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: December 31, 1995
----------------------------------
( ) 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)
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<S> <C>
Delaware 59-2225346
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
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6168 St. Andrews Road, Columbia, SC 29212
(Address of principal executive offices)
(803) 772-8840
(Issuer's telephone number)
(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:
4,083,496 shares of $.05 common stock outstanding at December 31, 1995
Transitional Small Business Disclosure Format (check one): ( )YES ( X ) NO
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1
UCI MEDICAL AFFILIATES, INC.
INDEX
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<CAPTION>
PAGE
NUMBER
<S> <C> <C> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets - December 31, 1995
and September 30, 1995 3
Consolidated Statements of Operations for the quarters
ending December 31, 1995 and December 31, 1994 4
Consolidated Statements of Cash Flows for the quarters
ending December 31, 1995 and December 31, 1994 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 8
PART II OTHER INFORMATION
Items 1-6 9
SIGNATURES 10
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2
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UCI Medical Affiliates, Inc.
Consolidated Balance Sheets
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<CAPTION>
DECEMBER 31, 1995 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 $741,865 and $608,792 2,841,954 2,343,325
Inventory 265,068 265,068
Deferred taxes 491,543 491,543
Prepaid expenses and other current assets 331,921 282,060
------------ ------------
Total current assets 3,930,486 3,458,509
Property and equipment less accumulated depreciation of
$1,561,787 and $1,529,999 2,715,448 2,795,384
Deferred taxes 120,639 120,639
Excess of cost over fair value of assets acquired, less
accumulated amortization of $932,580 and
$869,271 4,160,022 3,578,371
Other assets 260,639 262,768
------------ ------------
Total Assets $ 11,187,234 $ 10,215,671
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 1,196,071 $ 1,244,603
Accounts payable 1,177,269 1,652,792
Accrued salaries and payroll taxes 268,464 498,791
Other accrued liabilities 394,378 445,362
------------ ------------
Total current liabilities 3,036,182 3,841,548
Long-term debt, net of current portion 2,974,304 3,121,098
------------ ------------
Total Liabilities 6,010,486 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- 4,083,496 and 3,508,164
shares 204,175 175,408
Paid-in capital 11,454,881 9,694,256
Accumulated deficit (6,482,308) (6,616,639)
------------ ------------
Total Stockholders' Equity 5,176,748 3,253,025
------------ ------------
Total Liabilities and Stockholders' Equity $ 11,187,234 $ 10,215,671
============ ============
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See Notes to Consolidated Financial Statements
3
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UCI Medical Affiliates, Inc.
Consolidated Statements of Operations
(unaudited)
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<CAPTION>
Three Months Ended December 31,
1995 1994
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Revenues $ 5,160,284 $ 3,642,641
Operating costs 4,652,831 3,660,805
----------- -----------
Operating margin 507,453 (18,164)
General and administrative expenses 18,396 30,664
Depreciation and amortization 204,556 61,684
----------- -----------
Income (loss) from operations 284,501 (110,512)
Other income (expense)
Interest expense, net of interest income (151,497) (75,130)
Gain (loss) on disposal of equipment 1,327
----------- -----------
Other income (expense) (150,170) (75,130)
Income (loss) before benefit (provision )for
income taxes 134,331 (185,642)
Benefit (provision )for income taxes -- --
----------- -----------
Net income (loss) $ 134,331 $ (185,642)
=========== ===========
Net Income (loss) per common equivalent share $ .04 $(.07)
=========== ===========
Weighted average common shares
outstanding 3,709,784 2,622,178
=========== ===========
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See Notes to Consolidated Financial Statements
4
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UCI Medical Affiliates, Inc.
Consolidated Statements of Cash Flows
(unaudited)
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<CAPTION>
Three Months Ended December 31,
1995 1994
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OPERATING ACTIVITIES:
Net income (loss) $ 134,331 $ (185,642)
Adjustments to reconcile net income (loss) to net
cash provided by (used-in) operating activities:
(Gain) loss on disposal of equipment
(1,327) 0
Provision for losses on accounts receivable 154,309 0
Depreciation and amortization 204,556 61,684
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (652,938) (120,848)
(Increase) decrease in prepaid expenses and other
current assets (49,861) (48,590)
Increase (decrease) in accounts payable and accrued
expenses (756,834) 242,385
------------------ ----------------
Cash provided by (used in) operating activities (967,764) (51,011)
------------------ ----------------
INVESTING ACTIVITIES:
Purchases of property and equipment (89,063) (101,802)
Acquisitions of goodwill (40,560)
(Increase) decrease in other assets 2,129 (45,266)
------------------ ----------------
Cash provided by (used in) investing activities (127,494) (147,068)
------------------ ----------------
FINANCING ACTIVITIES:
Issuance of common stock, net of redemptions 1,214,992 0
Payments on long-term debt (196,247) (12,207)
------------------ ----------------
Cash provided by (used in) financing activities 1,018,745 (12,207)
------------------ ----------------
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 three month period ended December 31, 1995 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 26 medical centers, operating as
Doctor's Care (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
Revenues of $5,160,000 for the quarter ending December 31, 1995 reflect an
increase of 42% from those of the quarter ending December 31, 1994.
This increase in revenue is attributable to a number of factors. The Company
engaged in a significant expansion, increasing the number of medical centers
from 20 to 26. This expansion included Columbia's Doctor's Care-Family Medical
Center added in January 1995; Myrtle Beach's Doctor's Care-Waccamaw added in
January 1995; Greenville's Doctor's Care-Pelham opened in March 1995; Columbia's
Doctor's Care-Cayce added in May 1995; Myrtle Beach's Doctor's Care-North Myrtle
Beach opened in June 1995 and Greenville's Doctor's Care-Berea added in December
1995.
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. The Company now acts as primary care provider for three 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 79,000 in the first quarter of fiscal 1996
from 60,000 in the first quarter of fiscal 1995.
An operating margin of $507,000 was earned during the first quarter of fiscal
1996 as compared to an operating loss of $18,000 realized for the first 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, severe reduction in overtime and aggressive
negotiations with vendors to obtain more substantial discounts on medical
supplies.
Depreciation and amortization expense increased to $205,000 in the first quarter
of fiscal 1996, up from $62,000 in the first quarter of fiscal 1995. This
increase reflects higher depreciation expense as a result of significant
leasehold
7
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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 purchase of existing practices as
noted above. Interest expense increased from $75,000 in the first quarter of
fiscal 1995 to $151,000 in the first quarter of fiscal 1996 primarily as a
result of the interest costs associated with the indebtedness incurred in the
Company's purchase of these assets and centers.
Financial Condition at December 31, 1995
Cash and cash equivalents decreased by $77,000 during the quarter ended December
31, 1995 and were utilized mainly for working capital needs and to fund the
expansion previously discussed.
Accounts receivable increased 21% during the quarter, reflecting the addition of
the Greenville center in December 1995 and the overall growth in patient visits
to existing centers.
The increase in goodwill is attributable to the purchases of two practices in
December 1995, one in Greenville, South Carolina and one in the Myrtle Beach
area (originally brought on-line in January 1995 but the acquisition was not
finalized and recorded until December 1995).
Accounts payable decreased $476,000 during the first quarter of fiscal 1996 to
$1,177,000 as a result of the two capital infusions during the quarter (see
Liquidity and Capital Resources discussion below). Overall, the Company's
current assets exceeded its current liabilities by $894,000.
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), internally generated
funds and credit extended by suppliers.
Operating activities used $968,000 of cash during the first quarter 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. The
Company has taken a more aggressive approach toward accounts receivable
collections. Additional staff have been hired, and use of an outside collections
agency should result in better returns from older, more difficult accounts.
Management believes that these steps will result in a decrease in outstanding
receivables and improvement in the Company's cash flow.
Investing activities used $127,000 of cash during the quarter as a result of
expansion efforts. Continued growth is anticipated during the remainder of 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.
8
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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 January 1996, which
announced that it had received approval for trading on the
NASDAQ Small Cap Market. Effective January 2, 1996, the
Company began trading under the symbol UCIA.
9
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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, Chief Financial Officer
and Chairman of the Board
Date: January 22, 1996
10
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> DEC-31-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 2,841,954
<ALLOWANCES> 741,865
<INVENTORY> 265,068
<CURRENT-ASSETS> 3,930,486
<PP&E> 2,715,448
<DEPRECIATION> 1,561,787
<TOTAL-ASSETS> 11,187,234
<CURRENT-LIABILITIES> 3,036,182
<BONDS> 0
0
0
<COMMON> 204,175
<OTHER-SE> 4,972,573
<TOTAL-LIABILITY-AND-EQUITY> 11,187,234
<SALES> 0
<TOTAL-REVENUES> 5,160,284
<CGS> 0
<TOTAL-COSTS> 4,652,831
<OTHER-EXPENSES> 222,952
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 151,497
<INCOME-PRETAX> 134,331
<INCOME-TAX> 0
<INCOME-CONTINUING> 134,331
<DISCONTINUED> 0
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<NET-INCOME> 134,331
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
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