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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED SEPTEMBER 30, 2000
Commission File Number: 000-18839
UNITED AMERICAN HEALTHCARE CORPORATION
(Exact Name of Registrant as Specified in Charter)
MICHIGAN 38-2526913
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1155 BREWERY PARK BOULEVARD, SUITE 200
DETROIT, MICHIGAN 48207
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (313) 393-0200
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
(Title of Class)
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____
THE NUMBER OF OUTSTANDING SHARES OF REGISTRANT'S COMMON STOCK AS OF NOVEMBER 10,
2000 WAS 6,779,128.
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As filed with the Securities and Exchange Commission on November 13, 2000
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UNITED AMERICAN HEALTHCARE CORPORATION
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. PAGE
<S> <C> <C>
Item 1. Unaudited Condensed Consolidated Financial Statements-
Condensed Consolidated Balance Sheets - September 30, 2000
and June 30, 2000.............................................................................1
Condensed Consolidated Statements of Operations - Three Months
Ended September 30, 2000 and 1999.............................................................2
Condensed Consolidated Statements of Cash Flows - Three Months
Ended September 30, 2000 and 1999.............................................................3
Notes to the Unaudited Condensed Consolidated Financial Statements..............................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................................................8
PART II.
Item 1. Legal Proceedings..............................................................................12
Item 2. Changes in Securities and Use of Proceeds......................................................12
Item 3. Defaults Upon Senior Securities................................................................12
Item 4. Submission of Matters to a Vote of Security Holders............................................12
Item 5. Other Information..............................................................................12
Item 6. Exhibits and Reports on Form 8-K...............................................................13
SIGNATURES.........................................................................................................14
EXHIBITS...........................................................................................................15
</TABLE>
<PAGE> 3
PART I.
ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNITED AMERICAN HEALTHCARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
2000 2000
------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 10,281 $ 8,257
Marketable securities 3,351 2,312
Premium receivables 1,065 2,472
Management fee and advance receivable 4,270 2,700
Other receivables 1,396 1,222
Prepaid expenses and other 363 312
-------------------------------
Total current assets 20,726 17,275
Property and equipment, net 3,832 3,846
Intangible assets, net 3,485 3,663
Surplus notes receivable, net 6,900 6,900
Marketable securities 2,560 2,548
Other assets 939 577
-------------------------------
$ 38,442 $ 34,809
===============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 4,217 $ 791
Medical claims payable 13,604 11,245
Accounts payable and accrued expenses 4,747 5,739
Accrued compensation and related benefits 1,043 796
Other current liabilities 1,475 981
-------------------------------
Total current liabilities 25,086 19,552
Long-term debt, less current portion - 3,554
Accrued rent 640 652
Shareholders' equity
Preferred stock, 5,000,000 shares authorized; none issued - -
Common stock, no par, 15,000,000 shares authorized; 6,779,128 issued
and outstanding at September 30, 2000 and June 30, 2000 11,152 11,152
Retained earnings 1,724 59
Accumulated other comprehensive loss, net of income taxes (160) (160)
-------------------------------
12,716 11,051
-------------------------------
$ 38,442 $ 34,809
===============================
</TABLE>
See accompanying Notes to the Unaudited Condensed Consolidated Financial
Statements.
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UNITED AMERICAN HEALTHCARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
2000 1999
---------------------------
<S> <C> <C>
REVENUES
Medical premiums $ 23,998 $ 20,311
Management fees from related party 6,386 4,449
Interest and other income 424 443
---------------------------
Total revenues 30,808 25,203
EXPENSES
Medical services 20,535 16,859
Marketing, general and administrative 7,596 6,957
Depreciation and amortization 481 834
Interest expense 111 189
---------------------------
Total expenses 28,723 24,839
---------------------------
Earnings before income taxes 2,085 364
Income tax expense 420 57
---------------------------
NET EARNINGS $ 1,665 $ 307
===========================
NET EARNINGS PER COMMON SHARE - BASIC
Net earnings per common share $ 0.25 $ 0.05
===========================
Weighted average shares outstanding 6,779 6,800
===========================
NET EARNINGS PER COMMON SHARE - DILUTED
Net earnings per common share $ 0.25 $ 0.05
===========================
Weighted average shares outstanding 6,779 6,800
===========================
</TABLE>
See accompanying Notes to the Unaudited Condensed Consolidated Financial
Statements.
2
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UNITED AMERICAN HEALTHCARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
2000 1999
-------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 1,665 $ 307
Adjustments to reconcile net earnings to net cash provided by operating
activities
Loss on disposal of assets 4 22
Depreciation and amortization 481 834
Accrued rent (12) -
Changes in assets and liabilities 1,359 1,099
-------------------------------
Net cash provided by operating activities 3,497 2,262
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of marketable securities (1,038) (691)
Purchase of property and equipment (307) (328)
Proceeds from collection of notes receivable - 8,432
-------------------------------
Net cash (used in) provided by investing activities (1,345) 7,413
CASH FLOWS FROM FINANCING ACTIVITIES
Payments made on long-term debt (128) (8,514)
Repurchase of common stock - (370)
Issuance of common stock - 76
-------------------------------
Net cash used in financing activities (128) (8,808)
-------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,024 867
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 8,257 17,286
-------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,281 $ 18,153
===============================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 111 $ 189
===============================
Income taxes paid $ 33 $ -
===============================
</TABLE>
See accompanying Notes to the Unaudited Condensed Consolidated Financial
Statements.
3
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UNITED AMERICAN HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
NOTE 1 - BASIS OF PREPARATION
The accompanying consolidated financial statements include the accounts of
United American Healthcare Corporation and all of its majority-owned
subsidiaries, together referred to as the "Company." All significant
intercompany transactions and balances have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements of the
Company have been prepared in conformity with generally accepted accounting
principles and with the instructions for Form 10-Q and Rule 10-01 of Regulation
S-X as they apply to interim financial information. 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 of normal recurring
adjustments) considered necessary for a fair presentation of the financial
position and results of operations have been included. The results of operations
for the three-month period ended September 30, 2000 are not necessarily
indicative of the results of operations for the full fiscal year ending June 30,
2001. Audited June 30, 2000 financial statements, with accompanying footnotes,
can be found in the Company's most recent annual report on Form 10-K.
NOTE 2 - COMPREHENSIVE INCOME
The components of comprehensive income, net of related tax, are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
2000 1999
-----------------------
<S> <C> <C>
Net earnings $ 1,665 $ 307
Unrealized holding gains, net of deferred federal
income taxes - 6
-----------------------
Comprehensive income $ 1,665 $ 313
=======================
</TABLE>
The components of accumulated other comprehensive income, included in
shareholders' equity at September 30, 2000 and June 30, 2000, include net
unrealized holding losses, net of deferred federal income taxes.
4
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UNITED AMERICAN HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 2000 AND 1999
NOTE 3 - ACQUISITIONS AND DISPOSITIONS
OMNICARE HEALTH PLAN, INC. OF TENNESSEE (OMNICARE-TN)
In September 2000, the Company purchased $0.9 million of preferred stock of
OmniCare Health Plan, Inc., in Tennessee ("OmniCare-TN"), a managed care
organization 75% owned by the Company's wholly owned subsidiary, to enable
OmniCare-TN to meet minimum statutory requirements for net worth.
NOTE 4 - LONG TERM DEBT
On September 25, 2000, the Company entered into a new loan agreement, promissory
note and security agreement with its bank lender. The new loan agreement
replaced the outstanding bank line of credit balance with a $4.0 million term
loan with monthly installments of principal and interest of approximately
$85,000, based upon a five-year amortization. The term loan has an interest rate
equal to the bank's prime rate (9.5% at September 30, 2000) plus one percent per
annum. The maturity date of the new term loan is September 30, 2001, at which
time the remaining unpaid principal of approximately $3.4 million will be due.
The new loan agreement is collateralized by a security interest in all of the
Company's personal property. As a result of this refinancing, principal due
subsequent to June 30, 2001 is classified as long-term debt in the accompanying
balance sheets at June 30, 2000.
The Company has an outstanding $625,000 promissory note dated December 11, 1998,
issued in a shareholder lawsuit settlement, payable in 15 equal monthly
installments through March 31, 2001, with interest at 4% per annum.
The Company's outstanding debt is as follows (in thousands):
SEPTEMBER 30, JUNE 30,
2000 2000
----------------------------
Term loan $ 3,970 $ 3,970
Promissory note 247 375
----------------------------
4,217 4,345
Less debt payable within one year 4,217 791
----------------------------
Long-term debt, less current portion $ - $ 3,554
============================
NOTE 5 - LIQUIDITY
At September 30, 2000, the Company had (i) cash and cash equivalents and
short-term marketable securities of $13.6 million, compared to $10.6 million at
June 30, 2000; (ii) negative working capital of $4.4 million, compared to
negative working capital of $2.3 million at June 30, 2000; and (iii) a current
assets-to-current liabilities ratio of .83-to-1, compared to .88-to-1 at June
30, 2000. The principal sources of funds for the Company during the three months
ended September 30, 2000 were $3.5 million provided from net operating
activities. The principal uses
5
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UNITED AMERICAN HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 2000 AND 1999
of funds were $1.0 million to purchase marketable securities, $0.3 million for
capital expenditures and $0.1 million for debt repayment. Positive cash flow was
$2.0 million compared to $0.9 million for the three months ended September 30,
1999.
The maturity date of the Company's term loan is September 30, 2001, at which
time the remaining unpaid principal of approximately $3.4 million will be due.
Effective July 1, 2000, OmniCare-TN entered into a new 42-month contract with
the State of Tennessee's Bureau of TennCare ("TennCare") that provides for an
increase in average premiums to January 1, 2001, with future increases to
be determined by the State of Tennessee. Such increases are in lieu of the
quarterly adverse selection payments previously made to compensate managed care
organizations for their treatment of a high risk population. TennCare
anticipates an open enrollment period in early 2001, the first since 1995.
The Company manages OmniCare Health Plan of Michigan ("OmniCare-MI"), a managed
care organization serving Medicaid and commercial members in southeastern
Michigan. On May 1, 2000, the Company and OmniCare-MI entered into a strategic
partnership with the Detroit Medical Center ("DMC"), a major health care
provider in southeastern Michigan. At that time, approximately 28,000 Medicaid
members of DMC's managed care program were transferred to OmniCare-MI. The
transfer accounted for approximately $1.4 million in additional management fee
revenue to the Company for the three months ended September 30, 2000. In
addition, the State of Michigan notified OmniCare-MI that it was one of the
successful bidders in the State's extensive bid process for increased Medicaid
rates and continued eligibility as an HMO providing coverage to enrollees of the
State's Comprehensive Health Care Program for Medicaid beneficiaries. As a
result, OmniCare-MI has been awarded a rate increase effective October 1, 2000
and an extension of its contract with the State to September 30, 2002, with the
potential for three one-year extensions. Management believes that the awarded
rate increase could increase OmniCare-MI's annual Medicaid revenue by
approximately 11% on average, resulting in additional management fee revenue to
the Company in fiscal 2001.
The Company's ability to generate adequate amounts of cash to meet its future
cash needs will depend on a number of factors, including the continued
stabilization of OmniCare-MI and the ability of the Company to control medical
costs related to the TennCare program. Based on these factors, management
believes it has the ability to generate sufficient cash to meet its current
liabilities.
NOTE 6 - NET EARNINGS PER COMMON SHARE
Basic net earnings per share excluding dilution has been computed by dividing
net earnings by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share is computed the same as basic for the three
months ended September 30, 2000 and 1999, since the Company did not have any
outstanding securities having a dilutive effect on earnings per share.
6
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UNITED AMERICAN HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 2000 AND 1999
NOTE 7 - UNAUDITED SEGMENT FINANCIAL INFORMATION
Summarized financial information for the Company's principal operations, as of
and for the three months ended September 30, 2000 and 1999 is as follows (in
thousands):
<TABLE>
<CAPTION>
Management HMOs &
Companies Managed Corporate & Consolidated
SEPTEMBER 30, 2000 (1) Plans (2) Eliminations Company
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues - external customers $ 6,386 $ 23,998 $ - $ 30,384
Revenues - intersegment 2,822 - (2,822) -
Interest and other income 226 240 (42) 424
--------------------------------------------------------------------------
Total revenues $ 9,434 $ 24,238 $ (2,864) $ 30,808
===================================================================================================================
Interest expense $ 111 $ - $ - $ 111
Operating earnings (losses) 1,851 412 (178) 2,085
Segment assets 30,497 16,704 (8,759) 38,442
Purchase of equipment 307 - - 307
Depreciation and amortization 303 - 178 481
-------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, 1999
----------------------------------------
Revenues - external customers $ 4,449 $ 20,311 $ - $ 24,760
Revenues - intersegment 2,960 - (2,960) -
Interest and other income 229 308 (94) 443
--------------------------------------------------------------------------
Total revenues $ 7,638 $ 20,619 $ (3,054) $ 25,203
===================================================================================================================
Interest expense $ 189 $ - $ - $ 189
Operating earnings (losses) (213) 745 (168) 364
Segment assets 28,661 21,159 (7,168) 42,652
Purchase of equipment 328 - - 328
Depreciation and amortization 665 - 169 834
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Management Companies: United American Healthcare Corporation and United
American of Tennessee.
(2) HMOs and Managed Plans: OmniCare Health Plan, Inc. of Tennessee and County
Care.
7
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
The Company provides comprehensive management and consulting services to managed
care organizations, including health maintenance organizations in Tennessee and
Michigan, with a targeted mix of Medicaid and commercial enrollment. The Company
also has a contract to arrange for the delivery of healthcare services on a
capitated basis to certain enrollees residing in Wayne County, Michigan who lack
access to private or employer sponsored health insurance or to another
government health plan. As of September 30, 2000 there were approximately
158,000 enrollees in the managed care organizations owned or operated by the
Company.
Revenues increased $5.6 million (22%) to $30.8 million for the quarter ended
September 30, 2000 compared to the quarter ended September 30, 1999, as the
result of new membership, a premium rate increase on a new contract and
additional management fees from the increased volume.
Expenses are up $3.9 million (16%) to $28.7 million for the quarter ended
September 30, 2000 compared to the quarter ended September 30, 1999, principally
in medical services expenses from the added membership and a higher overall
medical loss ratio of 85.6%.
Earnings before income taxes were $2.1 million for the quarter ended September
30, 2000, a $1.7 million increase (25%) from the quarter ended September 30,
1999. Net earnings were $1.7 million, or $0.25 per share for the quarter ended
September 30, 2000 compared to $0.3 million, or $0.05 per share, for the quarter
ended September 30, 1999. The increase in net earnings of $1.4 million, or $0.20
per share, is principally due to the additional revenue generated from
operations.
FOR THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1999
Medical premium revenues were $24.0 million in the three months ended September
30, 2000, an increase of $3.7 million (18%) from $20.3 million in the three
months ended September 30, 1999. The increase came from OmniCare Health Plan,
Inc. in Tennessee ("OmniCare-TN"), a managed care organization owned 75% by the
Company. Effective July 1, 2000, OmniCare-TN entered into a new 42-month
contract with the State of Tennessee's Bureau of TennCare ("TennCare"), a State
of Tennessee program that provides medical benefits to Medicaid and working
uninsured and uninsurable recipients. The new contract rates accounted for
approximately $1.9 million (51%) of the increased medical premium revenues. The
remaining increase of $1.8 million is attributed to 12,000 additional member
months in the three-month period ended September 30, 2000 compared to the
three-month period ended September 30, 1999.
8
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The OmniCare-TN per member per month ("PMPM") premium rate -- based on an
average membership of 47,700 for the three months ended September 30, 2000
compared to 43,200 for the three months ended September 30, 1999 -- was $152 for
the three months ended September 30, 2000, compared to $139 for the three months
ended September 30, 1999, an increase of $13 (9%).
Premium revenues from the contract in Wayne County, Michigan ("County Care")
totaled $2.3 million for each of the three-month periods ended September 30,
2000 and 1999. From its inception, management has not anticipated significant
net earnings from this contract, but the County Care contract has met the
Company's strategic objective of expanding the membership base to achieve size
sufficient to negotiate better rates and save on administrative costs and
contribute to operating profits.
Management fees were $6.4 million in the three months ended September 30, 2000,
an increase of $1.9 million (42%) from fees of $4.5 million in the three months
ended September 30, 1999. $1.4 million (74%) of the increase is the result of
increased membership at OmniCare Health Plan of Michigan ("OmniCare-MI"). On May
1, 2000, the Company and OmniCare-MI entered into a partnership with the Detroit
Medical Center ("DMC"), a major health care provider in southeastern Michigan.
Approximately 28,000 Medicaid members of DMC's managed care program were
transferred to OmniCare-MI and DMC's seven hospitals and approximately 3,000
affiliated physicians now serve as part of OmniCare-MI's provider network.
Medical services expenses were $20.5 million in the three months ended September
30, 2000, an increase of $3.6 million (21%) from medical services expenses of
$16.9 million in the three months ended September 30, 1999. The percentage of
medical services expenses to medical premium revenues -- the medical loss ratio
("MLR") -- was 85% for the three months ended September 30, 2000 and 82% for the
three months ended September 30, 1999 for OmniCare-TN. Effective July 1, 2000
the new contract with TennCare provides for a minimum of 85% of capitated
revenue to be paid to medical services providers.
Medical services expenses for County Care were $2.0 million for both of the
three-month periods ended September 30, 2000 and 1999. The MLR for County Care
was 88% for each period.
Marketing, general and administrative expenses increased approximately $0.6
million (8%), to $7.6 million for the three months ended September 30, 2000 from
$7.0 million for the three months ended September 30, 1999. The increase is
principally due to higher labor costs, outsourced services and consulting costs.
Depreciation and amortization expense decreased $0.3 million (42%), to $0.5
million for the three months ended September 30, 2000 from $0.8 million for the
three months ended September 30, 1999. Previously capitalized costs for
internally developed customized software were fully depreciated at June 30,
2000.
9
<PAGE> 12
Interest expense decreased $0.1 million (50%), to $0.1 million for the three
months ended September 30, 2000, from $0.2 million for the three months ended
September 30, 1999, due to debt reduction in August 1999.
Principally as the result of increased management fee revenue, the Company
recognized earnings before income taxes of $2.1 million for the three months
ended September 30, 2000, compared to earnings before income taxes of $0.4
million for the three months ended September 30, 1999. Net earnings were $1.7
million, or $0.25 per share, for the three months ended September 30, 2000,
compared to net earnings of $0.3 million, or $0.05 per share, for the three
months ended September 30, 1999, an increase of $1.4 million, or $0.20 per
share.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, the Company had (i) cash and cash equivalents and
short-term marketable securities of $13.6 million, compared to $10.6 million at
June 30, 2000; (ii) negative working capital of $4.4 million, compared to
negative working capital of $2.3 million at June 30, 2000; and (iii) a current
assets-to-current liabilities ratio of .83-to-1, compared to .88-to-1 at June
30, 2000. The principal source of funds for the Company during the three months
ended September 30, 2000 was $3.5 million provided from net operating
activities. The principal uses of funds for the period were $1.0 million to
purchase marketable securities, $0.3 million for capital expenditures and $0.1
million for debt repayment. Positive cash flow was $2.0 million compared to $0.9
million for the comparable quarter a year earlier.
The maturity date for the Company's term loan is September 30, 2001, at which
time the remaining unpaid principal of approximately $3.4 million will be due.
The Company's negative working capital at September 30, 2000 of $4.4 million
includes the term loan balance of approximately $4.0 million. The Company
intends to replace the term loan at or prior to maturity with a multi-year
credit facility. In that event, the current portion of long-term debt would
exclude the principal not required to be repaid within the next 12 months and
would reduce any negative working capital to that extent. There can be no
assurance whether, when or on what terms the existing term loan will be
replaced.
The previously mentioned new TennCare contract provides for an increase in
average premiums to January 1, 2001, with future increases to be determined
by the State of Tennessee. Such increases are in lieu of the quarterly adverse
selection payments previously made to compensate managed care organizations for
their treatment of a high risk population. TennCare anticipates an open
enrollment period in early 2001, the first since 1995. Management expects that
the net effect of increased monthly premiums and the potential for added
membership, offset by the elimination of adverse selection payments, will
improve monthly cash flow in fiscal 2001. There can be no assurance of such
improvement, however.
10
<PAGE> 13
In addition to the added membership at OmniCare-MI as a result of the DMC
strategic partnership, the State of Michigan notified OmniCare-MI that it was
one of the successful bidders in the State's extensive bid process for increased
Medicaid rates and continued eligibility as an HMO providing coverage to
enrollees of the State's Comprehensive Health Care Program for Medicaid
beneficiaries. As a result, OmniCare-MI has been awarded a rate increase
effective October 1, 2000 and an extension of its contract with the State to
September 30, 2002, with the potential for three one-year extensions. Management
believes that the awarded rate increase could increase OmniCare's annual
Medicaid revenue by approximately 11% on average, resulting in approximately
$1.5 million of additional management fee revenue to the Company in fiscal 2001.
In addition, because the unsuccessful bidders' Medicaid enrollees must change to
a successful bidder in their region, management believes that OmniCare-MI's
volume of Medicaid enrollees could significantly increase, generating additional
management fee revenue for the Company in and after fiscal 2001. There can be no
assurance, however, of any such increase in OmniCare-MI's membership.
The Company's ability to generate adequate amounts of cash to meet its future
cash needs will depend on a number of factors, including the continued
stabilization of OmniCare-MI and the ability of the Company to control medical
costs related to the TennCare Program. Based on these factors, management
believes it has the ability to generate sufficient cash to meet its current
liabilities.
PART II.
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements to encourage management to provide prospective
information about their companies without fear of litigation so long as those
statements are identified
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<PAGE> 14
as forward-looking and are accompanied by meaningful cautionary statements
identifying important factors that could cause actual results to differ
materially from those projected in the statements. Certain statements contained
in this Form 10-Q report, including, without limitation, statements containing
the words "believes," "anticipates," "will," "could," "may," "might" and words
of similar import constitute "forward-looking statements" within the meaning of
this "safe harbor."
Such forward-looking statements are based on management's current expectations
and involve known and unknown risks, uncertainties and other factors, many of
which the Company is unable to predict or control, that may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors potentially include, among others,
the following:
1. Inability of OmniCare-MI to remain as a viable entity.
2. Inability to increase premium rates commensurate with increases in
medical costs due to utilization, government regulation, or other
factors.
3. Discontinuation of, limitations upon, or restructuring of
government-funded programs, including but not limited to the TennCare
program.
4. Increases in medical costs, including increases in utilization and
costs of medical services and the effects of actions by competitors or
groups of providers.
5. Adverse state and federal legislation and initiatives, including
limitations upon or reductions in premium payments; prohibition or
limitation of capitated arrangements or financial incentives to
providers; federal and state benefit mandates (including mandatory
length of stay and emergency room coverage); limitations on the
ability to manage care and utilization; and any willing provider or
pharmacy laws.
6. The shift of employers from insured to self-funded coverage, resulting
in reduced operating margins to the Company.
7. Failure to obtain new customer bases or retain existing customer bases
or reductions in work force by existing customers; and failure to
sustain commercial enrollment to maintain an enrollment mix required
by government programs.
8. Termination of the OmniCare-MI management agreement.
9. Increased competition between current organizations, the entrance of
new competitors and the introduction of new products by new and
existing competitors.
10. Adverse publicity and media coverage.
11. Inability to carry out marketing and sales plans.
12. Loss or retirement of key executives.
13. Termination of provider contracts or renegotiations at less
cost-effective rates or terms of payment.
14. The selection by employers and individuals of higher
co-payment/deductible/ coinsurance plans with relatively lower
premiums or margins.
12
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15. Adverse regulatory determinations resulting in loss or limitations of
licensure, certification or contracts with governmental payors.
16. Higher sales, administrative or general expenses occasioned by the
need for additional advertising, marketing, administrative or MIS
expenditures.
17. Increases by regulatory authorities of minimum capital, reserve and
other financial solvency requirements.
18. Denial of accreditation by quality accrediting agencies, e.g., the
National Committee for Quality Assurance (NCQA).
19. Adverse results from significant litigation matters.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Number Description of Document
--------------- -----------------------
27 Financial data schedule
(b) Reports on Form 8-K
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
UNITED AMERICAN HEALTHCARE CORPORATION
Dated: November 13, 2000 By: /s/ Gregory H. Moses, Jr.
----------------------------------
Gregory H. Moses, Jr.
President & Chief Executive Officer
Dated: November 13, 2000 By: /s/ William E. Jackson, II
----------------------------------
William E. Jackson, II
Chief Financial Officer
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EXHIBIT INDEX
Exhibit Number Description of Document
-------------- -----------------------
27 Financial data schedule
15
