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: March 31, 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)
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<CAPTION>
Delaware 59-2225346
<S> <C>
(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:
4,291,553 shares of $.05 common stock outstanding at March 31, 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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PAGE
NUMBER
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PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets - March 31, 1996 and
September 30, 1995 3
Consolidated Statements of Operations for the
quarters and the six months ending March 31, 1996 and
March 31, 1995 4
Consolidated Statements of Cash Flows for the six
months ending March 31, 1996 and March 31, 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
SIGNATURES 11
2
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UCI Medical Affiliates, Inc.
Consolidated Balance Sheets
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<TABLE>
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MARCH 31, 1996 SEPTEMBER 30, 1995
----------------------- -----------------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 174,160 $ 76,513
Accounts receivable, less allowance for doubtful accounts
of $934,519 and $608,792 3,064,385 2,343,325
Inventory 267,356 265,068
Deferred taxes 491,543 491,543
Prepaid expenses and other current assets 419,567 282,060
----------------------- -----------------------
Total current assets 4,417,011 ----------------------
3,458,509
Property and equipment, less accumulated depreciation of
$1,710,946 and $1,529,999 3,051,091 2,795,384
Deferred taxes 120,639 120,639
Excess of cost over fair value of assets acquired, less
accumulated amortization of $1,009,075 and
$869,271 4,818,258 3,578,371
Other assets 282,054 262,768
----------------------- -----------------------
Total Assets $ 12,689,053 $ 10,215,671
======================= =======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 1,614,574 $ 1,244,603
Accounts payable 1,009,289 1,652,792
Accrued salaries and payroll taxes 551,328 498,791
Other accrued liabilities 381,714 ----------------------
445,362
----------------------- -----------------------
Total current liabilities 3,556,905 3,841,548
Long-term debt, net of current portion 3,116,696 3,121,098
----------------------- -----------------------
Total Liabilities 6,673,601 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- 4,291,553 and 3,508,164
shares 214,578 175,408
Paid-in capital 12,129,979 9,694,256
Accumulated deficit (6,329,105) (6,616,639)
----------------------- -----------------------
Total Stockholders' Equity 6,015,452 3,253,025
----------------------- -----------------------
Total Liabilities and Stockholders' Equity $12,689,053 $ 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 March 31, Six Months Ended March 31,
1996 1995 1996 1995
--------------- ---------------- ----------------- ------------
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Revenues $ 5,909,220 $ 4,453,805 $ 11,069,503 $ 8,089,538
Operating costs 5,346,241 4,845,651 9,999,069 8,506,453
------------ ------------ ------------ ------------
Operating margin 562,979 1,070,434 (416,915)
(391,846)
General and administrative expenses 43,841 62,237 46,829
16,165
Depreciation and amortization 229,258 170,609 433,815 232,293
------------ ------------ ------------ ------------
Income (loss) from operations 289,880 574,382 (696,037)
(578,620)
Other income (expense)
Interest expense, net of interest income (137,456) (288,953) (151,634)
(76,504)
Gain (loss) on disposal of equipment 2,105 6,902
778 0
------------ ------------ ------------ ------------
Other income (expense) (136,678) (286,848) (144,732)
(76,504)
Income (loss) before benefit (provision )for
income taxes 153,202 287,534 (840,769)
(655,124)
Benefit (provision )for income taxes
0 0 0 0
------------ ------------ ------------ ------------
Net income (loss) $ 153,202 $ (655,124) $ 287,534 $ (840,769)
============ ============ ============
============
Net Income (loss) per common equivalent share $ .04 $ $ .07 $ (.29)
(.21)
============ ============ ============ ============
Weighted average common shares
outstanding 4,154,734 3,159,835 3,932,259 2,888,052
============ ============ ============ ============
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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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Six Months Ended March 31,
1996 1995
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OPERATING ACTIVITIES:
Net income (loss) $ 287,534 $ (840,769)
Adjustments to reconcile net income (loss) to net
cash provided by (used-in) operating activities:
(Gain) loss on disposal of equipment (2,105)
(6,902)
Provision for losses on accounts receivable 367,097 194,473
Depreciation and amortization 433,815 232,293
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (1,088,157) (626,376)
(Increase) decrease in inventories (2,288)
(4,787)
(Increase) decrease in prepaid expenses and other
current assets (145,348) (150,587)
Increase (decrease) in accounts payable and accrued
expenses (654,614)
81,363
----------- -----------
Cash provided by (used in) operating activities (804,066) (1,121,292)
----------- -----------
INVESTING ACTIVITIES:
Purchases of property and equipment (243,033)
(694,903)
Acquisitions of goodwill (139,450)
(7,275)
(Increase) decrease in other assets (19,286)
10,886
----------- -----------
Cash provided by (used in) investing activities (401,769)
(691,292)
----------- -----------
FINANCING ACTIVITIES:
Issuance of common stock, net of redemptions 1,500,492 1,000,000
Increase in long-term debt 725,000 868,938
Payments on long-term debt (922,010)
(266,640)
----------- -----------
Cash provided by (used in) financing activities 1,303,482 1,602,298
----------- -----------
Increase (decrease) in cash and cash equivalents 97,647
(210,286)
Cash and cash equivalents at beginning of period 76,513 210,286
----------- -----------
Cash and cash equivalents at end of period $ 174,160 $ 0
=========== ===========
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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 six month or three month periods ended March 31, 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 27 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 For the Three Months Ended March 31, 1996 as Compared to
the Three Months Ended March 31, 1995
Revenues of $5,909,000 for the quarter ending March 31, 1996 reflect an increase
of 33% from those of the quarter ending March 31, 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
23 to 27. This expansion included Columbia's Doctor's Care-Cayce added in May
1995; Myrtle Beach's Doctor's Care-North Myrtle Beach opened in June 1995;
Greenville's Doctor's Care-Berea added in December 1995 and Columbia's Capitol
Internal Medicine opened in January 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.
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 86,000 in the second quarter of fiscal 1996 from
75,000 in the second quarter of fiscal 1995.
An operating margin of $563,000 was earned during the second quarter of fiscal
1996 as compared to an operating loss of $392,000 realized for the second
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.
7
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Depreciation and amortization expense increased to $229,000 in the second
quarter of fiscal 1996, up from $171,000 in the second 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. Interest expense increased from $77,000 in the second quarter of
fiscal 1995 to $137,000 in the second 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.
For the Six Months Ended March 31, 1996 as Compared to the Six Months Ended
March 31, 1995
Revenues of $11,070,000 reflect an increase of 37% 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 165,000 for the six
months ended March 31, 1996 from 135,000 for the six months ended March 31,
1995.
Financial Condition at March 31, 1996
Cash and cash equivalents increased by $98,000 during the six months ended March
31, 1996 mainly as a result of profitable operations and the issuance of stock
and debt.
Accounts receivable increased 31% during the period, reflecting the addition of
three centers and the overall growth in patient visits to existing centers.
The increase in goodwill is attributable to the purchases of the four practices
previously described.
The increase in the current portion of long-term debt reflects borrowings from
the Company's primary commercial bank.
Accounts payable decreased $644,000 during the first six months of fiscal 1996
to $1,009,000 as a result of the capital infusions during the period (see
Liquidity and Capital Resources discussion below). Overall, the Company's
current assets exceeded its current liabilities by $860,000 at March 31, 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), internally generated
funds and credit extended by suppliers.
Operating activities used $804,000 of cash during the first six 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 $402,000 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.
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.
8
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Subsequent Events
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.
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 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.
The Company filed a Form 8-K during January 1996 to announce
the acquisition of its Doctor's Care - Berea center in
Greenville, South Carolina.
The Company filed a Form 8-K during March 1996 to announce the
acquisition of a North Myrtle Beach and a Columbia practice
which were merged into existing North Myrtle Beach and
Columbia centers.
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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, Vice President of Finance and
and Chairman of the Board Chief Financial Officer
Date: April 26, 1996
11