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UNITED STATES
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 quarterly period ended MARCH 31, 2005
COMMISSION FILE NUMBER: 1-10104
-------------------------------
- --------------------------------------------------------------------------------
UNITED CAPITAL CORP.
--------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2294493
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9 Park Place, Great Neck, NY 11021
---------------------------- -----
(Address of principal executive offices) (Zip Code)
516-466-6464
------------
(Registrant's telephone number, including area code)
N/A
---
(Former name, former address and former fiscal year,
if changed since last report)
- --------------------------------------------------------------------------------
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 and 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. [X] Yes [ ] No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
The registrant had 9,160,142 shares of common stock, $.10 par value, outstanding
as of May 12, 2005
UNITED CAPITAL CORP. AND SUBSIDIARIES
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as
of March 31, 2005 (Unaudited) and December 31, 2004................3
Consolidated Statements of Income for the
Three Months Ended March 31, 2005 and 2004 (Unaudited).............4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2005 and 2004 (Unaudited)...........5-6
Notes to Consolidated Financial Statements (Unaudited)..........7-15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................15-20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF
MARKET RISK.......................................................20
ITEM 4. CONTROLS AND PROCEDURES...........................................20
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS..........................................................21
SIGNATURES ..................................................................21
2
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
2005 2004
--------------- ---------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 86,409 $ 84,783
Marketable securities 52,719 54,456
Notes and accounts receivable, net 7,393 7,350
Inventories 4,537 4,132
Prepaid expenses and other current assets 1,026 892
Deferred income taxes 1,314 354
--------- ---------
TOTAL CURRENT ASSETS 153,398 151,967
--------- ---------
Property, plant and equipment, net 3,235 2,337
Real property held for rental, net 31,731 31,545
Investments in joint ventures 18,938 19,398
Noncurrent notes receivable 1,814 4,462
Other assets 2,016 2,051
Noncurrent assets of discontinued operations 946 964
--------- ---------
TOTAL ASSETS $ 212,078 $ 212,724
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 2,171 $ 2,394
Accounts payable and accrued liabilities 9,074 10,144
Income taxes payable 6,604 7,014
Current liabilities of discontinued operations 11 7
--------- ---------
TOTAL CURRENT LIABILITIES 17,860 19,559
--------- ---------
Long-term debt 5,610 6,041
Other long-term liabilities 30,173 30,316
Deferred income taxes 2,917 2,739
--------- ---------
TOTAL LIABILITIES 56,560 58,655
--------- ---------
Commitments and contingencies
Stockholders' equity:
Common stock $.10 par value, authorized 17,500 shares;
issued and outstanding 9,160 and 9,130 shares, respectively 916 913
Retained earnings 155,309 152,266
Accumulated other comprehensive income, net of tax (707) 890
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 155,518 154,069
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 212,078 $ 212,724
========= =========
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
3
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
Three Months Ended
March 31,
---------------------------
2005 2004
---- ----
REVENUES:
Net sales $ 10,093 $ 9,290
Rental revenues from real estate operations 5,229 5,307
-------- --------
Total revenues 15,322 14,597
-------- --------
COSTS AND EXPENSES:
Cost of sales 7,454 6,681
Real estate operations:
Mortgage interest expense 133 192
Depreciation expense 473 597
Other operating expenses 2,071 1,746
General and administrative expenses 1,654 1,519
Selling expenses 972 1,016
-------- --------
Total costs and expenses 12,757 11,751
-------- --------
Operating income 2,565 2,846
-------- --------
OTHER INCOME (EXPENSE):
Interest and dividend income 1,144 386
Interest expense (133) (120)
Other income and expense, net 789 1,635
-------- --------
Total other income 1,800 1,901
-------- --------
Income from continuing operations before income taxes 4,365 4,747
Provision for income taxes 1,519 1,268
-------- --------
INCOME FROM CONTINUING OPERATIONS 2,846 3,479
-------- --------
DISCONTINUED OPERATIONS:
(Loss) income from discontinued operations, net of tax (benefit) provision
of ($7) and $34, respectively (11) 49
Net gain (loss) on disposal of discontinued operations, net of provision
(benefit) of $20 and ($56), respectively 30 (83)
-------- --------
INCOME (LOSS) FROM DISCONTINUED OPERATIONS 19 (34)
-------- --------
NET INCOME $ 2,865 $ 3,445
======== ========
BASIC EARNINGS PER SHARE:
Income from continuing operations $ .31 $ .38
Income from discontinued operations -- --
-------- --------
NET INCOME PER SHARE $ .31 $ .38
======== ========
DILUTED EARNINGS PER SHARE:
Income from continuing operations $ .26 $ .32
Income from discontinued operations -- --
-------- --------
NET INCOME PER SHARE ASSUMING DILUTION $ .26 $ .32
======== ========
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
4
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
March 31,
---------------------------
2005 2004
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,865 $ 3,445
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 705 845
Net gain on sale of available-for-sale securities (445) (594)
Gain on sale of other assets -- (363)
Equity in losses of joint ventures 266 34
Net (gain) loss on disposal of discontinued operations, net of tax (30) 83
Net realized and unrealized (gain) loss on derivative instruments (605) 3
Changes in assets and liabilities:
Notes and accounts receivable, net (261) (823)
Inventories (405) (55)
Prepaid expenses and other current assets (134) (46)
Deferred income taxes 78 (1,708)
Noncurrent notes receivable -- (110)
Other assets 28 102
Accounts payable and accrued liabilities (489) (403)
Income taxes payable (430) 862
Other long-term liabilities (143) 64
Discontinued operations - noncash charges and
working capital changes 4 (725)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,004 611
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of available-for-sale securities (2,196) (10,264)
Proceeds from sale of available-for-sale securities 1,921 8,394
Proceeds from sale of other assets -- 1,363
Proceeds from sale of real estate assets 68 202
Purchase of derivative instruments -- (13)
Proceeds from sale of derivative instruments 24 --
Purchase of notes receivable -- (1,000)
Acquisition of property, plant and equipment (1,122) (37)
Principal payments on notes receivable 2,866 12
Acquisition of/additions to real estate assets (660) (236)
Distributions from joint ventures 194 195
-------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 1,095 (1,384)
-------- --------
5
UNITED CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
Three Months Ended
March 31,
---------------------------
2005 2004
---- ----
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on mortgage obligations (654) (864)
Proceeds from exercise of stock options 181 121
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (473) (743)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,626 (1,516)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 84,783 59,210
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 86,409 $ 57,694
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 213 $ 291
======== ========
Taxes $ 1,862 $ 1,913
======== ========
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
6
UNITED CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited Consolidated Financial Statements have been prepared
in accordance with the instructions to Form 10-Q used for quarterly reports
under Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended,
and therefore, do not include all information and footnotes necessary for a fair
presentation of financial position, results of operations and cash flows in
conformity with accounting principles generally accepted in the United States of
America.
The consolidated financial information included in this report has been prepared
in conformity with the accounting principles and methods of applying those
accounting principles, reflected in the Consolidated Financial Statements
included in the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission ("SEC") for the year ended December 31, 2004.
In the opinion of management, all adjustments, consisting only of normal and
recurring adjustments, necessary for a fair presentation of the results for the
interim periods presented have been recorded. The results of operations for the
periods presented are not necessarily indicative of the results to be expected
for the full year.
2. STOCKHOLDERS' EQUITY
Previous purchases of the Company's common stock have reduced the Company's
additional paid-in-capital to zero and, accordingly, any future purchases in
excess of par value will also reduce retained earnings. Future proceeds from the
issuance of common stock in excess of par value will be credited to retained
earnings until such time that previously recorded reductions have been
recovered. The Company did not purchase any shares of the Company's common stock
during the three months ended March 31, 2005 or 2004. Repurchases of the
Company's common stock may be made from time to time in the open market at
prevailing market prices and may be made in privately negotiated transactions,
subject to available resources. During the three months ended March 31, 2005 and
2004, the Company received proceeds of $181 and $121 from the exercise of 30 and
20 stock options, respectively.
3. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share from continuing operations:
Three Months Ended
March 31,
-------------------------------
2005 2004
---- ----
Numerator:
Income from continuing operations $ 2,846 $ 3,479
======= =======
Denominator:
Basic - weighted-average shares outstanding 9,142 9,097
Dilutive effect of employee stock options 1,868 1,858
------- -------
Diluted - weighted-average shares outstanding 11,010 10,955
======= =======
Basic earnings per share - continuing operations $ .31 $ .38
======= =======
Diluted earnings per share - continuing operations $ .26 $ .32
======= =======
4. STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation using the intrinsic value
method in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related Interpretations ("APB
7
No. 25") and has adopted the disclosure provisions of Statement of Financial
Accounting Standards No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure, an amendment of FASB Statement No. 123" ("SFAS No.
148"). Under APB No. 25, compensation expense is only recognized when the market
value of the underlying stock at the date of grant exceeds the amount an
employee must pay to acquire the stock. The Company has issued stock options
with an exercise price equal to the market value of the underlying stock on the
date of grant. Accordingly, no compensation expense has been recognized in the
Consolidated Financial Statements in connection with employee stock option
grants.
The following table illustrates the effect on net income and earnings per share
had the Company applied the fair value recognition provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("SFAS No. 123") to stock-based employee compensation.
Three Months Ended
March 31,
-------------------------------
2005 2004
---- ----
Net income, as reported $ 2,865 $ 3,445
Deduct: Total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax effects (497) (726)
-------- --------
Pro forma net income $ 2,368 $ 2,719
======== ========
Earnings per share:
Basic - as reported $ .31 $ .38
======== ========
Basic - pro forma $ .26 $ .30
======== ========
Diluted - as reported $ .26 $ .32
======== ========
Diluted - pro forma $ .22 $ .25
======== ========
Pro forma compensation expense may not be indicative of pro forma expenses in
future periods. For purposes of estimating the fair value of each option on the
grant date, the Company utilized the Black-Scholes option pricing model.
The Black-Scholes model was developed for use in estimating the fair value of
traded options, which have no vesting restrictions and are fully transferable.
In addition, option valuation models require the input of highly subjective
assumptions including the expected stock price volatility. Because the Company's
employee stock options have characteristics significantly different from those
of traded options and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of
its employee stock options.
As discussed in Note 15, "Recent Accounting Pronouncements," the Financial
Accounting Standards Board ("FASB") issued SFAS No. 123 (revised 2004),
"Share-Based Payment" in December 2004. The provisions of this statement are
effective as of the beginning of the first annual period that begins after June
15, 2005, as amended by the SEC, which would be January 1, 2006 for the Company.
5. MARKETABLE SECURITIES
The cost, gross unrealized gains, gross unrealized losses and fair market value
of marketable securities by type are as follows:
Gross Gross Fair
Unrealized Unrealized Market
Cost Gains Losses Value
-------- -------- -------- --------
March 31, 2005:
---------------
Available-for-sale:
Equity securities $ 48,801 $ 2,629 $ (3,716) $ 47,714
Bonds 5,005 -- -- 5,005
-------- -------- -------- --------
$ 53,806 $ 2,629 $ (3,716) $ 52,719
======== ======== ======== ========
8
Gross Gross Fair
Unrealized Unrealized Market
Cost Gains Losses Value
-------- -------- -------- --------
December 31, 2004:
------------------
Available-for-sale:
Equity securities $ 48,081 $ 4,371 $ (3,001) $ 49,451
Bonds 5,005 -- -- 5,005
-------- -------- -------- --------
$ 53,086 $ 4,371 $ (3,001) $ 54,456
======== ======== ======== ========
Proceeds from the sale of available-for-sale securities and the resulting gross
realized gains included in the determination of net income are as follows:
Three Months Ended
March 31,
-------------------------------
2005 2004
---- ----
Available-for-sale securities:
Proceeds $ 1,921 $ 8,394
Gross realized gains 445 594
6. INVENTORIES
The components of inventories are as follows:
March 31, December 31,
2005 2004
-------- --------
Raw materials $ 1,997 $ 1,985
Work in process 467 361
Finished goods 2,073 1,786
-------- --------
$ 4,537 $ 4,132
======== ========
7. REAL ESTATE
PROPERTY SALES
During the three months ended March 31, 2005, the Company divested itself of a
commercial property which had a net book value of $18 from its real estate
investment and management segment. The proceeds from this transaction were $68
resulting in a gain of $30, on a net of tax basis. This property had no
operating costs during the three months ended March 31, 2005.
During the three months ended March 31, 2004, the Company contributed, for a
nominal amount, two commercial properties from its real estate investment and
management segment which had a total net book value of $341. Net of proceeds
received, the Company recorded a loss of $83, on a net of tax basis.
The result of operations for these properties for the three months ended March
31, 2005 and 2004 have been reclassified to discontinued operations, on a net of
tax basis. In addition, the assets and liabilities associated with these
properties have been reclassified to discontinued operations in the accompanying
Consolidated Balance Sheet at December 31, 2004. These amounts primarily consist
of real property, net of accumulated depreciation, rents receivable, prepaid or
accrued charges, and mortgage obligations, if any.
9
Summarized financial information for properties sold and accounted for as
discontinued operations for the three months ended March 31, 2004 is as follows:
2004
----------------
Rental revenues from real estate operations $ 300
Mortgage interest expense (19)
Depreciation expense (23)
Other operating expenses (211)
----------
Income from operations $ 47
==========
PROPERTIES HELD FOR SALE
As of March 31, 2005, the Company considered two commercial properties from its
real estate and investment management segment to be held for sale and reported
as discontinued operations. The results of operations of these properties have
been reclassified to discontinued operations, on a net of tax basis, in the
Consolidated Statements of Income for the three months ended March 31, 2005 and
2004. In addition, the assets and liabilities associated with these properties,
primarily consisting of real property, net of accumulated depreciation, rents
receivable, prepaid or accrued charges and mortgage obligations, if any, have
been reclassified to discontinued operations in the accompanying Consolidated
Balance Sheets at March 31, 2005 and December 31, 2004.
One of the Company's properties, previously classified as held for sale, was
reclassified to continuing operations as the Company no longer expects to sell
this property, but expects to negotiate a favorable lease.
Summarized financial information for properties held for sale and accounted for
as discontinued operations is as follows:
Three Months Ended
March 31,
-------------------------------
2005 2004
---- ----
Rental revenues from real estate operations $ 13 $ 46
Depreciation expense -- (10)
Other operating expenses (31) --
-------- --------
(Loss) income from operations $ (18) $ 36
======== ========
8. INVESTMENTS IN JOINT VENTURES
Investments in joint ventures consist of the following:
March 31, December 31,
2005 2004
-------- --------
Investment in hotel ventures $ 11,416 $ 11,771
Lease financing 7,522 7,627
-------- --------
$ 18,938 $ 19,398
======== ========
INVESTMENTS IN HOTEL VENTURES
The Company has a 40% interest in two joint ventures which each own and operate
a hotel. The hotels are located in New Jersey (the "Hotel Venture") and Quebec,
Canada (the "Quebec Venture"). The New Jersey hotel secures a $25,000 mortgage
loan (the "Mortgage") with a bank. In connection with the Mortgage, the Company
and another joint venture partner entered into a direct guaranty agreement with
the bank whereby they, jointly and severally, guaranteed not more than $4,000 of
the Mortgage. Amounts due under the guaranty are reduced by the scheduled
principal payments under the Mortgage. The guaranty is enforceable upon the
occurrence of certain events, including a default as defined in the Mortgage,
and expires upon satisfaction of the loan in April 2006. Pursuant to the
operating agreement, any payments made under the guaranty would increase the
10
guarantors' ownership interest. The Company believes that the collateral of the
underlying hotel is sufficient to repay the Mortgage without requiring
enforcement of the guaranty. Accordingly, the fair value of the guarantee was
determined to be insignificant and, therefore, no liability has been recorded.
The equity method of accounting is used for investments in 20% to 50% owned
joint ventures in which the Company has the ability to exercise significant
influence, but not control. Under the operating agreements of the Hotel Venture
and Quebec Venture, all significant operating and capital decisions are made
jointly and operating profits are allocated based on ownership interests. These
investments were initially recorded at cost and are subsequently adjusted for
equity in earnings (losses) and cash contributions and distributions. The
Company's equity in losses of these hotel ventures was ($355) and ($141) for the
three months ended March 31, 2005 and 2004, respectively.
The accounts of the Quebec Venture are recorded in Canadian dollars and are
translated into U.S. dollars, the reporting currency of the Quebec Venture.
Currency adjustments relating to results of operations are generally included in
the equity in earnings reported by the Company while the translation of balance
sheet accounts do not generally affect the Company's investment in joint
venture.
Summarized financial information of the Hotel Venture and Quebec Venture are as
follows:
March 31, December 31,
Balance Sheets: 2005 2004
---------------------- ----------------------
Current assets $ 3,296 $ 4,073
============== ==============
Property, plant and equipment, net $ 59,751 $ 60,778
============== ==============
Other non-current assets $ 145 $ 179
============== ==============
Current liabilities $ 2,798 $ 2,807
============== ==============
Long-term liabilities $ 29,233 $ 29,766
============== ==============
Equity $ 31,161 $ 32,457
============== ==============
Three Months Ended
March 31,
-------------------------------
Operating results: 2005 2004
---- ----
Revenues $ 5,527 $ 5,573
======== ========
Operating profit $ 358 $ 730
======== ========
Net loss $ (887) $ (353)
======== ========
LEASE FINANCING
Lease financing consists of a 50% interest in a limited partnership whose
principal assets are two distribution centers leased to Kmart Corporation
("Kmart"), which are accounted for as leveraged leases. The Company's share of
income arising from this investment was $89 and $107 for the three months ended
March 31, 2005 and 2004, respectively, and is included in rental income in the
Consolidated Statements of Income.
9. DERIVATIVE FINANCIAL INSTRUMENTS
The Company recognizes all derivative financial instruments, such as put and/or
call options, in the Consolidated Financial Statements at fair value regardless
of the purpose or intent for holding the instrument. Changes in the fair value
of derivative financial instruments are either recognized periodically in income
or in stockholders' equity as a component of accumulated other comprehensive
income depending on whether the derivative financial instrument qualifies for
hedge accounting, and if so, whether it qualifies as a fair value or cash flow
hedge. Generally, changes in the fair value of derivatives accounted for as fair
value hedges are recorded in income along with the portions of the changes in
the fair value of the hedged items that relate to the hedged risks. Changes in
the fair value of derivatives accounted for as cash flow hedges, to the extent
they are effective as hedges, are recorded in accumulated other comprehensive
11
income net of deferred taxes. Changes in the fair value of derivatives not
qualifying as hedges are reported in income.
In strategies designed to hedge overall market risks and manage its interest
rate exposure, the Company may sell common stock short, participate in put
and/or call options and enter into interest rate swap agreements.
Management maintains a diversified portfolio of cash equivalents and investments
in a variety of securities, primarily U.S. investments in both common and
preferred equity issues, and participates on a limited basis in transactions
involving derivative financial instruments, including short stock sales and put
and/or call options. At March 31, 2005 and December 31, 2004, the fair value of
such derivatives was ($1) and ($581), respectively, which is recorded as a
component of accounts payable and accrued liabilities in the Consolidated
Balance Sheets. These instruments do not qualify for hedge accounting and
therefore changes in the derivatives fair value are recognized in income. The
Company recognized $605 and ($3) in net realized and unrealized gains (losses)
from derivative instruments for the three months ended March 31, 2005 and 2004,
respectively, which are included in other income and expense, net in the
Consolidated Statements of Income.
10. RELATED PARTY TRANSACTIONS
The Company has a 50% interest in an unconsolidated limited liability
corporation, whose principal assets are two distribution centers leased to
Kmart. A group that includes the wife of the Company's Board Chairman, two
Directors of the Company and the wife of one of the Directors has an 8% interest
in this entity (See Note 8).
The Company's two hotel properties, as well as the hotels owned by the Hotel
Venture and the Quebec Venture, are managed by BREP IV Hotel L.L.C. ("BREP"),
the successor to Prime Hospitality Corp. ("Prime"). The Company's Board Chairman
and another Director were directors and/or an executive officer of Prime prior
to its sale to BREP in October 2004. Fees paid for the management of the
Company's two hotel properties are based upon a percentage of revenue and were
approximately $18 for the three months ended March 31, 2004.
11. COMMITMENTS AND CONTINGENCIES
The Company has undertaken the completion of environmental studies and/or
remedial action at Metex' (as hereafter defined) two New Jersey facilities and
has recorded a liability for the estimated investigation, remediation and
administrative costs associated therewith.
The process of remediation has begun at one facility pursuant to a plan filed
with the New Jersey Department of Environmental Protection ("NJDEP").
Environmental experts engaged by the Company estimate that under the most
probable scenario, the remediation of this site is anticipated to require
initial expenditures of $860, including the cost of capital equipment, and $86
in annual operating and maintenance costs over a 15 year period.
Environmental studies at the second facility indicate that remediation may be
necessary. Based upon the facts presently available, environmental experts have
advised the Company that under the most probable scenario, the estimated cost to
remediate this site is anticipated to require $2,300 in initial costs, including
capital equipment expenditures, and $258 in annual operating and maintenance
costs over a 10 year period. These estimated costs of future expenses for
environmental remediation obligations are not discounted to their present value.
The Company may revise such estimates in the future due to the uncertainty
regarding the nature, timing and extent of any remediation efforts that may be
required at this site, should an appropriate regulatory agency deem such efforts
to be necessary.
The foregoing estimates may also be revised by the Company as new or additional
information in these matters become available or should the NJDEP or other
regulatory agencies require additional or alternative remediation efforts in the
future. Although such events are not expected to change these estimates, adverse
decisions or events, particularly as to the merits of the Company's factual and
12
legal basis, could cause the Company to change its estimate of liability with
respect to such matters in the future. The Company had approximately $10,000 and
$10,200 recorded in accounts payable and accrued liabilities and other long-term
liabilities at March 31, 2005 and December 31, 2004, respectively, to cover such
matters.
The Company is subject to various other litigation, legal, regulatory and tax
matters that arise in the ordinary course of business activities. When
management believes it is probable that a liability has been incurred and such
amounts are reasonably estimable, the Company provides for amounts that include
judgments and penalties that may be assessed. These liabilities are usually
included in accounts payable and accrued liabilities or other long-term
liabilities in the Consolidated Financial Statements, depending on the
anticipated payment date. At March 31, 2005 and December 31, 2004, the Company
had approximately $20,000 recorded in other long-term liabilities relating to
such matters. None of these matters are expected to result in a material adverse
effect on the Company's consolidated financial position or results of
operations.
12. COMPREHENSIVE INCOME
The components of comprehensive income are as follows:
Three Months Ended
March 31,
-------------------------------
2005 2004
---- ----
Net income $ 2,865 $ 3,445
Other comprehensive income, net of tax:
Change in net unrealized (loss) gain on
available for sale securities, net of
tax effect of $704 and ($1,627), respectively (1,308) 3,022
Reclassification adjustment for net gains
realized in net income, net of tax effect
of $156 and $208, respectively (289) (386)
------- -------
Comprehensive income $ 1,268 $ 6,081
======= =======
Accumulated other comprehensive income included as a component of stockholders'
equity at March 31, 2005 and December 31, 2004 consists of net unrealized
(losses) gains on available-for-sale securities of ($707) and $890, which is net
of ($381) and $479 of taxes, respectively.
13. BUSINESS SEGMENTS
The Company operates through two business segments: real estate investment and
management and engineered products. The real estate investment and management
segment is engaged in the business of investing in and managing real estate
properties which are located throughout the United States. Engineered products
are manufactured through wholly-owned subsidiaries of the Company and primarily
consist of knitted wire products and components and transformer products which
are sold worldwide.
Operating results of the Company's business segments are as follows:
Three Months Ended
March 31,
-------------------------------
2005 2004
---- ----
Net revenues and sales:
Real estate investment and management $ 5,229 $ 5,307
Engineered products 10,093 9,290
------- -------
$15,322 $14,597
======= =======
13
Three Months Ended
March 31,
-------------------------------
2005 2004
---- ----
Operating income:
Real estate investment and management $ 2,552 $ 2,772
Engineered products 902 839
General corporate expenses (889) (765)
------- -------
2,565 2,846
Other income, net 1,800 1,901
------- -------
Income from continuing operations before
income taxes $ 4,365 $ 4,747
======= =======
14. PENSION PLAN
The Company accounts for its defined benefit pension plan in accordance with
Statement of Financial Accounting Standards No. 87, "Employers' Accounting for
Pensions" ("SFAS No. 87"), which requires that amounts recognized in the
financial statements be determined on an actuarial basis. SFAS No. 87 generally
reduces the volatility of future income (expense) from changes in pension
liability discount rates and the performance of the pension plan's assets. The
Company uses December 31 as the measurement date for its pension plan.
Net periodic pension expense consists of the following:
Three Months Ended
March 31,
-------------------------------
2005 2004
---- ----
Service cost $ (74) $ (71)
Interest cost (165) (163)
Actual return on plan assets (204) 165
Net amortization and deferral 394 (21)
----- -----
Net periodic pension expense $ (49) $ (90)
===== =====
The Company did not contribute to the pension plan during the three months ended
March 31, 2005 as the plan is overfunded.
15. RECENT ACCOUNTING PRONOUNCEMENTS
In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
Payment" ("SFAS No. 123R"), which replaces SFAS No. 123 and supercedes APB No.
25. SFAS No. 123R requires that the compensation cost relating to share-based
payment transactions be recognized in financial statements based on alternative
fair value models. The share-based compensation cost will be measured based on
the fair value of the equity or liability instruments issued. Per APB No. 25,
compensation expense was recognized only to the extent the fair value of common
stock exceeded the stock option exercise price at the measurement date. In
addition, the pro forma disclosures previously permitted under SFAS No. 123 no
longer will be an alternative to financial statement recognition. SFAS No. 123R
also requires the benefits of tax deductions in excess of recognized
compensation cost to be reported as a financing cash flow rather than as an
operating cash flow as required under current literature. Under the effective
date provisions included in SFAS No. 123R, the Company would have been required
to implement SFAS No. 123R as of the first interim or annual period that begins
after June 15, 2005. On April 14, 2005, the SEC delayed the effective date which
allows companies to implement SFAS No. 123R at the beginning of the first fiscal
year after June 15, 2005, which would be January 1, 2006 for the Company. The
Company is evaluating the requirements of SFAS No. 123R and expects that the
adoption will have a material impact on the consolidated results of operations
and earnings per share similar to the current pro-forma disclosures under SFAS
No. 123 (see Note 4).
14
16. USE OF ESTIMATES
The preparation of Consolidated Financial Statements in conformity with
accounting principles generally accepted in the United States of America
requires management to use judgment in making estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses and
related disclosure of contingent assets and liabilities. Certain of the
estimates and assumptions required to be made relate to matters that are
inherently uncertain as they pertain to future events. While management believes
that the estimates and assumptions used were the most appropriate, actual
results could differ significantly from those estimates under different
assumptions and conditions.
17. RECLASSIFICATIONS
Certain prior year amounts have been reclassified to present them on a basis
consistent with the current year presentations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(In thousands, except as otherwise noted)
The following discussion should be read in conjunction with the Consolidated
Financial Statements of United Capital Corp. (the "Company") and related notes
thereto.
RESULTS OF OPERATIONS: THREE MONTHS ENDED MARCH 31, 2005 AND 2004
Total revenues for the quarter ended March 31, 2005 were $15,322, an increase of
$725 or 5% from the comparable 2004 period. Income from continuing operations
during the current period was $2,846 versus $3,479 during the three months ended
March 31, 2004. Net income for the first quarter of 2005 was $2,865 or $.31 per
basic share compared to net income of $3,445 or $.38 per basic share for the
first quarter of 2004.
REAL ESTATE INVESTMENT AND MANAGEMENT
Rental revenues from real estate operations decreased slightly to $5,229 for the
three months ended March 31, 2005 from $5,307 for the three months ended March
31, 2004. This decrease was primarily attributable to a decrease in percentage
rents ($191) and the receipt of a non-recurring amount ($165) in 2004 partially
offset by an increase in hotel operating revenue ($190). In general, rental
revenues do not fluctuate significantly due to the long-term nature of the
Company's leases. However, future rental revenues could be affected by changes
in hotel operating revenues, which are generally influenced by local and other
economic conditions, as well as by lease renewals, terminations, step-ups and
escalations and by the purchase or sale of additional properties.
Mortgage interest expense decreased $59 or 30.7% to $133 for the quarter ended
March 31, 2005, as compared to $192 for the first quarter of 2004. This decrease
was the result of continuing mortgage amortization. At March 31, 2005, the
outstanding mortgage balance on the Company's real estate properties was reduced
to $7.8 million. Mortgage interest expense on existing obligations will continue
to decline with scheduled principle reductions.
Depreciation expense associated with real properties held for rental decreased
$124 or 20.8% to $473 for the three months ended March 31, 2005, compared to
$597 for the same period in 2004. This decrease was primarily attributable to
reduced depreciation expense associated with certain properties or improvements
becoming fully depreciated in the current and prior year.
Other operating expenses associated with the management of real properties
increased $325 or 18.6% for the three months ended March 31, 2005, compared to
the same period in 2004. The increase was primarily the result of increased
hotel operating expenses ($210) and an increase in reported real estate tax
expense ($177) which was primarily the result of non-recurring tenant
reimbursements received in the prior year. These increases were partially offset
15
by a decrease in insurance expense ($101) primarily due to non-recurring tenant
reimbursements received in the current year.
ENGINEERED PRODUCTS
The Company's engineered products segment includes Metex Mfg. Corporation
("Metex") and AFP Transformers, LLC ("AFP Transformers"). The operating results
of the engineered products segment are as follows:
Three Months Ended
March 31,
-------------------------------
2005 2004
---- ----
Net sales $10,093 $ 9,290
Cost of sales 7,454 6,681
Selling, general and administrative
expenses 1,737 1,770
------- -------
Operating income $ 902 $ 839
======= =======
Net sales of the engineered products segment increased $803 or 8.6% for the
three months ended March 31, 2005, compared with the results of the
corresponding 2004 period. This increase was primarily due to increased demand
in the Company's transformer and engineered product lines offset by a slight
decrease in the automotive products which is a result of softening in the
automotive industry. Although management believes that sales of its engineered
products segment are directly influenced by general economic conditions,
worldwide automotive demand and industrial capital spending, future sales of
this segment could also be affected by changes in technology, competitive forces
or challenges to its intellectual property.
Cost of sales as a percentage of sales increased slightly for the three months
ended March 31, 2005, compared to the corresponding period in 2004. This
increase is primarily due to the change in product sales noted above and
increases in material purchase costs, primarily associated with steel which is
experiencing a higher then usual worldwide demand. Continued increases in the
price of raw materials could effect the gross margin and operating profit of the
engineered products segment.
Selling, general and administrative expenses of the engineered products segment
remained relatively consistent, decreasing $33 or 1.9% for the three months
ended March 31, 2005, from the comparable 2004 period. This decrease was
primarily due to decreases in payroll and payroll related expenses ($85) and
freight costs ($36) partially offset by increases in professional fees ($38) and
travel expenses ($32).
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses not associated with the manufacturing
operations increased $124 or 16.2% for the three months ended March 31, 2005,
compared to such expenses incurred for the comparable 2004 period. This increase
was primarily the result of increased compensation and benefit ($83) and travel
expenses ($62) partially offset by a decrease in pension related expenses ($41).
16
OTHER INCOME AND EXPENSE, NET
The components of other income and expense, net in the Consolidated Statements
of Income are as follows:
Three Months Ended
March 31,
-------------------------------
2005 2004
---- ----
Net gain on sale of available-for sale securities $ 445 $ 594
Net realized and unrealized gain (loss) on derivative
instruments 605 (3)
Gain on sale of other assets -- 363
Equity in losses of hotel ventures (355) (141)
Casualty insurance settlement -- 831
Other, net 94 (9)
------ -------
$ 789 $ 1,635
====== =======
INCOME TAXES
The effective tax rate from continuing operations for the three months ended
March 31, 2004 reflects the benefits of the donation of certain properties to
qualified organizations in 2004.
DISCONTINUED OPERATIONS
(Loss) income from operations on properties sold or held for sale and accounted
for as discontinued operations was ($11), on a net of tax basis, for the three
months ended March 31, 2005, versus $49 for the comparable 2004 period. Prior
year amounts have been reclassified to reflect results of operations of real
properties held for sale as of March 31, 2005, or disposed of during 2005 and
2004, as discontinued operations. Net gains (losses) on the disposal of real
estate assets accounted for as discontinued operations were $30 and ($83) for
the three months ended March 31, 2005 and 2004, respectively, on a net of tax
basis.
LIQUIDITY AND CAPITAL RESOURCES
The Company experienced a net cash inflow from operations of $1,004 for the
three months ended March 31, 2005 versus $611 for the three months ended March
31, 2004. The change in operating cash flow during these periods is the result
of current and deferred income tax fluctuations associated with unrealized
marketable securities gains and property donations during the first quarter of
2004 and are offset by other working capital changes and a decline in income
from operations.
Net cash provided by investing activities increased $2,479 for the three months
ended March 31, 2005, compared with the same period of 2004. This increase
primarily results from additional proceeds received from principal payments on
notes receivables ($2,854), the timing of the purchase or sale of marketable
securities ($1,632) and from the purchase of a notes receivable in 2004 ($1,000)
partially offset by proceeds received in 2004 from the sale of other assets
($1,363) and additional purchases of property, plant and equipment and real
property ($1,509).
Net cash used in financing activities was $473 and $743 during the three months
ended March 31, 2005 and 2004, respectively. These uses of cash were
attributable to debt reduction partially offset by cash proceeds from the
exercise of stock options.
At March 31, 2005, the Company's cash and marketable securities totaled $139.1
million and working capital was $135.5 million compared to cash and marketable
securities of $139.2 million and working capital of $132.4 million at December
31, 2004. Management continues to believe that the real estate market is
overvalued and accordingly acquisitions have been limited to those select
properties that meet the Company's stringent financial requirements. Management
believes that the available working capital along with the $80 million of
availability on the revolving credit facility, discussed below, puts the Company
in an opportune position to fund acquisitions and grow its portfolio, if and
when attractive long-term opportunities become available.
17
The equity method of accounting is used for investments in 20% to 50% owned
joint ventures in which the Company has the ability to exercise significant
influence, but not control. These investments are recorded initially at cost and
subsequently adjusted for equity in earnings and cash contributions and
distributions. The debt of the joint ventures in which the Company has an
ownership interest are non-recourse obligations and are collateralized by the
entity's real property. In one instance, the Company and another party have
jointly and severally guaranteed not more than $4 million of the joint venture's
mortgage obligation. The Company believes, in each case, that the value of the
underlying property and its operating cash flows are sufficient to satisfy its
obligations. Except for this guarantee, the Company is not obligated for the
debts of the joint ventures, but could decide to satisfy them in order to
protect its investment. In such event, the Company's capital resources and
financial condition would be reduced and, in certain instances, the carrying
value of the Company's investment and its results of operations would be
negatively impacted.
The cash needs of the Company have been satisfied from funds generated by
current operations. It is expected that future operational cash needs will also
be satisfied from existing cash balances, marketable securities, ongoing
operations and borrowings under the Revolver (as hereinafter defined). The
primary source of capital to fund additional real estate acquisitions and to
make additional high-yield mortgage loans will come from existing funds,
borrowings under the Revolver, the sale, financing and refinancing of the
Company's properties and from third party mortgages and purchase money notes
obtained in connection with specific acquisitions.
In addition to the acquisition of properties for consideration consisting of
cash and mortgage financing proceeds, the Company may acquire real properties in
exchange for the issuance of the Company's equity securities. The Company may
also finance acquisitions of other companies in the future with borrowings from
institutional lenders and/or the public or private offerings of debt or equity
securities. The Company currently has no agreements, commitments or
understandings with respect to the acquisition of real properties or other
companies in exchange for its equity securities or any debt securities.
Funds of the Company in excess of that needed for working capital, purchasing
real estate and arranging financing for real estate acquisitions are invested by
the Company in corporate equity securities, corporate notes, certificates of
deposit, government securities and other financial instruments. Changes in U.S.
interest rates affect the interest earned on the Company's cash and cash
equivalent balances and other interest bearing investments. Given the level of
cash and other interest bearing investments held by the Company and the recent
increase in U.S. interest rates, the Company's earnings have been favorably
impacted.
Effective December 10, 2002, the Company entered into a credit agreement with
five banks which provides for an $80 million revolving credit facility
("Revolver"). The Revolver may be increased under certain circumstances and
expires on December 31, 2005. The Company expects to renegotiate a similar
facility prior to the expiration of the Revolver.
Under the Revolver, the Company will be provided with eligibility based upon the
sum of (i) 60% of the aggregate annualized and normalized year-to-date net
operating income of unencumbered eligible properties, as defined, capitalized at
10%, (ii) 60% of the aggregate annualized and normalized year-to-date net
operating income of unencumbered eligible hotel properties, as defined,
capitalized at 10.5%, not to exceed the lesser of $10 million or 10% of total
eligibility, (iii) the lesser of $20 million or 50% of the aggregate annualized
and normalized year-to-date net operating income of encumbered eligible
properties, as defined, capitalized at 12%, (iv) the sum of 75% of eligible
accounts receivable, 50% of eligible inventory, and 50% of eligible loans, as
defined, (v) cash and cash equivalents in excess of working capital, as defined,
and (vi) 50% of marketable securities, as defined. At March 31, 2005 eligibility
under the Revolver was $80 million, based upon the above terms and there were no
amounts outstanding under the Revolver.
The credit agreement contains certain financial and restrictive covenants, as
follows: (i) total debt cannot exceed 50% of capitalization value, as defined,
(ii) equity value, as defined, must be at least $150 million, (iii) interest
coverage, as defined, must not be less than 2.25:1.00, (iv) debt service
18
coverage, as defined, must not be less than 1.35:1.00, (v) eligible properties
debt service coverage, as defined, must not be less than 1.50:1.00, (vi) capital
expenditures, exclusive of real estate, must not exceed $3 million annually,
(vii) capitalization value, as defined, must not be less than $200 million and
(viii) operating lease obligations must not exceed $1 million annually. The
Company was in compliance with all covenants at March 31, 2005. The credit
agreement also contains provisions which allow the banks to perfect a security
interest in certain operating and real estate assets in the event of a default,
as defined in the credit agreement. Borrowings under the Revolver, at the
Company's option, bear interest at the bank's prime lending rate or at the
London Interbank Offered Rate ("LIBOR") (2.9% at March 31, 2005) plus 2% for
non-cash collateralized borrowings and 1% for cash collateralized borrowings.
In strategies designed to hedge overall market risk, the Company may sell common
stock short and participate in put and/or call options. These instruments do not
qualify for hedge accounting and therefore changes in such derivatives fair
value are recognized in earnings. These derivatives are recorded as a component
of accounts payable and accrued liabilities in the Consolidated Balance Sheets.
The Company manufactures its products in the United States and Mexico and sells
its products in those markets as well as in Europe, South America and Asia. As a
result, the Company's operating results could be affected by factors such as
changes in foreign currency exchange rates or weak economic conditions in the
foreign markets in which the Company distributes its products. Most of the
Company's sales are denominated in U.S. dollars. For the three months ended
March 31, 2005 and 2004, 9.3% and 9.0% of the net sales of the Company's
engineered products segment were denominated in Euros, respectively. As such, a
portion of the Company's receivables are exposed to fluctuations with the U.S.
dollar. However, the Company does not believe this risk to be material to its
overall financial position. Since the Euro has been relatively stable in
relation to the U.S. dollar, the Company's results have not been significantly
impacted by foreign exchange gains or losses in the past. Accordingly, the
Company has not entered into forward exchange contracts to hedge this exposure.
If such exposure were to increase in the future, the Company may reexamine this
practice to minimize the associated risks.
The Company has undertaken the completion of environmental studies and/or
remedial action at Metex' two New Jersey facilities and has recorded a liability
for the estimated investigation, remediation and administrative cost associated
therewith. See Note 11 of Notes to Consolidated Financial Statements for further
discussion of this matter.
The Company is subject to various other litigation, legal regulatory and tax
matters that arise in the ordinary course of business activities. When
management believes it is probable that liabilities have been incurred and such
amounts are reasonably estimable, the Company provides for amounts that include
judgments and penalties that may be assessed. These liabilities are usually
included in accounts payable and accrued liabilities or other long-term
liabilities in the Consolidated Financial Statements, depending on the
anticipated payment date. At March 31, 2005 and December 31, 2004, the Company
had approximately $20 million recorded in other long-term liabilities relating
to such matters. None of these matters are expected to result in a material
adverse effect on the Company's consolidated financial position or results of
operations.
Previous purchases of the Company's common stock have reduced the Company's
additional paid-in capital to zero and, accordingly, any future purchases in
excess of par value will also reduce retained earnings. Future proceeds from the
issuance of common stock in excess of par value will be credited to retained
earnings until such time that previously recorded reductions have been
recovered. The Company did not purchase any shares of the Company's common stock
during the three months ended March 31, 2005 or 2004. Repurchases of the
Company's common stock may be made from time to time in the open market at
prevailing market prices or in privately negotiated transactions, subject to
available resources.
RELATED PARTY TRANSACTIONS
Refer to Notes to Consolidated Financial Statements for a discussion of related
party transactions.
19
CRITICAL ACCOUNTING POLICIES AND MANAGEMENT ESTIMATES
The preparation of consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America
requires management to use judgment in making estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. Certain of the
estimates and assumptions required to be made relate to matters that are
inherently uncertain as they pertain to future events. While management believes
that the estimates and assumptions used were the most appropriate, actual
results could differ significantly from those estimates under different
assumptions and conditions.
Refer to the Company's 2004 Annual Report on Form 10-K for a discussion of the
Company's critical accounting policies, which include revenue recognition and
accounts receivable, marketable securities, inventories, real estate,
discontinued operations, long-lived assets and pension plans. During the three
months ended March 31, 2005, there were no material changes to these policies.
RECENT ACCOUNTING PRONOUNCEMENTS
Refer to Notes to Consolidated Financial Statements for a discussion of recent
accounting pronouncements.
FORWARD-LOOKING STATEMENTS
Certain statements in this Report on Form 10-Q and other statements made by the
Company or its representatives that are not strictly historical facts are
"forward-looking" statements within the meaning of the Private Securities
Litigation Reform Act of 1995 that should be considered as subject to the many
risks and uncertainties that exist in the Company's operations and business
environment. The forward-looking statements are based on current expectations
and involve a number of known and unknown risks and uncertainties that could
cause the actual results, performance and/or achievements of the Company to
differ materially from any future results, performance or achievements,
expressed or implied, by the forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements, and that in
light of the significant uncertainties inherent in forward-looking statements,
the inclusion of such statements should not be regarded as a representation by
the Company or any other person that the objectives or plans of the Company will
be achieved. The Company also assumes no obligation to publicly update or revise
its forward-looking statements or to advise of changes in the assumptions and
factors on which they are based. See the Company's 2004 Annual Report on Form
10-K for a discussion of risk factors that could impact our future financial
performance and/or cause actual results to differ significantly from those
expressed or implied by such statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK
See Note 9 of Notes to Consolidated Financial Statements for a discussion of
derivative financial activity since December 31, 2004. There have been no other
material changes in quantitative and qualitative market risks from those
disclosed in item 7A of the Company's Annual Report on form 10-K for the year
ended December 31, 2004, which is incorporated herein by reference.
ITEM 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e) and
15d-15(e). Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiaries) required to be
included in the Company's periodic reports. There have been no significant
changes in the Company's internal controls over financial reporting or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation.
20
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS
31.1 Certification of the Chief Executive Officer pursuant to Rule
13a-15(e) and 15d-15(e).
31.2 Certification of the Chief Financial Officer Pursuant to Rule
13a-15(e) and 15d-15(e).
32.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley
Act of 2002.
32.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley
Act of 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
UNITED CAPITAL CORP.
Date: May 12, 2005
By: /s/ Anthony J. Miceli
---------------------------------------
Anthony J. Miceli
Vice President, Chief Financial Officer
and Secretary of the Company
21