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 August 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 September 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 Page
PART I: FINANCIAL INFORMATION
Item 1.Financial statements
Consolidated balance sheets as of August 31, 1995
and February 28, 1995
Consolidated statements of operations for the three and
six month periods ended August 31, 1995 and 1994
Consolidated statements of cash flows for the
six months ended August 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>
August 31, February 28,
1995 1995
(Unaudited)
----------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 659,499 $ 515,195
Certificate of deposit 313,425 304,549
Accounts receivable 198,928 201,594
Accounts receivable from related parties - 4,570
Inventories 69,972 83,113
Tax refund receivable 100,990 -
---------- ----------
TOTAL CURRENT ASSETS 1,342,814 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 (1,678,865) (1,605,532)
---------- ----------
1,342,202 1,415,535
OTHER ASSETS
Notes receivable 13,818 16,318
Other assets (net) 108,609 108,609
Investment in partnership 504,699 1,188,548
---------- ----------
627,126 1,313,475
---------- ----------
$3,312,142 $3,838,031
========== ==========
</TABLE>
<PAGE>
<TABLE>
Consolidated Balance Sheets - Continued
<CAPTION>
August 31, February 28,
1995 1995
(Unaudited)
---------- ----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 98,015 $ 75,670
Accounts payable to related parties - 32,508
Credit line payable - -
Taxes other than income 1,959 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 1,255 239,956
---------- ----------
TOTAL CURRENT LIABILITIES 390,811 639,492
LONG-TERM DEBT, net of current portion 79,367 122,222
DEFERRED TAXES PAYABLE, net of current portion 84,700 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 517,370 746,323
---------- ----------
2,757,264 2,986,217
---------- ----------
$3,312,142 $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 For the six months ended
August 31, August 31, August 31, August 31,
1995 1994 1995 1994
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
REVENUES
Refined product sales $ 107,481 $ 147,844 $ 258,805 $ 302,141
Electrical capacity and energy 147,031 189,384 350,232 508,873
Processing & terminalling agreements 750 4,286 1,500 15,124
Natural gas sales 42,724 67,276 76,491 128,833
Other 121,467 145,003 247,854 254,535
--------- ----------- ---------- -----------
419,453 553,793 934,882 1,209,506
COSTS AND EXPENSES
Cost of sales 334,448 438,183 765,499 944,750
General and administrative 70,716 94,019 151,496 167,509
Distributive share of partnership loss 166,738 - 266,295 -
Loss on sale of equipment - 571 - 571
Depreciation, depletion
and amortization 38,599 33,851 73,333 66,172
Interest, net 1,330 695 2,603 1,529
--------- ----------- ---------- -----------
611,831 567,319 1,259,226 1,180,531
--------- ----------- ---------- -----------
INCOME (LOSS) FROM OPERATIONS
BEFORE INCOME TAXES (192,378) (13,526) (324,344) 28,975
Provision for income taxes:
Current (44,191) 1,713 (89,991) 1,713
Deferred (2,700) (6,600) (5,400) (5,500)
--------- ----------- ---------- -----------
(46,891) (4,887) (95,391) (3,787)
--------- ----------- ---------- -----------
NET INCOME (LOSS) $(145,487) $ (8,639) $ (228,953) $ 32,762
========= =========== ========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 986,590 974,090 986,590 974,090
EARNINGS (LOSS) PER COMMON SHARE:
Earnings per common share $ (0.1475) $ (0.0089) $ (0.2321) $ 0.0336
========= ========== ==========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
UNICO, INC.
Consolidated Statements of Cash Flows
<CAPTION>
For the six months ended
August 31, August 31,
1995 1994
(Unaudited) (Unaudited)
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (228,953) $ 32,762
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation, depletion and amortization 73,333 66,172
Deferred income taxes (5,400) (5,500)
Distributive share of partnership loss 266,295 -
Loss on sale of equipment - 571
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 7,236 (9,594)
(Increase) decrease in inventories and
prepaid expenses 13,141 150,517
Increase in tax refund receivable (100,990) -
Increase (decrease) in accounts payable
and accrued expenses (9,980) (59,065)
Increase (decrease) in income taxes payable (238,701) -
---------- -----------
NET CASH FLOW PROVIDED (USED) BY OPERATING ACTIVITIES (224,019) 175,863
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment - (1,433)
Proceeds from sale of equipment - 418
Increase in certificates of deposit (8,876) (4,979)
Cash distributions from partnership 417,554 -
Collections on notes receivable 2,500 5,810
---------- -----------
NET CASH FLOW PROVIDED (USED)
BY INVESTING ACTIVITIES 411,178 (184)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (42,855) (9,072)
---------- -----------
NET CASH FLOW USED BY FINANCING ACTIVITIES (42,855) (9,072)
---------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 144,304 $ 166,607
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 515,195 321,659
---------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 659,499 $ 488,266
========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
The consolidated balance sheet as of August 31, 1995, the consolidated
statement of income for the three and six month period ended August 31, 1995
and 1994, and the consolidated statement of cash flows for the three and six
month periods ended August 31, 1995 and 1994, have been prepared by the
Company, without audit. In the opinion of management, all adjustments, (which
include only normal recurring adjustments), necessary to present fairly the
financial position, results of operations and changes in cash at August 31,
1995, and for all periods presented have been made.
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 August 31, 1995, are not necessarily
indicative of operating results for the full year.
Investment in Partnership
During the six month period ended August 31, 1995, unaudited losses by SCCLP
were $1,143,003. The company's share of loss allocations as of that date
included $266,295 and $413,855 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 six
month period ended August 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 August 31, 1995, loss allocations in excess of basis
attributed to IC and not included in results of operations totaled
approximately $2,468,000.
During the six month period ended August 31, 1995, the Company received
cash distributions of $417,554 from SCCLP representing the estimated tax
liabilities of the Company associated with income allocations for the year
ended December 31, 1994, and the two months ended February 28, 1995.
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.
<PAGE>
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 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.
<PAGE>
Results of Operations
Quarter ended August 31, 1995 compared to quarter ended August 31, 1994
Revenues declined to $420,000 during the second quarter of 1996, down from
$554,000 during the second quarter of 1995. Earnings declined to a loss of
$145,000, down from a loss of $9,000 during the same quarter last year. Cash
flow from operations decreased to a use of $32,000, down from $51,000 provided
by operations during the second 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 second 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 $(114,100) $ (43,100) $ (71,000)
Electrical generation 40,700 (17,700) 58,400
Gas production 9,200 40,900 (31,700)
Methanol project (96,500) 56,700 (153,200)
Corporate overhead and other (31,700) (50,300) 18,600
--------- ---------- ---------
$(192,400) $ (13,500) $(178,900)
========= ========== =========
</TABLE>
Losses associated with refining operations are the result of ongoing costs
and expenses incurred in maintaining the facility. The increase in electrical
generation operating results is generally due to lower fuel costs experienced
this year compared to the same period last year. The decline in natural gas
operating results is due to depressed natural gas prices compared to last
year. The decline in methanol project operating results is due to the
allocation of partnership operating losses experienced during the current
period quarter. The SCCLP methanol facility experienced significant losses
during the current period quarter due to an extended shutdown for scheduled
and unscheduled maintenance. The reduction in losses associated with overhead
costs and other income is attributed to the current quarter recognitions of
income from the COTI agreement.
Six months ended August 31, 1995 compared to six months ended August 31, 1994
Revenues declined to $935,000 during the first six months of 1996, down
from $1,210,000 during the same period of 1995. Earnings declined to a loss
of $229,000,down from earnings of $33,000 last year. Cash flow from
operations decreased to a use of $224,000, down from $176,000 provided by
operations during the same period in 1995.
The decline in revenues is most notably attributed to a reduction in
demand for electrical generation during the early part of the current year.
In addition, revenues associated with natural gas sales also declined due to
reduced prices ceased by the generally depressed natural gas market.
<PAGE>
Operating income (loss) by industry segment, before allocating of general
corporate overhead for the first six months of fiscal 1996 compared to the
same period last year is as follows:
<TABLE>
<CAPTION>
Increase
Segment 1996 1995 (Decrease)
--------- ---------- ---------
<S> <C> <C> <C>
Refining $(147,400) $ (56,600) $ (90,800)
Electrical generation 18,500 23,100 (4,600)
Gas production 18,200 73,700 (55,500)
Methanol project (126,000) 116,500 (242,500)
Corporate overhead
and other (87,600) (127,700) 40,100
--------- ---------- ---------
$(324,300) $ 29,000 $ 353,300
========= ========== =========
</TABLE>
The increased losses associated with refinery operations is
attributed to the earlier recognition of certain fixed operating costs during
the current year compared to last year. The decrease in electric energy
income is attributed to lower demand for power early in the year coupled with
high fuel costs during the same period. The decline in natural gas earnings
is attributed to a substantially decreased sales price due to the recent
depression in the natural gas market. The substantial loss associated with
methanol operations is due to partnership loss allocations recognized during
the current year in conjunction with the limited partnership interest in IC-LP
acquired in December, 1994. SCCLP losses during the current year are
attributed to both scheduled and unscheduled repair shut downs along with
substantially decreased sales prices for methanol. The improvement in
corporate overhead and other income is attributed to revenues associated with
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, are
anticipated to improve slightly during the third quarter of 1996. 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 $952,000 at August 31, 1995 compared
to $470,000 at the beginning of the year. The increase in working capital
consists of a $105,000 increase from operations, a reduction in the
non-current portion of long term debt of $43,000, collections of notes
receivable of $2,500 and cash distributions from SCCLP of $418,000. 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 $42,900 during
the first six months of the current year. Debt in these categories was 12.8%
of equity at August 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.
<PAGE>
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, (Part I, 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.
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: October 13, 1995
Rick L. Hurt, Controller, Secretary,
Treasurer, and Chief Financial Officer.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> FEB-28-1996 FEB-28-1996
<PERIOD-END> AUG-31-1995 AUG-31-1995
<CASH> 659499 659499
<SECURITIES> 313425 313425
<RECEIVABLES> 198928 198928
<ALLOWANCES> 0 0
<INVENTORY> 69972 69972
<CURRENT-ASSETS> 1342814 1342814
<PP&E> 3021067 3021067
<DEPRECIATION> 1678865 1678865
<TOTAL-ASSETS> 3312142 3312142
<CURRENT-LIABILITIES> 390811 390811
<BONDS> 79367 79367
<COMMON> 197318 197318
0 0
0 0
<OTHER-SE> 2559946 2559946
<TOTAL-LIABILITY-AND-EQUITY> 3312142 3312142
<SALES> 419453 934882
<TOTAL-REVENUES> 419453 934882
<CGS> 334448 765499
<TOTAL-COSTS> 445093 992931
<OTHER-EXPENSES> 166738 266295
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1330 2603
<INCOME-PRETAX> (192378) (324344)
<INCOME-TAX> (46891) (95391)
<INCOME-CONTINUING> (145487) (228953)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (145487) (228953)
<EPS-PRIMARY> (.15) (.23)
<EPS-DILUTED> (.15) (.23)
</TABLE>
