UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 February 28, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period to
Commission File No. 0-9833
UNIHOLDING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 58-1443790
- ---------------------------- -----------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
96 Spring Street, 8th Floor, New York, New York 10012
- ----------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 219-9496
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___
As of May 6, 1997, there were 7,926,120 shares of Common Stock, par value $0.01
per share, of the Registrant outstanding.
1
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UNIHOLDING CORPORATION AND SUBSIDIARIES Form 10-Q for the Quarterly
Period Ended November 30, 1996
INDEX
Page
Part I - FINANCIAL INFORMATION:
Item 1. Financial Statements 3
Consolidated Balance Sheets - February 28, 1997
(unaudited) and May 31, 1996 4
Unaudited Consolidated Statements of
Operations - Three month and nine month periods
ended February 28, 1997 and February 29, 1996 6
Unaudited Consolidated Statements of Cash
Flows - Nine month periods ended
February 28, 1997 and February 29, 1996 7
Notes to Unaudited Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Part II - OTHER INFORMATION:
Item 1. Legal Proceedings 19
Item 5. Other Items 19
Item 6. Exhibits 20
Signatures 21
2
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
3
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UNIHOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
February 28, May 31,
ASSETS 1997 1996
---- ----
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $5,178 $1,587
Accounts receivable, net of allowance
for doubtful accounts 18,802 18,726
Due from related companies 7,633 4,960
Inventories 1,958 1,910
Prepaid expenses 2,510 2,535
Other current assets 3,106 1,051
-------- --------
Total current assets 39,187 30,769
-------- --------
NON-CURRENT ASSETS:
Long-term notes receivable 818 818
Intangible assets, net 31,927 54,828
Property, plant and equipment, net 28,552 33,238
Investment in equity affiliates 483 1,423
Other assets, net 2,396 2,176
-------- --------
Total non-current assets 64,176 92,483
-------- --------
$103,363 $123,252
========= =========
See notes to financial statements
4
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UNIHOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
February 28, May 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
----------- --------
(Unaudited)
CURRENT LIABILITIES:
Bank overdrafts $6,543 $6,686
Lease payable, short-term portion 1,493 1,331
Payable to related parties - 9
Trade payables 8,569 6,843
Accrued liabilities 4,906 4,568
Note payable - 15,000
Long-term debt, current portion 7,855 2,971
Taxes payable, current portion 4,515 3,175
-------- --------
Total current liabilities 33,881 40,583
-------- --------
NON-CURRENT LIABILITIES:
Lease payable, non-current 2,639 2,633
Long-term debt, non-current 26,554 35,721
Taxes payable, long-term portion 170 199
Deferred taxes 177 4,410
-------- --------
Total non-current liabilities 29,540 42,963
-------- --------
Total liabilities 63,421 83,546
-------- --------
MINORITY INTERESTS 5,370 5,464
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value; Voting;
authorized 18,000,000 shares; issued
7,627,736 at February 28, 1997
and 5,823,785 at May 31, 1996 76 58
Non-Voting; authorized 2,000,000
shares; issued and outstanding
298,384 at February 28, 1997, and
298,384 at May 31, 1996 3 3
Additional paid-in capital 53,161 32,429
Cumulative translation adjustment (362) (239)
Retained earnings (14,910) 5,153
------- --------
37,968 37,404
Less - cost of 176,388 shares of
Common Stock held in treasury at
February 28, 1997 and May 31, 1996,
respectively (3,396) (3,162)
------- --------
Total stockholders' equity 34,572 34,242
------- --------
$103,363 $123,252
======= ========
See notes to financial statements
5
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UNIHOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
Three Months ended Nine Months ended
Feb. 28 Feb. 29 Feb. 28, Feb. 29,
1997 1996 1997 1996
------ ------ ------ ------
REVENUE $24,108 $23,587 $73,723 $71,262
Operating expenses:
Salaries and related charges 9,806 10,505 30,522 30,721
Supplies 4,479 3,922 12,808 11,282
Other operating expenses 8,066 6,524 22,299 17,751
Depreciation and amortization of
tangible assets 1,241 1,176 3,941 4,097
Write down of real estate 6,400 - 6,400 -
Amortization of intangible assets 980 633 2,149 1,827
Write down of intangible assets 25,222 - 25,222 -
------- -------- -------- --------
OPERATING INCOME (32,086) 827 (29,618) 5,584
Interest, net (762) (873) (2,631) (1,969)
Equity in loss of affiliates (225) - (298) (3,005)
Other, net 8,342 338 8,540 472
------- -------- -------- --------
Income (loss) before taxes and
minority interests (24,731) 292 (24,007) 1,082
Tax provision 2,534 22 1,510 (1,164)
------- -------- -------- --------
Income (loss) before minority
interests (22,197) 314 (22,497) (82)
Minority interests in income 2,982 (209) 2,434 (1,021)
-------- -------- -------- --------
NET INCOME (LOSS) ($19,215) $105 ($20,063) ($1,103)
======== ======== ======== ========
Weighted average common shares
outstanding 7,419,574 5,959,682 6,708,615 6,021,132
Earnings (loss) per share of
common stock ($2.59) $0.02 ($2.99) ($0.18)
See notes to financial statements
6
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UNIHOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Nine Months ended
February 28, February 29,
1997 1996
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($20,063) ($1,103)
Adjustments to reconcile net income to net cash
provided by operations:
Equity in loss of affiliates 298 3,005
Minority interests in income (2,434) 1,021
Depreciation and amortization of tangible assets 10,341 4,097
Amortization of intangible assets 27,371 1,827
Other non-cash income (expenses) (6,964) (40)
Net changes in assets and liabilities, net of
acquisitions:
(Increase) Decrease in accounts receivable (1,417) (582)
(Increase) Decrease in inventories (84) (173)
(Increase) Decrease in prepaid expenses (181) 918
(Increase) Decrease in other assets (2,171) 451
Increase (Decrease) in trade payables 640 1,045
Increase (Decrease) in accrued liabilities 379 158
Increase (Decrease) in reserve for taxes 2,341 254
Increase (Decrease) in deferred taxes (5,301) (741)
--------- ---------
Net cash provided by operating activities 2,755 10,137
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from issuance of share capital 5,000 1,240
Repayment of long-term debt (4,652) (750)
Cash proceeds from long-term debt 7,376 4,248
Proceeds (reimbursement) from (of) bank overdrafts (426) (424)
Dividend paid to minority shareholders (216) (335)
Proceeds (repayment) of lease debt (308) 1,839
Payment for purchase of treasury stock (249) (3,087)
--------- ---------
Net cash provided by (used in) financing activities 6,525 2,731
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for purchases of property and equipment (3,949) (5,638)
Loans and advances (to) from affiliates, related
companies and shareholders (9,393) (6,005)
Payment for purchase of interest in subsidiaries (5,049) (16,594)
Payment for purchase of intangible assets (125) (271)
Proceeds from sale of assets 13,401 285
--------- ---------
Net cash used in investing activities (5,115) (28,223)
--------- ---------
Effect of exchange rate changes on cash (574) (52)
Net increase (decrease) in cash and cash equivalents 3,591 (15,407)
Cash and cash equivalents, beginning of year 1,587 16,939
--------- ---------
Cash and cash equivalents, end of period $5,178 $1,532
======= =======
See notes to financial statements
7
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UNIHOLDING CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Monetary amounts in thousands, except per share data)
1. Basis of Presentation
The consolidated financial statements include the accounts of
UniHolding and its majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated. The investment in the Company's
equity affiliate MISE S.A. is accounted for on the equity method. The investment
in the Company's equity affiliate NDA Clinical Trials Services Inc. was
accounted for on the equity method until January 31, 1997, the date of the
merger discussed below, after which date its financial statements have been
fully consolidated.
2. Management Opinion
In the opinion of management, the accompanying unaudited interim financial
statements reflect all adjustments which are necessary to present fairly the
financial position, results of operations and cash flows for the interim periods
reported. All such adjustments made were of a normal recurring nature.
The results of operations and financial position for interim periods are
not necessarily indicative of those to be expected for a full year, due, in
part, to the seasonal fluctuations which are normal for the Company's business.
The accompanying interim financial statements and related notes should be
read in conjunction with the consolidated financial statements of the Company
and related notes as contained in the Annual Report on Form 10-K for the year
ended May 31, 1996.
3. Net Income (Loss) Per Share
Net income (loss) per share is computed by dividing net income or net loss
by the weighted average number of voting and non-voting common shares
outstanding.
4. Cumulative Translation Adjustment
The Company's operations are located in Switzerland, the United Kingdom,
Italy and Spain. Its net assets, revenues and expenses are substantially all
denominated in Swiss franc, Sterling pound, Italian lire, and Spanish pesetas,
while the Company presents its consolidated financial statements in US dollars.
In accordance with generally accepted accounting principles in the United
States, net gains and losses arising upon translation from local currency
financial statements are accumulated in a separate component of Stockholders'
Equity, the Cumulative Translation Adjustment account, which may be realized
upon the eventual disposition by the Company of part or all of its European
investments.
5. Supplemental Disclosure of Cash Flow Information
Nine months ended
February 28, February 29,
1997 l996
Cash paid during the period for
Interest $1,543 $1,518
Income taxes 1,489 1,735
8
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During the period ended February 29, 1996, in connection with its
acquisition of 40% of the share capital of UGL, the Company issued a note of
$15,000 and assumed a note of $2,000 payable to JSP. During the period ended
February 28, 1997, the $15,000 note and $750 accrued interest was converted into
1,394,963 newly issued shares of Common Stock.
During the period ended February 28, 1997, capital lease obligations of
$1,655 were incurred when the Company entered into leases for new capital
equipment.
6. Restructure and Recapitalization of ULSA
The share capital of ULSA was restructured on February 24, 1997. As a
result thereof, the ULSA share capital was divided into 120,000 registered
shares of SFr.20 par value each and 140,000 bearer shares of SFr.40 par value
each. Each share (both registered and bearer) is entitled to one vote.
Accordingly, the 120,000 registered shares, representing 25% of ULSA's share
capital, also represents 40% of the votes. In accordance with Swiss law, each
shareholder as of February 24, 1997, received its proportionate amount of new
registered and bearer shares, and all old shares were canceled. Accordingly, all
amounts of ULSA shares disclosed herein are the amounts after such restructuring
has become effective.
During the period ended February 28, 1997, ULSA acquired 3,750 bearer
shares (or 1.9%) of its own common stock from unaffiliated investors in ULSA for
a total consideration of SFr.2,010 ($1,550), all of which was paid during the
period.
Also during the period ended February 28, 1997, ULSA acquired 10,000
bearer shares (or 5.0%) of its own common stock from the Company's controlling
shareholder, Unilabs Holdings SA, for an initial consideration of SFr.6,500
($5,000), which was paid through a partial set-off of advances previously made.
Subsequent to February 28, 1997, ULSA acquired a further 10,000 bearer shares
(or 5.0%) of its own common stock from Unilabs Holdings SA, for an initial
consideration of SFr.6,500, which was paid through a partial set-off of advances
previously made. According to the related purchase contracts, the purchase price
is subject to an adjustment whereby the Company will pay Unilabs Holdings SA 50%
of the excess of the price per share on the first day of trading of the ULSA
shares on the Swiss Exchange after the ULSA initial public offering discussed
below and the price initially set. Based upon the last price paid on April 25,
1997 (the first day of trading of the ULSA shares on the Swiss Exchange), of
SFr.705 per new ULSA bearer share, an amount of SFr.550 will be due by the
Company to Unilabs Holdings SA.
During the period ended February 28, 1997, UGL and ULSA sold an
aggregate of 30,000 shares (or 15.0%) of ULSA's common stock to three financial
institutions for a total consideration of SFr.19,500 (approximately $15,000). As
a result of this series of transactions, the Company owned approximately 79% of
ULSA as of February 28, 1997. On April 24, 1997, the initial public offering of
40,000 new shares by ULSA (representing 20% of ULSA's equity) and 44,000 shares
by the Company closed, and the Company received aggregate net proceeds of
approximately SFr. 40.0 million (approximately $27.0 million at the exchange
rate then in effect). Such offering was made at the price of SFr.675 per bearer
share. The Company's holding in ULSA was reduced to approximately 60% following
the public offering. The shares of ULSA were listed on the Swiss Exchange on
April 25, 1997.
Capital Stock and Additional Paid In Capital
On July 22, 1996, UniHolding issued 333,333 new shares of common stock
to an investor, at a price of $15 per share. The antidilution provisions of the
related agreement provided that if the Company issued its Common Stock to repay
the $15,000 note owed to Unilab Corporation (a Delaware corporation "Unilab"),
it would transfer to the investor additional shares of Common Stock so that the
percentage of ownership of the investor would remain substantially unchanged.
The preemptive right provisions provide that the Company and its affiliates will
not sell, pledge, encumber or otherwise transfer any shares of Common Stock at a
value below market without first offering the same shares to the investor on the
same conditions.
As of December 31, 1996, the $15,000 note due Unilab was unpaid.
Accordingly, pursuant to the agreement with Unilab dated as of June 30, 1995,
the note's principal, together with accrued but unpaid interest of $750 as of
December 31, 1996, converted into 1,394,963 newly-issued shares of Common Stock.
Further, pursuant to the
9
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antidilution provisions referred to above, the Company issued to the investor
75,655 newly-issued shares of Common Stock, for no additional consideration.
7. Recapitalization of the Clinical Trials Segment
As of July 23, 1996, the Company transferred the assets of its Clinical
Trials Division, consisting of 100% of the equity of Unilabs Clinical Trials
Limited, 100% of the equity of Pharmasoft SA and 17% of the equity of NDA to a
newly formed wholly-owned British Virgin Islands subsidiary, Global Unilabs
Clinical Trials Ltd. ("GUCT") in exchange for 217,000 ordinary shares
representing all of the issued and outstanding shares of GUCT. After the
transaction, GUCT was a wholly-owned subsidiary of UniHolding. The ownership of
the 217,000 shares of GUCT was then transferred to UGL.
Also on July 23, 1996, the Company, through GUCT, made a loan of $700
to NDA. From August 1996 through January 1997, the Company made further loans to
NDA, totaling $1,200. GUCT entered into and closed a Master Combination
Agreement (the "UCTI Agreement")dated as of January 31, 1997 with NDA and the
stockholders of NDA. Pursuant to the UCTI Agreement, GUCT and the NDA
stockholders contributed their respective holdings in NDA (aggregating 100%) and
GUCT contributed its 100% holdings in UCT and Pharmasoft to a newly-formed
Delaware corporation, UCT International Inc. ("UCTI"). GUCT also converted an
aggregate of approximately $1,900 of debt of NDA and approximately $600 of debt
of UCT into equity of NDA and UCT respectively, which were exchanged for stock
of UCTI. Further, GUCT contributed approximately $2,200 to UCTI which, together
with the other contributions of stock, caused GUCT's ownership in UCTI to be
approximately 70% at January 31, 1997. The transactions were accounted for as a
recapitalization.
8. Investment in Equity Affiliate; Istanbul Laboratory
On January 31, 1997, the Company, through a subsidiary, signed an
agreement for the acquisition of 70% of an Istanbul-based laboratory, with an
option to increase the participation to 95%. The Company made this acquisition
together with another investor, and will thus initially own a controlling
interest of approximately 43% of the Turkish laboratory, for an investment of
approximately $600.
9. Segment Information
During the year ended May 31, 1996, the Company expanded its activities
in testing performed in relation with clinical trials for the pharmaceutical
industry, and therefore distinguishes its core clinical laboratory business (the
"Diagnostic Laboratory Division") from its clinical trials testing business (the
"Clinical Trials Division"). In connection therewith, the Company transferred to
UCT, as of June 1, 1996, certain clinical trials activities previously performed
by JSP. Accordingly, for analysis and comparative purposes, the activities
conducted by JSP in the clinical trials business during both years have been
included under the Clinical Trials Segment.
Following are the key financial data of the respective businesses for
purposes of segment information. Such information does not include segment data
relating to the Company's investment in unconsolidated affiliates.
10
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Nine Months Ended
February 28, February 29,
1997 1996
---- ----
Revenues from unaffiliated customers:
Diagnostic Laboratory Division $ 69,108 $ 68,263
Clinical Trials Division 4,615 2,999
Healthcare Management Services Division - -
Operating Profit or Loss:
Diagnostic Laboratory Division (26,521) 6,294
Clinical Trials Division (3,097) (710)
Healthcare Management Services Division - -
Identifiable Assets:
Diagnostic Laboratory Division 93,195 126,275
Clinical Trials Division 10,168 1,780
Healthcare Management Services Division - -
11
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Item 2. Management's Discussions and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
The Company's results of operations for the period ended February 28,
1997, include the operations of the Company's core business (the "Diagnostic
Laboratory Division") and of the Company's expanded activities in clinical
trials testing for the pharmaceutical industry (the "Clinical Trials Division")
and in health care management services (the "Healthcare Management Services
Division"). The following tables present a reconciliation of the results of
operations of each division with the consolidated statement of operations, for
the purpose of discussing the results of operations.
Three months ended February 28, 1997
-----------------------------------------
Healthcare
Diagnostic Management Clinical
Laboratory Services Trials As
Division Division Division reported
--------- --------- -------- --------
REVENUE $22,271 - $1,837 $24,108
Operating expenses:
Salaries and related charges 9,289 - 517 9,806
Supplies 3,915 - 564 4,479
Other operating expenses 6,345 - 1,721 8,066
Depreciation and amortization
of tangible assets 1,201 - 40 1,241
Write down of real estate 6,400 - 0 6,400
Amortization of intangible
assets 973 - 7 980
Write down of intangible assets 25,222 0 25,222
----------- ---------- ------- ---------
OPERATING INCOME (LOSS) (31,074) - (1,012) (32,086)
Interest, net (754) - (8) (762)
Equity in loss of affiliates (298) - 73 (225)
Other, net 8,338 - 4 8,342
----------- --------- ------- ---------
Income (loss) before taxes and
minority interests (23,788) - (943) (24,731)
Tax provision 2,279 - 255 2,534
---------- -------- ------ ---------
Income (loss) before minority
interests (21,509) - (888) (22,197)
Minority interests in income 2,783 - 199 2,982
---------- -------- ------ ---------
NET INCOME (LOSS) ($18,762) $0 ($489) ($19,215)
========= ======== ======= =========
Weighted average common
shares outstanding 7,419,574 7,419,574 7,419,574 7,419,574
Earnings (loss) per share of
common stock ($2.52) $0.00 ($0.07) ($2.59)
12
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Nine months ended February 28, 1997
-----------------------------------------
Healthcare
Diagnostic Management Clinical
Laboratory Services Trials As
Division Division Division reported
-------- ---------- -------- --------
REVENUE $69,067 - $4,656 $73,723
Operating expenses:
Salaries and related charges 28,593 - 1,929 30,522
Supplies 12,140 - 668 12,808
Other operating expenses 17,291 - 5,008 22,299
Depreciation and amortization
of tangible assets 3,823 - 118 3,941
Write down of real estate 6,400 - 0 6,400
Amortization of intangible
assets 2,119 - 30 2,149
Write down of intangible assets 25,222 - 0 25,222
--------- -------- ---------- ---------
OPERATING INCOME (LOSS) (26,521) - (3,097) (29,618)
Interest, net (2,552) - (79) (2,631)
Equity in loss of affiliates (298) - 0 (298)
Other, net 8,538 - 2 8,540
--------- -------- --------- ---------
Income (loss) before taxes and
minority interests (20,833) - (3,174) (24,007)
Tax provision 616 - 894 1,510
--------- -------- --------- ---------
Income (loss) before minority
interests (20,217) - (2,280) (22,497)
Minority interests in income 2,235 - 199 2,434
--------- -------- --------- --------
NET INCOME (LOSS) ($17,982) $0 ($2,081) ($20,063)
====== ====== ====== ========
Weighted average common
shares outstanding 6,708,615 6,708,615 6,708,615 6,708,615
Earnings (loss) per share of
common stock ($2.68) $0.00 ($0.31) ($2.99)
The Company's results for the three and nine month periods ended
February 28, 1997, give effect to the acquisition by UniHolding and UGL, as of
June 30, 1995, of 40% of the capital stock of UGL, while the Company's results
for the nine month period ended February 29, 1996 included a 40% minority
interest in UGL's earnings for the month of June 1995. The following table
presents the required adjustments to the results of operations for the nine
month period ended February 29, 1996, providing a comparative analysis with the
comparable period in the current fiscal year, had the 40% of UGL's common stock
been acquired as of June 1, 1995 (unaudited). The results of operations for the
three and nine month periods ended February 29, 1996 were translated into U.S.
dollars using the exchange rates which were then valid.
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Three months ended February 29, 1996
-----------------------------------------
Diagnostic Clinical
Laboratory Trials As
Division Division reported
--------- -------- --------
REVENUE $22,480 $1,107 $23,587
Operating expenses:
Salaries and related charges 9,957 548 10,505
Supplies 3,915 7 3,922
Other operating expenses 5,291 1,233 6,524
Depreciation and amortization
of tangible assets 1,157 19 1,176
Write down of real estate 0 0 0
Amortization of intangible
assets 626 7 633
Write down of intangible assets 0 0 0
-------- ------- -------
OPERATING INCOME (LOSS) 1,534 (707) 827
Interest, net (866) (7) (873)
Equity in loss of affiliates 0 0 0
Other, net 730 (392) 338
-------- ------- -------
Income (loss) before taxes and
minority interests 1,398 (1,106) 292
Tax provision (252) 274 22
-------- ------- -------
Income (loss) before minority
interests 1,146 (832) 314
Minority interests in income (196) (13) (209)
-------- ------- -------
NET INCOME (LOSS) $ 950 ($845) $ 105
========
Weighted average common
shares outstanding 5,959,682 5,959,682 5,959,682
Earnings (loss) per share of
common stock $0.17 ($0.14) $0.02
14
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<TABLE>
<CAPTION>
Nine months ended February 29, 1996
--------------------------------------------------------------------------------
Diagnostic Clinical
Laboratory Trials
Division Division As reported Adjustments Pro Forma
-------- -------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
REVENUE $68,263 $2,999 $71,262 $71,262
Operating expenses:
Salaries and related charges 30,173 548 30,721 30,721
Supplies 11,275 7 11,282 11,282
Other operating expenses 14,631 3,120 17,751 17,751
Depreciation and amortization of
tangible assets 4,071 26 4,097 4,097
Write down of real estate 0 0 0
Amortization of intangible assets 1,819 8 1,827 8(d) 1,835
Write down of intangible assets 0 0 0
-------- -------- -------- -------- --------
OPERATING INCOME (LOSS) 6,294 (710) 5,584 (8) 5,576
Interest, net (1,959) (10) (1,969) (138)(b) (2,107)
Equity in loss of affiliates (3,005) - (3,005) (3005)
Other, net 960 (488) 472 472
-------- -------- -------- -------- --------
Income (loss) before taxes and
minority interests 2,290 (1,208) 1,082 (146) 936
Tax provision (1,554) 390 (1,164) 41 (c) (1,123)
-------- -------- -------- -------- --------
Income (loss) before minority interests 736 (818) (82) (105) (187)
Minority interests in income (991) (30) (1,021) 116 (a) (905)
-------- -------- -------- -------- --------
NET INCOME (LOSS) ($ 255) ($ 848) ($1,103) $ 11 ($1,092)
======== ======== ======== ======== ========
Weighted average common shares outstanding 6,021,132 6,021,132 6,021,132 6,021,132 6,021,132
Earnings (loss) per share of common stock ($0.04) ($0.14) ($0.18) ($0.18)
</TABLE>
(a) To record the cancellation of the 40% minority interest in the June 1995 net
income of UGL.
(b) To record the interest cost on the repurchase of 40% in UGL at an effective
rate of 5.5% for June 1995
(c) To record the tax benefit at 30% on the interest cost on repurchase of 40%
in UGL.
(d) To record goodwill amortization on the acquisition of 40% in UGL for
June 1995.
15
<PAGE>
Three and nine month periods ended February 28, 1997 compared with the three and
nine month periods ended February 29, 1996
Consolidated revenue was $24.1 million and $73.7 million for the three
and nine months ended February 28, 1997, representing an increase of $0.5
million and $2.4 million respectively (including the effect of the change in the
US dollar exchange rate of $1.8 million and $3.9 million for the respective
periods) from the comparable prior year period. Revenue generated by the Swiss
operations for the nine months increased by approximately 3.0% as a result of
additional specimen volume of 2.6% and an increase attributable to test mix of
0.4%. Revenue generated by the UK increased in respect of the Diagnostic
Laboratory Division due to additional revenue resulting from an existing
Government contract. Spanish operations increased revenues to $4.6 million,
representing an 173% increase from the comparable prior year period. Revenues of
$1.9 million and $4.7 million for the three and nine months respectively
(compared to $1.1 million and $3.0 million in the prior periods) were recorded
by the Clinical Trials Division due to the development of a new client base.
Operating income for the nine months ended February 28, 1997 decreased
by $34.9 million (including the effect of the change in the US dollar exchange
rate of $0.8 million) versus the comparable prior year. Two main components of
the decrease are non-cash charges: (a) the write-down of goodwill in one of the
UK subsidiaries of $20.1 million and (b) the write-down in the carrying value of
the UK property of $6.4 million. In the course of preparing the consolidated
financial statements for the period ended February 28, 1997, management
performed its periodic evaluation of the Company's goodwill, based on
undiscounted expected future cash flows. As a result thereof, in view of
unexpected delays in returning UK operations to a level of profitability meeting
the Company's criteria, and in view of the present and estimated future cash
flows of such operations, management recorded a charge of approximately $20.1
million to adjust such goodwill to its estimated fair value. Further, the
Company changed its amortization policy so that all goodwill is amortized using
the straight line method over 20 years, instead of 40 years. As a result, the
Company recorded a charge of approximately $3.7 million to adjust accumulated
amortization as if such policy had been in effect since the occurrence of the
related acquisitions. Further, also in the course of preparing the consolidated
financial statements for the period ended February 28, 1997, as a result of its
strategic decision to sell the Company's building used by its UK operations,
management reconsidered the carrying value of such building in light of current
real estate market conditions, and the Company therefore recorded a charge of
$6.4 million (the equivalent of (pound)4.0 million) to adjust such carrying
value to its currently estimated fair market value. The other contributing
operating factors provide a small decrease in operating income of the Diagnostic
Laboratory Division ($0.6 million) reflecting increased provision for doubtful
debts, reagent and other operating costs. Italian operations have continued to
maintain a small positive contribution to operating income. Ignoring the effect
of exchange, the cumulative operating loss of Spain for the nine month period is
similar to that of the comparable period despite the increased turnover.
However, the operating loss incurred during the three months ended February 28,
1997, has been lower than that incurred during the comparable prior year period,
indicating a positive trend of returning to profitability. The variance in
operating results of the Clinical Trials Division (an operating loss of $3.2
million as compared to $1.5 million) reflects fixed expenses which are not
matched with income to be recorded in the future from a backlog of contracts,
due to lead-time of up to six months from the signing of a contract to the
actual start of a study, these costs are within budgeted limits.
Interest expense, net, decreased $0.1 million and increased $0.7
million during the three and nine months ended February 28, 1997 respectively as
compared to the prior year, primarily due to higher average borrowing levels by
the Company resulting from the Company's acquisition of the 40% minority
interest in UGL, which was repaid in full January 1, 1997 by the issuance of
UniHolding share capital, as partly offset by a decrease in interest rates.
Other income of $8.3 million and $8.5 million were recorded for the
three and nine months respectively, resulting from foreign currency
transactions, changes in foreign currency positions, and the profit of $6.8
million on sale of shares held in a subsidiary: as compared to income of $0.3
million and gains of $0.5 million in the prior year comparable periods.
Provision for income taxes decreased $2.5 million in the nine months
ended February 28, 1997, and $2.4 million in the three months ended February 28,
1997 reflecting taxation as offset by tax benefits of $7.2 million due to the
losses incurred by the write down of goodwill and value of UK property and
period losses of the Clinical Trials Division which gave rise to a tax benefit
of $0.9 million and $0.2 million respectively, which management believes it is
more likely than not that the Company will recover through future income of
16
<PAGE>
such Division in view of the already existing backlog of contracts. Other
potential future tax benefits arising from losses of other subsidiaries
(primarily in Spain) have been entirely reserved.
Minority interests in income decreased substantially as compared to the
comparable prior year, resulting primarily from the decrease in the minority
interests in income due to the acquisition of the 40% minority interest in UGL
as of June 30, 1995, offset by the 10% reduction in the holding in ULSA, and to
the variance in operating income of the respective subsidiaries.
Liquidity and Capital Resources
Net cash provided by operating activities for the nine months ended
February 28, 1997 amounted to $2.6 million, a decrease of $7.5 million from the
prior year primarily due to working capital needs of the Diagnostic Laboratory
Division.
Net cash provided by financing activities for the nine months ended
February 28, 1997 was $6.5 million, as compared to $2.7 million in the prior
year period. The increase of $3.5 million primarily resulted from increased long
term borrowing as compared to the prior year, considering also the use of $2.9
million in the prior year to purchase treasury stock.
Net cash used in investing activities for the period ended February 28,
1997 was $5.1 million, a decrease of $23.1 million from the prior period,
consisting primarily of the purchase of the 40% minority interest in UGL in the
prior period, offset in the current period by increased lending to Unilabs
Holdings SA, the Company's controlling shareholder, of $3.4 million and
increased proceeds from the sale of assets of $13.1 in relation to the sale of
10% holding in ULSA. The balance due from Unilabs Holdings SA as of February 28,
1997 was $7.6 million, which subsequently decreased as a result of the
subsequent purchase of 10,000 ULSA bearer shares for a consideration of
approximately $5.0 million. The balance of approximately $3.0 million currently
due by Unilabs Holdings SA is expected to be paid within twelve months.
The Company's bank facilities provide for a total of approximately
$38.8 million, including secured senior revolving facilities consisting of term
loans, working capital loans and/or guarantees. As of May 20, 1997, the Company
had approximately $10.1 million of availability under the aggregate credit
facilities.
On July 23, 1996, the Company issued 333,333 new shares of its common
stock to a U.S. institutional investor at $15.00 per share.
During the period ended February 28, 1997, UGL and ULSA sold an
aggregate of 2,400 shares (or 15.0%) of ULSA's common stock to three financial
institutions for a total consideration of SFr.19.5 million (approximately $13.2
million at the exchange rate then in effect). As a result of this series of
transactions, the Company owned approximately 79% of ULSA as of February 28,
1997. As of April 24, 1997, the initial public offering of new and outstanding
shares of ULSA was closed. Such offering, which was heavily oversubscribed, was
made at the price of SFr.675 per bearer share. The offering comprised the
issuance by ULSA to the public of a further 20% of its equity, and the sale by
the Company of a portion of its holding in ULSA, thereby reducing the Company's
holding in ULSA to approximately 60% following the post-initial public offering.
The shares of ULSA were listed on the Swiss Exchange on April 25, 1997. The
aggregate net proceeds received by the Company from the ULSA initial public
offering amounted to SFr.40.0 million (approximately $27.0 million). Such
proceeds shall be used to reduce existing bank debt in the amount of
approximately SFr.17.5 million (approximately $11.8 million), and the balance
shall be used principally for acquisitions and financing the development of the
Clinical Trials Division.
With respect to the Diagnostic Laboratory Division, the Company believes
that the liquidity provided by the cash flow from operations, the existing cash
balances and the borrowing arrangements described above will be sufficient to
meet the Company's capital requirements including anticipated operating expenses
arising from the Company's recent expansion into the Spanish and Italian
markets, as well as debt repayments. On January 31, 1997, the Company, through a
subsidiary, signed an agreement for the acquisition of 70% of an Istanbul-based
laboratory, with an option to increase the participation to 95%. The Company
made this acquisition together with another unaffiliated investor, and will thus
initially own a controlling interest of approximately 43% of the Turkish
laboratory, for an investment of approximately $600, the payment of which is
expected to be made on or before May 31, 1997. This Istanbul laboratory is among
the most well-known private laboratories in the city. The Company expects it to
grow significantly over the next few years, as a result of increasing demand for
state-of-the-art clinical laboratory services in Turkey.
With respect to the Clinical Trials Division, the Company believes that
the liquidity
17
<PAGE>
provided by the proceeds received from the ULSA initial public offering, the
existing cash balances and the borrowing arrangements described above will be
sufficient to meet the Company's capital requirements for the foreseeable future
including anticipated operating expenses, as well as debt repayments.
With respect to the Healthcare Management Services Division, the
Company and the other shareholder of MISE are currently negotiating with a view
to restructuring the relationship. The parties are discussing an exchange of the
Company's investment in MISE for an investment in preferred stock of Medical
Diagnostic Management, Inc.("MDM"), a New Jersey corporation. MDM originally
sold to the other MISE shareholder the rights and know-how subsequently acquired
and now held by MISE. While the negotiation is in progress, there can be no
assurance that such a transaction, or any similar transaction, will occur, nor
whether any terms offered by the other MISE shareholder and / or by MDM, if any
are finally offered, would be acceptable to the Company. Should such a
transaction occur, the Company expects to pay the balance of $1 million
currently due to MISE. The Company believes that no other significant new
funding will be required to meet working capital requirements during that
period.
In addition, the Company has outstanding obligations and commitments
under capital leases which mature over the next five to ten years.
18
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Arbitration
As described and discussed more thoroughly in the Company's Annual
Report on Form 10-K for the year ended May 31, 1996, the Company is entitled to
80% of the net recovery (less legal fees and costs) of any settlement or
successful resolution of the pending arbitration instituted by Americanino
Capital Corp. ("ACC") pursuant to an agreement by which the Company sold its
remaining interest in ACC.
In briefs in reply dated September 1996, PARIBAS FINANZIARIA on one
hand, and Mr. MANZALI on the other, vigorously contested again all the claims
made by ACC. Further, PARIBAS FINANZIARIA continued to contest the competence of
the Arbitral Tribunal over itself. Accordingly, ACC has proposed, and the
Arbitral Tribunal has agreed, that this specific issue will be pleaded
separately, after which the Arbitral Tribunal will decide what should be the
following steps. Such pleading occurred in May 1997, and the decision of the
Arbitral Tribunal on this specific issue is expected within weeks. ACC had
previously informed the Company that, independently from the arbitration, it
filed suit against BANQUE PARIBAS (France), BANQUE PARIBAS (Suisse) and BANQUE
PARIBAS (Milan) before the Commercial Court of Paris (France).
The Company's management will continue to monitor and report the
progress of the proceedings.
See also the discussion on Foreclosure Proceedings and Attachment Claim
in the 1996 Annual Report on Form 10-K.
Item 4. Submission of Matters to a Vote of Security Holders
As of December 2, 1996, holders of a majority of the issued and
outstanding Voting Common Stock of the Company approved an amendment and
restatement of the Certificate of Incorporation of the Company and By-laws by
written consent. In addition, the majority holders re-elected Pierre-Alain Blum,
Daniel Regolatti, Alessandra van Gemerden, Tobias Fenster, Edgard Zwirn and
Enrico Gherardi as directors of the Company. For more detailed information,
refer to the Information Statement filed with the Securities and Exchange
Commission on December 6, 1996 and transmitted to Stockholders on or about
December 16, 1996.
Item 5. Other items
Conversion of Unilab Note
On January 1, 1997, the note payable to Unilab Corporation in the
principal amount of $15 million, together with accrued but unpaid interest of
$750,000, was converted into 1,394,963 newly-issued shares of Common Stock. As a
result, total Stockholders' Equity increased from $41.2 million to $57.0
million. The Company intends to file with the Securities and Exchange Commission
a registration statement under the Securities Act of 1933, as amended, covering
the shares arising from such conversion and certain other outstanding shares of
Common Stock.
Amendment and Restatement of the Certificate of Incorporation
On January 8, 1997, the Company filed with the Secretary of State of
Delaware its Amended and Restated Certificate of Incorporation. As described in
an Information Statement that was transmitted to Stockholders on or about
December 16, 1996, the Amended and Restated Certificate of Incorporation, among
other things, classified the Board of Directors into three classes, with one
class being elected each year, and, in general, provided that special meetings
of Stockholders may be called by specified officers of the Company and not by
Stockholders.
Plans to Maximize Shareholder Value
The Company announced on February 27, 1996 that it is considering
several alternative proposals to maximize shareholder values, including the
selling of a minority or majority stake in some of its operations, and the
floating of one or more of its subsidiaries on a major European exchange. The
Company expects that such action will generate cash permitting the financing of
new developments and/or acquisitions in countries which offer significant
potential opportunities. As part of this plan, UGL and ULSA made an initial
public offering of ULSA's newly-issued and existing shares, which closed on
April 24, 1997. Such offering, which was heavily over-subscribed, was made at
19
<PAGE>
the price of SFr.675 per share, thus valuing the Company's investment in ULSA,
before the offering, SFr.106.6 million (approximately $72.0 million). The
offering comprised the issuance by ULSA to the public of a further 20% of its
equity, and the sale by the Company of a portion of its holding in ULSA, thereby
diluting the Company's holding in ULSA to approximately 60% post-initial public
offering. The shares of ULSA were listed on the Swiss Exchange on April 25,
1997. The Company will continue to actively pursue this type of opportunities.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
27 Financial Data Schedule
(b) Reports on Form 8-K.
A Form 8-K for an event on January 31, 1997 was filed during the quarter
ended February 28, 1997, reporting on Item 2 with financial statements of NDA
Clinical Trial Services, Inc.
20
<PAGE>
SIGNATURES
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 hereunto duly authorized.
UniHolding Corporation
By: /s/Bruno Adam
-----------------------
Bruno Adam, CFO
Date: May 23, 1997
21
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
COMPANY'S FINANCIAL STATEMENTS FOR THE QUARTER ENDED FEBRUARY 28, 1997 AS
SUBMITTED IN ITS QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS WITH REFERENCE TO THE ANNUAL
REPORT FILED ON FORM 10-K FOR THE YEAR ENDED MAY 31, 1996.
</LEGEND>
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