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 November 30, 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 December 31, 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 November 30, 1995
and February 28, 1995 3
Consolidated statements of operations for the three and
nine month periods ended November 30, 1995 and 1994 5
Consolidated statements of cash flows for the
nine months ended November 30, 1995 and 1994 6
Notes to consolidated financial statements 7
Item 2. Managements discussion and analysis of financial
condition and results of operations. 7
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 11
<PAGE>
<TABLE>
UNICO, INC.
Consolidated Balance Sheets
<CAPTION>
November 30, February 28,
1995 1995
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 440,336 $ 515,195
Certificate of deposit 317,678 304,549
Accounts receivable 235,855 201,594
Accounts receivable from related parties - 4,570
Inventories 50,969 83,113
Short term notes receivable 250,000 -
Tax refund receivable 123,326 -
TOTAL CURRENT ASSETS 1,418,164 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 (1,713,314) (1,605,532)
1,307,753 1,415,535
OTHER ASSETS
Notes receivable 12,318 16,318
Other assets (net) 108,609 108,609
Investment in partnership 435,219 1,188,548
556,146 1,313,475
$ 3,282,063 $ 3,838,031
</TABLE>
<PAGE>
<TABLE>
Consolidated Balance Sheets - Continued
<CAPTION>
November 30, February 28,
1995 1995
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 125,517 $ 75,670
Accounts payable to related parties 32,508
Credit line payable - -
Taxes other than income 1,375 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 81,613 96,079
Current portion of convertible subordinated debentures
payable to related parties 178,000 178,000
Income taxes payable - 239,956
TOTAL CURRENT LIABILITIES 402,008 639,492
LONG-TERM DEBT, net of current portion 72,222 122,222
DEFERRED TAXES PAYABLE, net of current portion 81,950 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 485,989 746,323
2,725,883 2,986,217
$ 3,282,063 $ 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 nine months ended
November 30, November 30, November 30, November 30,
1995 1994 1995 1994
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES
Refined product sales $ 137,708 $ 106,597 $ 396,513 $ 408,738
Electrical capacity and energy 190,875 248,450 541,107 757,323
Processing & terminalling agreements 57,644 750 59,144 15,874
Natural gas sales 31,435 34,260 107,926 163,093
Other 97,799 175,633 345,653 430,168
515,461 565,690 1,450,343 1,775,196
COSTS AND EXPENSES
Cost of sales 389,799 475,006 1,155,298 1,419,756
General and administrative 79,099 75,866 230,595 243,375
Depreciation, depletion
and amortization 34,449 29,723 107,782 95,895
Loss on disposal of assets - 4,302 - 4,873
Distributive share of partnership loss 69,480 - 335,775 -
Bad debt expense - - -
Interest, net 665 (875) 3,268 654
573,492 584,022 1,832,718 1,764,553
INCOME (LOSS) FROM OPERATIONS
BEFORE INCOME TAXES (58,031) (18,332) (382,375) 10,643
Provision for income taxes:
Current (23,900) (1,500) (113,891) 213
Deferred (2,750) 700 (8,150) (4,800)
(26,650) (800) (122,041) (4,587)
NET INCOME (LOSS) $ (31,381) $ (17,532) $ (260,334) $ 15,230
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 986,590 974,090 986,590 974,090
EARNINGS (LOSS) PER COMMON SHARE:
Earnings per common share $ (0.0318) $ (0.0180) $ (0.2639) $ 0.0156
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
UNICO, INC.
Consolidated Statements of Cash Flows
<CAPTION>
For the nine months ended
November 30, November 30,
1995 1994
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (260,334) $ 15,230
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation, depletion and amortization 107,782 95,895
Deferred income taxes (8,150) (4,800)
Distributive share of partnership loss 335,775 -
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (29,691) (32,072)
(Increase) decrease in inventories and
prepaid expenses 32,144 148,567
Increase (decrease) in accounts payable
and accrued expenses 16,938 (82,172)
Loss on disposal of assets - 4,873
Bad debt expense - -
Increase (decrease) in income taxes accrued (363,282) 27,842
NET CASH FLOW PROVIDED (USED) BY OPERATING ACTIVITIES (168,818) 173,363
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment - (30,033)
Proceeds from sale of assets - 418
Increase in certificates of deposit (13,129) (8,204)
Increase in other assets - (211)
Issuance of notes receivable (250,000) -
Cash distributions from partnership 417,554 -
Collections on notes receivable 4,000 13,965
NET CASH FLOW PROVIDED (USED) BY INVESTING ACTIVITIES 158,425 (24,065)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long term debt (64,466) (13,648)
NET CASH FLOW PROVIDED (USED) BY INVESTING ACTIVITIES (64,466) (13,648)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (74,859) 135,650
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 515,195 321,659
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 440,336 $ 457,309
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
The consolidated balance sheet as of November 30, 1995, the consolidated
statement ofincome for the six and nine month period ended November 30, 1995
and 1994, and the consolidated statement of cash flows for the six and nine
month periods ended November 30, 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 November 30,
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 November 30, 1995, are not necessarily
indicative of operating results for the full year.
Investment in Partnership
During the nine month period ended November 30, 1995, unaudited losses
by SCCLP were $1,455,978. The company's share of loss allocations as of that
date included $335,775 and $532,160 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 nine month period ended November 30, 1995. IC's investment in the
partnership was previously written off to zero as loss allocations exceeded
its basis in the investment. As of November 30, 1995, loss allocations in
excess of basis attributed to IC and not included in results of operations
totaled approximately $2,253,755.
During the nine month period ended November 30, 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.
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.
Results of Operations
Quarter ended November 30, 1995 compared to quarter ended November 30,
1994
Revenues declined to $515,000 during the second quarter of 1996, down
from $566,000 during the second quarter of 1995. Earnings declined to a loss
of $31,000, down from a loss of $17,000 during the same quarter last year.
Cash flow from operations decreased to a use of $137,000, down from $125,000
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 other revenues offset by improvements in refined
product sales and terminalling fees. The decline in electrical energy sales
is related to a reduction in demand by the local electric distribution
market. The improvement in refined product sales deals specifically with
sales of brokered crude oil wherein there have been slight improvements in
both crude oil prices and volumes sold. The decline in other revenues related
to the discontinuation of sales at cost of liquified carbon dioxide to SCCLP
by IC. The improvement in terminalling fees represents a one time recognition
of tank rental and related cost recovery on a short term terminalling
agreement.
Operating income (loss) by industry segment, before allocation of
general corporate overhead for the third 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 $ 21,200 $ (14,600) $ 35,800
Electrical generation (30,000) (40,600) 10,600
Gas production 4,500 6,400 (1,900)
Methanol project 700 52,300 (51,600)
Corporate overhead
and other (54,400) (21,900) (32,500)
$ (58,000) $ (18,400) $ (39,600)
</TABLE>
The significant improvement in refinery operations relates to the
recognition of income associated with a short term terminalling agreement.
The improvement of electrical generation income relates to slightly lower fuel
and maintenance costs experience this year compared to last. The decline in
natural gas production income reflects improved production from increased
demand but is offset by substantially reduced market prices received compared
to last year. The decline in income from methanol operations relates to the
recognition of partnership loss allocations associated with the GTI investment
acquired in December 1994. The increase in losses associated with other
activities relates to slightly increased overhead costs, reduced office rental
income, and interest expense of general debt.
Nine months ended November 30, 1995 compared to nine months
ended November 30, 1994
Revenues declined to $1,450,000 during the first nine months of 1996,
down from $1,775,000 during the same period of 1995. Earnings declined to a
loss of $382,000, down from earnings of $16,000 last year. Cash flow from
operations decreased to a use of $169,000, down from $173,000 provided by
operations during the same period in 1995.
The decline in revenues is most notably associated with a decline in
sales of electrical energy and capacity due to reduced demand in the local
distribution market. Natural gas revenues have also declined due to a
significant reduction in selling priced compared to last year. Other revenues
also declined due to the discontinuation of sales, at cost, of liquified
carbon dioxide to SCCLP.
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 $ (50,800) $ (71,200) $ 20,400
Electrical generation (87,000) (17,500) (69,500)
Gas production 22,700 80,100 (57,400)
Methanol project (125,300) 168,800 (294,100)
Corporate overhead
and other (142,000) (149,600) 7,600
$ (382,400) $ 10,600 $ (393,000)
</TABLE>
The decline in losses associated with refinery operations is attributed
to the one time recognition of terminalling fees from a short term
terminalling agreement. The significant increase in co-generation losses is
attributed to low demand early in the year and significantly higher fuel
costs. The reduction of earnings from natural gas operations is attributed to
the substantial reduction in selling price related to the depressed natural
gas market. The significant reduction in methanol project earnings is
directly related to loss allocations associated with the GTI interest that was
acquired in December 1994. The improvement in losses associated with other
activities reflects the addition of revenues associated with the COTI
agreement which became effective in January 1995.
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 fourth 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 several unexpected mechanical failures at the
facility have precluded operation at full capacity over the past several
months. However, settlement of the construction lawsuit in December is
expected to result in a significant one time income allocation to the
Registrant. Corporate overhead costs are expected to remain relatively flat
for the remainder of the year but income associated with the COTI agreement is
expected to decline as COTI reliance on credit support is declining.
Liquidity and Capital Resources
The Registrant had working capital of $1,016,000 at November 30, 1995
compared to $470,000 at the beginning of the year. The increase in working
capital consists of a $191,000 increase from operations, a reduction in the
non-current portion of long term debt of $50,000, collections of notes
receivable of $4,000 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 $64,500 during
the first nine months of the current year. Debt in these categories was 12.2%
of equity at November 30, 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 with the exception that Item 3(a) of Form 10-K filed by the Registrant
on May 256, 1995 was settled out of court on December 5, 1995 as was reported
by the Registrant on Form 8-K on December 8,1995.
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 November 30, 1995. However, the Registrant did file a Form 8-K
on December 8,1995 with respect to legal proceedings as noted in Part II Item
1(a) of this Form 10-Q.
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:January 12, 1996
Rick L. Hurt, Controller, Secretary,
Treasurer, and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> FEB-28-1996 FEB-28-1996
<PERIOD-END> NOV-30-1995 NOV-30-1995
<CASH> 440336 440336
<SECURITIES> 317678 317678
<RECEIVABLES> 485855 485855
<ALLOWANCES> 0 0
<INVENTORY> 50969 50969
<CURRENT-ASSETS> 1418164 1418164
<PP&E> 3021067 3021067
<DEPRECIATION> (1713314) (1713314)
<TOTAL-ASSETS> 3282063 3282063
<CURRENT-LIABILITIES> 402008 402008
<BONDS> 72222 72222
<COMMON> 197318 197318
0 0
0 0
<OTHER-SE> 2528565 2528565
<TOTAL-LIABILITY-AND-EQUITY> 3282063 3282063
<SALES> 515461 1450343
<TOTAL-REVENUES> 515461 1450343
<CGS> 389799 1155298
<TOTAL-COSTS> 503347 1493675
<OTHER-EXPENSES> 69480 335775
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 665 3268
<INCOME-PRETAX> (58031) (382375)
<INCOME-TAX> (26650) (122041)
<INCOME-CONTINUING> (31381) (260334)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (31381) (260334)
<EPS-PRIMARY> (.03) (.26)
<EPS-DILUTED> (.03) (.26)
</TABLE>
