UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended February 28, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period to
Commission File No. 0-9833
UNIHOLDING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 58-1443790
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
96 Spring Street, 8th Floor, New York, New York 10012
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 219-9496
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No___
As of April 15, 1998, there were 7,165,249 shares of Common Stock, par value
$0.01 per share, of the Registrant outstanding.
<PAGE>
UNIHOLDING CORPORATION AND SUBSIDIARIES
Form 10-Q for the Quarterly Period Ended February
28, 1998
INDEX
Page
Part I - FINANCIAL INFORMATION:
Item 1. Financial Statements 3
Consolidated Balance Sheets - February 28, 1998
(unaudited) and May 31, 1997 4
Unaudited Consolidated Statements of Operations - Three and nine
month periods ended February 28, 1998, and February 28, 1997 6
Unaudited Consolidated Statements of Cash Flows - Nine month
periods ended February 28, 1998, and February 28, 1997 7
Notes to Unaudited Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
Part II - OTHER INFORMATION:
Item 1. Legal Proceedings __
Item 6. Exhibits __
Signatures __
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE>
UNIHOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS February 28, 1998 May 31, 1997
----------- -----------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $8,918 $8,201
Accounts receivable, net of
allowance for doubtful accounts 19,424 21,133
Due from related companies 3,173 3,573
Inventories 1,724 2,272
Prepaid expenses 2,570 2,046
Other current assets 441 770
----------- -----------
Total current assets 36,250 37,995
----------- -----------
NON-CURRENT ASSETS:
Long-term notes receivable 818 818
Deferred tax assets 381 5,293
Intangible assets, net 44,101 30,019
Property, plant and equipment, net 8,360 28,610
Investment in equity affiliates 482 1,480
Investment in subsidiary sold 13,182 0
Investment in subsidiary distributed 13,660 0
Other assets, net 149 1,088
----------- -----------
Total non-current assets 81,133 67,308
----------- -----------
$117,383 $105,303
=========== ===========
See notes to financial statements
<PAGE>
UNIHOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY February 28, 1998 May 31, 1997
----------------- -----------
(Unaudited)
CURRENT LIABILITIES:
Bank overdrafts $1,258 $5,889
Lease payable 766 1,733
Payable to related parties 42 150
Trade payables 6,803 9,501
Accrued liabilities 3,561 4,458
Long-term debt 6,328 4,741
Taxes payable 4,393 4,707
----------- -----------
Total current liabilities 23,151 31,179
----------- -----------
NON-CURRENT LIABILITIES:
Lease payable 991 2,446
Long-term debt 32,308 12,109
Taxes payable 104 155
Deferred taxes 0 725
----------- -----------
Total non-current liabilities 33,403 15,435
----------- -----------
Total liabilities 56,554 46,614
----------- -----------
MINORITY INTERESTS 8,835 10,344
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value;
Voting; authorized 18,000,000
shares; issued 7,627,736 at
February 28, 1998, and May 31, 1997 76 76
Non-Voting; authorized 2,000,000 shares;
issued and outstanding 298,384 at
February 28, 1998, and May 31, 1997 3 3
Additional paid-in capital 49,832 49,832
Cumulative translation adjustment (1,517) (3,050)
Retained earnings 11,753 5,559
----------- -----------
60,147 52,420
Less - cost of 752,871 and 293,150 shares of
Common Stock held in treasury at
February 28, 1998, and May 31, 1997,
respectively (8,153) (4,075)
----------- -----------
Total stockholders' equity 51,994 48,345
----------- -----------
$117,383 $105,303
=========== ===========
See notes to financial statements
<PAGE>
UNIHOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
Three Months ended Nine Months ended
February 28 February 28
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
REVENUE $26,585 $24,108 $58,479 $73,723
Operating expenses:
Salaries and related charges 10,289 9,806 22,656 30,522
Supplies 4,006 4,479 9,234 12,808
Other operating expenses 8,302 8,066 17,364 22,299
Depreciation and amortization of tangible assets 1,041 7,641 2,209 10,341
Amortization of intangible assets 821 26,202 1,883 27,371
--------- ---------- --------- ----------
OPERATING INCOME 2,126 (32,086) 5,133 (29,618)
Interest, net 13 (762) (29) (2,631)
Equity in loss of affiliates 0 (225) 0 (298)
Other, net 4,430 8,342 4,558 8,540
--------- ---------- --------- ----------
Income before taxes and minority interests 6,569 (24,731) 9,662 (24,007)
Tax provision (252) 2,534 (1,126) 1,510
--------- ---------- --------- ---------
Income (loss) from continuing operations before
minority interests 6,317 (22,197) 8,536 (22,497)
Minority interests in income of continuing operations (762) 2,982 (1,845) 2,434
--------- ---------- --------- ---------
Income (loss) from continuing operations 5,555 (19,215) 6,691 (20,063)
Gain from subsidiaries disposed of, net of taxes and
minority interests 0 0 2,323 0
Loss from subsidiaries subsequently distributed, net
of taxes and minority interests (321) 0 (2,820) 0
--------- ---------- --------- ---------
NET INCOME (LOSS) $5,234 ($19,215) $6,194 ($20,063)
========= ========== ========= =========
Weighted average common shares outstanding 7,184,136 7,419,574 7,566,760 6,708,615
Earnings (loss) per share of common stock
Income (loss) from continuing operations $0.77 ($2.59) $0.88 ($2.99)
Gain (loss) on disposition of discontinued operations ($0.04) -- ($0.06) --
Net income (loss) $0.73 ($2.59) $0.82 ($2.99)
</TABLE>
See notes to financial statements
<PAGE>
UNIHOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Nine Months ended
February 28 February 28
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $6,194 ($20,063)
Adjustments to reconcile net income to net cash
provided by operations:
Equity in loss of affiliates 0 298
Minority interests in income 1,845 (2,434)
Deferred taxes (302) (5,301)
Depreciation and amortization of tangible assets 2,209 10,341
Amortization of intangible assets 1,883 27,371
Other non-cash income (expenses) 119 (6,964)
Net changes in assets and liabilities,
net of acquisitions and disposals:
Accounts receivable (884) (1,417)
Inventories (96) (84)
Prepaid expenses (1,224) (181)
Other current assets 2,134 (2,171)
Trade payables (87) 640
Accrued liabilities (958) 379
Taxes payable (248) 2,341
--------- ----------
Net cash provided by (used in) operating activities 10,585 2,755
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from issuance of share capital (73) 5,000
Repayment of long-term debt (1,277) (4,652)
Cash proceeds from long-term debt 27,958 7,376
Proceeds (reimbursement) from (of) bank overdrafts (335) (426)
Dividend paid (3,664) (216)
Repayment of lease debt (404) (308)
Payment for purchase of treasury stock (4,795) (249)
--------- ----------
Net cash provided by (used in) financing activities 17,410 6,525
--------- ----------
(continued)
<PAGE>
UNIHOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(continued)
Nine Months ended
February 28 February 28
1998 1997
---- ----
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for purchases of property and equipment ($1,327) ($3,949)
Loans and advances (to) from affiliates and
related companies, net (5,356) (9,393)
Payment for purchase of interest in subsidiaries (21,577) (5,049)
Payment for purchase of intangible assets (788) (125)
Proceeds from sale of assets 1,984 13,401
--------- ---------
Net cash provided by (used in) investing activities (27,064) (5,115)
--------- ---------
Effect of exchange rate changes on cash (214) (574)
Net increase (decrease) in cash and cash equivalents 717 3,591
Cash and cash equivalents, beginning of period 8,201 1,587
--------- ---------
Cash and cash equivalents, end of period 18 $5,178
========= =========
See notes to financial statements
<PAGE>
UNIHOLDING CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Monetary amounts in thousands, except per share data)
1. Basis of Presentation
The consolidated financial statements include the accounts of UniHolding
and its majority-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated. The investment in the Company's equity
affiliates is accounted for on the equity method. During the period ended
February 28, 1997, 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 nine months ended
February 28, 1998, and the net asset value resulting from each transaction has
been shown as a separate item in the accompanying balance sheet as of February
28, 1998. Certain amounts in prior periods financial statements have been
reclassified to conform with the current presentation.
In January 1998, the Company's subsidiary Unilabs SA ("ULSA") announced and
closed 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 $13,200), payable for SFr1,950 (approximately $1,320) in cash,
and SFr17,400 (approximately $11,880) 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.
In January 1998, ULSA also announced and closed an agreement for the
acquisition of a Geneva-based laboratory and the merger of another Geneva-based
laboratory into ULSA's own Geneva operations.
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
disposition by the Company of part or all of its European investments.
5. Supplemental Disclosure of Cash Flow Information
Nine months ended
February 28, February 28,
1998 l997
Cash paid during the period for
Interest $ 907 $ 1,543
Income taxes 1,593 1,489
During the period ended February 28, 1997, 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 February 28, 1998, capital lease obligations of
$712 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 spun 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.
Nine Months Ended
February 28,
1998 1997
---- ----
Revenues from unaffiliated customers:
Diagnostic Laboratory Division $ 58,479 $ 69,108
Clinical Trials Division 9,041 4,615
Operating Profit or Loss:
Diagnostic Laboratory Division 5,133 (26,521)
Clinical Trials Division (8,105) (3,097)
Identifiable Assets:
Diagnostic Laboratory Division 117,383 93,195
Clinical Trials Division - 10,168
Following are the key financial data of the Company for purposes of
geographical information, net of amounts related to operations subsequently
discontinued:
Nine Months Ended
February 28,
1998 1997
---- ----
Revenues from unaffiliated customers:
U.S. $ - $ -
Non-U.S. 58,479 73,723
Operating Profit or Loss:
U.S. - -
Non-U.S. 5,133 (29,618)
Identifiable Assets:
U.S. - 1,900
Non-U.S. 117,383 101,463
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. The Company continues to examine
the feasibility of such a merger.
On January 15, 1998, the Company announced its decision to spin off its
Clinical Trials Division to the Company's shareholders. The transaction was
effected as of February 27, 1998, 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 has retained
$20 million, on an historical cost basis, of non-voting preferred stock in GUCT.
GUCT, which was until then an indirect wholly-owned subsidiary of UniHolding,
now holds all of the Company's former Clinical Trials Division. One share of
common stock of GUCT was distributed to the shareholders of UniHolding, without
any consideration, for each share of common stock of UniHolding held on February
9, 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.
<PAGE>
Item 2. Management's Discussions and Analysis of Financial Condition and Results
of Operations
Results of Operations
The Company's results of operations for the period ended February 28, 1998,
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, which was completed on February 27, 1998, the loss of
the respective subsidiaries has been shown separately in the accompanying
statement of operations for the three and nine months ended February 28, 1998,
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 February 28,
1998. 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 Nine months ended
February 28,1998 February 28, 1998
----------------- -----------------
REVENUE $26,585 $58,479
Operating expenses:
Salaries and related charges 10,289 22,656
Supplies 4,006 9,234
Other operating expenses 8,302 17,364
Depreciation and amortization of
tangible assets 1,041 2,209
Amortization of intangible assets 821 1,883
--------- ---------
OPERATING INCOME 2,126 5,133
Interest, net 13 (29)
Other, net 4,430 4,558
--------- ---------
Income before taxes and minority interests 6,569 9,662
Tax provision (252) (1,126)
--------- ---------
Income from continuing operations before
minority interests 6,317 8,536
Minority interests in income of continuing
operations (762) (1,845)
--------- ---------
Income from continuing operations 5,555 6,691
Gain from subsidiaries subsequently sold,
net of taxes and minority interests - 2,323
Loss from subsidiaries subsequently distributed,
net of taxes and minority interes (321) (2,820)
--------- ---------
NET INCOME $5,234 $6,194
========= =========
Weighted average common shares outstanding 7,184,136 7,566,760
Earnings per share of common stock
Net income from continuing operations $0.77 $0.88
Gain (loss) on disposition of discontinued
operations ($0.04) ($0.06)
Net income $0.73 $0.82
Clinical Trials Division
Three months ended Nine months ended
February 28, 1998 February 28, 1998
----------------- -----------------
REVENUE $3,389 $9,041
Operating expenses:
Salaries and related charges 2,587 6,894
Supplies 549 1,094
Other operating expenses 3,036 8,151
Depreciation and amortization of tangible
assets 222 465
Amortization of intangible assets 181 542
--------- ---------
OPERATING LOSS (3,186) (8,105)
Interest, net (108) (290)
Other, net 1,435 1,443
--------- ---------
Loss before taxes and minority interests (1,859) (6,952)
Tax benefit 926 2,505
--------- ---------
Loss before minority interests (933) (4,447)
Minority interests in loss 612 1,627
--------- ---------
NET LOSS ($321) ($2,820)
========= =========
Weighted average common shares outstanding 7,184,136 7,566,760
Loss per share of common stock ($0.04) ($0.37)
<TABLE>
<CAPTION>
Three months ended February 28, 1997
--------------------------------------------
Diagnostic Clinical
Laboratory Trials
Division Division As reported
---------- --------- -------------
<S> <C> <C> <C>
REVENUE $22,271 $1,837 $24,108
Operating expenses:
Salaries and related charges 9,289 517 9,806
Supplies 3,915 564 4,479
Other operating expenses 6,345 1,721 8,066
Depreciation and amortization of tangible assets 1,201 40 1,241
Adjustment of carrying value of building 6,400 6,400
Amortization of intangible assets 973 7 980
Adjustment of carrying value of goodwill in subsidiary 25,222 25,222
--------- --------- ---------
OPERATING INCOME (LOSS) (31,074) (1,012) (32,086)
Interest, net (754) (8) (762)
Equity in loss of affiliates (298) 73 (225)
Other, net 8,338 4 8,342
--------- --------- ---------
Income (loss) before taxes and minority interests (23,788) (943) (24,731)
Tax credit (provision) 2,279 255 2,534
--------- --------- ---------
Income (loss) before minority interests (21,509) (688) (22,197)
Minority interests in income (loss) 2,783 199 2,982
--------- --------- ---------
NET INCOME (LOSS) ($18,726) ($489) ($19,215)
========= ========= =========
Weighted average common shares outstanding 7,419,574 7,419,574 7,419,574
Earnings (loss) per share of common stock ($2.52) ($0.07) ($2.59)
</TABLE>
<TABLE>
<CAPTION>
Nine months ended February 28, 1997
--------------------------------------------
Diagnostic Clinical
Laboratory Trials
Division Division As reported
---------- --------- ------------
<S> <C> <C> <C>
REVENUE $69,067 $4,656 $73,723
Operating expenses:
Salaries and related charges 28,593 1,929 30,522
Supplies 12,140 668 12,808
Other operating expenses 17,291 5,008 22,299
Depreciation and amortization of tangible assets 3,823 118 3,941
Adjustment of carrying value of building 6,400 6,400
Amortization of intangible assets 2,119 30 2,149
Adjustment of carrying value of goodwill in subsidiary 25,222 25,222
--------- --------- ---------
OPERATING INCOME (LOSS) (26,521) (3,097) (29,618)
Interest, net (2,552) (79) (2,631)
Equity in loss of affiliates (298) (298)
Other, net 8,538 2 8,540
--------- --------- ---------
Income (loss) before taxes and minority interests (20,833) (3,174) (24,007)
Tax credit (provision) 616 894 1,510
--------- --------- ---------
Income (loss) before minority interests (20,217) (2,280) (22,497)
Minority interests in income (loss) 2,235 199 2,434
--------- --------- ---------
NET INCOME (LOSS) ($17,982) ($2,081) ($20,063)
========= ========= =========
Weighted average common shares outstanding 6,708,615 6,708,615 6,708,615
Earnings (loss) per share of common stock ($2.68) ($0.31) ($2.99)
</TABLE>
Three and nine month periods ended February 28, 1998 compared with the three and
nine month periods ended February 28, 1997
Consolidated revenue was $26.6 million and $58.5 million for the three and
nine months ended February 28, 1998, respectively representing respectively an
increase of $2.5 million and a decrease of $15.2 million from the comparable
prior year periods. As further discussed below, the increase for the three
months ended February 28, 1998, was primarily due to organic growth and to an
acquisition in Switzerland, which more than compensated the decrease due to(a)
the sale of the UK operations of the Diagnostic Laboratory Division and (b) the
spin-off of the Clinical Trials Division. For the nine months ended February 28,
1998, 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 (excluding
the revenuess from the newly-acquired opoerations) for the nine months, as
expressed in local currency, increased by 0.3% as a result of an increase in
specimen volume of 0.7% and a decrease attributable to price changes and test
mix of 0.4%, all excluding the effect of newly-acquired operations which
contributed to an increase in revenues of approximately 22%. Spanish operations
increased revenues to $4.7 million, representing a 25% increase in local
currency.
Operating income for the three and nine months ended February 28, 1998 was
$2.1 million and $5.1 million respectively, compared to an operating loss of
$32.1 million and $29.6 million in the comparable prior year periods. The prior
year losses were largely attributable to (a) a write-down of goodwill in one of
the UK subsidiaries of $20.1 million, (b) a write-down in the carrying value of
the UK property of $6.4 million, and (c) a charge of $3.7 million to adjust
accumulated amortization of goodwill. Excluding the effect of such items, the
operating income generated by the Diagnostic Laboratory Division increased by
$3.0 million and $1.4 million versus 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, offset by an increase
in operating income contributed by newly-acquired operations and by the sale of
the UK operations.
Interest expense, net, decreased $0.8 million and $2.6 million during the
three and nine months ended February 28, 1998, as compared to the prior year
periods, primarily due to lower average borrowing levels.
Other income of $4.4 million were recorded during the three months ended
February 28, 1998, resulting from foreign currency transactions and changes in
foreign currency positions, and from gains on sale of part of the investment
held by the Company in ULSA. This compared to an income of $8.3 million in the
prior year comparable period due to approximately the same causes.
Provision for income taxes in the nine months ended February 28, 1998, was
$1.1 million, as compared to $1.5 million in the prior year comparable period.
Minority interests in income of continuing operations in the nine months
ended February 28, 1998, were $1.8 million as compared to a negative $2.4
million in the prior year comparable period. The current year's figure 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. The prior year figure resulted primarily from the
attribution to minority interests of the write-downs and write-offs made during
the three months ended February 28, 1997, as explained above.
In connection with the sale of its UK operations, the Company recorded a
net gain of $2.3 million in the nine 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 $2.8 million,
corresponding to period losses of such operations. While they are no longer part
of the Company's consolidated revenues, revenues of $3.4 million and $9.0
million for the three and nine months ended February 28, 1998, respectively,
representing an increase of $1.6 million and $4.3 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 $3.2 million and
$8.1 million for the three and nine months ended February 28, 1998 as compared
to a loss of $1.0 million and $3.1 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 $2.5 million in the nine
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 $1.6 million
credit to minority interests during the nine months due to period losses of the
division attributable to minority shareholders. Such amount compares to $0.2
million in the comparable prior year period due to the January 1997
reorganization of UCTI.
Liquidity and Capital Resources
Net cash provided by operating activities for the nine months ended
February 28, 1998 amounted to $10.6 million, a change of $7.8 million from the
prior year primarily due to improved operating results of the Diagnostic
Laboratory Division.
Net cash provided by financing activities for the nine months ended
February 28, 1998 was $17.4 million, primarily due to cash proceeds of new
long-term debt arrangements, offset by a dividend paid by ULSA to all its
shareholders, and by cash used to purchase the Company's treasury stock. In the
prior year period, net cash of $6.5 million had been provided by financing
activities, primarily due to the issuance of share capital occurred in the prior
period, as well as long-term debt.
Net cash used in investing activities for the nine months ended February
28, 1998 was $27.1 million, comparing to $5.1 million used in the prior year
period. The change is primarily due to capital expenditures incurred in
connection with the expansion of laboratory operations in Europe.
As of April 17, 1998, the Company's bank facilities provide for a total of
approximately $50 million, including secured senior revolving facilities
consisting of term loans, working capital loans and/or guarantees. As of April
17, 1998, the Company had approximately $9 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.
The Clinical Trials Division was spun off to the Company's shareholders as
of February 27, 1998. Accordingly, the Company will not make any further
investment or advances to the Clinical Trials Division.
In addition, the Company has outstanding obligations and commitments under
capital leases which mature over the next five to ten years.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Management's Discussion and Analysis contains various "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
which represent the Company's expectations or beliefs concerning the Company's
operations, economic performance and financial condition, including, in
particular, forward-looking statements regarding the Company's expectation of
future performance following implementation of its new business strategy. Such
statements are subject to various risks and uncertainties. Accordingly, the
Company hereby identifies the following important factors that could cause the
Company's actual financial results to differ materially from those projected,
forecast, estimated, or budgeted by the Company in such forward-looking
statements.
(a) Inability to carry out marketing and sales plans.
(b) Inability to 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.
<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 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
27 Financial Data Schedule
(b) Reports on Form 8-K.
Form 8-K filed January 15, 1998 reporting on Item 5.
<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: April 20, 1998
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
COMPANY'S FINANCIAL STATEMENTS FOR THE QUARTER ENDED FEBRUARY 28, 1998 AS
SUBMITTED IN ITS QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS WITH REFERENCE TO THE ANNUAL
REPORT FILED ON FORM 10-K FOR THE YEAR ENDED MAY 31, 1997.
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