<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: June 30, 1996
------------------------------
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period from: to
Commission file number: 0-13265
UCI MEDICAL AFFILIATES, INC.
(Exact name of small business issuer as specified in its charter)
<TABLE>
<CAPTION>
Delaware 59-2225346
<S> <C>
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
</TABLE>
1901 Main Street, Suite 1200, Mail Code 1105, Columbia, SC 29201
(Address of principal executive offices)
(803) 252-3661
(Issuer's telephone number)
6168 St. Andrews Road, Columbia, SC 29212
(Former name, address or fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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. ( X )YES ( ) NO
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. ( )YES ( ) NO
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
4,807,507 shares of $.05 common stock outstanding at June 30, 1996
Transitional Small Business Disclosure Format (check one): ( )YES ( X ) NO
1
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UCI MEDICAL AFFILIATES, INC.
INDEX
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<CAPTION>
PAGE
NUMBER
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
<S> <C>
Consolidated Balance Sheets - June 30, 1996
and September 30, 1995 3
Consolidated Statements of Operations for the quarters and
the nine months ending June 30, 1996 and June 30, 1995 4
Consolidated Statements of Cash Flows for the nine months
ending June 30, 1996 and June 30, 1995 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 9
PART II OTHER INFORMATION
Items 1-6 10-11
SIGNATURES 12
2
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UCI Medical Affiliates, Inc.
Consolidated Balance Sheets
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996 SEPTEMBER 30, 1995
------------ ------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 0 $ 76,513
Accounts receivable, less allowance for doubtful accounts
of $919,625 and $608,792 3,719,712 2,343,325
Inventory 267,356 265,068
Deferred taxes 301,146 491,543
Prepaid expenses and other current assets 393,056 282,060
------------ ------------
Total current assets 4,681,270 3,458,509
Property and equipment, less accumulated depreciation of
$1,868,034 and $1,529,999 3,001,552 2,795,384
Deferred taxes 486,036 120,639
Excess of cost over fair value of assets acquired, less
accumulated amortization of $1,105,992 and
$869,271 5,901,923 3,578,371
Other assets 271,013 262,768
------------ ------------
Total Assets $ 14,341,794 $ 10,215,671
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 1,720,302 $ 1,244,603
Accounts payable 1,419,726 1,652,792
Accrued salaries and payroll taxes 225,933 498,791
Other accrued liabilities 260,712 445,362
------------ ------------
Total current liabilities 3,626,673 3,841,548
Long-term debt, net of current portion 2,910,388 3,121,098
------------ ------------
Total Liabilities 6,537,061 6,962,646
------------ ------------
Commitments and contingencies
Stockholders' Equity
Preferred stock, par value $.01 per share:
Authorized shares - 10,000,000; none issued 0 0
Common stock, par value $.05 per share:
Authorized shares - 10,000,000
Issued and outstanding- 4,807,507 and 3,508,164
shares 240,375 175,408
Paid-in capital 13,732,333 9,694,256
Accumulated deficit (6,167,975) (6,616,639)
------------ ------------
Total Stockholders' Equity 7,804,733 3,253,025
------------ ------------
Total Liabilities and Stockholders' Equity $ 14,341,794 $ 10,215,671
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
3
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UCI Medical Affiliates, Inc.
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Nine Months Ended June 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 5,934,079 $ 4,729,526 $ 17,003,582 $ 12,825,971
Operating costs 5,519,769 5,009,047 15,513,107 13,511,486
------------ ------------ ------------ ------------
Operating margin 414,310 (279,521) 1,490,475 (685,515)
General and administrative expenses 28,126 9,896 90,364 56,725
Depreciation and amortization 254,005 160,912 687,819 393,205
------------ ------------ ------------ ------------
Income (loss) from operations 132,179 (450,329) 712,292 (1,135,445)
Other income (expense)
Interest expense, net of interest income (138,374) (149,845) (427,327) (301,480)
Gain (loss) on disposal of equipment
0 0 2,105 0
------------ ------------ ------------ ------------
Other income (expense) (138,374) (149,845) (425,222) (301,480)
Income (loss) before benefit (provision )for
income taxes (6,195) (600,174) 287,070 (1,436,925)
Benefit (provision )for income taxes 167,325 (3,233) 161,594 (7,233)
------------ ------------ ------------ ------------
Net income (loss) $ 161,130 $ (603,407) $ 448,664 $ (1,444,158)
============ ============ ============ ============
Net Income (loss) per common equivalent share $ .04 $ (.18) $ .11 $ (.48)
============ ============ ============ ============
Weighted average common shares
outstanding 4,504,274 3,318,331 4,121,683 3,031,478
============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
4
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UCI Medical Affiliates, Inc.
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
1996 1995
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 448,664 $(1,444,158)
Adjustments to reconcile net income (loss) to net
cash provided by (used-in) operating activities:
(Gain) loss on disposal of equipment (2,105) (5,493)
Provision for losses on accounts receivable 482,068 278,945
Depreciation and amortization 687,819 393,205
Deferred taxes (175,000) 0
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (1,834,528) (840,189)
(Increase) decrease in inventories (2,288) (32,013)
(Increase) decrease in prepaid expenses and other
current assets (118,836) (100,577)
Increase (decrease) in accounts payable and accrued
expenses (690,574) 761,684
----------- -----------
Cash provided by (used in) operating activities (1,204,780) (988,596)
----------- -----------
INVESTING ACTIVITIES:
Purchases of property and equipment (286,464) (1,507,918)
Acquisitions of goodwill (200,375) (12,227)
(Increase) decrease in other assets (8,245) 7,046
----------- -----------
Cash provided by (used in) investing activities (495,084) (1,513,099)
----------- -----------
FINANCING ACTIVITIES:
Issuance of common stock, net of redemptions 2,090,490 1,250,000
Increase in long-term debt 725,095 1,500,623
Payments on long-term debt (1,192,234) (459,214)
----------- -----------
Cash provided by (used in) financing activities 1,623,351 2,291,409
----------- -----------
Increase (decrease) in cash and cash equivalents (76,513) (210,286)
Cash and cash equivalents at beginning of period 76,513 210,286
----------- -----------
Cash and cash equivalents at end of period $ 0 $ 0
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
5
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UCI MEDICAL AFFILIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X of the Securities and Exchange Commission. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of those of a normal recurring
nature) considered necessary for a fair presentation have been included.
Operating results for the nine month or three month periods ended June 30, 1996
are not necessarily indicative of the results that may be expected for the
fiscal year ending September 30, 1996. For further information, refer to the
audited consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-KSB for the year ended September 30, 1995.
The consolidated financial statements of UCI Medical Affiliates, Inc. include
the accounts of UCI Medical Affiliates, Inc. ("UCI"), its wholly owned
subsidiary, UCI Medical Affiliates of SC, Inc. ("UCI-SC") and Doctor's Care, PA
("the P.A."), collectively the "Company". The financial statements of the P.A.
are consolidated with UCI because UCI-SC has unilateral control over the assets
and operations of the P.A. and, notwithstanding the lack of technical majority
ownership, consolidation of the P.A. with UCI is necessary to present fairly the
financial position and results of operations of UCI. UCI-SC provides non-medical
management and administrative functions for the medical centers which operate as
Doctor's Care, Capitol Internal Medicine Associates, Doctor's Surgical Group or
Doctor's Orthopedic Group (the "Centers"). All medical services at the Centers
are provided by or under the supervision of the P.A. The medical directors
operate the Centers under the financial and operational control of UCI-SC.
However, medical supervision of the centers is provided solely by the P.A. The
P.A. remits to UCI-SC all medical service revenues generated by the Centers, net
of expenses incurred by the P.A. This compensation is recorded in the
accompanying financial statements as revenue. Control of the P.A. is perpetual
and other than temporary because of the nature of this relationship and the
management agreements between the entities. The net assets of the P.A. are not
material for any period presented and intercompany accounts and transactions
have been eliminated.
EARNINGS PER SHARE
The computation of income per common and common equivalent share is based on the
weighted average number of common shares outstanding during the period plus (in
periods in which they have a dilutive effect) the effect of common shares
issuable from stock options, using the treasury stock method.
6
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PART I
FINANCIAL INFORMATION
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis provides information which the Company
believes is relevant to an assessment and understanding of the Company's
consolidated results of operations and financial condition. This discussion
should be read in conjunction with the consolidated financial statements and
notes thereto.
Results of Operations
For the Three Months Ended June 30, 1996 as Compared to the Three Months Ended
June 30, 1995
Revenues of $5,934,000 for the quarter ending June 30, 1996 reflect an increase
of twenty-five (25%) percent from those of the quarter ending June 30, 1995.
This increase in revenue is attributable to a number of factors. The Company
engaged in significant expansion, increasing the number of medical centers from
25 to 28. This expansion included Greenville's Doctor's Care-Berea added in
December 1995; Columbia's Capitol Internal Medicine opened in January 1996; and,
Columbia's Doctor's Care-Wateree added in June 1996.
Additionally, the Company acquired a practice in North Myrtle Beach in March
1996 for $600,000 (consisting of 72,728 shares of common stock and cash of
$300,000, paid $60,000 at closing and the remainder in twenty-four (24) monthly
installments) which was merged into its existing Doctor's Care - North Myrtle
Beach center. The Company also acquired a practice in Columbia in March 1996 for
$125,000 (consisting of 24,243 shares of common stock and the assumption of
$25,000 of trade accounts payable) which was merged into existing Columbia area
centers. On April 12, 1996, the Company acquired substantially all of the assets
of a medical practice in Greenville, South Carolina for $541,000 (consisting of
125,187 shares of common stock, the assumption of $27,000 of trade accounts
payable and cash of $76,000, paid $6,300 at closing and the remainder over the
next eleven months) and merged this practice into its existing Doctor's
Care-Pelham center located in Greenville.
The Company has increased its services provided to members of Health Maintenance
Organizations (HMOs). In such arrangements, the Company, through Doctor's Care,
P.A., acts as the designated primary caregiver for members of the HMO who have
selected Doctor's Care as their primary care provider. The Company began
participating in an HMO operated by Companion HealthCare Corporation
("Companion"), a wholly owned subsidiary of Blue Cross Blue Shield of South
Carolina in 1994. The Company now acts as primary care provider for four HMOs,
including Companion. While HMOs do not, at this time, have a significant
penetration into the South Carolina market, the Company believes that HMOs and
other managed care plans will experience a substantial increase in market share
in the next few years, and the Company is therefore positioning itself for that
possibility.
Increased revenues also reflect the Company's heightened focus on occupational
medicine and industrial health services. Focused marketing materials, including
quarterly newsletters for employers, were developed to spotlight the Company's
services for industry. The Company also entered into an agreement with Companion
Property and Casualty Insurance Company, wherein the Company acts as the primary
care provider for injured workers of firms insured through Companion Property
and Casualty Insurance Company. Companion Property and Casualty Insurance
Company is wholly owned by Blue Cross Blue Shield of South Carolina and is
therefore affiliated with Companion HealthCare Corporation, a primary
shareholder of the Company.
Patient encounters increased to 85,000 in the third quarter of fiscal 1996 from
75,000 in the third quarter of fiscal 1995.
7
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An operating margin of $414,000 was earned during the third quarter of fiscal
1996 as compared to an operating loss of $280,000 realized for the third quarter
of fiscal 1995. This significant improvement is due, in part, to the
implementation of significant cost cutting measures during the latter part of
the third quarter of fiscal 1995, including very substantial and across the
board reductions in personnel costs and overtime and aggressive negotiations
with vendors to obtain more substantial discounts on medical supplies.
Depreciation and amortization expense increased to $254,000 in the third quarter
of fiscal 1996, up from $161,000 in the third quarter of fiscal 1995. This
increase reflects higher depreciation expense as a result of significant
leasehold improvements and equipment upgrades at a number of the Company's
medical centers, as well as an increase in amortization expense related to the
intangible assets acquired from the Company's purchases of existing practices as
noted above.
During the third quarter of fiscal 1996, the Company recognized a deferred
tax asset of $175,000 relating to net operating loss carry forwards which
are available to offset future taxable income. This is reflected as a benefit
for income taxes on the Consolidated Statement of Operations and is offset
by any tax provisions recorded.
For the Nine Months Ended June 30, 1996 as Compared to the Nine Months Ended
June 30, 1995
Revenues of $17,004,000 reflect an increase of thirty-three (33%) percent from
the same period in fiscal 1995 and is attributable to the expansion, marketing
and line of business factors discussed above. Patient encounters increased to
250,000 for the nine months ended June 30, 1996 from 210,000 for the nine months
ended June 30, 1995.
Financial Condition at June 30, 1996
Cash and cash equivalents decreased by $77,000 during the nine months ended June
30, 1996 as detailed on page 5 of this report.
Accounts receivable increased 59% during the period, reflecting the addition of
centers and the overall growth in patient visits to existing centers.
The increase in goodwill is attributable to the purchases of the practices
previously described.
The increase in the current portion of long-term debt reflects borrowings from
the Company's primary commercial bank and new capital lease obligations incurred
in the refurbishment of older centers.
Accounts payable decreased $233,000 during the first nine months of fiscal 1996
to $1,420,000 as a result of capital infusions during the period (see Liquidity
and Capital Resources discussion below). Overall, the Company's current assets
exceeded its current liabilities by $1,055,000 at June 30, 1996.
Liquidity and Capital Resources
The Company requires capital principally to fund growth (acquire new centers),
for working capital needs and for the retirement of indebtedness. The Company's
capital requirements and working capital needs have been funded through a
combination of external financing (including bank debt and proceeds from the
sale of common stock to Companion HealthCare Corporation and Companion Property
and Casualty Insurance Company), internally generated funds and credit extended
by suppliers.
Operating activities used $1,205,000 of cash during the first nine months of
fiscal 1996. This reflects growth in the Company's accounts receivable as well
as prepaid expenses and a decrease in accounts payable and accrued expenses.
Investing activities used $495,000 of cash during the quarter as a result of
expansion efforts. Continued growth is anticipated during the remainder of
fiscal 1996.
On November 3, 1995, the Company, through a private placement, issued 218,180
shares of common stock at $2.75 per share to Companion HealthCare Corporation
and received $599,995 in cash. On December 15, 1995, the Company, through a
private placement, issued another 218,180 shares of common stock at $2.75 per
share to Companion HealthCare Corporation and received another $599,995 in cash
and on March 1, 1996, the Company, through a private placement, issued 109,091
shares of common stock at $2.75 per share to Companion HealthCare Corporation
and received $300,000 in cash. On June 5, 1996, the Company, through a private
placement, issued 218,181 shares of common stock at $2.75 per share to Companion
Property and Casualty Insurance Company and received $599,998 in cash.
8
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In March 1996, the Company paid out its line of credit for $475,000 and borrowed
another $725,000 from the same primary commercial bank.
Subsequent Events
In July of 1996, the Company opened its 29th center in Beaufort, South Carolina
as Doctor's Care-Port Royal.
9
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PART II
OTHER INFORMATION
Item 1 LEGAL PROCEEDINGS
The Company is not a party to any pending litigation other
than routine litigation incidental to the business or that
which is immaterial in amount of damages sought.
Item 2 CHANGES IN SECURITIES
This item is not applicable.
Item 3 DEFAULTS UPON SENIOR SECURITIES
This item is not applicable.
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
This item is not applicable.
Item 5 OTHER INFORMATION
This item is not applicable.
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
The Company filed a Form 8-K during April 1996 to announce the
acquisition of a Greenville practice which was merged into the
existing Doctor's Care-Pelham location.
The Company filed a Form 8-K during June 1996 to announce the
acquisition of its Doctor's Care-Wateree center in the
Columbia, South Carolina area.
The Financial Data Schedule is included herein as Exhibit 27.
10
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<PAGE>
SIGNATURE
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.
UCI Medical Affiliates, Inc.
(Registrant)
/S/ M.F. MCFARLAND, III, M.D. /S/ JERRY F. WELLS, JR.
Marion F. McFarland, III, M.D. Jerry F. Wells, Jr.
President, Chief Executive Officer, Vice President of Finance and
and Chairman of the Board Chief Financial Officer
Date: July 31, 1996
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 4,639,337
<ALLOWANCES> 919,625
<INVENTORY> 267,356
<CURRENT-ASSETS> 4,681,270
<PP&E> 4,869,586
<DEPRECIATION> 1,868,034
<TOTAL-ASSETS> 14,341,794
<CURRENT-LIABILITIES> 3,626,673
<BONDS> 4,630,690
0
0
<COMMON> 240,375
<OTHER-SE> 7,564,358
<TOTAL-LIABILITY-AND-EQUITY> 14,341,794
<SALES> 0
<TOTAL-REVENUES> 5,934,079
<CGS> 0
<TOTAL-COSTS> 5,404,798
<OTHER-EXPENSES> 282,131
<LOSS-PROVISION> 114,971
<INTEREST-EXPENSE> 138,374
<INCOME-PRETAX> (6,195)
<INCOME-TAX> (167,325)
<INCOME-CONTINUING> 161,130
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 161,130
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
