1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 001-13973
UNICAPITAL CORPORATION
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 65-0788314
-------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
10800 BISCAYNE BOULEVARD, SUITE 800, MIAMI, FLORIDA 33161
- --------------------------------------------------- ----------
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (305) 899-5000
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 May 11, 2000, there were 56,977,224 shares of Common Stock outstanding.
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UNICAPITAL CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
TABLE OF CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements.............................. 3
Consolidated Balance Sheets.................. ................................... 3
Consolidated Statements of Operations........ ................................... 4
Consolidated Statements of Stockholders' Equity ................................. 5
Consolidated Statements of Cash Flows............................................ 6
Notes to Unaudited Consolidated Financial Statements............................. 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................................. 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk............... 23
PART II. OTHER INFORMATION............................................................ 26
Item 1. Legal Proceedings........................................................ 26
Item 6. Exhibits and Reports on Form 8-K......................................... 26
Signature........................................................................ 27
Statement Regarding Computation of Per Share Loss................................ 28
Financial Data Schedule.......................................................... 29
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PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
UNICAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
MARCH 31, DECEMBER 31,
2000 1999
----------- -----------
(UNAUDITED)
ASSETS
Cash and cash equivalents ........................... $ 26,366 $ 25,849
Restricted cash ..................................... 77,024 126,637
Accounts receivable, net ............................ 52,662 60,870
Notes receivable .................................... 55,996 45,097
Net investment in finance contracts ................. 884,384 856,527
Equipment under operating leases, net ............... 549,209 1,908,686
Equipment held for sale or lease .................... 228,953 264,714
Investments ......................................... 40,981 20,981
Property and equipment, net ......................... 19,091 18,601
Goodwill, net of accumulated amortization of
$272,648 and $28,752, respectively ................ 390,101 625,180
Income taxes receivable ............................. 6,395 5,872
Deposits and other assets ........................... 35,820 45,567
----------- -----------
Total assets ................................... $ 2,366,982 $ 4,004,581
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Recourse debt ....................................... $ 392,182 $ 455,900
Non-recourse and limited recourse debt .............. 1,200,714 2,412,233
Accounts payable and accrued expenses ............... 98,515 115,210
Security and other deposits ......................... 32,062 61,185
Accrued restructuring ............................... 962 --
Income taxes payable ................................ 53 --
Deferred income taxes ............................... 61,100 82,772
Other liabilities ................................... 10,787 14,988
----------- -----------
Total liabilities .............................. 1,796,375 3,142,288
----------- -----------
Minority interest ................................... -- 23,725
Commitments and contingencies ....................... -- --
Stockholders' equity:
Preferred stock, $.001 par value, 20,000,000 shares
authorized, no shares issued and outstanding ... -- --
Common stock, $.001 par value, 200,000,000 shares
authorized, 56,891,878 and 53,512,308 shares
issued and outstanding, respectively ........... 57 53
Additional paid-in capital ........................ 817,425 808,657
Stock subscription notes receivable ............... (3,210) (3,210)
Accumulated other comprehensive income ............ 290 430
Retained earnings (deficit) ....................... (243,955) 32,638
----------- -----------
Total stockholders' equity ..................... 570,607 838,568
----------- -----------
Total liabilities and stockholders' equity ..... $ 2,366,982 $ 4,004,581
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
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UNICAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
2000 1999
------------ ------------
Income from finance contracts ... $ 27,056 $ 11,625
Rental income from operating
leases ........................ 40,967 33,027
Sales of equipment .............. 264,188 48,555
Gain on sale of finance
contracts ..................... 5,727 283
Fees, commissions and
remarketing income ............ 4,684 6,112
Interest and other income ....... 550 2,984
------------ ------------
Total revenues ............. 343,172 102,586
------------ ------------
Cost of operating leases ........ 21,298 16,074
Cost of equipment sold .......... 282,005 36,564
Interest expense ................ 44,496 18,806
Selling, general and
administrative expenses ....... 48,300 25,169
Restructuring charges ........... 1,908 --
Goodwill amortization and
impairment .................... 243,896 4,590
------------ ------------
Total expenses ............. 641,903 101,203
------------ ------------
Income (loss) from operations ... (298,731) 1,383
Equity in income from
minority-owned affiliates........ 441 --
------------ ------------
Income (loss) before taxes ...... (298,290) 1,383
Provision (benefit) for ......... (21,697) 2,270
------------ ------------
income taxes
Net loss ........................ $ (276,593) $ (887)
============ ============
Loss per common
share, basic .................. $ (5.04) $ (0.02)
Loss per common
share, diluted ................ $ (5.04) $ (0.02)
Weighted average shares
outstanding, basic ............ 54,873,166 51,915,588
Weighted average shares
outstanding, diluted .......... 54,873,166 51,915,588
The accompanying notes are an integral part of these
consolidated financial statements.
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UNICAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
(UNAUDITED)
STOCK ACCUMULATED
ADDITIONAL SUBSCRIPTION OTHER RETAINED
COMMON PAID-IN NOTES COMPREHENSIVE EARNINGS COMPREHENSIVE
STOCK CAPITAL RECEIVABLE INCOME (DEFICIT) INCOME TOTAL
------ ---------- ------------ ------------- -------- ------------- ---------
Balance at December 31, 1999..... $53 $808,657 $ (3,210) $ 430 $32,638 $ 838,568
Issuance of 3,340,971 shares of
common stock in connection
with earnouts for companies
acquired in 1998............. 4 8,656 -- -- -- 8,660
Issuance of 38,599 shares of
common stock in connection
with employee stock purchase
plan........................... -- 112 -- -- -- 112
Comprehensive income:
Net loss....................... -- -- -- -- (276,593) $(276,593) (276,593)
Other comprehensive income:
Change in net unrealized
gain on securities (net of
deferred taxes of $86)..... -- -- -- (140) -- (140) (140)
---------
Total comprehensive income .. $(276,733)
--- -------- -------- ------- --------- ========= ---------
Balance at March 31, 2000........ $57 $817,425 $ (3,210) $ 290 $(243,955) $ 570,607
=== ======== ======== ======= ========= =========
The accompanying notes are an integral part of these
consolidated financial statements.
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UNICAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 2000 MARCH 31, 1999
-------------- --------------
Cash flows from operating activities:
Net loss ....................................................... $(276,593) $ (887)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization .............................. 34,301 24,612
Impairment of goodwill ..................................... 239,102 --
Write-down of long-lived assets ............................ 37,504 --
Deferred income tax expense (benefit) ...................... (21,672) 1,988
Provision for credit losses ................................ 17,817 1,541
Gain on sale of finance contracts .......................... (5,727) (283)
Gain on sale of equipment .................................. (19,687) (11,991)
Gain on sale of beneficial interest in subsidiary .......... (220) --
Equity in net earnings of minority-owned affiliates ........ (441) --
Changes in other assets and liabilities:
Notes and accounts receivable ......................... (2,639) (7,695)
Income taxes receivable ............................... (523) --
Deposits and other assets ............................. 6,202 (10,100)
Accounts payable and accrued expenses ................. (3,679) (2,965)
Security and other deposits ........................... 3,648 7,253
Accrued restructuring ................................. 962 --
Income taxes payable .................................. 53 (6,353)
Other liabilities ..................................... 2,830 163
--------- ---------
Net cash provided by (used in) operating activities.... 11,238 (4,717)
--------- ---------
Cash flows from investing activities:
Capital expenditures ........................................... (2,023) (3,031)
Proceeds from sale of finance contracts ........................ 117,375 31,574
Proceeds from sale of equipment ................................ 215,515 22,628
Proceeds from sale of beneficial interest in subsidiary ........ 779 --
Collection of finance contracts, net of finance income earned .. 49,059 47,141
Investment in finance contracts and purchases of
equipment for sale or lease .................................. (255,477) (370,756)
Cash paid under earnout agreements for companies acquired
in 1998....................................................... (6,916) (10,951)
Decrease in investments, net ................................... 3,728 11,427
--------- ---------
Net cash provided by (used in) investing activities.... 122,040 (271,968)
--------- ---------
Cash flows from financing activities:
Proceeds from recourse debt .................................... 217,065 292,765
Repayment of recourse debt ..................................... (280,782) (181,754)
Proceeds from non-recourse and limited recourse debt ........... 541,161 265,347
Repayment of non-recourse and limited recourse debt ............ (567,668) (96,559)
Change in restricted cash ...................................... (42,537) --
--------- ---------
Net cash provided by (used in) financing activities.... (132,761) 279,799
--------- ---------
Increase in cash and cash equivalents .......................... 517 3,114
Cash and cash equivalents at beginning of period ............... 25,849 9,772
--------- ---------
Cash and cash equivalents at end of period ..................... $ 26,366 $ 12,886
========= =========
The accompanying notes are an integral part of these
consolidated financial statements.
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UNICAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(UNAUDITED)
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 2000 MARCH 31, 1999
-------------- --------------
Supplemental disclosure of cash flow information
for non-cash items:
Debt assumed in connection with acquisition of aircraft
and aircraft engines.......................................... $ -- $24,763
======== =======
Notes received as partial consideration on sales of
aircraft and aircraft engines ................................ $ 17,235 $ 9,200
======== =======
Debt assumed by buyers as partial consideration on
sales of equipment.............................................. $ 9,558 $ --
======== =======
Common stock issued in connection with earnouts
for companies acquired in 1998 ............................... $ 8,659 $ 6,656
======== =======
The accompanying notes are an integral part of these
consolidated financial statements.
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UNICAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION AND NATURE OF BUSINESS
UniCapital Corporation, incorporated in Delaware, was founded in October
1997 to create a national operator and integrator of equipment leasing,
specialty finance and related businesses serving the commercial market.
UniCapital Corporation acquired twelve equipment leasing, specialty finance and
related businesses (the "Founding Companies") upon consummation of an initial
public offering (the "Offering") of its common stock ("Common Stock") in May
1998. Subsequent to the Offering, UniCapital Corporation acquired, through
merger or purchase, five additional companies, continuing the expansion of its
national operations. UniCapital Corporation, the Founding Companies and the
subsequently acquired companies are referred to collectively as the "Company."
The Company originates, acquires, sells and services equipment leases and
arranges structured financing in the computer and telecommunications equipment,
large ticket and structured finance, middle market and small ticket areas of the
equipment leasing industry. In addition, the Company provides lease
administration and processing services, which include the servicing of certain
leases sold to third parties. The Company's leases and structured financing
arrangements cover a broad range of equipment, including aircraft, aircraft
engines and other aircraft equipment, computer and telecommunications equipment,
construction and manufacturing equipment, office equipment, tractor trailers,
printing equipment, car washes, and petroleum retail equipment.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and the
rules and regulations of the Securities and Exchange Commission for interim
financial statements. Accordingly, the interim statements do not include all of
the information and disclosures required for annual financial statements. In the
opinion of the Company's management, all adjustments (consisting solely of
adjustments of a normal recurring nature) necessary for a fair statement of
these interim results have been included. Intercompany accounts and transactions
have been eliminated. The results for the interim periods are not necessarily
indicative of the results to be expected for the entire year.
The financial statements should be read in conjunction with the Company's
Consolidated Financial Statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999 filed with the Securities and
Exchange Commission.
Certain reclassifications have been made to prior period amounts to conform
to the current presentation.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
For a description of the Company's accounting policies, refer to the Notes
to Consolidated Financial Statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999 filed with the Securities and
Exchange Commission.
NOTE 3--INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Under this method,
deferred tax assets and liabilities are determined based on the differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Valuation allowances are provided to reduce
deferred taxes to the amount expected to be realized based on available
evidence. The Company's effective tax rate differs from that computed at the
statutory rate principally as a result of non-deductible goodwill amortization
and write-offs of certain goodwill amounts in 2000.
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NOTE 4--STOCKHOLDERS' EQUITY
During the three months ended March 31, 2000, the Company issued 3,340,971
shares of Common Stock to the former owners of certain companies acquired in
1998. These shares were issued in connection with earnout arrangements and have
been recorded as additional purchase price in the amount of $8.7 million.
In 1999, the Company implemented an employee stock purchase plan. During the
three months ended March 31, 2000, the Company issued 38,599 shares of Common
Stock to employees under the plan.
NOTE 5--LOSS PER SHARE
Loss per share has been calculated and presented in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings Per Share", which
requires the Company to compute and present basic and diluted earnings per
share. Dilutive securities are excluded from the computation in periods in which
they have an anti-dilutive effect.
NOTE 6--SEGMENT INFORMATION
The following tables present selected financial information for the
Company's reporting segments as of and for the three months ended March 31, 2000
and 1999 (in thousands):
THREE MONTHS ENDED MARCH 31, 2000
------------------------------------------------------------------------------------
TECHNOLOGY
AND BUSINESS
BIG TICKET FINANCE CREDIT CORPORATE
DIVISION GROUP GROUP DIVISION CONSOLIDATED
---------- ----------- --------- ---------- ------------
Income from finance contracts... $ 1,949 $ 17,209 $ 7,897 $ 1 $ 27,056
Rental income from operating
leases ....................... 23,754 17,230 (17) -- 40,967
Sales of equipment ............. 219,519 44,669 -- -- 264,188
Gain on sale of finance
contracts....................... -- 3,583 2,144 -- 5,727
Fees, commissions and
remarketing income ........... 18 2,806 1,665 195 4,684
Interest and other income ...... 1,046 (803) (311) 618 550
--------- ----------- --------- --------- -----------
Total revenues ............ 246,286 84,694 11,378 814 343,172
--------- ----------- --------- --------- -----------
Cost of operating leases ....... 9,278 12,018 2 -- 21,298
Cost of equipment sold ......... 240,130 41,873 2 -- 282,005
Interest expense ............... 25,554 10,578 4,717 3,647 44,496
Selling, general and
administrative expenses ...... 15,925 20,757 9,181 2,437 48,300
Restructuring charges .......... 25 1,339 217 327 1,908
Goodwill amortization and
impairment .................. 226,155 14,009 3,657 75 243,896
--------- ----------- --------- --------- -----------
Total expenses ............ 517,067 100,574 17,776 6,486 641,903
--------- ----------- --------- --------- -----------
Equity in income from
minority-owned affiliates....... 441 -- -- -- 441
--------- ----------- --------- --------- -----------
Income (loss) before taxes ..... $(270,340) $ (15,880) $ (6,398) $ (5,672) $ (298,290)
========= =========== ========= ========= ===========
Net investment in
finance contracts.............. $ 64,622 $ 571,047 $ 259,140 $ (10,425) $ 884,384
========= =========== ========= ========= ===========
Equipment under operating
leases, net .................. $ 437,681 $ 111,512 $ 16 $ -- $ 549,209
========= =========== ========= ========= ===========
Total assets .............. $ 771,487 $ 1,130,536 $ 346,215 $ 118,744 $ 2,366,982
========= =========== ========= ========= ===========
Total debt ................ $ 444,425 $ 599,892 $ 240,430 $ 308,149 $ 1,592,896
========= =========== ========= ========= ===========
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THREE MONTHS ENDED MARCH 31, 1999
---------------------------------------------------------------------------------
TECHNOLOGY
AND BUSINESS
BIG TICKET FINANCE CREDIT CORPORATE
DIVISION GROUP GROUP DIVISION CONSOLIDATED
---------- ----------- --------- --------- ------------
Income from finance contracts...... $ 105 $ 8,911 $ 2,609 $ -- $ 11,625
Rental income from operating
leases .......................... 18,050 14,827 150 -- 33,027
Sales of equipment ................ 24,501 24,054 -- -- 48,555
Gain on sale of finance contracts . -- 283 -- -- 283
Fees, commissions and remarketing
income .......................... 26 3,699 1,722 665 6,112
Interest and other income ......... 591 1,232 559 602 2,984
-------- -------- --------- --------- ----------
Total revenues ............... 43,273 53,006 5,040 1,267 102,586
-------- -------- --------- --------- ----------
Cost of operating leases .......... 7,234 8,782 58 -- 16,074
Cost of equipment sold ............ 16,255 20,309 -- -- 36,564
Interest expense .................. 8,218 5,509 1,094 3,985 18,806
Selling, general and
administrative expenses............ 3,884 10,936 6,832 3,517 25,169
Goodwill amortization ............. 1,895 2,167 451 77 4,590
-------- -------- --------- --------- ----------
Total expenses ............... 37,486 47,703 8,435 7,579 101,203
Equity in income from
minority-owned affiliates ....... -- -- -- -- --
-------- -------- --------- --------- ----------
Income (loss) before taxes ........ $ 5,787 $ 5,303 $ (3,395) $ (6,312) $ 1,383
======== ======== ========= ========= ==========
Net investment in
finance contracts................ $ 12,663 $350,323 $ 96,157 $ 660 $ 459,803
======== ======== ========= ========= ==========
Equipment under operating leases,
net ............................ $434,031 $ 79,088 $ 235 $ -- $ 513,354
======== ======== ========= ========= ==========
Total assets ................. $842,415 $892,485 $ 193,413 $ 40,665 $1,968,978
======== ======== ========= ========= ==========
Total debt ................... $339,266 $329,171 $ 66,341 $ 237,106 $ 971,884
======== ======== ========= ========= ==========
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NOTE 7--NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133"), which
establishes accounting and reporting standards for derivative instruments,
including derivative instruments embedded in other contracts, and for hedging
activities. As issued, SFAS No. 133 was effective for fiscal years beginning
after June 15, 1999. In June 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133." SFAS No. 137 deferred the effective date of SFAS No.
133 for one year to fiscal years beginning after June 15, 2000. SFAS 133
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. The Company is in the process of evaluating the impact of
adopting SFAS 133 and the effect that the adoption of SFAS 133 will have on its
results of operations and financial position.
NOTE 8--SALES OF FINANCE CONTRACTS
The Company transfers finance contracts to third parties in the normal
course of business, which are accounted for as sales of finance contracts under
the provisions of SFAS 125. In these transactions, the Company records a gain on
the sale of finance contracts and may additionally retain interests in the
residual cash flows of the underlying receivables. Under the provisions of SFAS
125, gain on sale of finance contracts is calculated as the difference between
the proceeds received, net of related selling expenses, and the allocable
carrying amount of the related finance contracts, determined using the fair
value approach.
During the three months ended March 31, 2000, the Company transferred
finance contracts with a net book value of $46.8 million to third parties in
sales transactions, received proceeds of $49.6 million and recognized a gain of
$2.8 million.
During the three months ended March 31, 2000, the Company transferred
finance contracts with a net book value of $16.7 million to its Revolving
Purchase Facility with Key Global Finance in sales transactions, received
proceeds of $17.8 million and recognized a gain of $1.1 million.
During the three months ended March 31, 2000, in connection with a
securitization transaction, the Company transferred finance contracts with a net
book value of $58.9 million and recognized a gain of $1.8 million. From this
transaction the Company received cash of $59.5 million and recorded retained
interests of $1.2 million.
NOTE 9--RESTRICTED CASH
At March 31, 2000, the Company reported $77.0 million of restricted cash,
which relates to reserve accounts established in September 1999 and March 2000
under securitization and other credit facilities.
NOTE 10--RESTRUCTURING CHARGES
During the three months ended March 31, 2000, the Company implemented a
restructuring program and recorded certain restructuring charges related to
headcount reductions and the elimination of duplicative expenses and non-core
activities and businesses. The restructuring charge is shown as a separate
component of operating expenses. Cash outlays during the quarter were
principally for severance and the remaining cash outlays are expected to be
funded from cash flows from operations or through credit facilities.
A summary of the restructuring charges is as follows:
TOTAL ACCRUAL AT
EXPENSE CASH OUTLAYS MARCH 31, 2000
------- ----------- ---------------
(DOLLARS IN THOUSANDS)
Severance ........................... $1.4 $0.9 $0.5
Future lease obligations on
facility closures ................... 0.2 0.2
Other costs ......................... 0.3 0.1 0.2
---- ---- ----
Total restructuring charges.......... $1.9 $1.0 $0.9
==== ==== ====
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The severance costs are related to the termination of personnel in two
non-core businesses and other headcount reductions including positions ranging
from executive to administrative. At March 31, 2000 the accrual represents the
severance costs associated with the remaining employees to be terminated, which
will be completed by the end of the second quarter of 2000.
The other costs include costs associated with the early termination of
contractual arrangements as well as incremental costs associated with the
elimination of the two non-core businesses.
NOTE 11--ADJUSTMENTS TO CARRYING VALUE OF CERTAIN ASSETS
During the three months ended March 31, 2000, the Company recorded
impairment adjustments of $33.5 million to the carrying value of certain
aircraft engines and $4.0 million for certain aircraft due to a decline in the
market value of such assets determined by the Company to be permanent. These
asset impairment charges, totaling $37.5 million, are included in the
accompanying unaudited Consolidated Statement of Operations in the caption
entitled "Cost of Equipment Sold."
Beginning in the second half of 1999 and continuing into the first quarter
of 2000, there has been a continued decline in the market value of JT9D-7A type
aircraft engines due to the limited demand for these aircraft engines in the
worldwide market and the significant increase in the number of these aircraft
engines currently available in the marketplace. As a result of these factors,
the Company has recorded an impairment charge on these and other types of
aircraft engines of $33.5 million, representing the difference between the
values at which such aircraft engines were carried on the Company's books and
the Company's estimate of their actual fair value as of March 31, 2000.
Estimated fair values were determined through the use of current independent
appraisals. In connection with the Company's recent decision to exit the Big
Ticket Division over time, these aircraft engines are held for sale and the
Company intends to sell these aircraft engines in an orderly manner.
During the three months ended March 31, 2000, the Company also recorded a
$4.0 million impairment charge related to five aircraft representing the
difference between the values at which such aircraft were carried on the
Company's books and the Company's estimate of their actual fair market value as
of March 31, 2000. Estimated fair values were determined through the use of
current independent appraisals.
NOTE 12--IMPAIRMENT OF GOODWILL
During the three months ended March 31, 2000, the Company determined that
$239.1 million of goodwill was impaired and fully amortized these amounts during
the quarter. The impairment related to one company in the Business Credit Group,
one company in the Technology and Finance Group and the entire Big Ticket
Division.
A summary of the impairment of goodwill is as follows:
IMPAIRMENT OF
GOODWILL
-------------
(DOLLARS IN MILLIONS)
Big Ticket Division .............. $224.1
Business Credit Group ............ 3.2
Technology and Finance Group...... 11.8
------
Total impairment of goodwill...... $239.1
======
The impairment write-off of goodwill in the Big Ticket Division is based on
the Company's recent decision to dispose of its existing inventory of aircraft
and aircraft engines over time as it implements an orderly exit from this
segment. Pending exit from the segment, the Company will continue to operate its
Big Ticket Division, and may buy and sell aircraft as appropriate to that
business, subject to limitations imposed by the Company's credit facilities and
otherwise. The impairment write-off of goodwill in the Business Credit Group and
the Technology and Finance Group was a result of the Company's decision to close
certain unprofitable companies and redeploy capital to more profitable
activities. Since the Company has decided to exit the operations conducted by
these particular entities, the Company does not expect to realize any continuing
benefit from the goodwill associated with these entities and, accordingly, has
recorded the impairment charge.
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NOTE 13--AIRCRAFT FINANCE TRUST
Aircraft Finance Trust, which was formed on April 13, 1999, was initially
wholly-owned by UniCapital AFT-I, Inc. (51% equity interest) and UniCapital
AFT-II, Inc. (49% equity interest), each of which is a wholly-owned subsidiary
of the UniCapital Air Group, Inc. During 1999, the Company sold a 49.9% interest
in Aircraft Finance Trust to six financial services companies. On March 28,
2000, the Company sold all of the common stock in UniCapital AFT-I, Inc., which
held 1.1% of the beneficial interest in Aircraft Finance Trust, for proceeds of
$.8 million. As a result, the Company now owns a 49% beneficial interest in
Aircraft Finance Trust and accounts for its remaining investment in Aircraft
Finance Trust under the equity method of accounting. Equipment under operating
leases and other assets totaling $1,256.8 million, and non-recourse debt and
other liabilities totaling $1,208.4 million, have been eliminated from the
Company's Consolidated Balance Sheet, and the Company's results of operations
reflect only the Company's proportionate share of the net results from Aircraft
Finance Trust as equity in income from minority-owned affiliates. The carrying
value of this interest was $23.7 million as of March 31, 2000 and is presented
as investments in the accompanying unaudited Consolidated Balance Sheets.
Aircraft Finance Trust's condensed statement of operations for the three
months ended March 31, 2000 is as follows:
THREE MONTHS
ENDED
MARCH 31, 2000
--------------
(DOLLARS IN THOUSANDS)
Operating revenues..... $36,915
Operating expenses..... $36,034
Net income ............ $ 881
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The following discussion should be read in conjunction with the unaudited
consolidated financial statements, including the related notes thereto,
appearing elsewhere in this Quarterly Report on Form 10-Q, as well as the
audited consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999 filed with the
Securities and Exchange Commission.
UniCapital was founded in October 1997 as a Delaware corporation. We
commenced operations in May 1998 in conjunction with the consummation of our
initial public offering and the acquisition of twelve equipment leasing,
specialty finance and related businesses. In June, July and August 1998, we
completed the acquisition of five additional equipment leasing, specialty
finance and related businesses. We have integrated and intend to continue to
integrate the businesses, operations and administrative functions of the
businesses that we acquired over a period of time. Integration may present
opportunities to reduce costs through the elimination of duplicate functions and
through economies of scale, and may necessitate additional costs and
expenditures for corporate management and administration, corporate expenses
related to being a public company, systems integration, employee relocation and
severance and facilities expansion or contraction. These various costs and
possible cost-savings make comparison of future operating results with
historical operating results difficult.
We use the term "leases" to refer to both leases and finance contracts. We
derive the majority of our revenue from lease payments on leases originated and
held by the Company and sales of equipment, including sales of equipment
off-lease and the sale of new and used equipment. In addition, we derive revenue
from servicing fees, late charges and administrative fees. We also receive
remarketing fees for the sale of off-lease equipment on behalf of equity
investors in leases and we may obtain a premium for sales prices in excess of an
agreed-upon amount.
We intend to retain as on-balance-sheet leases those leases that we transfer
to our warehouse facilities, as well as leases to be transferred in connection
with future securitizations, as those transfers will no longer be structured to
meet the criteria to be accounted for as sales. We intend to continue our core
business practice of selling certain leases to third parties on a whole-loan
basis. These sales are typically non-recourse, and we generally maintain no
retained interest in those leases. In addition, to the extent that the
13
14
leases we substitute or otherwise transfer into our warehouse facilities or a
securitization should generate any surplus gain amounts over those leases that
were repurchased, in connection with either our warehouse facilities or
securitization transactions, those surpluses will be presented as a component of
gain on sale of finance contracts in our Consolidated Statement of Operations.
We expect to fund the majority of the leases that we originate through
credit facilities. We may sell leases to third parties or refinance them through
a securitization program or other structured finance products. On March 28,
2000, we completed a $301.5 million term securitization transaction. Should we
be unable to sell or securitize leases going forward our business, financial
condition and results of operations would be materially and adversely affected.
In addition, should we be unable to sell or securitize leases going forward with
satisfactory fixed interest rates within a reasonable period of time after
funding, our operating margins could be adversely affected by any increase in
interest rates to the extent that we have not effectively hedged our interest
rate exposure on variable rate debt. Moreover, increases in interest rates,
which cause us to raise the implicit interest rate charged to our customers,
could decrease demand for our lease and other financial products.
The leases we acquire or originate generally are noncancelable for a
specified term, during which we generally receive scheduled payments sufficient,
in the aggregate, to cover our borrowing costs and, when aggregated with the
residual, the costs of the underlying equipment. The noncancelable term of each
lease is generally equal to or less than the equipment's estimated economic
life. Initial terms of the leases in our portfolio generally range from 12 to 84
months. Certain of the leases we acquire or originate carry a $1.00 buy-out
provision upon the maturity of the lease.
Our leases are collateralized by the equipment leased as well as, in some
cases, a personal guarantee provided by a principal of the lessee. We manage
credit risk through diversifying our business customer base, geographic location
of lessees and the type of business equipment leased. We believe that prepayment
risks are mitigated by the noncancelable nature of the majority of our leases.
We have implemented Phase I of our previously announced expense reduction
program. We are currently planning Phase II of our expense reduction program,
which we expect to implement during 2000. Our expense reduction program involves
the elimination of duplicative expenses and non-core activities and businesses
as well as other possible expense reductions. We expect additional restructuring
expenses to be incurred in 2000 related to Phase II of our expense reduction
program. There can be no assurance that these expense reductions will result in
a reduction in our selling, general and administrative expenses in 2000, or an
increase in our pre-tax income in 2000 or any subsequent year. In addition,
unforeseen delays and expenses may affect our ability to implement our expense
reduction program in a timely manner or to realize savings therefrom in 2000.
During 1999, we entered into new employment agreements with certain of our
officers and subsidiary executives which provided for increases in base salary,
and in certain instances, performance based compensation. We expect that Phase I
of the expense reduction program will generate more than $5.0 million in
annualized expense savings, net of increases in compensation pursuant to those
new employment agreements and before any special charges associated with Phase I
of the expense reduction program, before the end of 2000.
We recorded a restructuring charge of $1.9 million for the three months
ended March 31, 2000. The Company's decision to record this charge in the first
quarter of 2000 was attributable to closing unprofitable businesses and the
reduction of overhead expense in order to achieve our expense reduction
objectives. The restructuring charge related to severance, future lease
obligations and other costs. Restructuring costs recorded in the first quarter
of 2000 included $1.4 million of severance, $0.2 million of future lease
obligations on leased facilities and $0.3 million of other costs. Approximately
$1.2 million related to the closure of non-core activities and businesses due to
poor operating performance. The remaining $0.7 million relates to severance due
to the elimination of personnel in connection with our expense reduction
program. We paid approximately $1.0 million of the costs included in the
restructuring charge in the first quarter of 2000 and anticipate paying most of
the remaining $0.9 million in the second quarter of 2000.
During the three months ended March 31, 2000, we determined that $239.1
million of goodwill was permanently impaired and wrote off that amount of
goodwill. The goodwill impairment related to the entire Big Ticket Division, one
company in the Business Credit Group and one company in the Technology and
Finance Group. Goodwill impairment of $224.1 million related to the Big Ticket
Division and resulted from our decision to exit this segment in an orderly
manner over time. Pending exit from the segment, we will continue to operate our
Big Ticket Division, and may buy and sell aircraft as appropriate to that
business, subject to limitations imposed by our credit facilities. We analyzed
the expected future cash flows of the Big Ticket Division and determined that
there was no future benefit related to the goodwill. Goodwill impairment of
$15.0 million related to one company in the Business Credit Group and one
company in the Technology and Finance Group. We decided to close these
operations because they have not produced sufficient operating profits and are
not expected to do so in the foreseeable future. We expect to close these
businesses during the second quarter of 2000. This decision is consistent with
our strategy to re-deploy capital to profitable businesses in the Technology and
Finance Group and the Business Credit Group.
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15
During the three months ended March 31, 2000, we recorded $37.5 million in
asset impairment charges related to the carrying value of certain aircraft and
aircraft engines due to a decline in the market value of these assets which we
have determined to be permanent. We determined impairment by obtaining current
fair market value appraisals from an independent third party. Asset impairment
charges of $33.5 million related to aircraft engines. Beginning in the second
half of 1999 and continuing into the first quarter of 2000, there has been a
continued decline in the market value of JT9D-7A type engines, which compose a
significant portion of our existing engine inventory, due to the limited demand
for these aircraft engines worldwide and the significant increase in the number
of these aircraft engines currently available in the marketplace. We intend to
dispose of our aircraft engine portfolio in an orderly manner over time. During
the quarter, $4.0 million of asset impairment write downs were recorded relating
to five aircraft as a result of current market conditions. In addition, there
has been a recent decline in the market for the 747-300 type aircraft. We own
one 747-300 aircraft currently configured for combined passenger/freighter use.
Although we are in the process of converting this aircraft to full freighter use
and a five-year lease is expected to be executed for such use of this aircraft,
we may be unable to recover the full carrying costs of this aircraft if it is
sold under current market conditions for this type of aircraft.
Although we have recorded $37.5 million in impairment charges to reduce
aircraft and aircraft engines to their estimated fair value, there is a
potential for future significant additional losses in connection with the sale
of our aircraft and aircraft engines, particularly if it is necessary to sell
such assets on an expedited basis. We cannot now predict the actual sale prices
of these assets at the time of any future sale. If market conditions continue to
deteriorate, then the values of these assets may ultimately be considerably
lower than their current carrying values on our books. In addition, a
significant portion of our aircraft inventory is financed with a term loan which
expires on December 31, 2000. We are currently exploring various options for the
sale or refinancing of these assets, prior to December 31, 2000, including a
possible securitization transaction. We have agreed to pay fees to investment
banks of up to $5.4 million in the event that we do not proceed, for any reason,
with the securitization transaction. Should we complete the contemplated
securitization transaction under current market conditions, it is likely we
would incur substantial losses, which could result in a violation of one or more
of the financial covenants contained in our credit facilities. Should we be
unable to otherwise refinance these assets on similar terms and with comparable
advance rates, or be unable to sell these assets in an orderly fashion which
would allow for full recovery of carrying costs, significant additional losses
would be incurred, which could result in a violation of one or more of the
financial covenants contained in our credit facilities. We are currently in the
process of developing an orderly plan to dispose of these assets.
On February 29, 2000, Tower Air filed a petition in bankruptcy under the
United States Bankruptcy Code. UniCapital Aircraft Engine Group had 16 aircraft
engines subject to sale and lease transactions with Tower Air. At March 31,
2000, we had lease receivables, notes and other receivables from Tower Air of
approximately $27.3 million. Of the 16 aircraft engines, UniCapital Aircraft
Engine Group has to date recovered seven. Based on appraisals from independent
third parties, the current market value of the 16 aircraft engines is
approximately $15.6 million. In the first quarter of 2000, we recorded a $11.7
million charge to reserve for the difference between the total receivables and
the net realizable value of the aircraft engines as determined by an independent
third party appraiser.
On March 28, 2000, we sold our entire interest in UniCapital AFT-I, Inc.,
which held 1.1% of the beneficial interest in Aircraft Finance Trust. As a
result of this sale, we own a 49% beneficial interest in Aircraft Finance Trust
and account for our remaining interest in Aircraft Finance Trust under the
equity method of accounting. During the three months ended March 31, 2000,
equipment under operating leases and other assets totaling $1,256.8 million, and
non-recourse debt and other liabilities totaling $1,208.4 million, were
eliminated from our Consolidated Balance Sheet and our results of operations
reflect only our proportionate share of the net results from Aircraft Finance
Trust as equity in income from minority-owned affiliates.
15
16
RESULTS OF OPERATIONS
The following table sets forth selected financial data for the Company and
its subsidiaries as a percentage of revenues for the periods indicated.
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 2000 MARCH 31, 1999
------------------------- -------------------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Income from finance contracts ............... $ 27,056 7.9% $ 11,625 11.3%
Rental income from operating leases ......... 40,967 11.9 33,027 32.2
Sales of equipment .......................... 264,188 77.0 48,555 47.3
Gain on sale of finance contracts ........... 5,727 1.7 283 0.3
Fees, commissions and remarketing income .... 4,684 1.4 6,112 6.0
Interest and other income ................... 550 0.1 2,984 2.9
--------- ----- --------- -----
Total revenues ......................... 343,172 100.0 102,586 100.0
--------- ----- --------- -----
Cost of operating leases .................... 21,298 6.2 16,074 15.7
Cost of equipment sold ...................... 282,005 82.2 36,564 35.6
Interest expense ............................ 44,496 12.9 18,806 18.4
Selling, general and administrative expenses. 48,300 14.1 25,169 24.5
Restructuring charges ....................... 1,908 0.5 -- --
Goodwill amortization and impairment ........ 243,896 71.1 4,590 4.5
--------- ----- --------- -----
Total expenses ......................... 641,903 187.0 101,203 98.7
--------- ----- --------- -----
Income (loss) from operations ............... (298,731) (87.0) 1,383 1.3
Equity in income from minority-owned
affiliates ................................ 441 0.1 -- 0.0
--------- ----- --------- -----
Income (loss) before taxes .................. (298,290) (86.9) 1,383 1.3
Provision (benefit) for income taxes ........ (21,697) (6.3) 2,270 2.2
--------- ----- --------- -----
Net loss .................................... $(276,593) (80.6)% $ (887) (0.9)%
========= ===== ========= =====
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The following tables set forth selected financial data for the Company by
reported business segment for the three months ended March 31, 2000 and 1999.
THREE MONTHS ENDED MARCH 31, 2000
-------------------------------------------------------------------------------
TECHNOLOGY
AND BUSINESS
BIG TICKET FINANCE CREDIT CORPORATE
DIVISION GROUP GROUP DIVISION CONSOLIDATED
---------- ---------- --------- --------- ------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Income from finance contracts ......... $ 1,949 $ 17,209 $ 7,897 $ 1 $ 27,056
Rental income from operating leases 23,754 17,230 (17) -- 40,967
Sales of equipment .................... 219,519 44,669 -- -- 264,188
Gain on sale of finance contracts ..... -- 3,583 2,144 -- 5,727
Fees, commissions and remarketing
income .............................. 18 2,806 1,665 195 4,684
Interest and other income ............. 1,046 (803) (311) 618 550
--------- --------- -------- ------- ---------
Total revenues ................... 246,286 84,694 11,378 814 343,172
--------- --------- -------- ------- ---------
Cost of operating leases .............. 9,278 12,018 2 -- 21,298
Cost of equipment sold ................ 240,130 41,873 2 -- 282,005
Interest expense ...................... 25,554 10,578 4,717 3,647 44,496
Selling, general and administrative
expenses ............................ 15,925 20,757 9,181 2,437 48,300
Restructuring charges ................. 25 1,339 217 327 1,908
Goodwill amortization and impairment... 226,155 14,009 3,657 75 243,896
--------- --------- -------- ------- ---------
Total expenses ................... 517,067 100,574 17,776 6,486 641,903
Equity in income from minority-owned
affiliates .......................... 441 -- -- -- 441
--------- --------- -------- ------- ---------
Income (loss) before taxes ............ $(270,340) $ (15,880) $ (6,398) $(5,672) $(298,290)
========= ========= ======== ======= =========
THREE MONTHS ENDED MARCH 31, 1999
-------------------------------------------------------------------------
TECHNOLOGY
AND BUSINESS
BIG TICKET FINANCE CREDIT CORPORATE
DIVISION GROUP GROUP DIVISION CONSOLIDATED
---------- ---------- --------- --------- ------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Income from finance contracts ......... $ 105 $ 8,911 $ 2,609 $ -- $ 11,625
Rental income from operating leases ... 18,050 14,827 150 -- 33,027
Sales of equipment .................... 24,501 24,054 -- -- 48,555
Gain on sale of finance contracts ..... -- 283 -- -- 283
Fees, commissions and remarketing
income .............................. 26 3,699 1,722 665 6,112
Interest and other income ............. 591 1,232 559 602 2,984
------- ------- ------- ------- --------
Total revenues .................... 43,273 53,006 5,040 1,267 102,586
------- ------- ------- ------- --------
Cost of operating leases .............. 7,234 8,782 58 -- 16,074
Cost of equipment sold ................ 16,255 20,309 -- -- 36,564
Interest expense ...................... 8,218 5,509 1,094 3,985 18,806
Selling, general and administrative
expenses ............................ 3,884 10,936 6,832 3,517 25,169
Goodwill amortization ................. 1,895 2,167 451 77 4,590
------- ------- ------- ------- --------
Total expenses .................... 37,486 47,703 8,435 7,579 101,203
Equity in income from minority-owned
affiliates .......................... -- -- -- -- --
------- ------- ------- ------- --------
Income (loss) before taxes ............ $ 5,787 $ 5,303 $(3,395) $(6,312) $ 1,383
======= ======= ======= ======= ========
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RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE RESULTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
Income from finance contracts. Income from finance contracts for the three
months ended March 31, 2000 increased by $15.4 million, or 132.7%, to $27.0
million from $11.6 million for the three months ended March 31, 1999. This
increase is primarily due to the $383.7 million increase in the finance contract
portfolios of the Technology and Finance Group and Business Credit Group
attributable to the Company's decision to retain, for its own portfolio, a
greater portion of the leases that it originates.
Rental income from operating leases. Rental income from operating leases for
the three months ended March 31, 2000 increased by $7.9 million, or 24.0%, to
$40.9 million from $33.0 million for the three months ended March 31, 1999. This
increase is largely due to the $5.7 million increase in rental income in the Big
Ticket Division, which is primarily a result of an increase in aircraft under
operating leases. Included in rental income from operating leases for the three
months ended March 31, 2000 is $5.6 million of rental income that relates to
certain aircraft that were sold at the end of March 2000. Additionally, there is
a $2.4 million increase in rental income in the Technology and Finance Group,
due to a $32.4 million increase in equipment under operating leases.
Sales of equipment. Sales of equipment for the three months ended March 31,
2000 increased by $215.6 million, or 444.1%, to $264.1 million from $48.5
million for the three months ended March 31, 1999. This increase is primarily
due to increased sales in the Big Ticket Division. Sales of aircraft increased
in the amount of $219.5 million. This increase was partially offset by a $24.5
million decline in sales of aircraft engines from the three months ended March
31, 1999. Only one engine was sold in the three months ended March 31, 2000 as
compared to nine for the three months ended March 31, 1999. The Company expects
the current unfavorable market conditions for the sale of certain aircraft
engines to continue for the foreseeable future. Increased sales of equipment in
two of the companies in the Technology and Finance Group account for the balance
of the increase.
Gain on sale of finance contracts. Gain on sale of finance contracts for the
three months ended March 31, 2000 increased by $5.4 million, or 1923.7%, to $5.7
million from $.3 million for the three months ended March 31, 1999. This
increase is primarily attributable to an increase in sales of finance contracts
to third parties in the Technology and Finance Group, as well as a $1.8 million
gain in connection with a securitization transaction in March 2000.
Fees, commissions and remarketing income. Fees, commissions and remarketing
income for the three months ended March 31, 2000 decreased by $1.4 million, or
23.4%, to $4.7 million from $6.1 million for the three months ended March 31,
1999. This decrease is primarily due to non-recurring transactions in the
Technology and Finance Group in 1999.
Interest and other income. Interest and other income for the three months
ended March 31, 2000 decreased by $2.4 million, or 81.6%, to $.6 million from
$3.0 million for the three months ended March 31, 1999. This decrease is
partially due to a $.7 million write-down due to a change in estimates of the
value of the Company's retained interests.
Cost of operating leases. Cost of operating leases for the three months
ended March 31, 2000 increased by $5.2 million, or 32.5%, to $21.3 million from
$16.1 million for the three months ended March 31, 1999. This increase is
primarily due to the $2.0 million increase in depreciation in the Big Ticket
Division as a result of increased aircraft under operating leases and the $3.2
million increase in depreciation in the Technology and Finance Group as a result
of increases in equipment under operating leases.
Cost of equipment sold. Cost of equipment sold for the three months ended
March 31, 2000 increased by $245.4 million, or 671.3%, to $282.0 million from
$36.6 million for the three months ended March 31, 1999. $186.4 million of the
increase in cost of equipment sold is a result of the sale of aircraft in March
2000. Additional increased cost of equipment sold is related to increased sales
of equipment in two of the companies in the Technology and Finance Group. The
remaining increase is primarily related to impairment write-downs of asset
values in the Big Ticket Division totaling $37.5 million, of which $33.5 million
is attributable to the write-down of aircraft engine values as a result of the
downturn in the market for certain aircraft engine types. More specifically, the
recent oversupply and resulting price pressure, in addition to the limited
demand for the JT9D-7A type and other type aircraft engines worldwide, resulted
in the Company's decision to adjust downward the value of approximately 60
engines currently in inventory. The Company expects the resulting price
pressures and market softness for this aircraft engine type to continue for the
foreseeable future. The remaining $4.0 million of asset impairment results from
an impairment in the value of five aircraft as a result of market conditions.
Interest expense. Interest expense for the three months ended March 31, 2000
increased by $25.7 million, or 136.6%, to $44.5 million from $18.8 million for
the three months ended March 31, 1999. This increase is primarily due to
increased borrowings outstanding to finance the $460.4 million growth of the
Company's lease and equipment portfolio, resulting from the Company's decision
to retain a greater portion of the leases it originates as well as the effect of
rising interest rates.
18
19
Selling, general and administrative expenses. Selling, general and
administrative expenses for the three months ended March 31, 2000 increased by
$23.1 million, or 91.9%, to $48.3 million from $25.2 million for the three
months ended March 31, 1999. $16.0 million of this increase is due to an $11.7
million incremental increase in the provision for lease losses in the Big Ticket
Division due to the Company's estimate of additional exposure under leases of,
and notes related to, aircraft engines to Tower Air, and a $4.6 million
incremental increase in the provision for lease losses in the Technology and
Finance Group and the Business Credit Group due to the Company's decision in
early 1999 to retain on balance sheet a greater portion of the leases that we
originate and the resulting increase in portfolio credit exposure. In addition,
increases in headcount, as well as the impact of new employment agreements with
certain of the Company's officers and subsidiary executives, resulted in higher
personnel costs. Certain of the new employment agreements are the result of a
recent emphasis on incentive-based compensation for subsidiary executives.
Restructuring charges. The Company incurred $1.9 million of restructuring
charges during the three months ended March 31, 2000, primarily as a result of
severance costs related to the elimination of non-core businesses and other
headcount reductions throughout the Company.
Goodwill amortization and impairment. Goodwill amortization and impairment
for the three months ended March 31, 2000 increased by $239.3 million, to $243.9
million from $4.6 million for the three months ended March 31, 1999. This
increase is primarily due to the impairment write-off of goodwill in the amount
of $239.1 million. Of that amount, $224.1 million is attributable to the
impairment write-off of all remaining unamortized goodwill in the Big Ticket
Division arising from the Company's decision to exit from this segment in an
orderly manner over time. Pending exit from the segment, the Company will
continue to operate its Big Ticket Division, and may buy and sell aircraft as
appropriate to that business, subject to limitations imposed by the Company's
credit facilities and subject to market conditions. In addition, an impairment
write-off of goodwill of $11.8 million and $3.2 million was recorded in the
Technology and Finance Group and the Business Credit Group, respectively, as a
result of the Company's decision to exit unprofitable operations and redeploy
capital to more profitable operations. The Company expects to complete closure
of these unprofitable operations during the second quarter of 2000.
Equity in income from minority-owned affiliates. As a result of the sale of
an additional 1.1% beneficial interest in Aircraft Finance Trust in March 2000,
the Company now owns a 49% beneficial interest in Aircraft Finance Trust and
will account for its remaining interest under the equity method of accounting.
Accordingly, during the three months ended March 31, 2000, the Company recorded
$0.4 million as its proportionate share of the net income from Aircraft Finance
Trust.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, we had cash and cash equivalents of approximately
$26.4 million. Our business is capital intensive and requires access to
substantial short-term and long-term credit and other capital to fund new
equipment leases and the purchase of equipment. We will continue to require
access to significant additional capital to maintain and expand the volume of
leases that we fund, as well as to fund any possible future acquisitions of
lease portfolios.
Our uses of cash include the origination of equipment leases and the
purchase of equipment, payment of interest expenses, repayment of borrowings
under our credit facilities, operating and administrative expenses, income taxes
and capital expenditures, and may include payment of the cash portion of the
earn-out arrangements with the former stockholders of certain of the acquired
companies, as well as any possible future acquisitions of lease portfolios.
Effective March 31, 2000 we amended our Revolving Facility to modify certain
financial covenants until June 22, 2000. If we had not amended this facility,
our financial condition as of March 31, 2000 and our results of operations for
the first quarter would have caused us to breach the fixed-charge coverage ratio
and tangible net worth financial covenants of this facility. Although we have
amended these financial covenants, we may not be able to remain in compliance
with these modified financial covenants or comply with the original covenants
after June 22, 2000. Our financial condition as of March 31, 2000 and our
results of operations for the first quarter would have caused us to breach the
fixed-charge coverage ratio and tangible net worth financial covenants of the
Morgan Stanley Asset Funding Warehouse Facility. Although we have obtained a
waiver of this breach, which waiver expires on June 14, 2000, we may not be able
to come into compliance with these financial covenants during the waiver period,
negotiate extensions of the waiver prior to its expiration, or negotiate
modifications of the covenants prior to the expiration of the waiver. Even if we
are able to come into compliance with the financial covenants, either directly
or through renegotiation of those covenants, we may not remain in compliance.
Any breach of the financial covenants that is not waived by our lenders
constitutes an event of default. An event of default under one of our credit
facilities could constitute an event of default under each of our other credit
facilities. If an event of default occurs under the Senior Credit Facilities,
our lenders could declare all amounts outstanding, together with accrued
interest, to be immediately due and payable. If we could not repay these
amounts, then our lenders could proceed against the collateral, which would have
a material adverse effect on our business and financial condition.
19
20
Our existing financial condition will limit our ability to obtain additional
sources of financing. Although we believe that we would not be able to obtain
additional credit facilities at this time, we anticipate that we will be able to
obtain financing for specific transactions and on a non-recourse basis. Our
failure to remain in compliance with the financial covenants of our credit
facilities will have a material adverse effect on our ability to obtain any
additional sources of financing. If we are unable to obtain additional sources
of financing, or to renew, replace or modify our credit facilities prior to
their expiration with facilities of like amount, or if we are unable to
implement other alternative strategies, then we may have insufficient cash to
continue to operate our business as it is now conducted, and may be unable, in
whole or in part, to fund new equipment leases or the purchase of equipment,
fund the acquisition of lease portfolios, fund additional purchase price
consideration pursuant to the earnout provisions of various acquisition
agreements, or fund other working capital requirements. Accordingly, in such
circumstances, we would have to make choices among the various demands upon our
liquidity, and among available alternatives to increase liquidity (including
asset dispositions on then available terms), and our business, financial
condition and results of operations would be materially and adversely affected.
CREDIT FACILITIES
We have in place a series of credit facilities (the "Senior Credit
Facilities") which consist of the following: (i) a $300.0 million Corporate
Revolving Credit Facility primarily to finance working capital needs (the
"Revolving Facility"); (ii) two asset-backed commercial paper conduit facilities
totaling $400.0 million to finance small ticket and middle market leases,
consisting of a limited recourse Equipment Lease Receivable Facility (the
"Limited Recourse Conduit Facility") and a recourse Equipment Lease Receivable
Facility (the "Full Recourse Conduit Facility"); and (iii) a $200.0 million
Warehouse Facility to finance small ticket and middle market leases (the
"Warehouse Facility").
The Company paid and continues to pay financing fees in connection with
entering into or extending each of the Senior Credit Facilities, which are being
amortized as a yield adjustment over the terms of the Senior Credit Facilities
using the interest method, and will pay an annual administration fee equal to a
percentage of certain of the facilities. We expect that the aggregate fees and
expenses to be paid in connection with entering into the Senior Credit
Facilities will be paid from cash flows from operating activities as well as
borrowings under the Revolving Facility.
REVOLVING FACILITY. Under the Revolving Facility, we may borrow up to $300.0
million with a $50.0 million sublimit for letters of credit and a $15.0 million
swingline sublimit. The proceeds of the Revolving Facility may be used to
refinance loans previously incurred to fund the cash portions of acquisitions
and for general corporate purposes, subject to certain limitations. Amounts
outstanding under the Revolving Facility bear interest, at our option, at Bank
of America's base rate plus an applicable margin or a Eurodollar rate plus an
applicable margin and must be supported by a borrowing base. The borrowing base
equals the net book value of qualifying assets, at varying advance rates
depending on asset types, plus an amortizing amount contractually agreed, which
amount does not bear relationship to any asset value. Our obligations under the
Revolving Facility are guaranteed by all of our subsidiaries other than certain
special purpose entities. The Revolving Facility is secured by a pledge of all
of the capital stock of our domestic guaranteeing subsidiaries (and a pledge of
65% of the capital stock of each non-United States guaranteeing subsidiary) and
a security interest in all other assets and properties of the Company and those
subsidiaries guaranteeing the Revolving Facility, other than assets financed on
a non-recourse basis by the Company and any assets subject to liens granted in
connection with certain permitted indebtedness (including securitizations).
Borrowings under the Revolving Facility are subject to certain conditions,
including but not limited to absence of material adverse effect and absence of
material litigation. In addition, the Revolving Facility contains covenants,
including but not limited to limitations on liens other than permitted liens,
investments, dividends and other restricted payments, incurrence of recourse
indebtedness, transactions with affiliates, acquisitions other than permitted
acquisitions (as defined in the Revolving Facility) as well as various financial
covenants, including ratios of recourse and limited recourse debt to tangible
net worth, cash flow to interest and rents, and maintenance at all times of a
minimum tangible net worth. We amended the Revolving Facility as of March 31,
2000 to modify certain of our financial covenants until June 22, 2000. If we had
not amended this facility, our financial condition as of March 31, 2000 and our
results of operations for the first quarter would have caused us to breach the
fixed-charge coverage ratio and tangible net worth financial covenants of the
facility. As a condition to this amendment, we have agreed to (i) develop a plan
to sell certain of our Big Ticket Division assets, (ii) limit the maximum amount
of borrowings under the Revolving Facility to $290.0 million, (iii) appoint
independent financial consultants to assist us in evaluating our business and
financial condition and (iv) pay the costs of any financial consultants engaged
by our lender to conduct an independent investigation of our business and
financial condition. The Revolving Facility, which was entered into in June
1998, has a three-year term. We pay a quarterly fee equal to a percentage of the
unused portion of the Revolving Facility. As of March 31, 2000, the Company had
borrowings of $249.0 million outstanding under the Revolving Facility with a
weighted average interest rate of 8.5%.
LIMITED RECOURSE CONDUIT FACILITY. We have established the Limited Recourse
Conduit Facility with Bank of America, as agent, pursuant to which a commercial
paper conduit (the "CP Conduit") or, if the CP Conduit does not buy them, one or
more bank
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investors, which will include Bank of America (the "Bank Investors"),
will purchase beneficial interests in leases (the "Net Investment") in an amount
of up to $200.0 million (the "Facility Limit"), from a special purpose entity,
collateralized by small ticket and middle market leases meeting certain
eligibility requirements. Two indirect, bankruptcy-remote subsidiaries of the
Company (the "Transferors") may purchase the Company's interest in certain
financing leases and related leased equipment originated or purchased by the
Company or eligible subsidiaries of the Company. The CP Conduit (or, upon the
occurrence of certain events, the Bank Investors) will purchase beneficial
interests in leases from the Transferors at an amount equal to a percentage of
the present value of the remaining lease receivables. Collections on the leases
will generally be applied first to pay any amounts due under the Limited
Recourse Conduit Facility and certain other specified facilities, and then to
the Transferors. We plan to reduce the Net Investment under the Limited Recourse
Conduit Facility periodically through securitizations. Should we be unable to
securitize leases going forward, our business, financial condition and results
of operations could be materially and adversely affected. The Limited Recourse
Conduit Facility contains certain restrictions, including but not limited to
limitations on liens on the leases, indebtedness, certain lease modifications
and changes in credit and collection practices. The Limited Recourse Conduit
Facility requires payment by the Transferor of program fees, facility fees,
administration fees and commercial paper dealer fees. The term of the Limited
Recourse Conduit Facility expires in August 2000. As of March 31, 2000, the
amount outstanding under the Purchase Facility was $136.7 million with a
weighted average interest rate of 6.8%.
FULL RECOURSE CONDUIT FACILITY. We have established the Full Recourse
Conduit Facility with Bank of America, as administrative agent, pursuant to
which the CP Conduit or the Bank Investors will advance an amount up to $200.0
million. A subsidiary of the Company (the "Financing SPE") will finance the
Company's interest in certain operating and financing leases and certain leased
equipment originated or purchased by the Company or certain subsidiaries of the
Company. The CP Conduit (or, under certain limited circumstances, the Bank
Investors) will lend funds to the Financing SPE in an amount equal to a
percentage of the present value of the remaining lease receivables. Such
borrowings are secured by an interest in the Financing SPE's leases and certain
leased equipment. We plan to reduce the borrowing outstanding under the Full
Recourse Conduit Facility periodically through securitizations. Should we be
unable to securitize leases going forward, our business, financial condition and
results of operations could be materially and adversely affected. The Full
Recourse Conduit Facility contains certain restrictions and requires the payment
of various fees, generally on terms substantially equivalent to those in the
Limited Recourse Conduit Facility. We have guaranteed the amounts borrowed under
the Full Recourse Conduit Facility. The term of the Full Recourse Conduit
Facility expires in August 2000. As of March 31, 2000, the amount outstanding
under the Full Recourse Conduit Facility was $133.9 million with a weighted
average interest rate of 6.8%.
MORGAN STANLEY ASSET FUNDING WAREHOUSE FACILITY. We have established a
Warehouse Facility with Morgan Stanley Asset Funding, Inc., (the "Lender")
pursuant to which Lender will make loans to an indirect, bankruptcy-remote
subsidiary of the Company (the "SPE Borrower"). As security for these loans, the
SPE Borrower will assign all of the Borrower's right, title and interest in, to
and under certain small ticket and middle market leases and loans and related
equipment originated or purchased by the Company or eligible subsidiaries of the
Company (the "Originators"). Lender will lend against leases at an amount equal
to a percentage of the present value of the remaining lease receivables, up to a
maximum amount of $200.0 million. Amounts outstanding under the Warehouse
Facility bear interest at a rate equal to a Eurodollar rate plus an applicable
margin. Collections on the leases will generally be applied first to pay any
amounts due under the Warehouse Facility, including without limitation the
repayment of principal of and interest on all loans and all other amounts owing
to the Lender and then to the Originators. We plan to reduce the borrowing
outstanding under the Warehouse Facility periodically through securitizations.
Should we be unable to securitize leases going forward, our business, financial
condition and results of operations could be materially and adversely affected.
Borrowings under the Warehouse Facility are subject to certain conditions. In
addition, the Warehouse Facility contains certain covenants, including but not
limited to limitations on liens, investments, dividends and other restricted
payments, capital expenditures, transactions with affiliates, acquisitions,
incurrence of debt, and interest rate protection acceptable to Lender, and
various financial covenants customary for transactions of this type. The term of
the Warehouse Facility, which was entered into in December 1999, is 364 days. As
of March 31, 2000, the Company had borrowings of $16.7 million outstanding under
the Warehouse Facility with a weighted average interest rate of 6.9%. Our
financial condition as of March 31, 2000 and our results of operations for the
first quarter would have caused us to breach the fixed-charge coverage ratio and
tangible net worth financial covenants under the Morgan Stanley Asset Funding
Warehouse Facility. We have obtained a waiver of this breach, which waiver
expires on June 14, 2000. We do not have the right to make additional borrowings
under this facility during the period that the waiver is in effect.
OTHER CREDIT FACILITIES
REVOLVING PURCHASE FACILITY. In November 1999, we closed a $50.0 million
increase in our $75.0 million discretionary, revolving facility with Key Global
Finance. This facility is for the funding of eligible leases and is available to
most of the originating units in
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our Technology and Finance Group as well as one of the originating units in our
Business Credit Group.
TERM LOANS
AIRCRAFT FACILITY. Effective March 30, 2000, we converted our revolving
credit facility for the financing of aircraft into a term loan. As a condition
of the conversion, the Company pledged 100% of the stock of UniCapital AFT-II,
Inc., five engines and the Class C Notes related to the 1999-1 and 2000-1
securitization transactions. The Aircraft Facility is nonrecourse to the Company
and is secured by a first priority perfected pledge of all of the common stock
of each special purpose entity wholly owned by the Company which uses the
Aircraft Facility ("SPE Aircraft Borrower") and each domestic subsidiary of each
SPE Aircraft Borrower, a first priority perfected security interest in all
present and future assets and properties of each SPE Aircraft Borrower and each
of its subsidiaries and certain other assets of the Company's aircraft and
aircraft engine businesses. The aggregate net book value of the assets that are
pledged as collateral under the Aircraft Facility is $120.7 million. Borrowings
under the Aircraft Facility are subject to certain conditions, including but not
limited to absence of material adverse effect and absence of material
litigation. In addition, the Aircraft Facility contains certain covenants,
including but not limited to limitations on liens, dividends and other
restricted payments, capital expenditures, acquisitions, incurrence of debt, as
well as requirements related to annual appraisals of eligible aircraft, approved
aircraft and aircraft engine types and interest rate protection acceptable to
the lender, and various financial covenants customary for transactions of this
type, including a ratio of cash flow to interest. The Aircraft Facility expires
in December 2000. As of March 31, 2000, the Company had borrowings of $329.3
million outstanding under the Aircraft Facility with a weighted average interest
rate of 9.3%. The Company's financial condition as of March 31, 2000 and results
of operations for the first quarter would have caused the SPE Aircraft Borrower
to breach the interest coverage ratio financial covenant of the Aircraft
Facility. This financial covenant was modified in connection with the amendment
to the facility effective March 30, 2000.
SECURITIZATION TRANSACTIONS
On September 9, 1999, we completed our first securitization transaction
involving the issuance of $365.7 million of Equipment Contract Backed Notes
originated primarily by the Business Credit Group and the Technology and Finance
Group. In connection with this transaction, four tranches of Class A Notes were
sold to accredited investors under Rule 144A. The Class A-1 Notes had short term
ratings of A-1+ by Standard & Poor's, P-1 by Moody's Investor Services, Inc.,
F1+/AAA by Fitch IBCA and D-1+ by Duff & Phelps Credit Rating Co. The Class A-2
through A-4 Notes were rated AAA by Standard & Poor's, Aaa by Moody's Investor
Services, Inc., AAA by Duff & Phelps Credit Rating Co. and AAA by Fitch IBCA.
The Class A Notes benefit from a surety bond issued by Ambac Assurance Corp. In
addition, Class B and Class C Notes, rated BBB and BB, respectively by Duff &
Phelps Credit Rating Co. and Fitch IBCA, were retained by the Company. We
financed the Class B Notes pursuant to short term facilities. The weighted
average interest rate for the Class A Notes as of March 31, 2000 was 6.96%. The
weighted average interest rate will vary as Class A Notes are paid. As of March
31, 2000, the outstanding principal balance was $327.3 million.
On March 28, 2000, the Company completed its second securitization
transaction involving the issuance of $301.5 million of Equipment Contract
Backed Notes originated primarily by the Business Credit Group and the
Technology and Finance Group. In connection with this transaction, four tranches
of Class A Notes and the Class B Notes were sold to accredited investors under
Rule 144A. The Class A-1 Notes had short term ratings of A-1+ by Standard &
Poor's, P-1 by Moody's Investor Services, Inc., F1+/AAA by Fitch IBCA and D-1+
by Duff & Phelps Credit Rating Co. The Class A-2 through A-4 Notes were rated
AAA by Standard & Poor's, Aaa by Moody's Investor Services, Inc., AAA by Duff &
Phelps Credit Rating Co. and AAA by Fitch IBCA. The Class A Notes benefit from a
surety bond issued by the Ambac Assurance Corp. The Class B Notes were rated
BBB- by each of Duff & Phelps Credit Rating Co. and Fitch IBCA. In addition,
Class C Notes rated BB by Duff & Phelps Credit Rating Co and Fitch IBCA were
retained by the Company. The weighted average interest rate for the Class A and
Class B Notes as of March 31, 2000 was 7.09%. The weighted average interest rate
will vary as Class A and Class B Notes are paid.
Under the terms of these securitization transactions, if we sustain losses
for two consecutive quarters or if there are defaults or if certain financial or
portfolio triggers occur, then certain payments on subordinate securities
otherwise due to the Company may be redirected to accelerate the senior bonds
and the majority interest of the bondholders (currently controlled by the
surety) may remove the Company as servicer.
FLUCTUATIONS IN QUARTERLY RESULTS
We have experienced and may continue to experience significant fluctuations
in quarterly operating results due to a number of
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factors including, among others, the consummation of a transaction in a
particular calendar quarter (or the failure to complete such a transaction),
variations in the volume of leases originated, variations in interest rates and
market conditions for assets in the principal asset classes of our portfolio. In
addition, certain of our operating subsidiaries may from time to time experience
relatively large transactions for one or a few customers or relatively large
sales of equipment and/or lease portfolios, which may not recur or may not be
followed by correspondingly large transactions in subsequent periods. Moreover,
to the extent that we retain for our own portfolio a greater portion of the
leases that we acquire or originate and the equipment that we acquire, we will
not generate revenue from gain on sale for the retained leases or revenue from
sales of the retained equipment. As a result of these fluctuations, results for
any one quarter should not be relied upon as being indicative of performance in
future quarters.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
Certain statements contained in this Quarterly Report on Form 10-Q
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements generally can be
identified by the use of forward-looking terminology such as "may," "will,"
"intend," "estimate," "anticipate," "believe," "expect" or "continue" or the
negative thereof or variations thereon or similar terminology. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from possible
future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
general economic and business conditions; changes in interest rates; changes in
asset values; inflation or deflation; changes in markets for financial products,
including securitized assets; changes in political, social and economic
conditions and local regulations; changes in, or failure to comply with,
government regulations; demographic changes; changes in the mix of sources of
revenues; competition; changes in business strategy or development plans;
availability of capital sufficient to meet the Company's need for capital or on
terms or at times acceptable to the Company; and availability of qualified
personnel. Factors that could cause or contribute to such differences include
those discussed under the heading "Factors that May Affect Future Operating
Results" in the Company's Annual Report on Form 10-K for the year ended December
31, 1999. Unforeseen delays and expenses may affect our ability to develop or
implement our expense-reduction program. Unforeseen delays and expenses as well
as possible unfavorable market conditions for certain of our assets, such as the
current unfavorable market condition for the sale of aircraft engines, may
affect our ability to develop or implement our asset turnover program, our
ability to refinance our debt or to secure adequate sources of liquidity, and
our ability to dispose of our Big Ticket Division assets in an orderly manner.
The Company assumes no obligation to update any forward-looking statements to
reflect actual results or changes in the factors affecting such forward-looking
statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
We incur debt to fund the origination and acquisition of leases, equipment,
lease portfolios and equipment leasing businesses and for general corporate
purposes. The interest rates charged on the debt are generally determined based
on variable measures of interest rates such as the prevailing "Prime" rates in
the United States or the London Interbank Offered Rate ("LIBOR"). For
information regarding contractual interest rates on the debt and amounts
outstanding and weighted average interest rate at March 31, 2000, see the
discussion in "Liquidity and Capital Resources."
We continually monitor interest rates in order to mitigate exposure to
certain unfavorable variations. Our objectives in managing this risk include:
o achieving certain ratios of fixed-rate debt to variable-rate debt; and
o achieving certain levels of our aggregate cost of funds.
As a result, from time to time we utilize interest rate swaps to hedge some
of the Company's exposure to changing interest rates. We do not hedge all
interest rate risks. As used by the Company, interest rate swaps synthetically
alter the repricing characteristics of recorded assets and liabilities,
effectively allowing us to reduce our exposure to variations in Prime or LIBOR.
There are risks associated with the use of these instruments, including:
o the possible inability of the counterparties to meet the terms of their
contracts; and
o market movements in values and interest rates.
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We do not enter into interest rate swap agreements for trading purposes.
The fair value of the swaps at any particular time is determined by
calculating the difference between the contractual payments at the contract rate
and the prevailing market rate of the swap at such time, and discounting the
stream of payments at the appropriate market discount rate.
The following table presents, as of March 31, 2000, the following
information regarding interest rate swap agreements to which we are a party: (i)
the notional amount of the agreement, (ii) the fixed interest rate to be paid by
the Company or its subsidiaries, (iii) the variable rate to be paid by the
counterparty under the agreement, (iv) the fair value of the instrument, (v) the
commencement date for agreements for which the effective period does not begin
until a subsequent date, if applicable, and (vi) the maturity of the agreement.
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EFFECTIVE PERIOD OF INTEREST RATE SWAP
AVERAGE NOTIONAL AMOUNT FOR THE TWELVE MONTHS ENDING MARCH 31, (B)
---------------------------------------------------------------------------------------
MARCH 31, 2000 2001 2002 2003 2004 2005 THEREAFTER
---------------- ------------ ------------ ----------- ----------- ----------- -----------
INTEREST RATE SWAPS
- -------------------
Amortizing notional
amount............ $20,353,572 $16,945,787 $ 9,601,358 $ 4,274,272 $ 1,150,456
Rate to be paid by the
Company........... 6.115%
Rate to be received by
the Company....... 30-day CP(a)
Fair value at
March 31, 2000...... $ 205,192
Maturity............ October 2003
Amortizing notional
amount............ $22,408,935 $19,154,417 $16,980,864 $12,656,415 $ 5,552,217 $ 980,605
Rate to be paid by the
Company........... 6.245%
Rate to be received by
the Company....... 30-day CP(a)
Fair value at
March 31, 2000..... $ 321,353
Maturity............ June 2004
Amortizing notional
amount............ $16,604,363 $18,964,165 $20,381,043 $17,534,077 $14,741,742 $11,891,592 $ 3,833,864
Rate to be paid by the
Company........... 6.575%
Rate to be received by
the Company....... 30-day CP(a)
Fair value at
March 31, 2000...... $ 314,157
Maturity............ August 2009
Amortizing notional
amount............ $30,914,292 $24,779,403 $12,280,531 $ 2,877,909 $ 438,649
Rate to be paid by the
Company........... 6.326%
Rate to be received by
the Company....... 30-day CP(a)
Fair value at
March 31, 2000...... $ 166,388
Maturity............ June 2003
Amortizing notional
amount............ $29,107,463 $26,652,985 $21,297,761 $15,942,537 $10,587,313 $ 5,232,090 $1,215,672
Rate to be paid by the
Company........... 6.880%
Rate to be received by
the Company....... 30-day CP(a)
Fair value at
March 31, 2000...... $ 7,177
Maturity............ September 2005
Amortizing notional
amount............ $ -- $33,812,519 $22,856,736 $13,699,199 $ 8,630,629 $ 5,328,265 $1,818,265
Rate to be paid by the
Company........... 7.035%
Rate to be received by
the Company....... 30-day CP(a)
Fair value at
March 31, 2000...... $ (74,299)
Commencement........ June 2000
Maturity............ September 2009
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EFFECTIVE PERIOD OF INTEREST RATE SWAP
AVERAGE NOTIONAL AMOUNT FOR THE TWELVE MONTHS ENDING MARCH 31, (B)
------------------------------------------------------------------------------------
MARCH 31, 2000 2001 2002 2003 2004 2005 THEREAFTER
------------------ ------------ ------------ ------------ ------------- ---------- -----------
Amortizing notional
amount............ $ -- $ 25,259,704 $ 15,657,867 $ 9,176,711 $ 6,647,708 $5,624,999 $2,662,389
Rate to be paid by the
Company........... 6.995%
Rate to be received by
the Company....... 30-day CP(a)
Fair value at
March 31, 2000...... $ (33,171)
Commencement........ June 2000
Maturity............ September 2009
Amortizing notional
amount............ $ -- $ 34,100,830 $ 22,151,686 $ 13,207,611 $ 8,875,136 $6,544,063 $2,682,639
Rate to be paid by the
Company........... 7.110%
Rate to be received by
the Company....... 30-day CP(a)
Fair value at
March 31, 2000...... $ (134,462)
Commencement........ June 2000
Maturity............ September 2009
Amortizing notional
amount............ $17,951,990 $ 16,671,082 $ 11,907,527 $ 7,779,817 $ 6,539,233 $6,539,233 $6,539,233
Rate to be paid by the
Company........... 7.230%
Rate to be received by
the Company....... 30-day CP(a)
Fair value at
March 31, 2000...... $ 26,537
Maturity............ July 2005
Fixed notional
amount............ $75,000,000 $ 75,000,000 $ 75,000,000 $ 75,000,000
Rate to be paid by the
Company........... 5.125%
Rate to be received by
the Company....... 3-month LIBOR
Fair value at
March 31, 2000...... $ 3,525,953
Maturity............ November 2002
Amortizing notional
amount............ $ -- $ 1,084,148 $ 1,024,181 $ 938,048 $ 843,768 $ 740,980 $ 371,057
Rate to be paid by the
Company........... 6.540%
Rate to be received by
the Company....... 30-day CP(a)
Fair value at
March 31, 2000...... $ 22,559
Commencement........ October 2000
Maturity............ January 2010
- ----------
(a) The rate to be received by the Company is based on a 30-day commercial
paper rate published by the U.S. Federal Reserve (H15 report).
(b) The amortizing notional amount is based on contractual agreements with the
counterparty.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
UniCapital and its subsidiaries are from time to time parties to lawsuits
arising out of our respective operations. We believe that any pending litigation
to which we or our subsidiaries are parties will not have a material adverse
effect upon our business or financial condition.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a.)Exhibits
4.01 Amended and Restated Credit Agreement by and among First Security
Bank, National Association, as Trustee, Lehman Commercial Paper Inc.,
as Lender and as Agent and the Lenders party thereto, dated as of
March 30, 2000.
11.01 Statement Regarding Computation of Per Share Earnings
27.01 Financial Data Schedule
(b.) Reports on Form 8-K
None.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNICAPITAL CORPORATION
Date: May 15, 2000
By: /s/ JONATHAN NEW
--------------------------------------------
Jonathan New
Chief Financial Officer
(Principal Financial and Accounting Officer)
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