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 August 31, 1998
[ ] 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 October 20, 1998, there were 6,079,151 shares of Common Stock, par value
$0.01 per share, of the Registrant outstanding.
<PAGE>
UNIHOLDING CORPORATION AND SUBSIDIARIES
Form 10-Q for the Quarterly Period Ended August 31, 1998
INDEX
Page
Part I - FINANCIAL INFORMATION:
Item 1. Financial Statements 3
Consolidated Balance Sheets - August 31, 1998 (unaudited) and
May 31, 1998 4
Unaudited Consolidated Statements of Operations - Three
month periods ended August 31, 1998, and August 31, 1997 6
Unaudited Consolidated Statements of Cash Flows - Three
month periods ended August 31, 1998, and August 31, 1997 7
Notes to Unaudited Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Part II - OTHER INFORMATION:
Item 1. Legal Proceedings
Item 6. Exhibits
Signatures
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE>
UNIHOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS August 31, 1998 May 31, 1998
--------------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $8,572 $9,186
Accounts receivable, net of allowance for doubtful accounts 17,280 19,464
Due from related companies 1,547 1,587
Inventories 1,851 1,849
Prepaid expenses 2,189 3,090
Other current assets 372 411
----------- -----------
Total current assets 31,811 35,587
----------- -----------
NON-CURRENT ASSETS:
Long-term notes receivable 818 818
Deferred tax assets 258 157
Intangible assets, net 46,030 44,344
Property, plant and equipment, net 20,860 8,828
Investment in equity affiliates 538 481
Long-term investments 23,020 22,781
Other assets, net 247 132
----------- -----------
Total non-current assets 91,771 77,541
----------- -----------
$123,582 $113,128
======= =======
</TABLE>
See notes to financial statements
<PAGE>
UNIHOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY August 31, 1998 May 31, 1998
--------------- ------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Bank overdrafts $6,636 $4,010
Lease payable 773 809
Payable to related parties 449 100
Trade payables 5,852 6,911
Accrued liabilities 5,784 6,018
Long-term debt 6,066 5,727
Taxes payable 6,170 6,459
Deferred taxes 785 769
----------- -----------
Total current liabilities 32,515 30,803
----------- -----------
NON-CURRENT LIABILITIES:
Lease payable 668 725
Long-term debt 39,188 29,544
Taxes payable 75 74
Deferred taxes 334 336
----------- -----------
Total non-current liabilities 40,265 30,679
----------- -----------
Total liabilities 72,780 61,482
----------- -----------
MINORITY INTERESTS 9,695 9,440
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value;
Voting; authorized 18,000,000 shares;
issued 7,627,736 at August 31 and May 31, 1998 $76 76
Non-Voting; authorized 2,000,000 shares;
issued and outstanding 298,384 at August 31
and May 31, 1998 3 3
Additional paid-in capital 49,832 49,832
Cumulative translation adjustment (1,636) (2,074)
Retained earnings 7,536 7,623
----------- -----------
55,811 55,460
Less - cost of 1,846,969 and 1,602,569 shares
of Common Stock held in treasury at August 31
and May 31, 1998, respectively (14,704) (13,254)
----------- -----------
Total stockholders' equity 41,107 42,206
----------- -----------
$123,582 $113,128
======= =======
</TABLE>
See notes to financial statements
<PAGE>
UNIHOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months ended
August 31 August 31
1998 1997
---- ----
<S> <C> <C>
REVENUE $20,542 $19,774
Operating expenses:
Salaries and related charges 9,532 8,645
Supplies 3,663 3,618
Other operating expenses 5,412 5,337
Depreciation and amortization of tangible assets 594 1,151
Amortization of intangible assets 746 482
----------- -----------
OPERATING INCOME (LOSS) 595 541
Interest, net (421) (272)
Other, net 169 307
----------- -----------
Income (loss) before taxes and minority interests 343 576
Tax benefit (provision) (217) (268)
----------- -----------
Income (loss) from continuing operations 126 308
before minority interests
Minority interests in income of continuing operations (212) (152)
----------- -----------
Income (loss) from continuing operations (86) 156
Loss from discontinued operations, net of taxes
and minority interests - (1,120)
----------- -----------
NET LOSS ($86) ($964)
======= =======
Weighted average common shares outstanding 6,201,351 7,926,120
Earnings per share of common stock
Net income (loss) from continuing operations ($0.01) $0.02
Loss from discontinued operations $0.00 ($0.14)
Net income (loss) ($0.01) ($0.12)
</TABLE>
See notes to financial statements
<PAGE>
UNIHOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months ended
August 31 August 31
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($86) ($964)
Adjustments to reconcile net income to net cash
provided by operations:
Minority interests in income 212 152
Deferred taxes (103) (21)
Depreciation and amortization of tangible assets 594 1,151
Amortization of intangible assets 746 482
Other non-cash (income) expenses 449 (756)
Net changes in assets and liabilities, net of acquisitions:
Accounts receivable 2,462 1,161
Inventories 32 (34)
Prepaid expenses 933 (759)
Other current assets 51 115
Trade payables (1,136) (1,723)
Accrued liabilities (341) 1,239
Taxes payable (313) (278)
----------- -----------
Net cash provided by (used in) operating activities 3,500 (235)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (1,401) (432)
Cash proceeds from long-term debt 2,001 -
Proceeds (reimbursement) from (of) bank overdrafts 2,459 747
Repayment of lease debt (212) (209)
Payment for purchase of treasury stock (2,988) -
----------- -----------
Net cash provided by (used in) financing activities (141) 106
----------- -----------
</TABLE>
(continued)
<PAGE>
UNIHOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(continued)
<TABLE>
<CAPTION>
Three Months ended
August 31 August 31
CASH FLOWS FROM INVESTING ACTIVITIES: 1998 1997
---- ----
<S> <C> <C>
Payment for purchases of property and equipment ($3,775) ($685)
Loans and advances (to) from affiliates and
related companies, net 117 1,901
Payment for purchase of interest in subsidiaries (69) (105)
Payment for purchase of intangible assets (413) (327)
Proceeds from sale of assets 25 12
--------- ---------
Net cash used in investing activities (4,115) 796
--------- ---------
Effect of exchange rate changes on cash 142 (245)
Net increase (decrease) in cash and cash equivalents
from continuing operations (614) 422
Net cash flows (used) by discontinued operations - (555)
Cash and cash equivalents, beginning of year 9,186 4,925
--------- ---------
Cash and cash equivalents, end of period $8,572 $4,792
======= =======
</TABLE>
See notes to financial statements
<PAGE>
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 affiliates is accounted for on the equity method.
2. Management Opinion
In the opinion of management, the accompanying unaudited interim
financial statements reflect all adjustments that 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, 1998.
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 principal operations are located primarily in
Switzerland, Italy, Spain, Turkey and Russia. A significant part of net assets,
revenues and expenses are denominated in the currency of those countries, 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 of local currency financial
statements are accumulated in a separate component of Stockholders' Equity, the
Cumulative Translation Adjustment account.
5. Supplemental Disclosure of Cash Flow Information
Three months ended
August 31 August 31
1998 l997
Cash paid during the period for
Interest $ 344 $ 443
Income taxes 571 575
During the period ended August 31, 1998, capital lease obligations of $92
were incurred when the Company entered into leases for new capital equipment.
During the period ended August 31, 1998, in connection with the acquisition
of Bewlay House, the Company incurred liabilities of approximately $8,500.
6. Acquisition of Bewlay House
In connection with the sale of UGUK, ULSA has agreed to purchase from the
latter the London building which houses most of UGUK's operations ("Bewlay
House").
On July 8, 1998, the Company completed this transaction and acquired a
999-year leasehold in Bewlay House for a purchase price of $12,322. This
consideration was paid by (i) the assumption of UGUK's existing debt of $10,812
with a bank and a finance institution; (ii) compensation of an intercompany
account of $733; and (iii) $777 in cash. The company simultaneously entered into
rental agreements with the tenants of the building. The bank facility was
reduced by $2,312 to $6,966 at closing, has a three-year maturity and is subject
to quarterly repayments of $162. The financial institution's facility of $1,458
is subject to monthly repayments increasing from $19 presently to $32 in January
2003 when it matures. The Company is actively looking to sell the building. Upon
such a sale, if and when it occurs, the Company intends to prepay the debts to
the bank and finance institution.
7. Long-term Investments
Focused Healthcare (Jersey) Limited
As partial consideration for the Company's disposal of UGUK, the Company
received non-voting, non-convertible, redeemable preferred shares of Focused
Healthcare (Jersey) Limited ("FHL"), with a face value of $11,797. During the
year ended May 31, 1998, the Company amortized $1,180 related to its investment
in FHL, which reflects management's appraisal of the uncertainty as to the
timing and the possibility of recovery of the investment. As of August 31, 1998,
such preferred stock of FHL is recorded at $10,837 in the accompanying
consolidated financial statements. The Company is of the opinion that no further
write-downs are necessary at this time.
Global Unilabs Clinical Trials Limited
The Company holds non-voting, non-convertible, redeemable preferred stock
of GUCT, with a face value of $20,000. As of August 31, 1998, such preferred
stock of GUCT is recorded at $12,183 in the accompanying consolidated financial
statements. The Company is of the opinion that no further write-downs are
necessary at this time.
8. Segment Information
During the year ended May 31, 1998, the Company performed testing in
relation to clinical trials for the pharmaceutical industry and therefore
distinguished its core clinical laboratory business (the "Diagnostic Laboratory
Division") from its clinical trials testing business (the "Clinical Trials
Division"). As of February 27, 1998, the Company's Clinical Trials Division was
spun off to the Company's shareholders.
Following are the key financial data of the Company for purposes of
geographical information.
Three Months Ended
August 31
1998 1997
---- ----
Revenues from unaffiliated cust
U.S. $ - $ -
Switzerland 17,385 12,226
United Kingdom - 5,159
Spain 1,659 1,443
Other 1,498 946
Operating Profit or Loss:
U.S. - -
Switzerland 955 1,255
United Kingdom - (429)
Spain (291) (256)
Other (69) (29)
Identifiable Assets:
U.S. 12,183 12,000
Switzerland 76,424 46,234
United Kingdom 23,356- 30,959
Spain 6,114 4,953
Other 5,505 4,994
<PAGE>
Item 2. Management's Discussions and Analysis of Financial Condition and Results
of Operations
Results of Operations
Three month period ended August 31, 1998 compared with the three month period
ended August 31, 1997
Consolidated revenue was $20.5 million for the three months ended August
31, 1998, representing an increase of $0.8 million (including the effect of the
change in the US dollar exchange rate of $0.5 million) from the comparable prior
year period, as adjusted for the spin-off of clinical trials operations. Revenue
generated by the Swiss operations for the three months was up by 45% in local
currency as a result of (i) a 1% increase in sales of the existing laboratories
and (ii) the contribution made by the new operations acquired during fiscal
1998. The UK operations, disposed of in January 1998, generated sales of $ 5.2
million in the prior year period. The Spanish operations increased revenues to
$1.7 million, as compared to $1.4 million in the comparable prior year period,
representing a 16% increase in local currency.
Operating result for the three months ended August 31, 1998 was an income
of $0.6 million, versus $0.5 million in the comparable prior year period, as
adjusted for the spin-off of clinical trials operations. The disposal of the
loss-making UK operations, which generated operating losses of $0.4 million in
the prior year period, was offset by higher amortization expenses in the Swiss
operations, resulting from the acquisitions completed during the year, which
were not covered by higher operating income during the seasonally slow first
fiscal quarter.
Interest expense, net, increased $0.1 million during the three months ended
August 31, 1998, as compared to the prior year, primarily due to higher average
borrowing levels resulting from the Swiss acquisitions completed during the year
which more than offset the reduction in UK debt as a result of the sale of the
UK operations.
Other income of $0.2 million was recorded for the three months ended August
31, 1998, resulting from foreign currency transactions and changes in foreign
currency positions as well as rental income in relation to Bewlay House, as
compared to other income of $0.3 million in the prior year comparable period.
Provision for income taxes in the three months ended August 31, 1998, was
$0.2 million, as compared to $0.3 million in the prior year comparable period.
Minority interests in income in the three months ended August 31, 1998,
were $0.2 million as compared to $0.2 million in the prior year comparable
period.
Liquidity and Capital Resources
Net cash provided by operating activities for the three months ended
August 31, 1998 amounted to $3.5 million, a change of $3.7 million from the
prior year primarily due to reduced net loss of $0.9 million, lower depreciation
and amortization expenses of $0.3 million and a positive change in working
capital of $1.9 million.
Net cash used in financing activities for the three months ended August
31, 1998 was $0.1 million, a decrease of $0.2 million from the prior period,
primarily due to net debt increase of $$3.1 million offset by a net increase in
treasury stock of $3.0 million.
Net cash used in investing activities for the period ended August 31,
1998 was $4.1million, comparing to net cash provided of $0.8 million in the
prior year period. The change is primarily due to increased cash capital
expenditures incurred in connection with the acquisition of Bewlay House.
In connection with the sale of UGUK, ULSA has agreed to purchase from
UGUK the London building which houses most of UGUK's operations ("Bewlay
House"). On July 8, 1998, the Company completed this transaction and acquired a
999-year leasehold in Bewlay House for a purchase price of $12.1 million. This
consideration was paid by (i) the assumption of UGUK's existing debt of $10.7
million with a bank and a finance institution; (ii) compensation of an
intercompany account of $0.6 million; and (iii) $0.8 million in cash. The
company simultaneously entered into rental agreements with the tenants of the
building. The bank facility reduced to $6.9 million after the closing, has a
three-year maturity and is subject to quarterly repayments of $0.1 million. The
financial institution's facility of $1.5 million is subject to monthly
repayments up to January 2003 when it matures. The Company is actively seeking
to sell the building. Upon such a sale, if and when it occurs, the Company
intends to prepay the debts to the bank and finance institution. Accordingly, as
of October 16 1998, the Company's bank facilities provide for a total of
approximately $59.6 million, including secured senior revolving facilities
consisting of term loans, working capital loans and/or guarantees. As of October
16, 1998, the Company had approximately $14.4 million of availability under the
aggregate credit facilities.
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.
In addition, the Company has outstanding obligations and commitments
under capital leases which mature over the next five to ten years.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Management's Discussion and Analysis contains various "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
which represent the Company's expectations or beliefs concerning the Company's
operations, economic performance and financial condition, including, in
particular, forward-looking statements regarding the Company's expectation of
future performance following implementation of its new business strategy. Such
statements are subject to various risks and uncertainties. Accordingly, the
Company hereby identifies the following important factors that could cause the
Company's actual financial results to differ materially from those projected,
forecast, estimated, or budgeted by the Company in such forward-looking
statements.
(a) Inability to carry out marketing and sales plans.
(b) Inability to recover the carrying value of the preferred stock in GUCT.
(c) Inability to recover the carrying value of the preferred stock in FHL.
As well as other factors listed in the Company's 1998 Annual Report on Form
10-K, which are incorporated herein by reference.
<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, 1998, 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.
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 1998 Annual Report on Form 10-K.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
27 Financial Data Schedule
(b) Reports on Form 8-K.
None
<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:
Bruno Adam, CFO
Date: October 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE QUARTER ENDED AUGUST 31, 1998 AS
SUBMITTED IN ITS QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS WITH REFERENCE TO THE ANNUAL REPORT
FILED ON FORM 10-K FOR THE YEAR ENDED MAY 31, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> AUG-31-1998
<CASH> 8,572
<SECURITIES> 0
<RECEIVABLES> 17,280
<ALLOWANCES> 0
<INVENTORY> 1,851
<CURRENT-ASSETS> 31,811
<PP&E> 20,860
<DEPRECIATION> 0
<TOTAL-ASSETS> 123,582
<CURRENT-LIABILITIES> 32,515
<BONDS> 0
0
0
<COMMON> 76
<OTHER-SE> 41,031
<TOTAL-LIABILITY-AND-EQUITY> 123,582
<SALES> 20,542
<TOTAL-REVENUES> 20,542
<CGS> 18,607
<TOTAL-COSTS> 19,947
<OTHER-EXPENSES> (421)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (421)
<INCOME-PRETAX> 343
<INCOME-TAX> (217)
<INCOME-CONTINUING> (86)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (86)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
