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, 1999
[ ] 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 13, 1999, there were, for accounting purposes, 3,151,480 shares of
Common Stock, par value $0.01 per share, of the Registrant outstanding.
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UNIHOLDING CORPORATION AND SUBSIDIARIES
Form 10-Q for the Quarterly Period Ended February 28, 1999
INDEX
Page
Part I - FINANCIAL INFORMATION:
Item 1. Financial Statements 3
Consolidated Balance Sheets - February 28, 1999 (unaudited)
and May 31, 1998 4
Unaudited Consolidated Statements of Operations - Three month
and nine month periods ended February 28, 1999, and February 28, 1998 6
Unaudited Consolidated Statements of Cash Flows - Nine month
periods ended February 28, 1999, and February 28, 1998 7
Notes to Unaudited Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Part II - OTHER INFORMATION:
Item 1. Legal Proceedings 16
Item 6. Exhibits 16
Signatures 17
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
3
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UNIHOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS February 28, May 31,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $8,960 $9,186
Accounts receivable, net of allowance for doubtful accounts 20,083 19,464
Due from related companies 1,410 1,587
Inventories 1,842 1,849
Prepaid expenses 1,998 3,090
Other current assets 1,942 411
---------- ---------
Total current assets 36,235 35,587
---------- ---------
NON-CURRENT ASSETS:
Long-term notes receivable 818 818
Intangible assets, net 45,088 44,344
Property, plant and equipment, net 7,879 8,828
Investment in equity affiliates 231 481
Long-term investments 26,303 22,781
Other assets, net 219 132
---------- ---------
Total non-current assets 80,538 77,384
---------- ---------
$116,773 $112,971
========== =========
</TABLE>
See notes to financial statements
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UNIHOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY February 28, May 31,
1999 1998
----------- ----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Bank overdrafts $1,821 $4,010
Lease payable 655 809
Payable to related parties 421 100
Trade payables 7,484 6,911
Accrued liabilities 5,363 6,018
Long-term debt 5,795 5,727
Taxes payable 6,706 6,459
Deferred taxes - 769
----------- ---------
Total current liabilities 28,245 30,803
----------- ---------
NON-CURRENT LIABILITIES:
Lease payable 628 725
Long-term debt 36,876 29,544
Taxes payable 75 74
Deferred taxes - 179
----------- ---------
Total non-current liabilities 37,579 30,522
----------- ---------
Total liabilities 65,824 61,325
----------- ---------
MINORITY INTERESTS 18,791 9,440
----------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value;
Voting; authorized 18,000,000 shares; issued 7,627,736 at
February 28, 1999, and May 31, 1998 $76 76
Non-Voting; authorized 2,000,000 shares; issued and
outstanding 298,384 at February 28, 1999, and May 31, 1998 3 3
Additional paid-in capital 49,832 49,832
Cumulative translation adjustment (1,630) (2,074)
Retained earnings 8,624 7,623
----------- -----------
56,905 55,460
Less - cost of 4,774,640 and 1,602,569 shares of Common
Stock held in treasury at February 28,1999, and May 31, 1998,
respectively (24,747) (13,254)
----------- ---------
Total stockholders' equity 32,158 42,206
----------- ---------
$116,773 $112,971
=========== =========
</TABLE>
See notes to financial statements
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UNIHOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months ended Nine Months ended
February 28, February 28,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE $24,469 $20,631 $71,953 $58,479
Operating expenses:
Salaries and related charges 9,698 7,466 29,688 22,656
Supplies 4,348 2,681 12,704 9,234
Other operating expenses 6,995 6,619 18,940 17,364
Depreciation and amortization of
tangible assets 839 518 2,152 2,209
Amortization of intangible assets 836 792 2,388 1,883
----------- ----------- ----------- -----------
OPERATING INCOME 1,753 2,555 6,081 5,133
Interest, net (503) 242 (1,550) (29)
Other, net (322) 3,973 (129) 6,881
----------- ----------- ----------- -----------
Income before taxes and minority
interests 928 6,770 4,402 11,985
Tax provision (426) (252) (1,550) (1,126)
----------- ----------- ----------- -----------
Income from continuing operations
before minority interests 502 6,518 2,852 10,859
Minority interests in income of
continuing operations (376) (963) (1,851) (1,845)
----------- ----------- ----------- -----------
Income from continuing operations 126 5,555 1,001 9,014
Loss from discontinued operations, net
of taxes and minority interests - (321) - (2,820)
----------- ----------- ----------- -----------
NET INCOME $126 $5,234 $1,001 $6,194
=========== =========== =========== ===========
Weighted average common shares
outstanding 5,918,366 7,184,136 6,016,337 7,566,760
Earnings per share of common stock
Net income from continuing operations $0.02 $0.77 $0.17 $1.19
Loss from discontinued operations - ($0.04) - ($0.36)
Net income $0.02 $0.73 $0.17 $0.82
</TABLE>
See notes to financial statements
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UNIHOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months ended February 28,
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income from continuing operations $1,001 $9,014
Adjustments to reconcile net income to net cash provided by
operations:
Minority interests in income 1,851 1,845
Deferred taxes (1,008) (302)
Depreciation and amortization of tangible assets 2,152 2,209
Amortization of intangible assets 2,388 1,883
Other non-cash (income) expenses 1,172 119
Net changes in assets and liabilities, net of acquisitions:
Accounts receivable (355) (884)
Inventories 36 (96)
Prepaid expenses 1,175 (1,224)
Other current assets (1,518) 2,134
Trade payables 497 (87)
Accrued liabilities (737) (958)
Taxes payable 245 (248)
----------- -----------
Net cash provided by (used in) operating activities 6,899 13,405
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from issuance of share capital - (73)
Repayment of long-term debt (13,305) (1,277)
Cash proceeds from long-term debt 8,770 27,958
Proceeds (reimbursement) from (of) bank overdrafts 600 (335)
Dividend paid to minority shareholders (1,842) (3,664)
Repayment of lease debt (678) (404)
Payment for purchase of treasury stock (2,561) (4,795)
----------- -----------
Net cash provided by (used in) financing activities (9,016) 17,410
----------- -----------
</TABLE>
(continued)
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UNIHOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(continued)
<TABLE>
<CAPTION>
Nine Months ended February 28,
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for purchases of property and equipment ($4,638) ($1,327)
Loans and advances (to) from affiliates and related
companies, net 227 (5,356)
Payment for purchase of interest in subsidiaries (5,459) (21,577)
Payment for purchase of interest in long-term investments (3,014) -
Payment for purchase of intangible assets (1,049) (788)
Proceeds from sale of interest in subsidiaries 3,222 -
Proceeds from sale of assets 12,437 1,984
--------- ---------
Net cash (used in) provided by investing activities 1,726 (27,064)
--------- ---------
Effect of exchange rate changes on cash 165 (214)
Net increase (decrease) in cash and cash equivalents from
continuing operations (226) 3,537
Net cash flows provided by discontinued operations - 456
Cash and cash equivalents, beginning of year 9,186 4,925
--------- ---------
Cash and cash equivalents, end of period $8,960 $8,918
========= =========
</TABLE>
See notes to financial statements
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UNIHOLDING CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Monetary amounts in thousands, except per share data)
1. Basis of Presentation
The consolidated financial statements include the accounts of UniHolding and its
majority-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated. The investment in the Company's equity
affiliates is accounted for on the equity method. Prior periods' financial
statements have been restated to reflect the effect of discontinued operations.
2. Management Opinion
In the opinion of management, the accompanying unaudited interim financial
statements reflect all adjustments that are necessary to present fairly the
financial position, results of operations and cash flows for the interim periods
reported. All such adjustments made were of a normal recurring nature.
The results of operations and financial position for interim periods are not
necessarily indicative of those to be expected for a full year, due, in part, to
the seasonal fluctuations which are normal for the Company's business.
The preparation of consolidated 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.
The accompanying interim financial statements and related notes should be read
in conjunction with the consolidated financial statements of the Company and
related notes as contained in the Annual Report on Form 10-K for the year ended
May 31, 1998.
3. Earnings Per 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 all periods
presented, 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 period.
4. Cumulative Translation Adjustment
The Company's principal operations are located primarily in Switzerland, Italy,
Spain, Turkey and Russia. A significant part of net assets, revenues and
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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.
5. Comprehensive Income
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, however interim period disclosure is limited to reporting a
total for comprehensive income. The Company's comprehensive income represents
net income plus the change in the cumulative translation adjustment equity
account for the periods presented. The Company has determined total
comprehensive income or (loss), net of tax, to be ($534) and $10,197 for the
three months ended February 28, 1999 and 1998, respectively, and $1,445 and
$7,727 for the nine months ended February 28, 1999 and 1998, respectively.
6. Supplemental Disclosure of Cash Flow Information
Nine months ended
February 28,
1999 1998
Cash paid during the year for:
Interest $ 1,425 $ 907
Income taxes 1,460 1,593
During the period ended February 28, 1999, capital lease obligations of $398
were incurred when the Company entered into leases for new capital equipment.
During the period ended February 28, 1999, in connection with the acquisition of
Bewlay House, the Company incurred liabilities as described in Note 7.
7. Acquisition and Disposal of Bewlay House
In connection with the sale of the Company's former UK subsidiary ("UGUK"),
UniLabs SA agreed to purchase from the latter the London building which houses
most of UGUK's operations ("Bewlay House").
On July 8, 1998, the Company completed this transaction and acquired a 999-year
leasehold in Bewlay House for a purchase price of $12,322 at the then exchange
rate. This consideration was paid by (i) the assumption of UGUK's existing debt
of $10,812 with a bank and a finance institution; (ii) compensation of an
intercompany account of $733; and (iii) $777 in cash. The company simultaneously
entered into rental agreements with the tenants of the building. The bank
facility was reduced by $2,388 to $6,966 at closing, had a three-year maturity
and was subject to quarterly repayments of $162. The financial institution's
facility of $1,458 was subject to monthly repayments increasing from $19
presently to $32 in January 2003.
On February 25, 1999, the Company closed on definitive agreements to sell the
building for cash, for a consideration of approximately $12,000, net of all
related costs and expenses. No significant gain or loss,
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other than resulting from currency changes, was made as compared to the carrying
value of the building. The Company simultaneously prepaid the debts to the bank
and finance institution.
8. Long-term Investments
Focused Healthcare (Jersey) Limited
As partial consideration for the Company's disposal of UGUK, the Company
received non-voting, non-convertible, redeemable preferred shares of Focused
Healthcare (Jersey) Limited ("FHL"), with a face value of $11,797. During the
year ended May 31, 1998, the Company amortized $1,180 related to its investment
in FHL, which reflects management's appraisal of the uncertainty as to the
timing and the possibility of recovery of the investment. As of February 28,
1999, such preferred stock of FHL is recorded at $10,807 in the accompanying
consolidated financial statements. The Company is of the opinion that no further
write-downs are necessary at this time.
Global Unilabs Clinical Trials Limited
As of February 27, 1998, the Company spun off its then wholly-owned subsidiary
Global Unilabs Clinical Trials Limited ("GUCT") to its shareholders. During the
three and nine months periods ended February 28, 1998, GUCT had consolidated
revenues of $3,389 and $9,041, respectively. Immediately after the spin-off, the
Company continued to hold non-voting, non-convertible, redeemable preferred
stock of GUCT, with a face value of approximately $20,000, carried at $12,183 in
its balance sheet.
As of December 30, 1998, the Company became a party to an agreement with a
first-class third party investment bank regarding the operating subsidiaries of
the Company's former wholly-owned subsidiary, GUCT. During the second half of
calendar 1998, the Company was informed that GUCT's operating subsidiaries were
in need of substantial new capital to continue and satisfactorily develop their
clinical trials operations, and that GUCT was unable to obtain the necessary
funding. As a result of discussions held by GUCT with various potential partners
throughout 1998, an agreement was reached whereby an investment bank agreed to
invest $7,500 in GUCT's subsidiaries, provided, among other conditions, that (1)
the investment bank would have total management control over the business, and
(2) GUCT or the Company would invest $2,500. As GUCT had no funds available for
such a transaction, the Company agreed to fund such additional investment,
essentially with a view to protect its own original investment in GUCT, in which
the Company continued to own approximately $20,000 of non-voting and
non-convertible preferred stock, as described above. The Company and GUCT agreed
that this additional financing of GUCT by the Company was structured such that
GUCT owns the shares newly issued to the Company by GUCT's subsidiaries, and the
Company owns additional preferred stock of GUCT with a face value equal to the
amount of the additional investment. The terms of the additional preferred stock
include conditions that will enable the Company to share the upside potential,
if any, deriving from the agreement with the investment bank. The agreement with
the investment bank further provides that, if the operating subsidiaries meet
certain business targets by June 30, 1999, an additional investment of $4,500
and $1,500, respectively, must be made in the second half of calendar 1999 by
the investment bank and GUCT and/or the Company, respectively. As of April 13,
1999, the Company was not aware whether such business targets would be met and
whether such additional investment would have to be made. The Company's
management has performed a careful review of the value of the GUCT preferred
stock held as of February 28, 1999, based upon several criteria including the
valuation criteria applied to the business by the investment bank in the
December transaction. As a result of such review, the Company's management has
concluded that it presently had no basis to determine that there was a permanent
impairment in the value of GUCT, and that it was therefore not appropriate to
record a write-down in the aggregate value of the GUCT preferred stock, carried
at $15,197 in the accompanying balance sheet as of February 28, 1999.
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The Company will continue to monitor the value of its investment in GUCT
preferred stock, particularly when the business data as of June 30, 1999,
becomes available.
9. Segment Information
During the year ended May 31, 1998, the Company performed testing in relation to
clinical trials for the pharmaceutical industry and therefore distinguished its
core clinical laboratory business from its clinical trials testing business. As
of February 27, 1998, the Company's clinical trials testing business was spun
off to the Company's shareholders.
Following are the key financial data of the Company for purposes of geographical
information.
Nine Months Ended
February 28,
1999 1998
Revenues from unaffiliated customers
Switzerland $60,744 $49,321
United Kingdom - -
Spain 6,069 4,888
Other 5,140 4,270
Operating Profit or Loss:
Switzerland 8,103 6,558
United Kingdom - -
Spain (417) (389)
Other (1,605) (1,036)
Identifiable Assets:
Switzerland 83,689 86,161
United Kingdom 10,807 9,277
Spain 6,291 5,310
Other 15,985 2,975
10. Restructuring
On February 25, 1999, the Company's subsidiary, Unilabs Group Limited ("UGL")
issued approximately 2.8 million new shares of its common stock in exchange for
the same number of shares of common stock of UniHolding owned by Unilabs
Holdings SA and its affiliates, the then largest shareholders of the Company. As
a result of these transactions, UGL now directly holds approximately 4.8 million
shares (61%) of UniHolding, including approximately 2 million shares previously
owned. UniHolding continues to hold 2.5 million shares of UGL, the initial
amount of UGL shares issued and outstanding when UniHolding owned 100% of UGL.
As a result of the above mentioned share issuance by UGL, UniHolding's direct
ownership interest in UGL was reduced to approximately 47% at February 28, 1999.
Out of the 2.8 million newly-issued shares, UGL has kept in its custody
approximately 2.3 million shares corresponding to UniHolding shares which
Unilabs Holdings SA will deliver upon receipt of the necessary authorization
from one of its banks, because such shares are pledged to such bank. Based upon
information obtained by UGL from the bank, there is no reason to believe that
such authorization will not be given, and, accordingly, UGL has accounted for
the issuance of the 2. 3 million shares in the accompanying balance sheet as of
February 28, 1999.
After the above restructuring, UGL continues to own the majority of Unilabs SA,
its main operating subsidiary.
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Item 2. Management's Discussions and Analysis of Financial Condition and Results
of Operations
Results of Operations
Three and nine month periods ended February 28, 1999 compared with the three and
nine month periods ended February 28, 1998
Consolidated revenue was $24.5 million and $71.9 million for the three and nine
months ended February 28, 1999, representing respectively an increase of $3.9
million and $13.4 million (including the effect of the change in the US dollar
exchange rate of $1.3 million) from the comparable prior year periods, as
restated for the spin-off of the clinical trials operations. Revenue generated
by the Swiss operations for the three months was down by 12% in local currency
due to the effect of the integration of the new operations during the comparable
prior year period, while revenue for the nine months was up by 20% in local
currency as a result of (i) a 1% increase in sales of the existing laboratories
and (ii) the contribution made by the new operations acquired during fiscal
1998. The Spanish operations increased revenues during the nine month period to
$6.1 million, as compared to $4.9 million in the comparable prior year nine
months period representing a 24% increase in local currency.
Operating income for the three months ended February 28, 1999 was $1.7 million,
versus $2.6 million in the comparable prior year three months period, due to the
effect of the integration of the new operations during the comparable prior year
period. For the nine months ended February 28, 1999 operating income was $6.1
million, versus $5.1 million in the comparable prior year period, as restated
for the spin-off of clinical trials operations. Such increase of $1.0 million
was essentially due to the Swiss operations, which increased operating income by
$1.5 million.
Other income of $3.9 million and $6.9 million, respectively, for the three and
nine months ended February 28, 1999 resulted primarily 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. No such gains were recorded
during the current year comparable periods.
Interest expense, net, increased $1.5 million during the nine months ended
February 28, 1999, as compared to the prior year, primarily due to higher
average borrowing levels resulting from the Swiss acquisitions completed during
fiscal 1998 and to the UK debt incurred as a result of the acquisition of the UK
building.
Provision for income taxes in the nine months ended February 28, 1999, was $1.6
million, as compared to $1.1 million in the prior year comparable period.
Minority interests in income of continuing operations in the nine months ended
February 28, 1999, were $1.9 million as compared to $1.8 million in the prior
year comparable period, essentially due to certain income not subject to
minority interest in the prior year period.
Liquidity and Capital Resources
Net cash provided by operating activities for the nine months ended February 28,
1999 amounted to $6.9 million, a decrease of $6.5 million from the prior year
period primarily due to a $8.0 million decrease in net income from continuing
operations, offset by an improvement in working capital, and higher amortization
charges.
Net cash used in financing activities for the nine months ended February 28,
1999 was $9.0 million, a change of $26.4 million from the prior year period,
primarily due to a net change of $19.2 million in proceeds from debt and to an
increase of $12.1 million in the repayment of debt, primarily caused by the
repayment of the UK debt upon the sale of Bewlay House, and scheduled repayments
under the new Swiss credit facilities.
Net cash provided by investing activities for the nine months ended February 28,
1999 was $1.7 million, compared to net cash used of $27.1 million in the prior
year comparable period. The change is primarily due to a $16.1 million decrease
in the level of cash expenditures incurred in connection with the purchases of
businesses and purchase of additional shares of subsidiaries, as well as a $10.4
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million increase in the proceeds from the sale of assets, which was principally
the result of the acquisition and disposal of Bewlay House during the same nine
month period (see Note 7 to the accompanying financial statements). Offsetting
these amounts was a $3.0 million increase in cash paid for long-term
investments, primarily GUCT (see Note 8 to the accompanying financial
statements).
In connection with the sale of UGUK, ULSA agreed to purchase from UGUK the
London building which houses most of UGUK's operations ("Bewlay House"). On July
8, 1998, the Company completed this transaction and acquired a 999-year
leasehold in Bewlay House for a purchase price of $12.3 million. This
consideration was paid by (i) the assumption of UGUK's existing debt of $10.8
million with a bank and a finance institution; (ii) compensation of an
intercompany account of $0.7 million; and (iii) $0.8 million in cash. The
company simultaneously entered into rental agreements with the tenants of the
building. The bank facility reduced to $6.9 million after the closing, had a
three-year maturity and was subject to quarterly repayments of $0.1 million. The
financial institution's facility of $1.5 million was subject to monthly
repayments up to January 2003. On February 25, 1999, the Company closed on
definitive agreements to sell the building for cash, for a consideration of
approximately $12,000, net of all related costs and expenses. No significant
gain or loss, other than resulting from currency changes, was made as compared
to the carrying value of the building. The Company simultaneously prepaid the
debts to the bank and finance institution.
As of April 14, 1999, the Company's bank facilities provide for a total of
approximately $46 million, including secured senior revolving facilities
consisting of term loans, working capital loans and/or guarantees. As of April
14, 1999, the Company had approximately $10 million of availability under the
aggregate credit facilities.
The Company believes that the liquidity provided by the cash flow from
operations, the existing cash balances and the borrowing arrangements described
above will be sufficient to meet the Company's capital requirements including
anticipated operating expenses arising from the Company's recent expansion into
markets other than Switzerland, as well as debt repayments.
In addition, the Company has outstanding obligations and commitments under
capital leases which mature over the next five to ten years.
IMPACT OF YEAR 2000
As previously reported in the Company's Form 10-K for the year ended May 31,
1998, most of the Company's laboratories are faced with "Year 2000" remediation
issues. Many computer programs were written with a two digit date field and if
these programs are not made Year 2000 compliant, they will be unable to
correctly process date information on or after the Year 2000. While these issues
impact all of the Company's data processing systems to some extent, they are
most significant in connection with patient- related computer programs.
Moreover, remediation efforts go beyond the Company's internal computer systems
and require coordination with clients, suppliers and other third parties to
assure that their systems and related interfaces are compliant. Given the
different computer systems operated by the Company's business units, the type
and extent of the Year 2000 issues and the cost of remediation vary
significantly among the Company's laboratories. Failure to achieve timely
remediation of computer systems that process client information and
transactions, and of all other systems with embedded technologies that are
critical to the Company's operations, would have a material adverse effect on
the Company's business, operations and financial results.
In response to the Year 2000 concerns, the Company created a Year 2000 Task
Force to coordinate and monitor the laboratories' progress in their Year 2000
remediation efforts. The Task Force reports directly to the Company's executive
management, provides regular progress reports to executive management, and
regularly meets with executive management to discuss its reports.
The Company's initial plans called for all critical systems to be renovated and
compliance testing underway by the end of calendar 1998. As of April 13, 1999,
the Company estimated that approximately 50 to 60% of its
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critical systems had been renovated and compliance testing underway, and that
the balance will be renovated by June 30, 1999. As the Company uses many
computerized laboratory machinery manufactured, provided and maintained by
third-party vendors, it has requested each of those vendors to provide the
Company with appropriate certification that the machinery is Year 2000
compliant. The Company currently estimates that approximately 50% of such
certification has been received, and it continuously presses those vendors that
have not responded. Acceptance testing is scheduled to take place through
mid-1999 with time frames differing by laboratory unit. Completion of any third
party interface testing is dependent upon those third parties completing their
own internal remediation. The Company could be adversely affected to the extent
third parties with which it interfaces (including some of the Company's
customers) have not properly addressed their Year 2000 issues. The Company
currently develops contingency plans to handle critical areas in the event
remediation is not fully successful or is beyond the Company's control.
In fiscal 1998, the Company spent approximately $0.5 million on its Year 2000
remediation efforts. The Company currently anticipates expenditures for Year
2000 remediation efforts and testing in the range of $0.5 million to $1.0
million in fiscal 1999, out of which approximately $0.6 million were spent in
the nine months ended February 28, 1999, and of approximately $0.2 million in
fiscal 2000. Substantially all of the expenditures already made are related to
internal payroll and external consultants, while future expenditures include
approximately $0.5 for computer equipment that was not compliant and should be
replaced.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Management's Discussion and Analysis contains various "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
which represent the Company's expectations or beliefs concerning the Company's
operations, economic performance and financial condition, including, in
particular, forward-looking statements regarding the Company's expectation of
future performance following implementation of its new business strategy. Such
statements are subject to various risks and uncertainties. Accordingly, the
Company hereby identifies the following important factors that could cause the
Company's actual financial results to differ materially from those projected,
forecast, estimated, or budgeted by the Company in such forward- looking
statements.
(a) Inability to carry out marketing and sales plans.
(b) Inability to recover the carrying value of the preferred stock in GUCT.
(c) Inability to recover the carrying value of the preferred stock in FHL.
As well as other factors listed in the Company's 1998 Annual Report on Form
10-K, which are incorporated herein by reference.
15
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Arbitration
As described and discussed more thoroughly in the Company's Annual Report on
Form 10-K for the year ended May 31, 1998, the Company is entitled to 80% of the
net recovery (less legal fees and costs) of any settlement or successful
resolution of the pending arbitration instituted by Americanino Capital Corp.
("ACC") pursuant to an agreement by which the Company sold its remaining
interest in ACC.
The Company's management will continue to monitor and report the progress of the
proceedings.
See also the discussion on Foreclosure Proceedings and Attachment Claim in the
1998 Annual Report on Form 10-K.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
27 Financial Data Schedule
(b) Reports on Form 8-K.
None
16
<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 16, 1999
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from this
Consolidated Statement of Financial Condition at February 28, 1999 (Unaudited)
and the Consolidated Statement of Income for the Nine Months Ended February 28,
1999 (Unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> May-31-1998
<PERIOD-START> Dec-1-1998
<PERIOD-END> Feb-28-1999
<CASH> 8,960
<SECURITIES> 0
<RECEIVABLES> 20,083
<ALLOWANCES> 0
<INVENTORY> 1,842
<CURRENT-ASSETS> 36,235
<PP&E> 7,879
<DEPRECIATION> 2,152
<TOTAL-ASSETS> 116,773
<CURRENT-LIABILITIES> 28,245
<BONDS> 0
0
0
<COMMON> 76
<OTHER-SE> 32,082
<TOTAL-LIABILITY-AND-EQUITY> 116,773
<SALES> 71,953
<TOTAL-REVENUES> 71,953
<CGS> 61,332
<TOTAL-COSTS> 65,872
<OTHER-EXPENSES> 129
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,550)
<INCOME-PRETAX> 4,402
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