<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
_____________________________________
FOR THE QUARTER ENDED MARCH 31, 1996 COMMISSION FILE # 0-15303
UNICO, INC.
-----------
(Exact name of Registrant as specified in its Charter)
DELAWARE 73-1215433
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
8380 ALBAN ROAD, SPRINGFIELD, VA 22150
----------------------------------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (703) 644-0200
--------------
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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
CLASS: COMMON STOCK, $.01 PAR VALUE
------------------------------------
Number of SHARES OUTSTANDING as of May 13, 1996 7,883,095
---------
<PAGE>
UNICO, INC.
INDEX
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PAGE NO.
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PART 1 - FINANCIAL INFORMATION
ITEM 1 CONSOLIDATED BALANCE SHEETS
March 31, 1996 and December 31, 1995 3 & 4
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarter Ended March 31, 1996
and the Quarter Ended March 31, 1995 5
CONSOLIDATED STATEMENTS OF CASH FLOW
For the Quarter Ended March 31, 1996
and the Quarter Ended March 31, 1995 6
NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS 7
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
PART 11 - OTHER INFORMATION 12
SIGNATURE PAGE 13
2
<PAGE>
PART 1. FINANCIAL INFORMATION
UNICO, INC.
CONSOLIDATED BALANCE SHEETS 1 of 2
- --------------------------- ------
<TABLE>
<CAPTION>
ASSETS March 31, December 31,
- ------ 1996 1995
---- ----
<S> <C> <C>
CURRENT:
Cash and Cash Equivalents $ 429,600 $ 300,821
Accounts Receivable:
Trade (net of allowance for uncollectible
accounts of $386,082 and $377,793) 478,613 771,495
Inventory 295,497 254,505
Notes Receivable 98,968 189,707
Notes Receivable - Stockholders 280,000 280,000
Prepaid Expenses 114,412 171,203
----------- -----------
Total current assets 1,697,090 1,967,731
PROPERTY:
Furniture, fixtures and equipment 4,375,131 4,285,322
Leasehold improvements 158,061 152,470
Less accumulated depreciation (1,656,325) (1,552,175)
----------- -----------
Property, net 2,876,867 2,885,617
GOODWILL (net of amortization of
$330,897 and $317,309) 1,694,125 1,707,713
DEPOSITS AND OTHER 195,855 200,619
----------- -----------
TOTAL $ 6,463,937 $ 6,761,680
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
UNICO, INC.
CONSOLIDATED BALANCE SHEETS 2 of 2
- --------------------------- ------
<TABLE>
<CAPTION>
March 31, December 31,
LIABILITIES & STOCKHOLDERS' EQUITY 1996 1995
- ---------------------------------- ---- ----
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 1,185,518 $ 1,258,768
Accrued liabilities 349,557 242,844
Notes payable, current portion 774,967 781,715
Deferred revenue 11,315 110,921
----------- -----------
Total current liabilities 2,321,357 2,394,248
LONG TERM LIABILITIES:
Notes Payable 748,500 805,021
Convertible debenture - Affiliate 1,400,000 1,386,750
Subordinated debenture 1,010,000 996,750
Other 198,328 91,933
----------- -----------
Total long term liabilities 3,356,828 3,280,454
----------- -----------
Total liabilities 5,678,185 5,674,702
REDEEMABLE PREFERRED STOCK:
Preferred stock - $.01 par value:
5,000,000 shares authorized;
Series A and B Redeemable Preferred stock -
280 shares issued and outstanding
(Redemption value of $280,000) 3 3
COMMITMENTS AND CONTINGENCIES (Note 2)
STOCKHOLDERS' EQUITY:
Preferred stock - $.01 par value:
5,000,000 shares authorized;
Series A Convertible Preferred Stock -
0 shares issued and outstanding - -
Common stock - $.01 par value:
20,000,000 shares authorized;
7,883,095 shares outstanding 78,830 78,830
Additional paid-in capital 4,974,034 4,974,034
Accumulated deficit (4,267,115) (3,965,889)
----------- -----------
Total stockholders' equity 785,752 1,086,975
----------- -----------
TOTAL $ 6,463,937 $ 6,761,680
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
UNICO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED MARCH 31, 1996 AND 1995
- ----------------------------------------------
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
REVENUES:
Coupon and advertising sales,
net of discounts and allowances $1,782,693 $3,046,874
Franchise fees 92,133 0
Other 70,573 92,969
---------- ----------
TOTAL REVENUES 1,945,399 3,139,843
EXPENSES:
Production 1,367,199 2,098,164
General and administrative 679,518 856,296
Franchise development 89,002 98,328
Interest expense - affiliate 43,563 38,528
Interest expense - other 58,676 41,705
---------- ----------
TOTAL EXPENSES 2,237,958 3,133,021
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NET INCOME (LOSS) BEFORE INCOME TAXES (292,559) 6,822
DEFERRED INCOME TAX EXPENSE 8,667 2,729
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NET INCOME (LOSS) $ (301,226) $ 4,093
========== ==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 7,883,095 7,305,521
---------- ----------
NET INCOME (LOSS) PER COMMON SHARE $(.038) $.001
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
UNICO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(301,226) $ 4,093
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 117,738 118,343
Provision for bad debts 68,289 21,003
Deferred income taxes 8,667 2,729
Changes in operating assets and liabilities:
Accounts and notes receivable (315,332) (25,334)
Prepaid expenses and inventory 15,799 (150,544)
Deposits and other 4,764 2,373
Accounts payable and accrued liabilities 131,190 160,759
Deferred revenue (99,605) (100,327)
--------- ---------
Net Cash Provided by (Used in) Operating Activities 260,948 33,095
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property (95,400) (196,900)
--------- ---------
Net Cash Provided by (Used in) Investing Activities (95,400) (196,900)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debentures 25,000 0
Proceeds from notes payable 0 104,000
Payment of notes payable (61,769) (162,595)
Payment of funding costs 0 (1,039)
--------- ---------
Net Cash Provided (Used In) Financing Activities (36,769) (59,634)
--------- ---------
CHANGE IN CASH AND CASH EQUIVALENTS: 128,779 (223,439)
Cash and Cash Equivalents - Beginning of Period 300,821 708,742
--------- ---------
Cash and Cash Equivalents - End of Period $ 429,600 $ 485,303
========= =========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for income taxes $ 0 $ 0
Cash paid for interest $ 31,977 $ 114,290
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE>
UNICO, INC.
- -----------
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED MARCH 31, 1996 AND 1995
- --------------------------------------------------
1. BASIS OF PRESENTATION
---------------------
The interim consolidated financial statements at March 31, 1996 and for the
three month periods ended March 31, 1996 and 1995 are unaudited, but
include all adjustments which the Company considers necessary for a fair
presentation. The December 31, 1995 balance sheet was derived from the
Company's audited financial statements.
The accompanying unaudited financial statements are for the interim periods
and do not include all disclosures normally provided in annual financial
statements, and should be read in conjunction with the Company's audited
financial statements included in the Company's Form 10-KSB for the year
ended December 31, 1995. The accompanying unaudited interim financial
statements for the three month period ended March 31, 1996 are not
necessarily indicative of the results which can be expected for the entire
year.
2. COMMITMENTS & CONTINGENCIES
---------------------------
Prior to 1995, the Florida Department of Revenue issued a Notice of Intent
to levy additional sales taxes with penalty and interest charges totaling
approximately $480,000 against the Company's subsidiary, Cal-Central. A
liability for a portion of this matter was recorded by Cal-Central and was
included in other long-term liabilities in the financial statements at
December 31, 1994. Subsequent to December 31, 1995, written settlement was
reached with Florida authorities whereby Cal-Central agreed to a payout of
$35,000, payable at $5,000 per quarter, over seven quarters beginning in
June, 1996. The agreed to amount is recorded as a liability at December
31, 1995 and March 31, 1996.
The Company is exposed to various other legal matters encountered in the
normal course of business. In the opinion of management, the resolution of
these matters will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
3. INCOME TAXES
------------
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"), which requires an asset and liability approach to
accounting for income taxes. Under SFAS 109, deferred tax assets or
liabilities are computed on the difference between the financial statement
and income tax bases of assets and liabilities ("temporary differences")
using the enacted marginal tax rate. Deferred income tax expenses or
benefits are based on the changes in the deferred tax asset or liability
from period to period.
7
<PAGE>
Management has determined that it is not more likely than not that the
Company will be able to realize all the tax benefits from available net
operating loss carryforwards and has, therefore, provided a valuation
allowance of an equal amount. The deferred income tax expense of $8,667
reflected in the Statements of Operations for the quarter ended March 31,
1996 represents state income taxes payable by United Coupon on first
quarter profits that are not impacted by the net operating loss
carryforwards.
4. SUBSIDIARY RESTRUCTURING
------------------------
The Company acquired Cal-Central Marketing Corporation as a wholly owned
subsidiary on October 27, 1993. Operating profitability and cash flow for
the subsidiary have been below management's expectations and anticipated
potential since the acquisition. During the third quarter of 1995,
management determined that it was in the best interest of shareholders and
the Company to close the Fort Lauderdale, Florida, production facility and
consolidate all art and printing functions for Cal-Central into the
Company's newly expanded facility in Springfield, Virginia. This
transition was accomplished during December 1995, and a restructuring
charge of $772,433 was recorded during 1995 to reflect initial costs
associated with the restructuring.
During the quarter ended March 31, 1996, the Company further evaluated the
collectibility of remaining accounts receivable of Cal-Central, including
receivables related to advertising commitments completed during the period.
As a result of this review, the Company recorded additional bad debt
expense of $60,000 related to Cal-Central accounts receivable. Remaining
accounts receivable of Cal-Central, deemed to be collectible following this
additional impairment, is $107,413.
5. CORPORATE RESTRUCTURING
-----------------------
On March 4, 1996, the Company entered into a Third Restated and Amended
Loan Agreement with BancFirst which provided for the renewal of the
Company's existing term and revolving credit facilities until January 31,
1997.
In consideration of the plan to consolidate the corporate office functions
from Oklahoma City to the expanded offices of the Company in Springfield,
Virginia, the Company's Chairman, Chief Executive Officer and President, W.
Douglas Frans, and its Chief Financial Officer, Ted W. Strickland, proposed
to resign their positions following completion of specific key objectives
encompassing the bank restructuring and annual audit. The Board of
Directors approved this plan on March 22, 1996, and appointed Gerard R.
Bernier, current Chief Executive Officer and President of United Coupon,
and Robert F. Pulliza, former Executive Vice President of United Coupon, as
their respective successors. This transition of corporate authority and
relocation of corporate headquarters became effective March 31, 1996.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
-------------
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's principal measures of liquidity are cash, certificates of
deposit, accounts receivable and salable inventory. Also, management deems
appropriately managed and collateralized bank lines of credit as a proper
supplement to its liquidity.
The Company's working capital was a deficit $624,267 at March 31, 1996, a
46% decrease from December 31, 1995. This change reflects: an increase in Cash
and Equivalents of $128,779 resulting primarily from positive operating cash
flow, aided by deferred interest payments regarding subordinated debt; a net
decrease of $292,882 in trade Accounts Receivable, related to impairment of
collectibility of accounts receivable at Cal-Central Marketing Corporation
("Cal-Central"); an increase of $40,992 in paper and work in process Inventory
at United Coupon Corporation ("United Coupon"); a decrease of $56,791 in Prepaid
Expenses related to amortization of prepaid sales commissions on advertising
contracts completed during the period; and a decrease of $90,739 in Notes
Receivable collected during the first quarter of 1996. These changes were
impacted by a decrease of $73,250 in Accounts Payable and a $106,713 increase in
Accrued Liabilities related to accrual of seasonal operating costs at United
Coupon. Working capital was aided by a $99,606 reduction in Deferred Revenue
related to completion of advertising contracts during the period. Certain
liabilities, totaling $294,000, have maturity dates of less than twelve months.
The Company has an established history of renewal for these items. Management
has the intent and believes the Company has the ability to renew these items,
thus, they have been appropriately classified as long term.
Long term liabilities increased by $76,374 during the period as a result of
deferral of interest payments on subordinated debt obligations until July 1997.
During the latter half of 1995, the Company's subsidiary Cal-Central
developed a serious liquidity shortfall as a result of an unexpected, rapid
decline in the subsidiary's core cooperative advertising business. The decline,
which was precipitated by a temporary interruption of service by two key
advertising distributors, limited Cal-Central's ability to meet current
operating and debt-service obligations. As a result, UNICO management initiated
a restructuring program for Cal-Central which immediately reduced operating
expenditures, through the elimination of non-critical personnel, marginal sales
centers, and unprofitable sales and manufacturing functions. In addition,
management arranged a deferral of interest payments on subordinated debt
obligations and arranged convertible debt financing with the Company's major
debenture holders to provide supplemental working capital for financing the
restructuring plan. Management is optimistic that the plan for Cal-Central will
be successful and that the interim financing will be sufficient to allow time
for an appropriate reduction of debt within limits that are comfortably
supportable by total Company operations. Such actions could require securities,
debt, or cash beyond that currently available within the Company. Management
will consider appropriate options available in providing such funding.
As a component of the restructuring of Company debt, a Letter of Intent to
convert a major portion of subordinated debt to equity has been executed with
lenders representing approximately 80% of the Company's subordinated debt.
Management believes such action is appropriate for improving the financial
condition of the company and for improving value for shareholders.
9
<PAGE>
RESULTS OF OPERATIONS - QUARTER ENDED MARCH 31, 1996
AS COMPARED TO THE QUARTER ENDED MARCH 31, 1995
- ----------------------------------------------------
Gross Revenue for the quarter ended March 31, 1996 declined 38% from the
same period in 1995, from $3,139,843 to $1,945,399. Coupon and Advertising
Sales, which include coupon production service fees, national account
advertising fees, advertising sales and commercial printing, and which represent
92% of total revenue for 1996, decreased by 46% from the corresponding period in
1995. Coupon Sales from United Coupon Corporation increased approximately 7%
over the prior year, at $1,866,636 compared to $1,751,145 for the same period in
1995. Net income contribution from United Coupon increased by approximately 31%
during the first quarter of 1996 compared to the same period in 1995.
Advertising Sales at Cal-Central declined by $1,286,057. The Cal-Central decline
was a result of restructuring activities for the distributor based cooperative
advertising business of Cal-Central.
Franchise Fee Income for the period improved substantially from the prior
year, with $92,133 reported for the 1996 quarter compared to no sales for the
same period in 1995. Franchise sales continue to receive intensive effort and
management attention.
Other Revenue for the current period was $70,573 compared to $92,969 in
1995. The decline is related to lower credit fees collected by Cal-Central as a
result of lower overall sales activity by Cal-Central during the 1996 period.
Production Expenses, which include art development, printing, bindery,
delivery, product development, distributor support and selling expense,
decreased by $730,965, 35%, during the 1996 quarter in contrast to the same
period in 1995. This decrease is related to the 26% decline in Advertising Sales
and related production activities at Cal-Central, partially offset by higher
levels of Commercial Printing at United Coupon.
General and Administrative Expense decreased by 21% over the same period
last year primarily as a result of cost containment and consolidation of
administrative functions for all Company operations within the Springfield
facility.
Franchise Development Cost, which includes the cost of developing,
advertising, selling, training and supporting United Coupon franchises, was 10%
less than the prior year.
Interest Expense increased $22,006 over the same period last year as a
result of additional borrowed funds accumulated during the second half of 1995.
During the latter portion of 1995, the Company's subsidiary, Cal-Central,
experienced a significant cash flow shortfall as a result of the temporary
interruption of product distribution by two key distributors. This shortfall
received reaction from UNICO management through the initiation of a
restructuring plan to reduce Cal-Central administrative overhead and operating
expenses and to implement more efficient and effective approaches to sales
administration and product manufacturing. During the initial phases of
restructuring, Cal-Central has been unable to meet all product art and printing
requirements. In addition, the interruption of distribution of Cal-Central
products caused a delay in Cal-Central's ability to meet the distribution
commitment of advertising sales contracts. In management's opinion, this delay
caused an additional impairment of $60,000 during the first quarter of 1996 in
the
10
<PAGE>
probable collectibility of trade accounts receivable related to these contracts.
During the three month period ended March 31, 1996, the Company completed art
and printing functions and delivered advertising product related to
approximately $460,000 in Cal-Central advertising contracts. The Company has not
recorded sales or accounts receivable for these items due to the lateness in
which such delivery was completed. Art and printing costs related to this work
are reported as production expense for the period.
Net Loss for the current period was $301,226 compared to net income of
$4,093 for the prior year. This significant decline is directly related to the
restructuring of Cal-Central, including the interruption of art and printing
functions which delayed the realization of revenue from advertising sales, as
well as the net effect of revenue variations and cost reductions noted above.
During the first quarter of 1996, Company management agreed upon and completed a
plan to consolidate all corporate administrative functions, including the
corporate headquarters and the offices of Chief Executive Officer, President and
Chief Financial Officer within the facility and with personnel within the
Company's Springfield, Virginia facility. This action is expected to yield lower
administrative costs in future periods.
11
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
-----------------
Omitted from this report as inapplicable.
Item 2. Changes in Securities
---------------------
Omitted from this report as inapplicable.
Item 3. Default Upon Senior Securities
------------------------------
Omitted from this report as inapplicable.
Item 4. Submission of Matters to Vote of Securities Holders
---------------------------------------------------
Omitted from this report as inapplicable.
Item 5. Other Information
-----------------
Omitted from this report as inapplicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
A. Exhibits
Omitted from this report as inapplicable
B. Reports on Form 8-K
Form 8-K was filed on April 11, 1996 disclosing
the change in corporate office location and
change in Chief Executive Officer, President &
Chairman, as well as Chief Financial Officer.
12
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
Undersigned.
UNICO, INC.
May 13, 1996 By: /s/ Gerard R. Bernier
- ------------
-------------------------
Gerard R. Bernier
Chief Executive Officer
and President
By: /s/ Robert F. Pulliza
-------------------------
Robert F. Pulliza
Chief Financial Officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 429,600
<SECURITIES> 0
<RECEIVABLES> 1,243,663
<ALLOWANCES> (386,082)
<INVENTORY> 295,497
<CURRENT-ASSETS> 0
<PP&E> 4,533,192
<DEPRECIATION> (1,656,325)
<TOTAL-ASSETS> 6,463,937
<CURRENT-LIABILITIES> 2,321,357
<BONDS> 0
0
3
<COMMON> 5,052,864
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,463,937
<SALES> 1,945,399
<TOTAL-REVENUES> 1,945,399
<CGS> 1,367,199
<TOTAL-COSTS> 2,237,958
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 102,239
<INCOME-PRETAX> (292,559)
<INCOME-TAX> 8,667
<INCOME-CONTINUING> (292,559)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (301,226)
<EPS-PRIMARY> (.038)
<EPS-DILUTED> (.038)
</TABLE>
