UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[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 3,151,480 shares of Common Stock, par value
$0.01 per share, of the Registrant outstanding.
1
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UNIHOLDING CORPORATION AND SUBSIDIARIES
Form 10-Q for the Quarterly Period Ended 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 14
Part II - OTHER INFORMATION:
Item 1. Legal Proceedings 17
Item 6. Exhibits 17
Signatures 18
2
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
3
<PAGE>
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 $ 239 $ 9,186
Accounts receivable, net of allowance for doubtful accounts 104 19,464
Due from related companies 1,130 1,587
Inventories - 1,849
Prepaid expenses 10 3,090
Other current assets - 411
---------- ----------
Total current assets 1,483 35,587
---------- ----------
NON-CURRENT ASSETS:
Long-term notes receivable 818 818
Intangible assets, net - 44,344
Property, plant and equipment, net - 8,828
Investment in Unilabs Group Limited 46,826 -
Investment in equity affiliates - 481
Long-term investments - 22,781
Other assets, net - 132
---------- ----------
Total non-current assets 47,644 77,384
---------- ----------
$ 49,127 $112,971
========== ==========
</TABLE>
See notes to financial statements
4
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UNIHOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
February 28, May 31,
1999 1998
------------- ------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Bank overdrafts $ - $4,010
Lease payable - 809
Payable to related parties 359 100
Trade payables 572 6,911
Accrued liabilities - 6,018
Long-term debt - 5,727
Taxes payable 5,000 6,459
Deferred taxes - 769
--------- ---------
Total current liabilities 5,931 30,803
--------- ---------
NON-CURRENT LIABILITIES:
Lease payable - 725
Long-term debt - 29,544
Taxes payable - 74
Deferred taxes - 179
--------- ---------
Total non-current liabilities - 30,522
--------- ---------
Total liabilities 5,931 61,325
--------- ---------
MINORITY INTERESTS - 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 2,024,640 and 1,602,569 shares of Common
Stock held in treasury at February 28,1999, and May 31, 1998,
respectively (13,709) (13,254)
--------- ---------
Total stockholders' equity 43,196 42,206
--------- ---------
$ 49,127 $112,971
========= =========
</TABLE>
See notes to financial statements
5
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UNIHOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<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 benefit / (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
Basic and diluted 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
6
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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> <C> <C> <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 - (302)
Depreciation and amortization of tangible assets 2,152 2,209
Amortization of intangible assets 2,388 1,883
Other non-cash (income) expenses - 119
Net changes in assets and liabilities, net of acquisitions:
Accounts receivable - (884)
Inventories - (96)
Prepaid expenses - (1,224)
Other current assets - 2,134
Trade payables 49 (87)
Accrued liabilities - (958)
Taxes payable - (248)
--------- ---------
Net cash provided by (used in) operating activities 7,441 13,405
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from issuance of share capital - (73)
Repayment of long-term debt - (1,277)
Cash proceeds from long-term debt - 27,958
Proceeds (reimbursement) from (of) bank overdrafts - (335)
Dividend paid to minority shareholders - (3,664)
Repayment of lease debt - (404)
Payment for purchase of treasury stock - (4,795)
--------- ---------
Net cash provided by (used in) financing activities - 17,410
--------- ---------
</TABLE>
(continued)
7
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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> <C> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for purchases of property and equipment - ($1,327)
Loans and advances (to) from affiliates and related
companies, net 227 (5,356)
Payment for purchase of interest in subsidiaries - (21,577)
Payment for purchase of interest in long-term investments - -
Payment for purchase of intangible assets - (788)
Proceeds from sale of interest in subsidiaries - -
Proceeds from sale of assets - 1,984
-------- ---------
Net cash (used in) provided by investing activities 227 (27,064)
-------- ---------
Effect of exchange rate changes on cash - (214)
Impact on consolidated assets and liabilities from change in
accounting method for Unilabs Group Limited (16,615) -
Net increase (decrease) in cash and cash equivalents from
continuing operations (8,947) 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 $ 239 $8,918
======== =========
</TABLE>
See notes to financial statements
8
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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. Prior periods' financial statements have been
restated to reflect the effect of discontinued operations.
Investments in significant 20 to 50%-owned affiliates or in which UniHolding
otherwise exercises significant influence are accounted for by the equity method
of accounting, whereby the investment is carried at cost of acquisition, plus
the proportionate equity in undistributed earnings or losses since acquisition.
As a result of UniHolding's decrease in ownership of Unilabs Group Limited
("UGL"), the method used to account for the investment in UGL has changed from
the consolidation method to the equity method effective February 25, 1999.
Valuation allowances are provided where management determines that the
investment or equity in earnings is not realizable. As of February 28, 1999, UGL
owns approximately 5 million shares of UniHolding common stock and UniHolding
owns 2,000,000 shares of UGL common stock. UniHolding has utilized the treasury
stock method in accounting for this reciprocal shareholding between itself and
UGL.
The Reorganization
Until February 25, 1999, UGL was a wholly-owned subsidiary of UniHolding.
Effective February 25, 1999, UGL reached an agreement with Unilabs Holdings SA,
a Panama corporation ("Holdings"), then a major shareholder of UniHolding,
whereby Holdings received approximately 2.3 million newly issued shares of
common stock of UGL in exchange for its UniHolding shares of common stock on a
one-for-one basis. At the same time, UGL reached agreements with certain other
non-US shareholders whereby such shareholders also received newly issued shares
of common stock of UGL in exchange for their approximate 0.4 million UniHolding
shares of common stock on the same one for one basis. Accordingly, effective
February 25, 1999, UGL had gained control of UniHolding. As a result, as of
February 28, 1999, UGL owned approximately 55% of UniHolding, while UniHolding
owned approximately 43% of UGL. As more fully described in Note 12, UGL
subsequently exchanged its shares of UniHolding common stock for 30,000 shares
of UGL common stock held by UniHolding. After the above restructuring, UGL
continues to own the majority of Unilabs SA, its main operating subsidiary.
Summarized income statement information for UGL for the nine-month period ended
February 28, 1999 is as follows:
Revenues $ 71,953
Operating income 6,529
Income from continuing operations 1,696
Net income 1,696
9
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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, other than to reflect the accounting impact
of the Reorganization, 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, including its current investment in UGL, are
located primarily 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 denominated in foreign currencies 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.
10
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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.
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.
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.
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 $1,190 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 consolidated
financial statements of UGL. The Company was of the opinion that no further
write-down was necessary at that time. See also Note 10.
11
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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 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 consolidated financial statements of UGL as of February 28,
1999. See also Note 10.
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.
12
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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 - 86,161
United Kingdom - 9,277
Spain 5,310
Other 49,127 2,975
10. Subsequent events
During the fourth quarter of fiscal 1999, UGL recorded an impairment write-down
of $15,710 relating to its investment in GUCT. Such write-down arose due to a
lack of available financing for the operating companies in which GUCT has an
ownership interest. As a result of such lack of available financing, GUCT and
UGL were informed that the controlling shareholders of the operating companies
had decided to look for alternative solutions including a sale of operations or
a liquidation. Accordingly, UGL's management performed a careful review of the
value of the GUCT preferred stock held as of May 31, 1999, considering the
situation described above. As a result of such review, UGL's management
concluded that there was a permanent impairment in the value of GUCT, and that
it was therefore necessary to record a 100% write- down of the aggregate value
of the GUCT preferred stock at May 31, 1999.
On September 3, 1999, pursuant to separate board of directors resolutions of the
UniHolding and UGL board of directors which resulted from discussions between
the boards of directors of UniHolding and UGL, UniHolding transferred to UGL
30,000 shares of UGL common stock, and UGL transferred to UniHolding its entire
shareholding of UniHolding common stock. Pursuant to this agreement, as of
September 3, 1999, UGL does not currently own any UniHolding shares, while
UniHolding owns a balance of approximately 2.0 million shares of UGL common
stock, or approximately 37% of UGL's equity. The remaining UniHolding
shareholders, who owned approximately 37% of the outstanding UniHolding stock
before the Reorganization, own 100% of the outstanding UniHolding stock after
the Reorganization and the September 3, 1999, transaction. Accordingly, their
indirect equity interest in UGL is not less than it was before the
Reorganization.
On October 1, 1999, ULSA closed on an agreement with FHL regarding the disposal
of the non-voting, redeemable preferred shares of that company. As of that date,
FHL merged its UK laboratory subsidiary into another laboratory owned by
Advanced Pathology Services Ltd., England. In connection therewith, ULSA sold
its FHL preferred shares against an immediate cash payment of 3,000 pounds
($4,800), with the balance being essentially constituted of notes due within 4
years payable by Advanced Pathology Services.
On December 21, 1999, ULSA closed on an agreement with Advanced Pathology
Services Ltd., England, regarding the disposal of Unilabs International (UK)
Ltd., a subsidiary engaged in the marketing of pathology services in the Middle
East. The sale consideration was agreed at 538 pounds ($860), in the form of a
note payable on December 21, 2003.
13
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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, 1998, 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 $7.4 million, a decrease of $6.0 million from the prior year
period primarily due to a $8.0 million decrease in net income from continuing
operations, offset by the effects of the accounting resulting from the
Reorganization.
Net cash used in financing activities for the nine months ended February 28,
1999 decreased by $26.4 million from the prior year period, primarily due to the
effects of the accounting resulting from the Reorganization.
14
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Net cash provided by investing activities for the nine months ended February 28,
1999 deceased by $27.1 million from the prior year comparable period. The change
is primarily due to the effects of the accounting resulting from the
Reorganization.
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. 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.
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.
UniHolding believes that the liquidity provided to ULSA and UGL by the cash flow
from operations, the existing cash balances and the borrowing arrangements
described above will be sufficient to meet UGL's capital requirements including
anticipated operating expenses arising from UGL's expansion into several new
markets, as well as debt repayments.
In addition, ULSA 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 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
15
<PAGE>
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 of UGL to carry out marketing and sales plans.
(b) Inability to recover the carrying value of the notes due from Advanced
Pathology Services Ltd.
As well as other factors listed in the Company's 1998 Annual Report on Form
10-K, which are incorporated herein by reference.
16
<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
17
<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: February 8, 2000
18
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
COMPANY'S FINANCIAL STATEMENTS FOR THE QUARTER ENDED FEBRUARY 28, 1997 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, 1996.
</LEGEND>
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