCLP") which performs all production and marketing operations
associated with the facility. IC holds the general partnership interest in
IC Partners Limited, ("IC-PL"), the general partner of SCCLP. The facility
is owned by Shawmut Bank Connecticut, who leases the facility to SCCLP under
a fifteen year operating lease. Construction and start-up testing of the
facility was substantially completed in October 1993 and the facility is
currently operating near design capacity. The Company provides management,
accounting and personnel services to the facility and has been active in the
<PAGE>
completion of construction of the project. The Company has received various
payments and expense reimbursements associated with its services and
activities on the project.
In December 1994, the Company, through its newly formed wholly owned
subsidiary GTGI, acquired a limited partnership interest in IC-PL. The
Company receives allocations of SCCLP income and loss in accordance with
it's various interests in IC-PL.
Other Sources of Revenues
In January 1994, the Registrant agreed to provide credit support to
Consolidated Oil and Transportation, Inc. ("COTI") in the form of guarantees
of commercial credit and stand by letters of credit. COTI is a marketer and
transporter of heavy fuel oils and asphalt. In exchange for the credit
support provided to COTI, the Registrant receives 8.75% of gross margins
realized by COTI.
Results of Operations
Quarter ended May 31, 1995 compared to quarter ended May 31, 1994
Revenues declined to $515,000 during the first quarter of 1996, down
from $656,000 during the first quarter of 1995. Earnings declined to a loss
of $84,000, down from earnings of $41,000 during the same quarter last year.
Cash flow from operations decreased to a use of $192,000, down from $126,000
provided by operations during the first quarter of 1995.
The decline in revenues is most notably associated with a decline in
electrical energy sales and natural gas revenues. The decline in electrical
energy sales is related to a reduction in demand by the buyer due to changes
in the electric distribution market in the local area. The reduction in
natural gas revenues declined due to a reduction in the contract price for
natural gas that was implemented in December 1994.
Operating income (loss) by industry segment, before allocation of
general corporate overhead for the first quarter of 1996 compared to the same
period during 1995 is as follows.
<TABLE>
<CAPTION>
Increase
Segment 1996 1995 (Decrease)
-------- --------- --------
<S> <C> <C> <C>
Refining $ (33,300) $ (13,500) $ (19,800)
Electrical generation (22,200) 40,800 (63,000)
Gas production 9,000 32,700 (23,700)
Methanol project (29,500) 59,800 (89,300)
Corporate overhead
and other (56,000) (77,300) 21,300
--------- ---------- --------
$(132,000) $ 42,500 $(174,500)
========= ========== ========
</TABLE>
Losses associated with refining operations are the result of ongoing
costs and expenses incurred in maintaining the refinery facility. The
decline in electrical energy income is associated with a reduction in demand
coupled with substantially higher fuel costs. The decrease in natural gas
production income is attributed almost entirely to a sales price reduction
due to an overly depressed natural gas market. The decrease in methanol
project income is attributed to the allocations of a $100,000 operating loss
<PAGE>
from SCCLP due to unscheduled plant repairs experienced in the current year,
contrasted with the same period last year where no allocations of
income/loss had been accrued. The reduction in losses associated with
overhead costs and other income are attributed to the current year
recognition of approximately $31,000 from the COTI agreement.
Losses associated with refinery operations are expected to continue
until such time as additional raw materials can be located for processing or
an alternative use of those assets is identified. Several alternative uses
are currently being explored by management. Electrical generation
operations, while currently impaired by diminished local demand, are
anticipated to improve slightly during the second quarter of 1995. The
natural gas market continues to be very soft. While current production
levels are anticipated to remain consistent with prior years, the generally
depressed market price of natural gas is anticipated to continue in the near
future. Management is considering direct marketing gas to end users in an
effort to improve selling prices, but the impact of changing from the
current marketing arrangements has not as yet been fully evaluated.
Operating results of SCCLP were somewhat disappointing after the phenomenal
earnings experienced during the later half of 1994 and early 1995. Methanol
prices have now fallen to more traditional levels but the Company can
anticipate moderate income allocations for the remainder of the current
year. Corporate overhead costs are expected to remain relatively flat for
the remainder of the year and income associated with the COTI agreement is
expected to improve slightly over that experienced last year.
Liquidity and Capital Resources
The Registrant had working capital of $658,000 at May 31, 1995
compared to $470,000 at the beginning of the year. The increase in working
capital consists of a $48,000 increase from operations, a reduction in the
non-current portion of long term debt of $21,000, collections of notes
receivable of $1,000 and cash distributions from SCCLP of $160,000. The
Registrant believes that current working capital levels, are adequate to
cover expected operating needs.
Total debt, consisting of notes payable, current portion of long-term
debt, long-term debt, and subordinated debentures, decreased by $21,400
during the first three months of the current year. Debt in these categories
was 12.9% of equity at May 31, 1995 compared to 13.2% at the beginning of
the current year.
Inflation, Deflation and Changing Prices
The results of operations and capital expenditures will continue to be
affected by inflation, deflation and changing prices. Prices of natural
gas, and generator fuel could have a materially adverse effect on the
Registrant's operations. Management is unable to predict the full impact of
these factors on the results of operations or working capital.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
(a) In reference to legal proceedings described in the Registrant's
February 28, 1995 Form 10-K, (PartI, Item 3), there have been
no material changes in the actions that have occurred during the
period covered by this report.
Item 6. Exhibits and Reports on Form 8-K
(a) No reports on Form 8-k were filed by the Registrant during the
quarter ended May 31, 1995.
<PAGE>
SIGNATURES
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 capacities and on the dates indicated:
UNICO, INC.
By: Rick L. Hurt Date: July 11, 1995
Rick L. Hurt, Controller, Secretary,
Treasurer, and Chief Financial Officer.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> MAY-31-1995
<CASH> 458950
<SECURITIES> 308999
<RECEIVABLES> 159541
<ALLOWANCES> 0
<INVENTORY> 90786
<CURRENT-ASSETS> 1073820
<PP&E> 3021067
<DEPRECIATION> 1640266
<TOTAL-ASSETS> 3507301
<CURRENT-LIABILITIES> 416304
<BONDS> 100846
<COMMON> 197318
0
0
<OTHER-SE> 2705433
<TOTAL-LIABILITY-AND-EQUITY> 3507301
<SALES> 515429
<TOTAL-REVENUES> 515429
<CGS> 431051
<TOTAL-COSTS> 546565
<OTHER-EXPENSES> 99557
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1273
<INCOME-PRETAX> (131966)
<INCOME-TAX> (48500)
<INCOME-CONTINUING> (83466)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (83466)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
