UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the fiscal year ended May 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 of (I.R.S. Employer
incorporation) Identification Number)
96 Spring Street, New York, New York 10012
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 219-9496
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 Par Value Per Share
(title of class)
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___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ ]
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART II
The Registrant is hereby correcting one typographical error in the 1998 Cash
Flow Statement (Page II-F-9 of Form 10-K; specifically, changing Net income from
continuing operations to $5,884 from $5,984). In addition, Registrant is hereby
correcting one error in the 1997 Cash Flow Statement (Page II-F-10 of Form 10-K;
specifically, changing Net increase in cash from continuing operations to
$10,376 from $13,598). Finally, Registrant is hereby correcting one error in
Note 5 for 1998 total net operating loss carry forwards (Line 4 of the
penultimate paragraph of Note 5; specifically, changing to approximately $6.4
million from approximately $31 million).
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page Number
Reports of Independent Auditors..........................................II-F-2
UniHolding Corporation and Subsidiaries Consolidated
Balance Sheets as of May 31, 1998, and 1997..............................II-F-4
UniHolding Corporation and Subsidiaries Consolidated
Statements of Operations for the Years Ended
May 31, 1998, 1997 and 1996..............................................II-F-6
UniHolding Corporation and Subsidiaries Consolidated
Statements of Stockholders' Equity for the Years Ended
May 31, 1998, 1997 and 1996..............................................II-F-7
UniHolding Corporation and Subsidiaries Consolidated
Statements of Cash Flows for the Years Ended
May 31, 1998, 1997 and 1996..............................................II-F-9
UniHolding Corporation and Subsidiaries Notes to
Consolidated Financial Statements for the Years Ended
May 31, 1998, 1997 and 1996..............................................II-F-11
<PAGE>
ATAG ERNST & YOUNG
6, rue d'italie Telephone: ++41 22 318 06 18
P.O. Box 3270 Telefax: ++41 22 312 01 70
CH-1211 Geneva 3
Switzerland
REPORT OF INDEPENDENT AUDITORS
to the Board of Directors and Shareholders of
UNIHOLDING CORPORATION, Delaware, USA
We have audited the accompanying consolidated balance sheets of UniHolding
Corporation and subsidiaries (the "Company") as of May 31, 1998 and 1997 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the two years in the period ended May 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The consolidated statements of operations, stockholders' equity and
cash flows for the year ended May 31, 1996 were audited by other auditors whose
report dated September 26, 1996, expressed an unqualified opinion on those
statements.
We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the 1998 and 1997 consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of UniHolding Corporation and subsidiaries at May 31, 1998 and 1997 and
the consolidated results of their operations and their cash flows for each of
the two years in the period ended May 31, 1998, in conformity with accounting
principles generally accepted in the United States of America.
Geneva, Switzerland,
October 26, 1998 ATAG ERNST & YOUNG SA
/s/ C. PICCI /s/S. REID
--------------------- ---------------------
C. Picci S. Reid
Expert-comptable diplome
(Auditor in charge)
II-F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
UniHolding Corporation
New York, New York
We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of UniHolding Corporation and subsidiaries
(the "Company") for the year ended May 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provide a reasonable basis for our opinion.
In our opinion, the financial statements of Uniholding Corporation and
subsidiaries referred to above present fairly, in all material respects, the
results of their operations and their cash flows for the year ended May 31, 1996
in conformity with generally accepted accounting principles.
As more fully described in Note 11, during the year ended May 31, 1996, the
Company invested $3 million in a newly formed company accounted for by the
equity method, which in turn, used the funds to acquire know-how, software and
marketing plans. The equity investee's loss was charged to earnings in the year
ended May 31, 1996.
/s/Richard A. Eisner & Company, LLP
New York, New York
September 26, 1996
With respect to Note 1
February 27, 1998
II-F-3
<PAGE>
UNIHOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
May 31
ASSETS 1998 1997
CURRENT ASSETS:
Cash and cash equivalents $9,186 $4,925
Accounts receivable, net of allowance for doubtful
accounts of $2,940 in 1998 and $1,201 in 1997 19,464 18,786
Due from related companies 1,587 3,573
Inventories 1,849 2,052
Prepaid expenses 3,090 1,811
Other current assets 411 753
Net current assets of discontinued operations - 3,111
----------- -----------
Total current assets 35,587 35,011
----------- -----------
NON-CURRENT ASSETS:
Long-term notes receivable 818 818
Intangible assets, net 44,344 25,025
Property, plant and equipment, net 8,828 26,951
Investment in equity affiliates 481 1,480
Long-term investments 22,781 -
Other assets, net 132 467
Net noncurrent assets of discontinued operations - 12,473
----------- -----------
Total non-current assets 77,384 67,214
----------- -----------
$112,971 $102,225
======= =======
See notes to financial statements
II-F-4
<PAGE>
UNIHOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
May 31
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
CURRENT LIABILITIES:
Bank overdrafts $4,010 $5,889
Lease payable 809 1,435
Payable to related parties 100 150
Trade payables 6,911 7,288
Accrued liabilities 6,018 3,985
Long-term debt 5,727 4,741
Taxes payable 6,459 4,707
Deferred taxes 769 -
----------- -----------
Total current liabilities 30,803 28,195
----------- -----------
NON-CURRENT LIABILITIES:
Lease payable 725 2,446
Long-term debt 29,544 12,109
Taxes payable 74 155
Deferred taxes 179 631
----------- -----------
Total non-current liabilities 30,522 15,341
----------- -----------
Total liabilities 61,325 43,536
----------- -----------
MINORITY INTERESTS 9,440 10,344
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value;
Voting; authorized 18,000,000 shares;
issued 7,627,736 at May 31, 1998 and 1997 76 76
Non-Voting; authorized 2,000,000 shares; issued
and outstanding 298,384 at May 31, 1998 and 1997 3 3
Additional paid-in capital 49,832 49,832
Cumulative translation adjustment (2,074) (3,050)
Retained earnings 7,623 5,559
----------- -----------
55,460 52,420
Less - cost of 1,602,569 and 293,150 shares of
Common Stock held in treasury at May 31, 1998
and May 31, 1997, respectively (13,254) (4,075)
----------- -----------
Total stockholders' equity 42,206 48,345
----------- -----------
$112,971 $102,225
======= =======
See notes to financial statements
II-F-5
<PAGE>
UNIHOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Years ended May 31
1998 1997 1996
<S> <C> <C> <C>
REVENUE $83,503 $92,635 $92,634
Operating expenses:
Salaries and related charges 32,618 37,431 38,569
Supplies 12,937 15,545 15,083
Other operating expenses 22,643 22,451 20,971
Depreciation and amortization of tangible assets 3,071 5,118 5,387
Adjustment of carrying value of building - 5,805 -
Amortization of intangible assets 2,638 5,367 2,354
Adjustment of carrying value of goodwill in subsidiary - 23,722 -
-------- ----------- -----------
OPERATING INCOME (LOSS) 9,596 (22,804) 10,270
Interest expense, net of interest income of
$891, $268 and $664 in 1998, 1997 and 1996 (238) (2,965) (2,935)
Impairment of investment (1,190) - (3,005)
Gain on sale of subsidiary shares 6,007 16,164 (37)
Other, net (1,215) 508 883
---------- ----------- -----------
Income (loss) before taxes and minority interests 12,960 (9,097) 5,176
Tax (provision) (4,585) (814) (2,979)
---------- ----------- -----------
Income (loss) from continuing operations
before minority interests 8,375 (9,911) 2,197
Minority interests in income of continuing operations (2,491) (362) (942)
---------- ----------- -----------
Income (loss) from continuing operations 5,884 (10,273) 1,255
Loss from discontinued operations, net of tax benefit
of $2,505, $4,402 and $624 in 1998, 1997 and 1996 and
minority interests (2,820) (3,033) (1,555)
---------- ----------- -----------
NET INCOME (LOSS) $3,064 ($13,306) ($300)
======= ======= =======
Weighted average common shares outstanding 7,466,565 7,015,943 6,005,643
Earnings per share of common stock
Net income (loss) from continuing operations $0.79 ($1.46) $0.21
Loss from discontinued operations ($0.38) ($0.44) ($0.26)
Net income (loss) $0.41 ($1.90) ($0.05)
</TABLE>
See notes to financial statements
II-F-6
<PAGE>
UNIHOLDING CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Stock Additional Cumulative
Voting Non-Voting Paid-in Translation
Shares Amount Shares Amount Capital Adjustment
<S> <C> <C> <C> <C> <C> <C>
Balances, May 31, 1995 6,060,182 $60 - - $31,190 $1,174
Net loss
Adjustment for 4-to-1 reverse split (513)
Issuance and exchange of Non-Voting Common
Stock for Voting Common Stock (298,384) (3) 298,384 3
Issuance of common stock for cash, net of
expenses of $113 62,500 1 1,239
Cost of Common Stock held in treasury
Cumulative translation adjustment (1,413)
---------- --------- --------- -------- --------- --------
Balances, May 31, 1996 5,823,785 58 298,384 3 32,429 (239)
Net loss
Issuance of common stock for cash 333,333 3 4,997
Issuance of common stock for no additional
consideration, pursuant to antidilutive provisions 75,655 1 (1)
Issuance of common stock for repayment of note
and accrued interest due to former UGL stockholder 1,394,963 14 15,736
Excess of purchase price of subsidiaries over predecessor
cost (3,329)
Issuance of shares at a premium by ULSA
Cost of Common Stock held in treasury
Cumulative translation adjustment (2,811)
----------- --------- --------- ----------- ---------- ---------
Balances, May 31, 1997 7,627,736 76 298,384 3 49,832 (3,050)
Net income
Cost of Common Stock held in treasury
Distribution of GUCT
Cumulative translation adjustment 976
--------- ------- --------- ---------- --------- ----------
Balances, May 31, 1998 7,627,736 $76 298,384 $3 $49,832 ($2,074)
======== ====== ======== ====== ====== ======
</TABLE>
(continued)
II-F-7
<PAGE>
UNIHOLDING CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
(continued)
<TABLE>
<CAPTION>
Total
Retained Treasury Stockholders'
Earnings Stock Equity
<S> <C> <C> <C>
Balances, May 31, 1995 $5,453 - $37,877
Net loss (300) (300)
Adjustment for 4-to-1 reverse split -
Issuance and exchange of Non-Voting Common
Stock for Voting Common Stock -
Issuance of common stock for cash, net of
expenses of $113 1,240
Cost of Common Stock held in treasury (3,162) (3,162)
Cumulative translation adjustment (1,413)
---------- ----------- -----------
Balances, May 31, 1996 5,153 (3,162) 34,242
Net loss (13,306) (13,306)
Issuance of common stock for cash 5,000
Issuance of common stock for no additional
consideration, pursuant to antidilutive provisions -
Issuance of common stock for repayment of note
and accrued interest due to former UGL stockholder 15,750
Excess of purchase price of subsidiaries over predecessor
cost (3,329)
Issuance of shares at a premium by ULSA 13,712 13,712
Cost of Common Stock held in treasury (913) (913)
Cumulative translation adjustment (2,811)
---------- ----------- -----------
Balances, May 31, 1997 5,559 (4,075) 48,345
Net income 3,064 3,064
Cost of Common Stock held in treasury (9,179) (9,179)
Distribution of GUCT (1,000) (1,000)
Cumulative translation adjustment 976
--------- ----------- -----------
Balances, May 31, 1998 $7,623 ($13,254) $42,206
====== ====== ======
</TABLE>
See notes to financial statements
II-F-8
<PAGE>
UNIHOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Years ended May 31
1998 1997 1996
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) from continuing operations $ 5,884 ($10,273) $1,255
Adjustments to reconcile net income to net cash provided by operations:
Impairment of investment 1,190 0 3,005
Minority interests in income 2,491 362 942
Deferred taxes 1,082 (3,188) (197)
Depreciation and amortization of tangible assets 3,071 10,923 5,387
Amortization of intangible assets 2,638 29,089 2,354
Gain on sale of subsidiary shares (6,007) (16,164) 0
Other non-cash (income) expenses (620) (1,292) (78)
Net changes in assets and liabilities, net of acquisitions: 0
Accounts receivable (2,066) (1,441) (1,860)
Inventories (227) (276) (164)
Prepaid expenses (1,757) 591 193
Other current assets 2,179 266 (428)
Trade payables 61 837 2,205
Accrued liabilities 1,530 (383) (114)
Taxes payable 1,754 1,870 675
----------- ----------- -----------
Net cash provided by operating activities 11,203 10,921 13,175
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from issuance of share capital, net of expenses (87) 21,152 1,240
Repayment of long-term debt (168) (20,115) (1,156)
Cash proceeds from long-term debt 25,204 0 4,560
Proceeds (reimbursement) from (of) bank overdrafts 2,868 (1,131) 171
Dividend paid to minority shareholders (3,662) (209) (331)
Repayment of lease debt (620) (1,697) (1,796)
Payment for purchase of treasury stock (2,949) (696) (3,162)
----------- ----------- -----------
Net cash provided by (used in) financing activities 20,586 (2,696) (474)
----------- ----------- -----------
</TABLE>
(continued)
II-F-9
<PAGE>
UNIHOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(continued)
<TABLE>
<CAPTION>
Years ended May 31
1998 1997 1996
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for purchases of property and equipment (2,661) (3,641) (3,357)
Loans and advances (to) from affiliates and 0
related companies, net (1,213) (5,719) (6,196)
Payment for businesses acquired net of cash acquired (27,323) (15,403) (16,418)
Payment for purchase of intangible assets (842) (59) (139)
Proceeds from sale of subsidiary shares 8,084 26,842 481
--------- ----------- -----------
Net cash provided by (used in) investing activities (23,955) 2,020 (25,629)
--------- ----------- -----------
Effect of exchange rate changes on cash (244) 131 (123)
Net increase (decrease) in cash and cash equivalents
from continuing operations 7,590 10,376 (13,051)
Net cash flows (used) by discontinued operations (3,329) (6,984) (2,355)
Cash and cash equivalents, beginning of year 4,925 1,533 16,939
-------- ----------- -----------
Cash and cash equivalents, end of year $9,186 $4,925 $1,533
======= ======= =======
</TABLE>
See notes to financial statements
II-F-10
<PAGE>
UNIHOLDING CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Monetary amounts in 000's, except per share data)
1. Description of the Company and Basis of Presentation
UniHolding Corporation and its subsidiaries (collectively the "Company"
or the "Group") provide clinical laboratory testing services to physicians,
managed care organizations, hospitals and other health care providers through
laboratories in Switzerland, Italy, Spain, Russia and Turkey. Until February 27,
1998, the Company also performed testing in relation to clinical tests for the
pharmaceutical industry through its Clinical Trials Division.
UniHolding acquired control of the Group in March 1994, when it acquired
from Unilabs Holdings SA, a Panama corporation ("Holdings"), 60% of the equity
of Unilabs Group Limited, a British Virgin Islands corporation ("UGL"). UGL then
had as principal operating subsidiaries Unilabs SA, a Swiss corporation
("ULSA"), and Unilabs Group (UK) Limited, a United Kingdom corporation ("UGUK").
As of June 30, 1995, the Company acquired from Unilab Corporation, a Delaware
corporation ("Unilab") the remaining outstanding common stock of UGL for a total
consideration of $30,000. The consideration was paid $13,000 in cash, $2,000
through the assumption of a debt from Unilab to a Group subsidiary, and $15,000
in the form of a one-year, interest-bearing promissory note. The excess of the
purchase price over the fair value of the assets acquired, $3,301, was allocated
to goodwill. The $15,000 promissory note, together with accrued but unpaid
interest of $750 converted as of December 31, 1996, into 1,394,963 newly-issued
shares of Common Stock.
Recent acquisitions and dispositions
Clinical Trials Spin-off
As of February 27, 1998, the Company spun off its wholly owned investment
in the common stock of Global Unilabs Clinical Trials Ltd, a British Virgin
Islands corporation ("GUCT") to the Company' shareholders. GUCT represented the
Company's Clinical Trials Division and had been established pursuant to a series
of transactions commencing in March 1995. In connection therewith, the Company
received $20,000 in non-voting, non-convertible, redeemable preferred stock of
GUCT in exchange for previously existing inter-company debt. The redeemable
preferred stock is entitled to non-cumulative dividends in the form of
additional redeemable preferred stock for a period of five years, and to cash
dividends thereafter. The preferred stock is redeemable at GUCT's option at any
time during the first five years at a redemption price equal to its then face
value. At the time of the spin-off of GUCT's common stock to the Company's
shareholders, the Company's net investment in GUCT amounted to $12,164 being the
aggregate of $9,000 of common stock, plus advances of $10,979, less accumulated
losses incurred of $7,815. The Company valued the $20,000 of GUCT preferred
shares received at this net investment value, which valuation reflected the
uncertainty as to the timing and the possibility of recovery of the investment.
Accordingly, at May 31, 1998, the GUCT preferred stock is carried at a value of
$12,164 and is included under "Long-term investments" in the accompanying
balance sheet.
Prior years' financial statements have been restated to reflect the
spin-off of GUCT. Accordingly, the net current and long term assets of GUCT have
been segregated in the May 31, 1997 consolidated balance sheet and are
summarized below:
Current assets 6,095
Current liabilities (2,984)
-------
Net current assets 3,111
=======
Deferred tax assets 5,199
Intangible assets, net 4,994
Property, plant and
equipment, net 1,659
Other assets, net 621
-------
12,473
=======
The operations of GUCT are now considered discontinued
operations.
Other Acquisitions and Dispositions
In October 1996, the Company entered into 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 $ 240 in cash,
and owns 50% of Unimed Laboratories (a newly-established Russian close joint
stock company, "Unimed"), which has established 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 on an on-going basis with certain scientific and
system consulting services and management supervision. The new Unimed laboratory
started operations on December 1, 1997.
In January 1997, the Company acquired, through a subsidiary, together with
a minority investor, a 70% stake of a laboratory company in Istanbul (Turkey).
Upon the acquisition of the 70% stake, which closed on May 29, 1997, the Company
had a controlling interest of 43% in the Turkish company, for an investment of
approximately $600.
During the year ended May 31, 1997, ULSA acquired 49.8% of Pathologie-Labor
Brunnhof, a Swiss corporation of which it already owned 50.2%, at a cost of
$2,500. The excess of the purchase price over the fair value of the assets
acquired, $2,200, was allocated to goodwill.
Also during the year ended May 31, 1997, in conformity with the Company's
plans to maximize shareholder values, the Company organized an initial public
offering of ULSA's newly-issued and existing shares, which closed on April 24,
1997. The offering comprised the sale by ULSA to the public of newly issued
shares of common stock corresponding to 20% of its equity, and the sale by UGL
of a portion of its holding in ULSA, thereby diluting the Company's holding in
ULSA to 60% post-initial public offering. The shares of ULSA have been listed on
the Swiss Exchange since April 25, 1997.
During the year ended May 31, 1998, through the exercise of previously
acquired pre-emptive rights, ULSA acquired from a third party 100% of the equity
of Institut Bio-Analytique Medical SA, a Geneva company, and related companies
at an aggregate cost of $21,791 . Also during the same period, through the
exercise of a previously acquired option, ULSA acquired from a third party 100%
of the equity of Laboratoire Medical Pierre-Alain Gras SA, a Geneva company, at
a cost of $3,469. Those acquisitions were accounted for as a purchase and the
excess of the assets contributed over the fair value of the assets acquired,
$20,042, was allocated to goodwill and is being amortized over a period of 20
years.
Also during the year ended May 31, 1998, ULSA sold UGUK to a third party
for $13,119, consisting of a $1,312 payment in cash and the balance in
non-voting, redeemable preferred shares of the purchaser, Focused Healthcare
(Jersey) Ltd. ("FHL"), a Jersey investment company. FHL is controlled by a
former director of Unilab Corporation, who is also affiliated to Health
Strategies Limited, a Jersey Channel Island corporation ("HSL") with which the
Company entered into certain other agreements as described in Note 11. The
agreement with FHL called for a disposal price equal to the net book value of
UGUK at May 31, 1997. After reversal of cumulative translation and other
adjustments of $1,550 related to UGUK, reduced by legal and other costs related
to the disposal of $1,434, the Company recorded a net gain on disposal of $116.
Subsequently however, the Company recorded a write-down of approximately $1,190,
which reflects the Company's appraisal of the uncertainty as to the timing and
the possibility of recovery of its investment in FHL. Such amount of preferred
shares is therefore carried at a value of $10,617 as of May 31, 1998, and is
included under "Long-Term investments" in the accompanying balance sheet.
2. Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements have been prepared in accordance
with United States generally accepted accounting principles and include the
accounts of UniHolding and its majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated. Investments in
equity affiliates are accounted for under the equity method and are included in
"Investments in equity affiliates" on the accompanying consolidated balance
sheet. Certain prior year amounts have been reclassified to conform to the
current year presentation.
Use of estimates
The preparation of financial statements in conformity with United
States generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results may differ from
these estimates.
Inventories
Inventories, which consist principally of purchased clinical laboratory
supplies, are valued at the lower of cost (first-in, first-out method) or
market.
Revenue Recognition
Revenue from performing laboratory testing services is recognized at
the time service is provided and is based on the amount billed or billable.
Property and Equipment
Property and equipment are stated at cost and depreciated using the
straight-line method over the estimated useful lives of the related assets,
which range from 3 to 33 years. Property and equipment includes items acquired
under finance leases, which are capitalized, and the related equipment is
amortized over its useful life. Leasehold properties are depreciated over the
lease period, which may range from 1 to 10 years and leasehold improvements are
depreciated using the straight-line method over the remaining term of the
related lease or their useful life, whichever is shorter. Purchased data
processing software costs which is considered to have a useful life of over one
year is amortized over periods not exceeding 5 years.
Goodwill
Goodwill represents the excess of cost over the fair value of net
tangible and identifiable intangible assets acquired and is amortized using the
straight-line method. Goodwill is evaluated periodically based on undiscounted
expected future cash flows and adjusted if necessary, if events and
circumstances indicate that a permanent decline in value below the current
unamortized historical cost has occurred. During the year ended May 31, 1997,
the Company revised its estimate of the useful life of existing goodwill from 40
to 20 years. The net effect of such change was a charge of $3,025 (or $0.43 per
share).
Other Intangible Assets
Customer lists are recorded at cost and amortized utilizing the
straight-line method over periods determined by the relative circumstances but
not exceeding 15 years. The value of the customer lists is reviewed and
evaluated periodically by management and adjusted, if necessary, if events and
circumstances indicate that a permanent decline in value below the current
unamortized historical cost has occurred.
Income Taxes
The Company accounts for income taxes utilizing the liability method
requiring the recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the basis of
assets and liabilities for financial reporting purposes and tax purposes.
The Company currently provides income taxes on the earnings of foreign
subsidiaries to the extent they are taxable or expected to be remitted.
Any dividend received from subsidiaries by UniHolding, through UGL,
would be subject to the withholding taxes at a maximum rate of 35%, which the
Company could not recover, but may be creditable against U.S. Federal income
tax.
Foreign Currency Translation
The Company's principal operations during the fiscal years 1998, 1997
and 1996 were located in Switzerland and various other countries. 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. Assets and liabilities are translated at the exchange
rates in effect at the balance sheet date. Revenues and expenses are translated
at the weighted average exchange rates for the period. Net gains and losses
arising upon translation of local currency financial statements to US dollars
are accumulated in a separate component of Stockholders' Equity, the Cumulative
Translation Adjustment account.
Foreign Currency Transactions
Gains and losses resulting from foreign currency transactions and
changes in foreign currency positions are included in income or expense
currently. Other income includes an exchange gain (loss) of ($206), ($248) and
$696 in fiscal 1998, 1997 and 1996, respectively.
Income (Loss) Per Common Share
Effective December 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"), which changes
the method used to compute earnings per share This Statement specifies the
computation, presentation and disclosure requirements for earnings per share
("EPS") for entities with publicly held common stock. SFAS 128 replaces the
presentation of primary EPS with a presentation of basic EPS, and for entities
with a complex capital structure requires the additional presentation of diluted
EPS on the face of the income statement. Basic EPS is computed by dividing net
income available to common stockholders by the weighted average number of shares
outstanding during the period. The computation of diluted EPS is similar to the
computation of basic EPS, except that the denominator is increased to include
the number of additional common shares that would have been outstanding if any
dilutive potential common shares had been issued.
The adoption of this standard did not impact the Company's reported EPS, as
no dilutive securities were outstanding during the periods presented, because
all outstanding options were and are out of the money. Accordingly, for the
years ended May 31, 1998, 1997 and 1996 income or loss per common share was
computed by dividing net income or net loss by the weighted average number of
voting and non-voting shares outstanding during the year.
Cash and Cash Equivalents
The Company considers cash and all highly liquid investments purchased with
an original maturity of three months or less to be cash equivalents.
Fair Value of Financial Instruments
The carrying amount reported in the consolidated balance sheets for cash,
accounts receivable and accounts payable approximates fair value because of the
immediate or short-term maturity of these financial instruments. The carrying
amount reported for outstanding bank indebtedness approximates fair value
because the debt is generally at a variable rate that reprices frequently. The
Company believes that its non-bank indebtedness approximates fair value based on
current yields for debt instruments of similar quality and terms.
Concentration of credit risk
The Company maintains cash and cash equivalents, and investment
securities with various financial institutions. The Company limits its
concentration of these financial instruments with any one institution, and
periodically reviews the credit standings of these institutions. The Company has
a large and diverse customer base, thereby minimizing the credit risk of any one
customer to the Company's accounts receivable amounts. In addition, whenever
applicable, each of the Company's business units perform ongoing credit
evaluations of their customers' financial condition.
Stock Based Compensation Plans
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock Based Compensation" ("SFAS 123"), establishes accounting and reporting
standards for stock based employee compensation plans. As permitted by the
standard, UniHolding continues to account for such arrangements under APB
Opinion No. 25, "Accounting for Stock Issued to Employees", and related
interpretations. Accordingly, adoption of the standard has not affected the
Company's results of operations or financial position. See Note 6.
Recently Issued Accounting Pronouncements
In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive
Income ("SFAS 130"). This Statement establishes standards for reporting and
display of comprehensive income and its components in the financial statements.
This Statement is effective for financial statements for periods beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
presented for comparative purposes is required. The Company is in the process of
evaluating the disclosure requirements. This Statement, by its nature, will not
impact the Company's consolidated results of operations, financial position or
cash flows.
Also in June 1997, the FASB issued Statement No. 131, Disclosures about
Segments of an Enterprise and Related Information ("SFAS 131"). This Statement
establishes standards for the way that public business enterprises report
information about operating segments in annual and interim financial statements.
It also establishes standards for related disclosures about products and
services, geographic areas and major customers. This Statement is effective for
financial statements for fiscal years beginning after December 15, 1997.
Financial statement disclosures for prior periods are required to be restated.
The Company is in the process of evaluating the disclosure requirements. This
Statement, by its nature, will not impact the Company's consolidated results of
operations, financial position or cash flows.
3. Property, Plant and Equipment, net, and Intangible Assets
Property, plant and equipment, net consists of the following :
May 31, 1998 May 31, 1997
Land and buildings $ 942 $ 15,277
Long-term leasehold and improvements 9,007 8,936
Furniture and fittings 3,213 5,062
Laboratory and office equipment 20,544 27,501
Capitalized data processing software 1,862 3,599
----------- -----------
$ 35,568 $ 60,375
Less: Accumulated depreciation (26,740) (33,424)
----------- -----------
$ 8,828 $ 26,951
Amounts charged to expense for depreciation of tangible assets, including
assets under capital lease, was $3,071, $10,923, and $5,387 in the years ended
May 31, 1998, 1997 and 1996, respectively. During the year ended May 31, 1997,
as a result of its decision to sell a building used by its UK operations, the
Company reconsidered the carrying value of such building, and recorded a
one-time charge of $5,805 (the equivalent of (pound)4,000) to adjust such
carrying value to its then currently estimated market value.
The net amount of capitalized data processing software is $106 and $1,997
as of May 31, 1998 and 1997 respectively. The amount of assets under capital
leases is $4,476 ($1,725 net of accumulated depreciation) and $7,533 ($ 3,887
net of accumulated depreciation) as of May 31, 1998 and 1997 respectively.
Intangible assets consist of :
May 31, 1998 May 31, 1997
Goodwill $ 50,577 $ 58,299
Customer lists 6,938 10,494
Other 694 668
----------- -----------
58,209 69,461
Less : Accumulated amortization (13,865) (44,436)
----------- -----------
$ 44,344 $ 25,025
Amortization of intangible assets was $2,638, $29,089, and $2,354 in the
years ended May 31, 1998, 1997 and 1996. During the year ended May 31, 1997, the
Company revised its estimate of the useful life of existing goodwill from 40 to
20 years. The net effect of such change was a charge before tax effect of $3,025
(or $0.43 per share).
Further, during the year ended May 31, 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 then present and estimated future profitability of
such operations, the Company recorded a charge before tax effect of $23,722 (or
$3.38 per share) to adjust such goodwill.
4. Long Term Debt
Long term debt consists of the following :
May 31, 1998 May 31, 1997
Senior secured debt :
ULSA Credit Facilities $ 34,644 $ 10,461
Debt of former UK subsidiaries - 5,928
Other debt 627 461
Capital leases, net of interest component 1,534 3,881
---------- -----------
$ 36,805 $ 20,731
Less: current portion (6,536) (6,176)
---------- -----------
$ 30,269 $ 14,555
Senior Secured Debt
Senior secured debt consists of credit facilities granted by banks in
Swiss francs. Such debt is secured by a pledge of the common stock of
substantially all of ULSA's subsidiaries, and contains covenants of a customary
nature, including restriction of the use of $2,740 of cash and cash equivalents
only for future acquisitions or capital expenditures.
Interest on long term debt is generally at market rates plus a margin,
and depends upon actual utilization of the facilities and the maturity of the
debt instruments. As part of the ULSA credit facility, the Company has an
agreement with a bank under which the interest may only fluctuate between 3.25%
and 5.25%, irrespective of effective market rates. At May 31, 1998, the
effective average interest rate was approximately 3.25% per annum, as compared
to 4.25% per annum as of May 31, 1997.
As of May 31, 1998, the Company has a total of $6,800 available and
unused under its credit facilities.
In connection with acquisitions completed during the year, the Company
increased its senior secured debt by $24,349.
In connection with the disposal of the UK operation, all of the debt
related to that operation was disposed of.See Note 1 regarding disposal of UK
operations
Maturities
At May 31, 1998, future scheduled principal payments of long-term debt
and capital lease obligations were as follows :
Net obligation
1999 $ 6,536
2000 5,999
2001 5,294
2002 4,115
2003 14,644
thereafter 217
-----------
$ 36,805
5. Income Taxes
Deferred income tax assets and liabilities are provided for temporary
differences between financial statement income and the amounts currently taxable
in the jurisdictions in which the Company operates. Income (loss) before income
taxes and minority interests of domestic and foreign corporations is as follows:
Years ended May 31
1998 1997 1996
Domestic $ 2,149 $ (3,052) $ 118
Foreign 10,811 (6,045) 5,058
----------- ----------- -----------
Total $ 12,960 ($ 9,097) $ 5,176
=========== =========== ===========
The provision (benefit) for income taxes is as follows :
Years ended May 31
1998 1997 1996
Current:
Foreign $ 1,560 $ 864 $ 3,468
U.S. 2,000 3,000 -
Deferred:
Foreign 1,025 (3,050) (489)
----------- ----------- -----------
Total $ 4,585 $ 814 $ 2,979
=========== =========== ===========
Deferred taxes are provided principally in relation to temporary
differences in the amortization of intangibles and to different book and tax
rates of depreciation of tangible assets.
The deferred tax assets and liabilities as of May 31, 1998, are as
follows :
Assets Liabilities
Depreciation of tangible assets $ - $ 33
Amortization of intangibles - 303
Operating loss carry forwards 1,030 -
Dividend distribution - 769
----------- -----------
1,030 1,105
Valuation allowance (873) -
----------- -----------
$ 157 $ 1,105
The deferred tax assets and liabilities as of May 31, 1997, are as
follows :
Assets Liabilities
Depreciation of tangible assets $ - $ 699
Amortization of intangibles - 26
Operating loss carry forward 2,535 -
----------- -----------
2,535 725
Valuation allowance (2,441) -
----------- -----------
$ 94 $ 725
=========== ===========
The net change in the valuation allowance for deferred tax assets related
to utilization of tax loss carry forwards and disposition and distribution of
subsidiaries during the year ended May 31, 1998.
During the year ended May 31, 1996, the Company decided to merge two of its
principal Swiss subsidiaries. This had the effect of decreasing the effective
tax rate of Swiss operations to approximately 24%, but caused a non-recurring
charge of $1,092.
A reconciliation between the actual income tax expense (benefit) and
income taxes computed by applying the US Federal income tax rate of 34% to
earnings before taxes and minority interests is as follows (in thousands) :
Years ended May 31
1998 1997 1996
Computed income taxes
at rate of 34% $3,448 ($ 3,421) $ 1,760
Impact of difference between
statutory and US tax rates 1,532 (634) (647)
Effect of change in accounting
estimates 698 (2,510) -
Permanent differences (1,251) 4,383 175
Temporary differences 775 - -
Impact of change
in effective Swiss tax rate - - (730)
Impact of merger
of certain Swiss subsidiaries - - 1,092
Change in valuation reserves
on deferred tax assets (634) 2,570 173
Impact of equity
in loss of affiliates - - 1,021
Effect of operating loss
carry forward acquired (30) - -
Other 47 426 135
----------- ----------- -----------
$ 4,585 $ 814 $ 2,979
=========== =========== ===========
Certain of the Company's subsidiaries have incurred losses, which can
be used to offset their taxable income for up to seven years after incurring the
losses, depending on the applicable tax legislation. Total net operating loss
carry forwards amount to approximately $6,400. Management has reviewed the
probability of realization of the tax benefits that may arise from these losses
being carried forward. Based on the estimated realization, the Company has
reserved for the tax benefits in all cases where it has not been satisfied that
it is more likely than not that the benefits will be realized. Therefore, the
Company has recognized deferred tax assets of $157. The major portion of
underlying net operating loss carry forwards is expected to expire starting in
2004.
Taxes have not been provided on approximately $8,400 of accumulated
foreign unremitted earnings because those earnings are expected to remain
invested indefinitely. It is not practical to estimate the amount of additional
tax that might be payable if such accumulated earnings were remitted.
Additionally, if such accumulated earnings were remitted, certain countries
impose withholding taxes that, subject to certain limitations, are available for
use as a tax credit against any Federal income tax liability arising from such
remittance.
6. Stockholders' Equity
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 in connection with the acquisition of 40% of UGL, 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, and
accordingly, together with accrued but unpaid interest of $750 as of December
31, 1996, converted into 1,394,963 newly-issued shares of Common Stock. As a
result thereof, the Company issued to the above mentioned investor 75,655
newly-issued shares of Common Stock for no additional consideration.
In February, 1996, UniHolding amended its Certificate of Incorporation
and designated 2,000,000 of its authorized shares as Non-Voting Common Stock.
The Non-Voting shares have identical rights and privileges as the Voting shares,
other than the vote. The Non-Voting shares are convertible into an equal number
of Voting shares at the holder's option, except in certain circumstances.
Also in February 1996, UniHolding issued to SBC Equity Partners, a Swiss
corporation then a subsidiary of Swiss Bank Corporation, 298,384 shares of
Non-Voting Common Stock, together with 298,384 shares of Common Stock for 10% of
the common stock of ULSA. In compliance with certain U.S. regulations on banks,
the exchange agreement provides that the Non-Voting shares are not convertible
into Voting Shares as long as they are held by such subsidiary of a major Swiss
bank.
Treasury Stock
During the year ended May 31, 1996, UniHolding acquired 155,000 shares of
UniHolding's common stock from Holdings for $2,900, the fair market value of
such shares which was less than the cost of such shares to Holdings. Further,
during the year ended May 31, 1996, the Company acquired 13,000 of its own
shares on the market for $262.
During the year ended May 31, 1997, the Company acquired 125,150 of its own
shares on the market for $913.
During the year ended May 31, 1998, the Company acquired 1,309,419 shares
of its own common stock at a cost of approximately $9.2 million. Approximately
$6.3 million of this total was obtained through forgiveness of amounts owed to
the Company by its principal shareholder. Of the remaining $2.9 million, $1.2
million was attributable to purchases from its principal shareholder and $1.7
million to purchases from third parties.
Stock Options
As of June 28, 1994, UniHolding's Board of Directors adopted a Stock
Option Plan for the Company whereby options can be granted to directors, key
officers or management personnel of the Company or any of its subsidiaries or
affiliates by the Administrator of the Plan, acting in agreement with the Board.
500,000 shares of UniHolding's common stock can be so reserved each year for
issuance pursuant to the Plan, as amended. Options are granted with an exercise
price at no less than 100% of the fair market value of UniHolding's common stock
on the date of the grant or the book value on the date of the most recent
financial statements. Options vest 18 months after the date of grant, and shares
subscribed by Option grantees cannot be sold prior to two years from the date of
grant. The Plan will expire on June 28, 2004. Accordingly, the Company will be
able to grant 3.5 million options in addition to those already granted.
On August 17, 1995, a total of 163,750 options were granted. These
options are all exercisable on or after February 17, 1997, at $22 per share for
63,750 options and at $ 24 per share for 100,000 options, and expire on June 28,
2004.
On July 9, 1996, a total of 357,142 additional options were granted.
These options are all exercisable on or after January 9, 1998, at $16 per share,
and expire on June 28, 2004.
On August 25, 1997, a total of 352,142 additional options were granted.
These options are all exercisable on or after February 25, 1999, at $10 per
share, and expire on June 28, 2004.
The following tables summarize information about options outstanding at
May 31, 1998 :
<TABLE>
<CAPTION>
Outstanding Options
----------------------------------------------------------------------------
Weighted-Average
Shares Outstanding Remaining Weighted-Average
Range of Exercise Prices at May 31, 1998 Contractual Life Exercise Price
- ----------------------------- ---------------------- ------------------------ -------------------------
<S> <C> <C> <C> <C>
$24.00 100,000 6.08 $24.00
$22.00 63,750 6.08 $22.00
$16.00 357,142 6.08 $16.00
$10.00 352,142 6.08 $10.00
------------------------------------------------- -------------------------
873,034 6.08 $14.93
</TABLE>
<TABLE>
<CAPTION>
Options Exercisable
------------------------------------------------
Shares Exercisable Weighted-Average
Range of Exercise Prices at May 31, 1998 Exercise Price
- ---------------------------- ------------------------ -----------------------
<S> <C> <C> <C>
$24.00 100,000 $24.00
$22.00 63,750 $22.00
$16.00 357,142 $16.00
------------------------ -----------------------
520,892 $18.27
</TABLE>
All options outstanding as of May 31, 1998, expire on June 28, 2004.
Pro forma information:
Pro forma information regarding net loss and loss per share is required by
SFAS 123. This information is required to be determined as if the Company had
accounted for its employee stock options granted subsequent to May 31, 1995,
under the fair value method of that statement. All option grants to date have
been made with an exercise price greater than the fair market value on the grant
date. For purposes of pro forma disclosures, the estimated fair value of the
options, if any, is recognized in expense on the option vesting date. At May 31,
1998, 520,892 vested options are outstanding. All of these options vested during
the years ended May 31, 1997 and May 31, 1998. For the years ended May 31, 1997,
and 1998, there is no pro-forma effect to net loss and loss per share. Since pro
forma compensation cost relates to all periods over which the options vest, the
initial impact on pro forma results may not be representative of option expense
in subsequent years, when the effect of the amortization of multiple awards
would be reflected.
Capital Stock of Subsidiary and Initial Public Offering by Subsidiary
During the year ended May 31, 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.
In February 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 a total consideration of SFr. 6,500 ($5,000), which was paid through a
partial set-off of advances previously made. In March, ULSA acquired a further
10,000 bearer shares (or 5.0%) of its own common stock from Holdings, for a
total consideration of SFr. 6,500 ($5,000), which was paid through a partial
set-off of advances previously made. According to the related purchase
contracts, the purchase price was subject to an adjustment whereby the Company
and Holdings would share on an equal basis any difference between the purchase
price initially set and 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. 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 became due by the Company to Holdings and
was paid through a partial set-off of advances previously made. The excess of
the purchase price over the predecessor cost ($3,329) was debited to paid-in
capital.
During the year ended May 31, 1997, in conformity with the Company's
plans to maximize shareholder values, the Company organized an initial public
offering of ULSA's newly-issued and existing shares. In anticipation thereof,
the Company sold an aggregate of 30,000 shares (or 15.0% of the then ULSA's
equity) 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 84% of ULSA as of March 31,
1997. As of April 24, 1997, the initial public offering closed. The offering 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 diluting the Company's
equity holding in ULSA to 60% post-initial public offering. The shares of ULSA
have been listed on the Swiss Exchange since April 25, 1997.
During the year ended May 31, 1998, the Company purchased 3,260 shares
of ULSA stock, and sold 18,150 shares of ULSA stock, either on the market, or in
private transactions at prices substantially equal to market.
7. Related Party Transactions
Advances to and from related companies bear an interest rate based on
the 3 months LIBOR plus 2% per annum. These advances are unsecured.
During the year ended May 31, 1994, the Company entered into a
management services contract with a company owned by the Chairman of
UniHolding's Board of Directors. The contract provided for an annual payment of
SFr.600 for a term of 5 years. Under this contract the Company paid SFr.600
($507 at then average exchange rate) during the year ended May 31, 1996, after
which such contract was canceled and replaced by a management contract under
which a subsidiary paid SFr.720 ($610 at then average exchange rate) and SFr.720
($492 at average exchange rate) during the years ended May 31, 1997 and 1998 to
a company in which the Chairman is a director. During 1997 and 1998, pursuant to
a management consulting agreement, GUCT paid $300 per annum to a company in
which the Chairman is a director.
During the year ended May 31, 1996 the Company made payments of SFr.600
($507 at then average exchange rate) for consultancy services to a company
affiliated with a Director of the Company. During the years ended May 31, 1997,
and 1998, a subsidiary paid SFr.720 ($610 at then average exchange rate) and
SFr.720 ($492 at then average exchange rate) for consultancy services to a
company affiliated with two Directors of the Company. During 1997 and 1998,
pursuant to a management consulting agreement, GUCT paid $300 per annum to a
company affiliated with those two Directors of the Company.
8. Retained Earnings
Retained earnings of Swiss subsidiaries are partially restricted by law
as to distribution. Restricted amounts (including temporary restrictions) were
approximately $17,997 and $17,982 at May 31, 1998 and 1997.
9. Retirement plans
All of the Company's employees participate in the pension or retirement
plans legally required in their place of work. All of such plans are defined
contribution plans. Under all such plans, which are administered by third
parties, contributions are made by the employees and by the Company. This
contribution is expensed in the period that the cost is incurred.
Total benefit plans expenses was approximately $1,247, $1,336, and $1,424
for the years ended May 31, 1998, 1997 and 1996 respectively.
The Company does not maintain any plans for other post-employment or
post-retirement employee benefits.
10. Commitments and Contingencies
The Company is obligated under capital and operating leases for
laboratory premises, offices and equipment expiring at various times through
2003. Minimum lease payments for leases that have initial or remaining
noncancellable terms in excess of one year approximate :
Operating leases Capital leases
1998/99 $ 2,818 $ 875
1999/2000 1,701 511
2000/01 919 248
2001/02 329 79
2002/03 66 -
-----------
Minimum lease payments 1,713
Less : amount representing interest (179)
Present value of net minimum -----------
lease payments $ 1,534
Operating lease expenses, which primarily relate to the rental of
buildings, office furniture and equipment, were approximately $3,984, $3,220,
and $3,476 for the years ended May 31, 1998, 1997 and 1996 respectively.
Certain key officers have employment agreements that provide for
aggregate annual salaries of approximately $1,500 and which include
non-competition clauses. In the event that the Company invokes such clauses
after termination of the employment agreements, the Company may be obligated,
under certain circumstances, to compensate these individuals for differences in
salary between the compensation paid to them by the Company on the date of the
expiration of the employment agreements and their new annual salaries.
In connection with the initial public offering of ULSA's bearer shares
on April 25, 1997, the Company, as well as certain of the Company's direct and
indirect shareholders, have agreed for a certain period of time to respect
certain restrictions regarding the transfer and listing of ULSA's shares held by
them and the maintenance of the existing shareholder control. The restrictions
are summarized as follows: (a) no sale or other transfer of ULSA's bearer shares
and/or registered shares until April 25, 1999, without the prior written consent
of the lead manager of the initial public offering; (b) no listing of ULSA's
registered shares on any securities exchange for a period of five years from
April 25, 1997; and (c) maintenance of existing majority ownership and effective
control of ULSA until April 25, 1999.
In the normal conduct of its business, the Company may be a party to
certain litigation. As of May 31, 1998, the Company is a party to a litigation
in connection with a clinical test. While the proceedings are still at an early
stage, in the opinion of management and as confirmed by legal counsel, the
resolution of this matter should have no material effect, if any, on the
financial position or results of operations.
11. Investment in Equity Affiliates
Medical Diagnostic Management Inc.
In 1995, UGL entered into an agreement with HSL, whereby a new company,
MISE S.A., a British Virgin Islands corporation ("MISE") was formed. The Company
invested $3,005 in MISE for 33.3% of the voting rights and 66.6% of the equity
of MISE. HSL owned the remaining voting and equity interests in MISE for which
it contributed a nominal amount of cash and its agreement to obtain for MISE
certain know-how and related software and services. MISE acquired for $1,500
certain know-how and computer software from HSL, which know-how and software
were simultaneously acquired for $250 by HSL from Medical Diagnostic Management
Inc., a U.S. corporation ("MDM"), and MISE paid HSL a total of $1,500 for
certain plans for marketing the know-how and software in several European
countries. HSL at the time might be deemed to be related to the Company because
of its apparent affiliation with a then director of Unilab Corporation, who
presently serves as Chairman and Managing Director of FHL and of UGUK as a
result of UGUK's disposal discussed in Note 1. HSL granted to MISE a perpetual
license for the use of the MDM know-how and related computer software for use in
Western Europe. In addition, HSL agreed to provide marketing and support
services for a three-year period at no further cost to MISE. United States
generally accepted accounting principles require that purchased know-how and
marketing plans be expensed as incurred. Accordingly, during the year ended May
31, 1996, the Company expensed its investment in MISE. As a result of
operational difficulties in implementing the original plan, and after having
considered several alternatives to achieve their goals, HSL, MDM and the Company
agreed to restructure their relationship. As of May 31, 1997, (i) the Company
sold its MISE shares to HSL, (ii) HSL caused MISE to assign back to MDM all of
its rights related to the MDM know-how and computer software and (iii) MDM
issued $3,000 of preferred stock of MDM to the Company. Such preferred stock is
redeemable at MDM's option, in whole or in part at a total price of $3,000 in
1998, escalating to $3,600 in 2002. Should MDM offer any of its common stock in
an initial public offering, all outstanding shares of preferred stock owned by
the Company will be converted into common stock representing the lesser of (a)
15% of the MDM equity on a fully-diluted basis after the public offering, or (b)
$5,000 valued at the offering price. Further, as part of the agreement, MDM is
obligated to use its best efforts to introduce and implement its business in
Europe and to pay the Company a commission of 5% on its net sales in Europe for
a period of seven years. As a result of the write-off of the initial investment
in MISE and of the above reorganization, the Company's investment in MDM is
fully provided for.
12. Subsequent Events
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 $12,150. This
consideration was paid by (i) the assumption of UGUK's existing debt of $10,692
with a bank and a finance institution; (ii) compensation of an intercompany
account of $648; and (iii) $810 in cash. The company simultaneously entered into
rental agreements with the tenants of the building. The bank facility reduced to
$6,966 after the 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.
13. Supplemental Disclosures of Cash Flow Information
(in thousands) Years ended May 31
1998 1997 1996
Cash paid during the year for:
Interest $2,852 $2,003 $3,048
Income taxes 2,179 2,129 2,756
Capital lease obligations of $955, $1,904, and $3,581 were incurred
during the years ended May 31, 1998, 1997 and 1996, respectively.
14. Quarterly Financial Data (unaudited)
Summarized unaudited quarterly financial data for the years ended May 31,
1998 and 1997 is as follows (in thousands, except per share data)(note that
discontinued operations have been reclassified) :
<TABLE>
<CAPTION>
Year ended May 31, 1998
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Revenue $ 19,774 $ 18,074 $ 26,585 $ 19,070
Operating income (loss) 541 2,037 2,126 4,892
Income (loss) from continuing operations 156 3,303 5,555 (3,130)
Income (loss) from discontinued
operations (1,120) (1,379) (321) -
Net income (loss) (964) 1,924 5,234 (3,130)
Per share data :
Net income (loss)
from continuing operations $0.02 $0.44 $0.77 ($0.44)
Loss from discontinued operations ($0.14) ($0.18) ($0.04) -
Net income (loss) ($ 0.12) $0.25 $ 0.73 ($ 0.44)
Price range:
High $ 9.50 $ 10.00 $ 8.50 $ 7.50
Low $ 3.50 $ 4.50 $ 5.50 $ 4.50
</TABLE>
<TABLE>
<CAPTION>
Year ended May 31, 1997
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Revenue $ 21,627 $ 25,169 $ 22,271 $ 23,568
Operating income (loss) 1,320 3,233 (31,074) 3,717
Income (loss) from continuing operations (795) 1,539 (18,726) 7,709
Income (loss) from discontinued
operations (700) (892) (489) (952)
Net income (loss) (1,495) 647 (19,215) 6,757
Per share data :
Net income (loss)
from continuing operations ($0.13) $0.24 ($2.52) $0.97
Loss from discontinued operations ($0.11) ($0.14) ($0.07) ($0.12)
Net income (loss) ($ 0.24) $ 0.10 ($ 2.59) $ 0.85
Price range :
High $ 16.75 $ 16.25 $ 14.75 $ 11.50
Low $ 15.00 $ 13.75 $ 6.75 $ 7.25
</TABLE>
Earnings per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share for a year
does not equal the total computed for the year due to stock transactions that
occurred during the periods.
15. Segment Information
During the years ended May 31, 1997 and 1996, 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.
Year Ended May 31
1998 1997 1996
Revenues from unaffiliated customers:
U.S. - $ - $ -
Switzerland 70,076 60,810 66,427
United Kingdom - 21,334 19,596
Spain 6,721 6,523 3,754
Other 6,706 3,968 2,857
Operating Profit or Loss:
U.S. - - -
Switzerland 9,830 10,738 10,261
United Kingdom - (32,083) 925
Spain (191) (202) (808)
Other (43) (1,257) (108)
Identifiable Assets:
U.S. - - -
Switzerland 74,350 44,233 54,722
United Kingdom 10,617 36,360 60,851
Spain 5,706 5,382 4,480
Other 22,298 666 999
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
FINANCIAL STATEMENTS AND SCHEDULES:
1. Financial Statements - See Index to Financial Statements at ITEM 8.....
2. Financial Statement Schedule II..........................................
The information required pursuant to Item 601
of Regulation S-K is incorporated by
reference to the Exhibit Index of this Report ..............
EXHIBITS:
The information required pursuant to Item 601 of Regulation S-K is
incorporated by reference to the Exhibit Index of this report ............
REPORTS ON FORM 8-K:
1. Current Report on Form 8-K filed April 1, 1998
Reporting on Item 5
2. Current Report on Form 8-K filed May 11, 1998 Reporting on Item 2
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
2.1 Share Purchase Agreement between Unilabs
Management Company, Ltd. as Seller, and EIBA
"Eidgenoessische Bank" Beteiligungs und
Finanzgesellschaft as Purchaser, dated January 17,
1997 (1)
2.2 Share Purchase Agreement between Unilabs
Group Limited and Unilabs Management
Company Ltd. and Banque Cantonale de Geneve,
dated February 6, 1997 (1)
2.3 Share Purchase Agreement between Unilabs
Group Limited and KK Trust AG., dated February
17, 1997 (1)
2.4 Share Purchase Agreement between Unilabs
Group Limited and Unilabs Holdings SA, dated
February 18, 1997(2)
2.5 Share Purchase Agreement between Unilabs
Group Limited and Unilabs Holdings SA, dated
March 13, 1997(2)
2.6 Underwriting Agreement between Unilabs SA and Union
Bank of Switzerland, dated April 24, 1997(2)
2.7 Master Combination Agreement by and among
NDA Clinical Trials Services, Inc. ("NDA"),
certain NDA stockholders and Global Unilabs
Clinical Trials, Ltd., dated as of January 31, 1997
(3)
2.8 Stock Purchase Agreement, dated as of July 23,
1996, between Morgan Stanley & Co.,
Incorporated and UniHolding Corporation (4)
2.9 Agreement by and among Unilabs Group Limited,
Health Strategies Limited and Medical Diagnostic
Management, Inc., dated as of May 23, 1997(2)
3.1 Amended Certificate of Incorporation of
UniHolding Corporation (5)
3.2 Bylaws of UniHolding Corporation(2)
10.1 Memorandum of Agreement between Health
Strategies Ltd. and Unilabs Group Ltd. (6)
10.2 Amended Stock Option Plan (6)
10.3 Lock-Up Agreement between Edgard Zwirn, Unilabs
Holdings SA, UniHolding Corp., Unilabs Group Ltd.,
Unilabs SA and Union Bank of Switzerland, dated
April 14, 1997(2)
16 Letter from Richard A. Eisner & Company, LLP, dated
June 16, 1997 (7)
21 Subsidiaries of Registrant
27 Financial Data Schedule
- - ----------
(1) Incorporated by reference to Current Report on Form 8-K dated February 20,
1997.
(2) Incorporated by reference to Annual Report on Form 10-K for the Fiscal Year
ended May 31, 1997.
(3) Incorporated by reference to Current Report on Form 8-K dated January 31,
1997.
(4) Incorporated by reference to Quarterly Report on Form 10-Q for the period
ended August 31, 1996
(5) Incorporated by reference to Quarterly Report on Form 10-Q for the period
ended November 30, 1996.
(6) Incorporated by reference to Annual Report on Form 10-K for the Fiscal Year
ended May 31, 1996.
(7) Incorporated by reference to Amended Current Report on Form 8-K/A dated May
30, 1997
<PAGE>
UNIHOLDING CORPORATION AND SUBSIDIARIES Schedule II
VALUATION AND QUALIFYING ACCOUNTS
(dollars in thousands)
<TABLE>
<CAPTION>
Additions
Balance at Charged to Charged to Effect of Balance
Beginning Cost and Other Currency at End
of Period Expenses Other Accounts Deductions Changes Period
--------- --------- ------ -------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended May 31, 1996
Allowance for doubtful accounts $1,457(1) $743 $0 $0 $605 ($95) $1,500
Deferred tax on loss carryforwards 510 0 0 0 173 59 396
Year ended May 31, 1997
Allowance for doubtful accounts $1,500 $595 $0 $0 $826 ($68) $1,201
Deferred tax on loss carryforwards 396 2,249 (204)(2) 0 0 0 2,441
Year ended May 31, 1998
Allowance for doubtful accounts $1,201 $522 $2,188 (3) $0 $920 (4) ($51) $2,940
Deferred tax on loss carryforwards 2,441 0 30 0 1,504 (5) (94) 873
</TABLE>
(1) total allowance for doubtful accounts of $1,901 as disclosed in the balance
sheet as of May 31, 1995, included $444 of allowance on long-term notes
receivable, not included above, and classified separately in the balance sheet
as of May 31, 1996.
(2) restatement for operations discontinued in fiscal 1998
(3) includes $569 of collections of amounts previously reserved, and $1,619 of
allowances acquired in fiscal 1998
(4) includes $307 related to business disposed of in fiscal 1998
(5) includes $1,213 of allowances used and $291 of allowances related to
business disposed of in fiscal 1998
IV-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
to the Board of Directors and Shareholders of
UNIHOLDING CORPORATION, Delaware, USA
We have audited the consolidated balance sheets of UniHolding Corporation and
subsidiaries (the "Company") as of May 31, 1998 and 1997 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the two years in the period ended May 31, 1998, and have issued our
report thereon dated October 26, 1998. Our audits also included the financial
statement schedule listed in the Index at Item 14(a) for each of the two years
in the period ended May 31, 1998. This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. The consolidated statements of operations, stockholders' equity and cash
flows for the year ended May 31, 1996 were audited by other auditors whose
report dated September 26, 1996, expressed an unqualified opinion on those
statements.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Geneva, Switzerland,
October 26, 1998 ATAG ERNST & YOUNG SA
/s/ C. PICCI /s/S. REID
--------------------- ---------------------
C. Picci S. Reid
Expert-comptable diplome
(Auditor in charge)
IV-3
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
UniHolding Corporation
New York, New York
We have audited the consolidated financial statements of UniHolding Corporation
and subsidiaries for the year ended May 31, 1996 referred to in our report dated
September 26, 1996 which are included in the Company's Form 10-K. In connection
with our audit of these financial statements, we audited the financial statement
schedule listed under Item 14. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information stated therein, when
considered in relation to the financial statements taken as a whole.
Richard A. Eisner & Company, LLP
/s/ Richard A. Eisner & Company, LLP
New York, New York
September 26, 1996
With respect to Note 1
February 27, 1998
IV-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to this report to be signed on its
behalf by the undersigned hereunto duly authorized.
UniHolding Corporation
By: /s/ Bruno Adam
-----------------------
Bruno Adam
(CFO/Treasurer)
Date: November 30, 1998
