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, 1996
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, 1996, 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 May 31, 1996
and February 29, 1996 3
Consolidated statements of operations for the three
month period ended May 31, 1996 and 1995 5
Consolidated statements of cash flows for the
three months ended May 31, 1996 and 1995 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>
May 31, February 29,
1996 1996
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 275,363 $ 232,409
Certificate of deposit and short term investments 123,781 356,858
Accounts receivable 81,442 88,392
Accounts receivable from related parties - 17,859
Inventories 22,988 36,316
Tax refund receivable 53,349 -
TOTAL CURRENT ASSETS 556,923 731,834
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 290,298 263,348
Oil and gas properties 894,400 894,400
Property, plant and equipment (gross) 3,019,707 2,992,757
Accumulated depreciation & depletion (1,780,493) (1,746,015)
1,239,214 1,246,742
OTHER ASSETS
Notes receivable 9,818 10,818
Other assets (net) 186,624 131,624
Investment in Chatfield Dean 600,000 500,000
Investment in partnership 1,417,972 1,800,730
2,214,414 2,443,172
$ 4,010,551 $ 4,421,748
</TABLE>
<PAGE>
<TABLE>
Consolidated Balance Sheets - Continued
<CAPTION>
May 31, February 29,
1996 1996
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 96,398 $ 106,327
Taxes other than income 5,406 4,930
Other accrued expenses 4,038 4,063
Current portion of long-term debt 81,521 76,539
Income taxes payable - 367,151
TOTAL CURRENT LIABILITIES 187,363 559,010
LONG-TERM DEBT, net of current portion 44,696 55,555
CONVERTIBLE SUBORDINATED DEBENTURES PAYABLE
TO RELATED PARTIES 178,000 178,000
DEFERRED TAXES PAYABLE, net of current portion 97,150 101,050
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 1,263,448 1,288,239
3,503,342 3,528,133
$ 4,010,551 $ 4,421,748
<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,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
REVENUES
Refined product sales $ 140,774 $ 151,324
Electrical capacity and energy 75,912 203,201
Rent and miscellaneous income 3,105 750
Natural gas sales 51,127 33,767
Loss from investment in partnership (63,929) (99,557)
Overhead, management fees, and other revenues 117,400 126,387
324,389 415,872
COSTS AND EXPENSES
Cost of sales 228,467 431,051
General and administrative 103,945 80,780
Depreciation, depletion
and amortization 34,478 34,734
Interest, net 3,190 1,273
370,080 547,838
INCOME (LOSS) FROM OPERATIONS
BEFORE INCOME TAXES (45,691) (131,966)
Provision for income taxes:
Current (17,000) (45,800)
Deferred (3,900) (2,700)
(20,900) (48,500)
NET INCOME (LOSS) $ (24,791) $ (83,466)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 986,590 986,590
EARNINGS PER COMMON SHARE $ (0.0251) $ (0.0846)
<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,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (24,791) $ (83,466)
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation, depletion and amortization 34,478 34,734
Deferred income taxes (3,900) (2,700)
Loss on investment in partnership 63,929 99,557
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 24,809 46,623
(Increase) decrease in inventories and
prepaid expenses 13,328 (7,673)
Increase (decrease) in accounts payable
and accrued expenses (9,478) 16,768
Increase (decrease) in income taxes accrued (420,500) (295,500)
NET CASH FLOW PROVIDED, (USED) BY OPERATING ACTIVITIES (322,125) (191,657)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (26,950) -
Cash distribution received from partnership 318,829 160,238
Increase in certificates of deposit (1,923) (4,450)
Decrease in certificates of deposit 235,000 -
Increase in other assets (55,000) -
Investment in Chatfield Dean (100,000) -
Collections on notes receivable 1,000 1,000
NET CASH FLOW PROVIDED (USED) BY INVESTING ACTIVITIES 370,956 156,788
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long-term debt 26,950 -
Payments on long term debt (32,827) (21,376)
NET CASH FLOW USED BY FINANCING ACTIVITIES (5,877) (21,376)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 42,954 $ (56,245)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 232,409 515,195
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 275,363 $ 458,950
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
The consolidated balance sheet as of May 31, 1996, the consolidated
statement of income for the six month period ended May 31, 1996 and 1995, and
the consolidated statement of cash flows for the six month period ended May 31,
1996 and 1995, 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 May 31, 1996, 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 May 31, 1996, are not necessarily indicative of
operating results for the full year.
Investment in Partnership
During the three month period ended May 31, 1996, unaudited losses
by SCCLP were $106,548. The company's share of loss allocations as of that date
included $23,654 and $40,275 to Gas Technologies Group, Inc. ("GTGI"), and
Intermountain Chemical, Inc. ("IC") respectively. The GTGI and IC shares are
recorded using the equity method and are included in results of operations for
the three month period ended May 31, 1996.
During the three month period ended May 31, 1996, the Company
received cash distributions of $318,829 from SCCLP representing the estimated
tax liabilities of the Company associated with income allocations for the year
ended February 29, 1996.
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 in the past refined low-cost, heavy crude oil and other
low gravity refined products into diesel fuel, fuel oils, and asphalt which were
generally marketed on a wholesale basis in the intermountain region. IRC
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 periodically provides certain asphalt terminalling services
wherein IRC receives a fixed monthly fee and reimbursement of certain operating
expenses directly related to the service provided.
<PAGE>
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 when the refinery is operating.
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
Fleet Bank, previously 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 was 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 received 8.75% of gross margins realized by
COTI. The Agreement with COTI was terminated in December 1995.
Results of Operations
Quarter ended May 31, 1996 compared to quarter ended May 31, 1995
Revenues declined to $324,000 during the first quarter of 1997,
down 22% from the same period last year. Earnings however, while still a loss
of $25,000, improved by 70% over a loss of $84,000 during the first quarter of
last year. Cash flow from operations decreased to a use of $322,000, down 68%
from a use of $192,000 last year.
<PAGE>
The decline in revenues is almost entirely attributed to a decline
in co-generation revenues. The generators are currently being provided on a
standby capacity basis, accordingly, while co-generation revenues are
substantially lower, the related operating costs such as fuel and maintenance
are also avoided. Revenues associated with natural gas sales improved by 51%
over those from the prior year quarter due to a renegotiation of the natural gas
sales price. Revenues associated with management fees and overhead cost
reimbursement from SCCLP improved slightly over those from the prior year
quarter but were off-set by the discontinuation of revenues associated with the
COTI agreement which expired in December 1995.
<TABLE>
Operating income (loss) by industry segment, before allocation of
general corporate overhead for the first quarter of 1997 compared to the same
period during 1996 is as follows:
<CAPTION>
Increase
Segment 1996 1995 (Decrease)
<D> <S> <S> <S>
Refining $ (38,800) $ (33,300) $ (5,500)
Electrical generation 29,200 (22,200) 51,400
Gas production 21,300 9,000 12,300
Methanol project 53,200 (29,500) 82,700
Corporate overhead
and other (110,600) (56,000) (54,600)
$ (45,700) $ (132,000) $ (86,300)
</TABLE>
The slight decline in refining income relates to an increase in the
allocation of operating costs associated with the combined refining and co-
generation activities. The significant increase in electrical generation income
is attributed to lower allocated operating costs in addition to substantially
lower operating costs associated with the current standby capacity arrangement.
The improvement in natural gas income is attributed to the improvement in sales
prices realized starting in April 1996. The improvement in methanol project
income is attributed to an increase in management fees initiated in December
1995 and a reduction in operating loss allocations from the partnership. The
increased loss associated with corporate overhead is attributed to the
discontinuation of the COTI agreement.
Liquidity and Capital Resources
The Registrant had working capital of $369,600 at May 31, 1996
compared to $172,800 at the beginning of the year. The increase in working
capital consists of a $70,000 increase from operations, a reduction in the non-
current portion of long term debt of $28,000, collections of notes receivable of
$1,000, cash distributions from SCCLP of $319,000, the addition investment in
Chatfield Dean preferred stock of 100,000, and the acquisition of other assets
of $55,000. 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 $5,900
during the first nine months of the current year. Debt in these categories was
8.7% of equity at May 31, 1996 compared to 8.8% 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 29, 1996 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 5. Other Information
(a) On January 15, 1996 the Registrant executed a Letter of Intent
with Chatfield Dean & Co., ("Chad") setting out the terms of a
proposed acquisition, by the Registrant, of all of the
outstanding common and preferred stock of Chad. The
Registrant has previously reported information regarding this
proposed acquisition in its Form 8-k filed as of January 15,
1996, and in its Form 10-k filed for the year ended February
29, 1996. As of the date of this report, the Registrant and
Chad are in the process of performing due diligence and it is
anticipated that a formal merger agreement will be finalized
and executed in the very near future.
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, 1996.
<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 15, 1996
Rick L. Hurt, Controller, Secretary,
Treasurer, and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
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<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> MAY-31-1996
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<INVENTORY> 22988
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<PP&E> 3019707
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