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 November 30, 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 January 20, 1998, there were 7,195,022 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, 1997
INDEX
Page
Part I - FINANCIAL INFORMATION:
Item 1. Financial Statements 3
Consolidated Balance Sheets - November 30, 1997
(unaudited) and May 31, 1997 4
Unaudited Consolidated Statements of
Operations - Three month and six month periods
ended November 30, 1997 and 1996 6
Unaudited Consolidated Statements of Cash
Flows - Six month periods ended
November 30, 1997 and 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 Information 19
Item 6. Exhibits 19
Signatures 20
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)
November 30, May 31,
ASSETS 1997 1997
---- ----
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $2,715 $8,201
Accounts receivable, net of allowance
for doubtful accounts 15,298 21,133
Due from related companies 641 3,573
Inventories 1,594 2,272
Prepaid expenses 1,080 2,046
Other current assets 312 770
-------- --------
Total current assets 21,640 37,995
-------- --------
NON-CURRENT ASSETS:
Long-term notes receivable 818 818
Deferred tax assets 366 5,293
Intangible assets, net 23,049 30,019
Property, plant and equipment, net 6,521 28,610
Investment in equity affiliates 500 1,480
Investment in subsidiary
subsequently sold 13,579 -
Investment in subsidiary
subsequently distributed 9,655 -
Other assets, net 163 1,088
-------- --------
Total non-current assets 54,651 67,308
-------- --------
$ 76,291 $105,303
======== ========
See notes to financial statements
4
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UNIHOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
November 30, May 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1997
----------- --------
(Unaudited)
CURRENT LIABILITIES:
Bank overdrafts $ 2,143 $5,889
Lease payable 735 1,733
Payable to related parties 48 150
Trade payables 4,115 9,501
Accrued liabilities 3,338 4,458
Long-term debt 55 4,741
Taxes payable 3,868 4,707
-------- --------
Total current liabilities 14,302 31,179
-------- --------
NON-CURRENT LIABILITIES:
Lease payable 999 2,446
Long-term debt 9,910 12,109
Taxes payable 154 155
Deferred taxes - 725
-------- --------
Total non-current liabilities 11,063 15,435
-------- --------
Total liabilities 25,365 46,614
-------- --------
MINORITY INTERESTS 8,956 10,344
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value; Voting;
authorized 18,000,000 shares; issued
7,627,736 at November 30 and May 31, 1997 76 76
Non-Voting; authorized 2,000,000
shares; issued and outstanding
298,384 at November 30 and
May 31, 1997 3 3
Additional paid-in capital 49,832 49,832
Cumulative translation adjustment (6,480) (3,050)
Retained earnings 6,519 5,559
-------- --------
49,950 52,420
Less - cost of 731,098 and 293,150 shares
of Common Stock held in treasury at
November 30, and May 31, 1997,
respectively (7,980) (4,075)
-------- --------
Total stockholders' equity 41,970 48,345
-------- --------
$ 76,291 $105,303
======== ========
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 Six Months ended
November 30, November 30,
1997 1996 1997 1996
------ ------ ------ ------
REVENUE $18,074 $26,771 $31,894 $49,615
Operating expenses:
Salaries and related charges 6,545 10,425 12,367 20,716
Supplies 2,935 4,495 5,228 8,329
Other operating expenses 5,408 7,753 9,062 14,233
Depreciation and amortization of
tangible assets 540 1,404 1,168 2,700
Amortization of intangible assets 609 588 1,062 1,169
------- ------- -------- --------
OPERATING INCOME 2,037 2,106 3,007 2,468
Interest, net 1 (906) (42) (1,869)
Equity in loss of affiliates - (39) - (73)
Other, net (22) 756 128 198
------- ------- -------- --------
Income before taxes and
minority interests 2,016 1,917 3,093 724
Tax provision (606) (859) (874) (1,024)
------- ------- -------- --------
Income (loss) from continuing
operations before minority
interests 1,410 1,058 2,219 (300)
Minority interests in income of
continuing operations (730) (411) (1,083) (548)
-------- ------- -------- --------
Income (loss) from continuing
operations 680 647 1,136 (848)
Gain from subsidiaries subsequently
sold, net of taxes and minority
interests 2,623 - 2,323 -
Loss from subsidiaries subsequently
distributed, net off taxes and
minority interests (1,379) - (2,499) -
-------- -------- -------- --------
NET INCOME (LOSS) $1,924 $ 647 $ 960 ($848)
======== ======== ======== ========
Weighted average common shares
outstanding 7,581,870 6,455,502 7,754,936 6,358,963
Earnings (loss) per share of
common stock:
Income (loss) from continuing
operations $0.09 $0.10 $0.15 ($0.13)
Gain on disposition of
discontinued operations $0.16 - ($0.03) -
Net income (loss) $0.25 $0.10 $0.12 ($0.13)
See notes to financial statements
6
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UNIHOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Six Months ended
November 30,
1997 1996
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 960 $ (848)
Adjustments to reconcile net income to net cash
provided by operations:
Equity in loss of affiliates - 73
Minority interests in income 1,083 548
Deferred taxes (175) (714)
Depreciation and amortization of tangible assets 1,168 2,700
Amortization of intangible assets 1,062 1,169
Other non-cash income (expenses) (2,847) 15
Net changes in assets and liabilities, net of acquisitions and disposals:
Accounts receivable (953) (1,098)
Inventories (63) (88)
Prepaid expenses (57) 797
Other current assets (88) (171)
Trade payables (171) 98
Accrued liabilities 365 915
Taxes payable (806) 372
--------- ---------
Net cash provided by (used in) operating activities (522) 3,768
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from issuance of share capital (72) 5,000
Repayment of long-term debt (821) (1,953)
Cash proceeds from long-term debt - (25)
Proceeds (reimbursement) from (of) bank overdrafts 861 954
Dividend paid to minority shareholders (1,317) -
Repayment of lease debt (113) (219)
Payment for purchase of treasury stock (3,905) -
--------- ---------
Net cash provided by (used in) financing activities (5,367) 3,757
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for purchases of property and equipment (847) (2,689)
Loans and advances (to) from affiliates, related
companies, net 1,555 (3,961)
Payment for purchase of interest in subsidiaries (242) (622)
Payment for purchase of intangible assets (712) (164)
Proceeds from sale of assets 743 55
--------- ---------
Net cash provided by (used in) investing activities 497 (7,381)
--------- ---------
Effect of exchange rate changes on cash (94) (124)
Net increase (decrease) in cash and cash equivalents (5,486) 20
Cash and cash equivalents, beginning of period 8,201 1,587
--------- ---------
Cash and cash equivalents, end of period $2,715 $1,607
======= =======
See notes to financial statements
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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 affiliates is accounted for on the equity method. During the period ended
November 30, 1996, the investment in the Company's equity affiliate MISE S.A.
(which was exchanged for preferred stock of Medical Diagnostic Management, Inc.,
as of May 31, 1997) was 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 reorganization
of the Company's Clinical Trials Division, after which date its financial
statements have been fully consolidated, except as discussed below. In
connection with the subsequent disposal of two subsidiaries discussed in Note 9,
the gain or loss of the respective subsidiaries has been shown separately in the
accompanying statement of operations for the three and six months ended November
30, 1997, and the net asset value resulting from each transaction has been shown
as a separate item in the accompanying balance sheet as of November 30, 1997.
Certain amounts in prior periods financial statements have been reclassified to
conform with the current presentation.
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, 1997.
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 and, until the disposals discussed in Note 9, in the
United Kingdom and the United States. 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, which may be realized upon the
eventual
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disposition by the Company of part or all of its European investments.
5. Supplemental Disclosure of Cash Flow Information
Six months ended
November 30 November 30
1997 l996
---- ----
Cash paid during the period for
Interest $421 $903
Income taxes 1,418 1,375
During the period ended November 30, 1996, in connection with its
acquisition of 300 shares of the share capital of ULSA, the Company incurred a
future obligation of $1,100, which was fully paid subsequently.
During the period ended November 30, 1997, capital lease obligations of
$513 were incurred when the Company entered into leases for new capital
equipment.
6. 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 investor received certain
antidilution and preemptive subscription rights. The antidilution provisions
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. The Company had a call right on the shares of the investor at a
price of $18 per share, exercisable on or before January 15, 1997, which expired
without having been exercised.
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 antidilution provisions referred to above, the Company
issued to the investor 75,655 newly-issued shares of Common Stock, for no
additional consideration.
7. Investment in Equity Affiliates
Unimed Laboratories
On October 8, 1996, the Company, through its subsidiary Unilabs
International Limited (a British Virgin Islands corporation, "UIL"), signed a
joint venture agreement with the state affiliated company Medincenter of the
Main Administration for Services to the Diplomatic Corps of the Ministry of
Foreign Affairs of the Russian Federation. Pursuant to the agreement, the
Company has invested $120 in cash and has agreed to invest a further $120 in
cash in fiscal 1998, and holds 50% of Unimed Laboratories (a newly-established
Russian close joint stock company, "Unimed"), which establishes a diagnostic
laboratory in Moscow to provide a comprehensive range of clinical laboratory
tests to public and private medical institutions, doctors and patients in
Russia. The Company also provides the venture with certain engineering services
in connection with the construction and establishment of the new laboratory, and
will provide on-going management supervision. The effective start of laboratory
operations has been delayed as a result of the late completion of new laboratory
facilities, but finally occured in December 1997.
8. Segment Information
In view of the fact that its former subsidiary MISE had no activity
until the restructuring of this investment, when the shares of MISE were sold
and shares of preferred stock of MDM were acquired, the Company does not
maintain a healthcare management services division and no longer considers
healthcare management services to be an industry segment. Accordingly, the
Company currently considers that it had two business segments in fiscal years
1997 and 1998 : its core clinical laboratory business (the Diagnostic Laboratory
Division), and the clinical trials testing business (the Clinical Trials
Division). However, as discussed in Note 9, the Company subsequently announced
that it is spinning off the Clinical Trials Division to the Company's
shareholders.
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.
Six Months Ended
November 30
1997 1996
---- ----
Revenues from unaffiliated customers:
Diagnostic Laboratory Division $30,028 $46,796
Clinical Trials Division 5,652 2,819
Operating Profit or Loss:
Diagnostic Laboratory Division 3,007 4,553
Clinical Trials Division (4,919) (2,085)
Identifiable Assets:
Diagnostic Laboratory Division 66,636 126,700
Clinical Trials Division 9,655 6,524
Following are the key financial data of the Company for purposes of
geographical information, net of amounts related to operations subsequently
discontinued:
Six Months Ended
November 30
1997 1996
Revenues from unaffiliated customers:
U.S. $ - $ -
Non-U.S. 31,894 49,615
Operating Profit or Loss:
U.S. - -
Non-U.S. 3,007 2,468
Identifiable Assets:
U.S. - 1,900
Non-U.S. 76,291 131,324
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9. Subsequent Events
On August 8, 1997, UniHolding Corporation announced that it intends to
merge into its wholly-owned subsidiary, Unilabs Group Limited, a British Virgin
Islands corporation. The proposed merger is intended to streamline the corporate
structure of the entire Group. The merger is subject to shareholder and
regulatory approvals, but the principle of such merger has been unanimously
approved by the Company's board of directors. However, the Company expects to
complete the spin-off described below before it continues preparation for the
proposed merger.
On January 15, 1998, the Company announced its decision to spin off its
Clinical Trials Division to the Company's shareholders. The transaction will be
in the form of a distribution by UniHolding to its shareholders of all the
common stock of Global Unilabs Clinical Trials Limited, a British Virgin Islands
corporation ("GUCT"). UniHolding will retain $20 million of non-voting preferred
stock in GUCT. GUCT, which is an indirect wholly-owned subsidiary of UniHolding,
now holds all of the Company's Clinical Trials Division. One share of common
stock of GUCT will be distributed to the shareholders of UniHolding, without any
consideration, for each share of common stock of UniHolding held on the record
date. On January 29, 1998, the Company announced that the record date will be
February 9, 1998 and the distribution date will be February 27, 1998. GUCT will
restrict the transfer of shares of GUCT common stock until a Registration
Statement under the Securities Exchange Act of 1934 has been filed and declared
effective.
On January 29, 1998, the Company's subsidiary Unilabs SA ("ULSA")
announced the signature of an agreement relating to the sale of its wholly-owned
subsidiary Unilabs Group (UK) Limited to FHP Holdings Limited, a Bahamas
corporation, and Focused Healthcare Partners (No.1) Limited, a Jersey, Channel
Islands corporation, a group of investors led by Mr. Andrew Baker, a British
businessman. Mr. Baker is the former Chairman and Chief Executive Officer of
Unilab Corporation, a Delaware corporation, and currently is a Director of
Medical Diagnostic Management, Inc., a U.S. corporation of which the Company
holds redeemable preferred stock convertible into common stock under certain
terms and circumstances. The sale consideration was agreed upon at SFr19,350
(approximately $13,600), payable for SFr1,950 (approximately $1,360) in cash,
and SFr17,400 (approximately $12,240) against issuance of non-voting preferred
stock of Focused Healthcare Partners (No.1) Limited, redeemable within three
years, carrying certain dividend and liquidation preferences. While the Company
will have the ability to veto certain specific actions of the new controlling
shareholders through two non-executive directors which it will nominate on the
board of Focused Healthcare Partners (No.1) Limited, the Company will not retain
any control over Unilabs Group (UK) Limited, of which Mr. Baker will be Chairman
and Managing Director.
On January 29, 1998, ULSA also announced the signature of an agreement
for the acquisition of a Geneva-based laboratory and the merger of another
Genevabased laboratory into ULSA's own Geneva operations.
10
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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 November 30,
1997, include the operations of the Company's core business (the "Diagnostic
Laboratory Division") and of the Company's activities in clinical trials testing
for the pharmaceutical industry (the "Clinical Trials Division"). However, as a
result of the Company's decision to spin off the Clinical Trials Division to the
Company's shareholders, the loss of the respective subsidiaries has been shown
separately in the accompanying statement of operations for the three and six
months ended November 30, 1997, and the consolidated net asset value of the
Clinical Trials Division has been shown as a separate item in the accompanying
balance sheet as of November 30, 1997. Certain amounts in prior periods
financial statements have been reclassified to conform with the current
presentation. The following tables present the breakdown of the results of
operations of each division, for the purpose of discussing the results of
operations.
Diagnostic Laboratory Division
Three months ended Six months ended
November 30, 1997 November 30, 1997
----------------- -----------------
REVENUE $18,074 $31,894
Operating expenses:
Salaries and related charges 6,545 12,367
Supplies 2,935 5,228
Other operating expenses 5,408 9,062
Depreciation and amortization
of tangible assets 540 1,168
Amortization of intangible assets 609 1,062
--------- ---------
OPERATING INCOME 2,037 3,007
Interest, net 1 (42)
Other, net (22) 128
--------- ---------
Income before taxes and
minority interests 2,016 3,093
Tax provision (606) (874)
--------- ---------
Income from continuing operations
before minority interests 1,410 2,219
Minority interests in income of
continuing operations (730) (1,083)
--------- ---------
Income from continuing operations 680 1,136
Gain from subsidiaries subsequently
sold, net of taxes and
minority interests 2,623 2,323
Loss from subsidiaries subsequently
distributed, net of taxes and
minority interests (1,379) (2,499)
--------- ---------
NET INCOME $1,924 $ 960
========= =========
Weighted average common
shares outstanding 7,581,870 7,754,936
Earnings per share of common stock
Net income from continuing operations $0.09 $0.15
Gain on disposition of
discontinued operations $0.16 ($0.03)
Net income $0.25 $0.12
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Clinical Trials Division
Three months ended Six months ended
November 30, 1997 November 30, 1997
----------------- -----------------
REVENUE $2,837 $5,652
Operating expenses:
Salaries and related charges 2,275 4,307
Supplies 298 545
Other operating expenses 2,266 5,115
Depreciation and amortization of
tangible assets 124 243
Amortization of intangible assets 182 361
--------- --------
OPERATING LOSS (2,308) (4,919)
Interest, net (83) (182)
Other, net (259) 8
--------- --------
Loss before taxes and
minority interests (2,650) (5,093)
Tax benefit 782 1,579
--------- --------
Loss before minority interests (1,868) (3,514)
Minority interests in loss 489 1,015
--------- --------
NET LOSS ($1,379) ($2,499)
========= ========
Weighted average common
shares outstanding 7,581,870 7,754,936
Loss per share of common stock ($0.18) ($0.32)
12
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Three months ended November 30, 1996
-----------------------------------------
Diagnostic Clinical
Laboratory Trials As
Division Division reported
--------- -------- --------
REVENUE $25,169 $1,602 $26,771
Operating expenses:
Salaries and related charges 9,590 835 10,425
Supplies 4,436 59 4,495
Other operating expenses 5,968 1,785 7,753
Depreciation and amortization
of tangible assets 1,366 38 1,404
Amortization of intangible
assets 576 12 588
----------- -------- --------
OPERATING INCOME (LOSS) 3,233 (1,127) 2,106
Interest, net (860) (46) (906)
Equity in loss of affiliates - (39) (39)
Other, net 758 (2) 756
----------- -------- --------
Income (loss) before taxes and
minority interests 3,131 (1,214) 1,917
Tax provision (1,181) 322 (859)
----------- -------- --------
Income (loss) before minority
interests 1,950 (892) 1,058
Minority interests in income (411) - (411)
----------- -------- --------
NET INCOME (LOSS) $1,539 ($892) $647
=========== ======== ========
Weighted average common
shares outstanding 6,455,502 6,455,502 6,455,502
Earnings (loss) per share of
common stock $0.24 ($0.14) $0.10
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Six months ended November, 1996
-----------------------------------------
Diagnostic Clinical
Laboratory Trials As
Division Division reported
-------- --------- --------
REVENUE $46,796 $2,819 $49,615
Operating expenses:
Salaries and related charges 19,304 1,412 20,716
Supplies 8,225 104 8,329
Other operating expenses 10,946 3,287 14,233
Depreciation and amortization
of tangible assets 2,622 78 2,700
Amortization of intangible
assets 1,146 23 1,169
--------- -------- --------
OPERATING INCOME (LOSS) 4,553 (2,085) 2,468
Interest, net (1,798) (71) (1,869)
Equity in loss of affiliates - (73) (73)
Other, net 200 (2) 198
--------- -------- --------
Income (loss) before taxes and
minority interests 2,955 (2,231) 724
Tax provision (1,663) 639 (1,024)
--------- -------- --------
Income (loss) before minority
interests 1,292 (1,592) (300)
Minority interests in income (548) - (548)
--------- -------- --------
NET INCOME (LOSS) $744 ($1,592) ($848)
====== ======== ========
Weighted average common
shares outstanding 6,358,963 6,358,963 6,358,963
Earnings (loss) per share of
common stock $0.12 ($0.25) $(0.13)
Three and six month periods ended November 30, 1997 compared with the three and
six month periods ended November 30, 1996
Consolidated revenue was $18.1 million and $31.9 million for the three
and six months ended November 30, 1997, respectively representing a decrease of
$8.7 million and $17.7 million from the comparable prior year periods.
Substantially all of the decrease is due to (a) the sale of the UK operations of
the Diagnostic Laboratory Division and (b) the spin-off of the Clinical Trials
Division. Revenue generated by the Swiss operations for the six months, as
expressed in local currency, decreased by 1.0% as a result of a small reduction
in specimen volume of 0.8% and a decrease attributable to test mix of 0.2%.
Spanish operations increased revenues to $3.2 million, representing a 34%
increase in local currency.
Operating income for the three and six months ended November 30, 1997
was $2.0 million and $3.0 million respectively, versus $2.1 million and $2.5
million in the comparable prior year periods. The operating income generated by
the Diagnostic Laboratory Division decreased by $1.2 million and $1.5 million
versus
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the comparable prior year periods. The major contributing operating factors
providing such variance in operating income of the Diagnostic Laboratory
Division principally were due to increased administrative operating costs,
particularly in relation to the development of new operations in emerging
markets, increased costs associated with the going public of the Swiss
subsidiary, and increased costs associated with the development and improvements
of data processing systems. Italian operations have continued to maintain a
small positive contribution to operating income.
Interest expense, net, decreased $0.9 million and $1.8 million during
the three and six months ended November 30, 1997, as compared to the prior year
periods, primarily due to lower average borrowing levels and to the sale of the
UK operations.
Other income of $0.1 million were recorded for the six months ended
November 30, 1997, resulting from foreign currency transactions, and changes in
foreign currency positions as compared to net income of $0.1 million in the
prior year comparable period.
Provision for income taxes in the six months ended November 30, 1997,
was $0.9 million, as compared to $1.0 million in the prior year comparable
period.
Minority interests in income of continuing operations in the six months
ended November 30, 1997, were $1.1 million as compared to $0.5 million in the
prior year comparable period. The changes resulted primarily from an increased
percentage of minority interests in net income as a result of the Swiss
subsidiary's initial public offering in April 1997, and from the sale of the UK
operations.
In connection with the sale of its UK operations, the Company recorded
a net gain of $2.3 million in the six months, including the net loss after tax
and minority interests of such operations, net of the currency translation gain,
net of minority interests, accounted for upon disposal.
In connection with the spin-off of its Clinical Trials Division, the
Company recorded a net loss after tax and minority interests of $2.5 million,
corresponding to period losses of such operations. While they are no longer part
of the Company's consolidated revenues, revenues of $2.8 million and $5.7
million for the three and six months ended November 30, 1997, respectively,
representing an increase of $1.2 million and $2.9 million respectively from the
comparable prior year periods, were recorded by the Clinical Trials Division due
to the development of a new client base and to the January 1997 reorganization
of UCTI whereby NDA became fully consolidated within this division, which was
not the case in the comparable prior year period. The variance in operating
results of the Clinical Trials Division (an operating loss of $2.3 million and
$4.9 million for the three and six months ended November 30, 1997 as compared to
a loss of $1.1 million and $2.1 million in the comparable prior year periods)
reflects the January 1997 reorganization of UCTI whereby NDA became fully
consolidated within the division, and fixed expenses 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. The
Clinical Trials Division recorded a tax benefit of $1.6 million in the six
months, which management believes it is more likely than not it will be
recovered through future income of such Division in view of the already existing
backlog of contracts. The Clinical Trials Division also recorded a $1.0 million
credit to minority interests during the six months due to period losses of the
division attributable to minority shareholders. Such amount compares to nil in
the comparable prior year period due to the January 1997 reorganization of UCTI.
15
<PAGE>
Liquidity and Capital Resources
Net cash used by operating activities for the six months ended November
30, 1997 amounted to $0.5 million, a change of $4.2 million from the prior year
primarily due to period losses of the Clinical Trials Division and lower
operating results of the Diagnostic Laboratory Division.
Net cash used by financing activities for the six months ended November
30, 1997 was $5.4 million, primarily due to a dividend paid by ULSA to all its
shareholders, and to cash used to purchase the Company's treasury stock. In the
prior year period, net cash of $3.8 million had been provided by financing
activities, primarily due to the issuance of share capital occurred in the prior
period, offset by repayment of long-term debt.
Net cash provided by investing activities for the period ended November
30, 1997 was $0.5 million, comparing to $7.4 million used in the prior year
period. The change is primarily due to lower capital expenditures and net
reimbursement of advances to affiliates.
As of January 21, 1998, the Company's bank facilities provide for a
total of approximately $52.6 million, including secured senior revolving
facilities consisting of term loans, working capital loans and/or guarantees. As
of January 21, 1998, the Company had approximately $32 million of availability
under the aggregate credit facilities, part of which were to be used
subsequently for acquisitions.
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.
With respect to the Clinical Trials Division, the Company has announced
its decision to spin it off to its shareholders. Approximately $2.0 million of
additional loans were made subsequent to November 30, 1997, prior to the
spin-off, however the Company will not make any further advances to the Clinical
Trials Division. While the Clinical Trials Division management believes that the
existing cash balances of the Clinical Trials Division will be sufficient to
meet capital requirements for the foreseeable future including anticipated
operating expenses, any other possible future cash needs will have to be covered
through the Clinical Trials Division's shareholders or through other financing
arrangements.
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,
16
<PAGE>
forecast, estimated, or budgeted by the Company in such forward-looking
statements.
(a) Inability to carry out marketing and sales plans.
(b) Inability to successfully develop Clinical Trials operations.
As well as other factors listed in the Company's 1997 Annual Report on
Form 10-K, which are incorporated herein by reference.
17
<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, 1997, 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 1997 Annual Report on Form 10-K.
Item 5. Other items
On January 29, 1998, the Company announced an agreement to sell its
Diagnostic Laboratory Division operations in the United Kingdom. On the same
date, the Company also announced the expansion of Swiss operations with an
acquisition of Laboratoire Medical Pierre-Alain Gras SA, and the merger of its
Geneva operations with those of Institut Bio-Analytique Medical SA. Finally, in
regard to the previously announced spin-off of the Clinical Trials Division, the
Company announced that the record date is February 9, 1998 and the distribution
date is February 27, 1998. See Financial Statements, Note 9, Subsequent Events
and Exhibit 20, Press Release which is incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
20 Press Release
27 Financial Data Schedule
(b) Reports on Form 8-K.
None
18
<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: January 30, 1998
19
EXHIBIT 20
20
<PAGE>
UNIHOLDING CORPORATION
96 Spring Street
New York, New York 10012
Telephone: (212) 219-9496
Fax: (212) 925-2184
FOR IMMEDIATE RELEASE
UNIHOLDING SUBSIDIARY ANNOUNCES IMPROVED INTERIM RESULTS, SALE OF UK UNIT AND
EXPANSION OF SWISS OPERATIONS.
UNIHOLDING ALSO SETS RECORD DATE AND DISTRIBUTION DATE FOR PREVIOUSLY ANNOUNCED
SPIN-OFF OF CLINICAL TRIALS DIVISION.
NEW YORK, N.Y., January 29, 1998 - UniHolding Corporation (NASDAQ:
UHLD) today announced that its majority-owned subsidiary UNILABS SA, a Swiss
company publicly traded and quoted on the Swiss Exchange, published today the
following press release:
"PRESS RELEASE
UNILABS SA announces improved interim
results, exits UK and expands Swiss
operations.
Swiss listed Unilabs SA, Geneva, the leading pan-European clinical
laboratory testing group, achieved a marked increase in net income for its
half-year results to November 30, 1997.
Consolidated net income before exceptional items rose 49% to CHF 3.9
million compared with CHF 2.6 million in the same period of last year,
principally as a result of higher net income from its Swiss operations and the
sale of its UK laboratories, effective June 1, 1997. Net income after
exceptional items, consisting of the CHF 4.6 million gain on the sale of the UK
operations, was CHF 8.5 million.
On a pro-forma basis, i.e. as if the UK laboratories had already been
sold in the prior year period, consolidated net income rose 20%.
Sale of UK operations
Unilabs entered the UK clinical laboratory market in 1993 through the
purchase of what became Unilabs Group (UK) Ltd, its 100%-owned subsidiary, with
the key objective of penetrating the large National Health Service laboratory
services market through privatization or outsourcing programs. However,
political changes and uncertainties have led to continuing postponements in such
programs, depriving Unilabs of the major engine for growth it counted on in the
UK.
As a result, in view of its UK profitability continuing to fall short
of its objectives, Unilabs decided that it could generate more shareholder value
by disposing of its UK subsidiary and reallocating its resources to more
promising opportunities.
Accordingly, Unilabs has in January 1998 entered into an agreement with
21
<PAGE>
Focused Health Partners Ltd. ("FHP"), a financial investor, pursuant to which it
will sell all of its UK operations to FHP for a consideration of CHF 19.4
million, of which CHF 1.9 million will be paid in cash at closing and the
balance will be paid by FHP through redeemable, non-voting preferred stock. As a
result of the sale, Unilabs is no longer consolidating the UK operations. Paul
Hokfelt, former chief Operating Officer of the UK activities and of Unilabs, has
resigned all his functions within the group to join UCT International Inc., a US
corporation, as Chief Executive Officer.
Sustained success in Switzerland
As expected, net sales generated by the seven Swiss laboratories
declined by 1% in the six months ended November 30, 1997, largely as a result of
the introduction by the Office Federal des Assurances Sociales (OFAS) of a 10%
price cut on the 49 most prescribed tests effective as of October 1, 1997.
Combined with higher operating charges linked to further investments in
information technology systems and to its publicly traded company status, this
has led to a reduction in operating income of 19% to CHF 5.9 million, in line
with the company's expectations. However, lower interest and tax charges have
enabled its Swiss operations to increase their net income by 20% over the prior
year period.
The group is confident that the anticipated initial negative impact of
the OFAS price change should be offset by volume gains in the second half. Owing
to seasonality factors (testing volumes are lower during the summer holiday
season), results for the first half of the year are not necessarily indicative
of full year results.
Major expansion in Switzerland
In order to further enhance shareholder value, Unilabs has
significantly expanded its Swiss operations through the recent acquisition of
Laboratoire Medical Pierre-Alain Gras SA and merger of its Geneva operations
with those of Institut Bio-Analytique Medical SA. These laboratories' operations
will be consolidated as from January 1, 1998 and will immediately contribute to
earnings; there will be no dilution to Unilabs shareholders resulting from these
transactions. The integration of Laboratoire Gras SA and Institut Bio-Analytique
Medical SA will represent additional annual sales of CHF 30 million
approximately.
Start of Operations in Emerging Markets
Whilst the Istanbul laboratory, renamed Buyuk SwissLab Laboratuari, has
now been integrated and has begun its expansion, the Moscow joint-venture, ZAO
Unimed, saw its operating launch delayed until December 1997 as completion of
the new laboratory premises took longer than planned. Both units will be fully
operational in the second half.
Looking ahead
"We are naturally disappointed to exit the UK market, on which we had
pinned high hopes" says Edgard Zwirn, Chairman and CEO of Unilabs SA. "However,
in view of the political and union resistance to further NHS outsourcing
contracts such as the one we had ourselves initiated and considering the
deterioration of UK operating results, further exacerbated by the stronger
pound, we came to the conclusion that our commitment to increase shareholder
value would be best served by disposing of our UK subsidiary.
This will further allow us to focus our resources on integrating our
22
<PAGE>
expanding Swiss operations, which present important opportunities for synergy.
As for Europe, we remain committed to seize growth opportunities throughout the
different markets, as long as they will enable us to deliver increased
shareholder value."
Geneva, January 29, 1998
23
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