-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PfkkRZK8MIz0e744NV5QgoivF7s0GJ6HdIeK4SHKYAJT0fmrMizsju/plmNu6bQT IBB6DobKNzL3r40BQM6X2Q== 0000943763-99-000013.txt : 19990419 0000943763-99-000013.hdr.sgml : 19990419 ACCESSION NUMBER: 0000943763-99-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990228 FILED AS OF DATE: 19990416 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIHOLDING CORP CENTRAL INDEX KEY: 0000354199 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 581443790 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-09833 FILM NUMBER: 99595860 BUSINESS ADDRESS: STREET 1: 96 SPRING STREET STREET 2: 8TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10012 BUSINESS PHONE: 2122199496 MAIL ADDRESS: STREET 1: 96 SPRING ST STREET 2: 8TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10012 FORMER COMPANY: FORMER CONFORMED NAME: UNITED FASHIONS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: CP OVERSEAS INC DATE OF NAME CHANGE: 19901009 FORMER COMPANY: FORMER CONFORMED NAME: IRT REALTY SERVICES INC DATE OF NAME CHANGE: 19880501 10-Q 1 UNIHOLDING CORPORATION QUARTERLY REPORT FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended February 28, 1999 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period to Commission File No. 0-9833 UNIHOLDING CORPORATION (Exact name of registrant as specified in its charter) Delaware 58-1443790 (State or other jurisdiction (I.R.S. Employer of incorporation) Identification Number) 96 Spring Street, 8th Floor, New York, New York 10012 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 219-9496 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ As of April 13, 1999, there were, for accounting purposes, 3,151,480 shares of Common Stock, par value $0.01 per share, of the Registrant outstanding. 1 UNIHOLDING CORPORATION AND SUBSIDIARIES Form 10-Q for the Quarterly Period Ended February 28, 1999 INDEX Page Part I - FINANCIAL INFORMATION: Item 1. Financial Statements 3 Consolidated Balance Sheets - February 28, 1999 (unaudited) and May 31, 1998 4 Unaudited Consolidated Statements of Operations - Three month and nine month periods ended February 28, 1999, and February 28, 1998 6 Unaudited Consolidated Statements of Cash Flows - Nine month periods ended February 28, 1999, and February 28, 1998 7 Notes to Unaudited Consolidated Financial Statements 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Part II - OTHER INFORMATION: Item 1. Legal Proceedings 16 Item 6. Exhibits 16 Signatures 17 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements 3 UNIHOLDING CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
ASSETS February 28, May 31, 1999 1998 ----------- ------------ (Unaudited) CURRENT ASSETS: Cash and cash equivalents $8,960 $9,186 Accounts receivable, net of allowance for doubtful accounts 20,083 19,464 Due from related companies 1,410 1,587 Inventories 1,842 1,849 Prepaid expenses 1,998 3,090 Other current assets 1,942 411 ---------- --------- Total current assets 36,235 35,587 ---------- --------- NON-CURRENT ASSETS: Long-term notes receivable 818 818 Intangible assets, net 45,088 44,344 Property, plant and equipment, net 7,879 8,828 Investment in equity affiliates 231 481 Long-term investments 26,303 22,781 Other assets, net 219 132 ---------- --------- Total non-current assets 80,538 77,384 ---------- --------- $116,773 $112,971 ========== =========
See notes to financial statements 4 UNIHOLDING CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY February 28, May 31, 1999 1998 ----------- ---------- (Unaudited) CURRENT LIABILITIES: Bank overdrafts $1,821 $4,010 Lease payable 655 809 Payable to related parties 421 100 Trade payables 7,484 6,911 Accrued liabilities 5,363 6,018 Long-term debt 5,795 5,727 Taxes payable 6,706 6,459 Deferred taxes - 769 ----------- --------- Total current liabilities 28,245 30,803 ----------- --------- NON-CURRENT LIABILITIES: Lease payable 628 725 Long-term debt 36,876 29,544 Taxes payable 75 74 Deferred taxes - 179 ----------- --------- Total non-current liabilities 37,579 30,522 ----------- --------- Total liabilities 65,824 61,325 ----------- --------- MINORITY INTERESTS 18,791 9,440 ----------- --------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, $0.01 par value; Voting; authorized 18,000,000 shares; issued 7,627,736 at February 28, 1999, and May 31, 1998 $76 76 Non-Voting; authorized 2,000,000 shares; issued and outstanding 298,384 at February 28, 1999, and May 31, 1998 3 3 Additional paid-in capital 49,832 49,832 Cumulative translation adjustment (1,630) (2,074) Retained earnings 8,624 7,623 ----------- ----------- 56,905 55,460 Less - cost of 4,774,640 and 1,602,569 shares of Common Stock held in treasury at February 28,1999, and May 31, 1998, respectively (24,747) (13,254) ----------- --------- Total stockholders' equity 32,158 42,206 ----------- --------- $116,773 $112,971 =========== =========
See notes to financial statements 5 UNIHOLDING CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share data)
Three Months ended Nine Months ended February 28, February 28, 1999 1998 1999 1998 ----------- ----------- ----------- ----------- REVENUE $24,469 $20,631 $71,953 $58,479 Operating expenses: Salaries and related charges 9,698 7,466 29,688 22,656 Supplies 4,348 2,681 12,704 9,234 Other operating expenses 6,995 6,619 18,940 17,364 Depreciation and amortization of tangible assets 839 518 2,152 2,209 Amortization of intangible assets 836 792 2,388 1,883 ----------- ----------- ----------- ----------- OPERATING INCOME 1,753 2,555 6,081 5,133 Interest, net (503) 242 (1,550) (29) Other, net (322) 3,973 (129) 6,881 ----------- ----------- ----------- ----------- Income before taxes and minority interests 928 6,770 4,402 11,985 Tax provision (426) (252) (1,550) (1,126) ----------- ----------- ----------- ----------- Income from continuing operations before minority interests 502 6,518 2,852 10,859 Minority interests in income of continuing operations (376) (963) (1,851) (1,845) ----------- ----------- ----------- ----------- Income from continuing operations 126 5,555 1,001 9,014 Loss from discontinued operations, net of taxes and minority interests - (321) - (2,820) ----------- ----------- ----------- ----------- NET INCOME $126 $5,234 $1,001 $6,194 =========== =========== =========== =========== Weighted average common shares outstanding 5,918,366 7,184,136 6,016,337 7,566,760 Earnings per share of common stock Net income from continuing operations $0.02 $0.77 $0.17 $1.19 Loss from discontinued operations - ($0.04) - ($0.36) Net income $0.02 $0.73 $0.17 $0.82
See notes to financial statements 6 UNIHOLDING CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Nine Months ended February 28, 1999 1998 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income from continuing operations $1,001 $9,014 Adjustments to reconcile net income to net cash provided by operations: Minority interests in income 1,851 1,845 Deferred taxes (1,008) (302) Depreciation and amortization of tangible assets 2,152 2,209 Amortization of intangible assets 2,388 1,883 Other non-cash (income) expenses 1,172 119 Net changes in assets and liabilities, net of acquisitions: Accounts receivable (355) (884) Inventories 36 (96) Prepaid expenses 1,175 (1,224) Other current assets (1,518) 2,134 Trade payables 497 (87) Accrued liabilities (737) (958) Taxes payable 245 (248) ----------- ----------- Net cash provided by (used in) operating activities 6,899 13,405 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash proceeds from issuance of share capital - (73) Repayment of long-term debt (13,305) (1,277) Cash proceeds from long-term debt 8,770 27,958 Proceeds (reimbursement) from (of) bank overdrafts 600 (335) Dividend paid to minority shareholders (1,842) (3,664) Repayment of lease debt (678) (404) Payment for purchase of treasury stock (2,561) (4,795) ----------- ----------- Net cash provided by (used in) financing activities (9,016) 17,410 ----------- -----------
(continued) 7 UNIHOLDING CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (continued)
Nine Months ended February 28, 1999 1998 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Payment for purchases of property and equipment ($4,638) ($1,327) Loans and advances (to) from affiliates and related companies, net 227 (5,356) Payment for purchase of interest in subsidiaries (5,459) (21,577) Payment for purchase of interest in long-term investments (3,014) - Payment for purchase of intangible assets (1,049) (788) Proceeds from sale of interest in subsidiaries 3,222 - Proceeds from sale of assets 12,437 1,984 --------- --------- Net cash (used in) provided by investing activities 1,726 (27,064) --------- --------- Effect of exchange rate changes on cash 165 (214) Net increase (decrease) in cash and cash equivalents from continuing operations (226) 3,537 Net cash flows provided by discontinued operations - 456 Cash and cash equivalents, beginning of year 9,186 4,925 --------- --------- Cash and cash equivalents, end of period $8,960 $8,918 ========= =========
See notes to financial statements 8 UNIHOLDING CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Monetary amounts in thousands, except per share data) 1. Basis of Presentation The consolidated financial statements include the accounts of UniHolding and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The investment in the Company's equity affiliates is accounted for on the equity method. Prior periods' financial statements have been restated to reflect the effect of discontinued operations. 2. Management Opinion In the opinion of management, the accompanying unaudited interim financial statements reflect all adjustments that are necessary to present fairly the financial position, results of operations and cash flows for the interim periods reported. All such adjustments made were of a normal recurring nature. The results of operations and financial position for interim periods are not necessarily indicative of those to be expected for a full year, due, in part, to the seasonal fluctuations which are normal for the Company's business. The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from these estimates. The accompanying interim financial statements and related notes should be read in conjunction with the consolidated financial statements of the Company and related notes as contained in the Annual Report on Form 10-K for the year ended May 31, 1998. 3. Earnings Per Share Effective December 1997, the Company adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"), which changes the method used to compute earnings per share. This Statement specifies the computation, presentation and disclosure requirements for earnings per share ("EPS") for entities with publicly held common stock. SFAS 128 replaces the presentation of primary EPS with a presentation of basic EPS, and for entities with a complex capital structure requires the additional presentation of diluted EPS on the face of the income statement. Basic EPS is computed by dividing net income available to common stockholders by the weighted average number of shares outstanding during the period. The computation of diluted EPS is similar to the computation of basic EPS, except that the denominator is increased to include the number of additional common shares that would have been outstanding if any dilutive potential common shares had been issued. The adoption of this standard did not impact the Company's reported EPS, as no dilutive securities were outstanding during the periods presented, because all outstanding options were and are out of the money. Accordingly, for all periods presented, income or loss per common share was computed by dividing net income or net loss by the weighted average number of voting and non-voting shares outstanding during the period. 4. Cumulative Translation Adjustment The Company's principal operations are located primarily in Switzerland, Italy, Spain, Turkey and Russia. A significant part of net assets, revenues and 9 expenses are denominated in the currency of those countries, while the Company presents its consolidated financial statements in US dollars. Assets and liabilities are translated at the exchange rates in effect at the balance sheet date. Revenues and expenses are translated at the weighted average exchange rates for the period. Net gains and losses arising upon translation of local currency financial statements to US dollars are accumulated in a separate component of Stockholders' Equity, the Cumulative Translation Adjustment account. 5. Comprehensive Income In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive Income ("SFAS 130"). This Statement establishes standards for reporting and display of comprehensive income and its components in the financial statements. This Statement is effective for financial statements for periods beginning after December 15, 1997, however interim period disclosure is limited to reporting a total for comprehensive income. The Company's comprehensive income represents net income plus the change in the cumulative translation adjustment equity account for the periods presented. The Company has determined total comprehensive income or (loss), net of tax, to be ($534) and $10,197 for the three months ended February 28, 1999 and 1998, respectively, and $1,445 and $7,727 for the nine months ended February 28, 1999 and 1998, respectively. 6. Supplemental Disclosure of Cash Flow Information Nine months ended February 28, 1999 1998 Cash paid during the year for: Interest $ 1,425 $ 907 Income taxes 1,460 1,593 During the period ended February 28, 1999, capital lease obligations of $398 were incurred when the Company entered into leases for new capital equipment. During the period ended February 28, 1999, in connection with the acquisition of Bewlay House, the Company incurred liabilities as described in Note 7. 7. Acquisition and Disposal of Bewlay House In connection with the sale of the Company's former UK subsidiary ("UGUK"), UniLabs SA agreed to purchase from the latter the London building which houses most of UGUK's operations ("Bewlay House"). On July 8, 1998, the Company completed this transaction and acquired a 999-year leasehold in Bewlay House for a purchase price of $12,322 at the then exchange rate. This consideration was paid by (i) the assumption of UGUK's existing debt of $10,812 with a bank and a finance institution; (ii) compensation of an intercompany account of $733; and (iii) $777 in cash. The company simultaneously entered into rental agreements with the tenants of the building. The bank facility was reduced by $2,388 to $6,966 at closing, had a three-year maturity and was subject to quarterly repayments of $162. The financial institution's facility of $1,458 was subject to monthly repayments increasing from $19 presently to $32 in January 2003. On February 25, 1999, the Company closed on definitive agreements to sell the building for cash, for a consideration of approximately $12,000, net of all related costs and expenses. No significant gain or loss, 10 other than resulting from currency changes, was made as compared to the carrying value of the building. The Company simultaneously prepaid the debts to the bank and finance institution. 8. Long-term Investments Focused Healthcare (Jersey) Limited As partial consideration for the Company's disposal of UGUK, the Company received non-voting, non-convertible, redeemable preferred shares of Focused Healthcare (Jersey) Limited ("FHL"), with a face value of $11,797. During the year ended May 31, 1998, the Company amortized $1,180 related to its investment in FHL, which reflects management's appraisal of the uncertainty as to the timing and the possibility of recovery of the investment. As of February 28, 1999, such preferred stock of FHL is recorded at $10,807 in the accompanying consolidated financial statements. The Company is of the opinion that no further write-downs are necessary at this time. Global Unilabs Clinical Trials Limited As of February 27, 1998, the Company spun off its then wholly-owned subsidiary Global Unilabs Clinical Trials Limited ("GUCT") to its shareholders. During the three and nine months periods ended February 28, 1998, GUCT had consolidated revenues of $3,389 and $9,041, respectively. Immediately after the spin-off, the Company continued to hold non-voting, non-convertible, redeemable preferred stock of GUCT, with a face value of approximately $20,000, carried at $12,183 in its balance sheet. As of December 30, 1998, the Company became a party to an agreement with a first-class third party investment bank regarding the operating subsidiaries of the Company's former wholly-owned subsidiary, GUCT. During the second half of calendar 1998, the Company was informed that GUCT's operating subsidiaries were in need of substantial new capital to continue and satisfactorily develop their clinical trials operations, and that GUCT was unable to obtain the necessary funding. As a result of discussions held by GUCT with various potential partners throughout 1998, an agreement was reached whereby an investment bank agreed to invest $7,500 in GUCT's subsidiaries, provided, among other conditions, that (1) the investment bank would have total management control over the business, and (2) GUCT or the Company would invest $2,500. As GUCT had no funds available for such a transaction, the Company agreed to fund such additional investment, essentially with a view to protect its own original investment in GUCT, in which the Company continued to own approximately $20,000 of non-voting and non-convertible preferred stock, as described above. The Company and GUCT agreed that this additional financing of GUCT by the Company was structured such that GUCT owns the shares newly issued to the Company by GUCT's subsidiaries, and the Company owns additional preferred stock of GUCT with a face value equal to the amount of the additional investment. The terms of the additional preferred stock include conditions that will enable the Company to share the upside potential, if any, deriving from the agreement with the investment bank. The agreement with the investment bank further provides that, if the operating subsidiaries meet certain business targets by June 30, 1999, an additional investment of $4,500 and $1,500, respectively, must be made in the second half of calendar 1999 by the investment bank and GUCT and/or the Company, respectively. As of April 13, 1999, the Company was not aware whether such business targets would be met and whether such additional investment would have to be made. The Company's management has performed a careful review of the value of the GUCT preferred stock held as of February 28, 1999, based upon several criteria including the valuation criteria applied to the business by the investment bank in the December transaction. As a result of such review, the Company's management has concluded that it presently had no basis to determine that there was a permanent impairment in the value of GUCT, and that it was therefore not appropriate to record a write-down in the aggregate value of the GUCT preferred stock, carried at $15,197 in the accompanying balance sheet as of February 28, 1999. 11 The Company will continue to monitor the value of its investment in GUCT preferred stock, particularly when the business data as of June 30, 1999, becomes available. 9. Segment Information During the year ended May 31, 1998, the Company performed testing in relation to clinical trials for the pharmaceutical industry and therefore distinguished its core clinical laboratory business from its clinical trials testing business. As of February 27, 1998, the Company's clinical trials testing business was spun off to the Company's shareholders. Following are the key financial data of the Company for purposes of geographical information. Nine Months Ended February 28, 1999 1998 Revenues from unaffiliated customers Switzerland $60,744 $49,321 United Kingdom - - Spain 6,069 4,888 Other 5,140 4,270 Operating Profit or Loss: Switzerland 8,103 6,558 United Kingdom - - Spain (417) (389) Other (1,605) (1,036) Identifiable Assets: Switzerland 83,689 86,161 United Kingdom 10,807 9,277 Spain 6,291 5,310 Other 15,985 2,975 10. Restructuring On February 25, 1999, the Company's subsidiary, Unilabs Group Limited ("UGL") issued approximately 2.8 million new shares of its common stock in exchange for the same number of shares of common stock of UniHolding owned by Unilabs Holdings SA and its affiliates, the then largest shareholders of the Company. As a result of these transactions, UGL now directly holds approximately 4.8 million shares (61%) of UniHolding, including approximately 2 million shares previously owned. UniHolding continues to hold 2.5 million shares of UGL, the initial amount of UGL shares issued and outstanding when UniHolding owned 100% of UGL. As a result of the above mentioned share issuance by UGL, UniHolding's direct ownership interest in UGL was reduced to approximately 47% at February 28, 1999. Out of the 2.8 million newly-issued shares, UGL has kept in its custody approximately 2.3 million shares corresponding to UniHolding shares which Unilabs Holdings SA will deliver upon receipt of the necessary authorization from one of its banks, because such shares are pledged to such bank. Based upon information obtained by UGL from the bank, there is no reason to believe that such authorization will not be given, and, accordingly, UGL has accounted for the issuance of the 2. 3 million shares in the accompanying balance sheet as of February 28, 1999. After the above restructuring, UGL continues to own the majority of Unilabs SA, its main operating subsidiary. 12 Item 2. Management's Discussions and Analysis of Financial Condition and Results of Operations Results of Operations Three and nine month periods ended February 28, 1999 compared with the three and nine month periods ended February 28, 1998 Consolidated revenue was $24.5 million and $71.9 million for the three and nine months ended February 28, 1999, representing respectively an increase of $3.9 million and $13.4 million (including the effect of the change in the US dollar exchange rate of $1.3 million) from the comparable prior year periods, as restated for the spin-off of the clinical trials operations. Revenue generated by the Swiss operations for the three months was down by 12% in local currency due to the effect of the integration of the new operations during the comparable prior year period, while revenue for the nine months was up by 20% in local currency as a result of (i) a 1% increase in sales of the existing laboratories and (ii) the contribution made by the new operations acquired during fiscal 1998. The Spanish operations increased revenues during the nine month period to $6.1 million, as compared to $4.9 million in the comparable prior year nine months period representing a 24% increase in local currency. Operating income for the three months ended February 28, 1999 was $1.7 million, versus $2.6 million in the comparable prior year three months period, due to the effect of the integration of the new operations during the comparable prior year period. For the nine months ended February 28, 1999 operating income was $6.1 million, versus $5.1 million in the comparable prior year period, as restated for the spin-off of clinical trials operations. Such increase of $1.0 million was essentially due to the Swiss operations, which increased operating income by $1.5 million. Other income of $3.9 million and $6.9 million, respectively, for the three and nine months ended February 28, 1999 resulted primarily from foreign currency transactions and changes in foreign currency positions and from gains on sale of part of the investment held by the Company in ULSA. No such gains were recorded during the current year comparable periods. Interest expense, net, increased $1.5 million during the nine months ended February 28, 1999, as compared to the prior year, primarily due to higher average borrowing levels resulting from the Swiss acquisitions completed during fiscal 1998 and to the UK debt incurred as a result of the acquisition of the UK building. Provision for income taxes in the nine months ended February 28, 1999, was $1.6 million, as compared to $1.1 million in the prior year comparable period. Minority interests in income of continuing operations in the nine months ended February 28, 1999, were $1.9 million as compared to $1.8 million in the prior year comparable period, essentially due to certain income not subject to minority interest in the prior year period. Liquidity and Capital Resources Net cash provided by operating activities for the nine months ended February 28, 1999 amounted to $6.9 million, a decrease of $6.5 million from the prior year period primarily due to a $8.0 million decrease in net income from continuing operations, offset by an improvement in working capital, and higher amortization charges. Net cash used in financing activities for the nine months ended February 28, 1999 was $9.0 million, a change of $26.4 million from the prior year period, primarily due to a net change of $19.2 million in proceeds from debt and to an increase of $12.1 million in the repayment of debt, primarily caused by the repayment of the UK debt upon the sale of Bewlay House, and scheduled repayments under the new Swiss credit facilities. Net cash provided by investing activities for the nine months ended February 28, 1999 was $1.7 million, compared to net cash used of $27.1 million in the prior year comparable period. The change is primarily due to a $16.1 million decrease in the level of cash expenditures incurred in connection with the purchases of businesses and purchase of additional shares of subsidiaries, as well as a $10.4 13 million increase in the proceeds from the sale of assets, which was principally the result of the acquisition and disposal of Bewlay House during the same nine month period (see Note 7 to the accompanying financial statements). Offsetting these amounts was a $3.0 million increase in cash paid for long-term investments, primarily GUCT (see Note 8 to the accompanying financial statements). In connection with the sale of UGUK, ULSA agreed to purchase from UGUK the London building which houses most of UGUK's operations ("Bewlay House"). On July 8, 1998, the Company completed this transaction and acquired a 999-year leasehold in Bewlay House for a purchase price of $12.3 million. This consideration was paid by (i) the assumption of UGUK's existing debt of $10.8 million with a bank and a finance institution; (ii) compensation of an intercompany account of $0.7 million; and (iii) $0.8 million in cash. The company simultaneously entered into rental agreements with the tenants of the building. The bank facility reduced to $6.9 million after the closing, had a three-year maturity and was subject to quarterly repayments of $0.1 million. The financial institution's facility of $1.5 million was subject to monthly repayments up to January 2003. On February 25, 1999, the Company closed on definitive agreements to sell the building for cash, for a consideration of approximately $12,000, net of all related costs and expenses. No significant gain or loss, other than resulting from currency changes, was made as compared to the carrying value of the building. The Company simultaneously prepaid the debts to the bank and finance institution. As of April 14, 1999, the Company's bank facilities provide for a total of approximately $46 million, including secured senior revolving facilities consisting of term loans, working capital loans and/or guarantees. As of April 14, 1999, the Company had approximately $10 million of availability under the aggregate credit facilities. The Company believes that the liquidity provided by the cash flow from operations, the existing cash balances and the borrowing arrangements described above will be sufficient to meet the Company's capital requirements including anticipated operating expenses arising from the Company's recent expansion into markets other than Switzerland, as well as debt repayments. In addition, the Company has outstanding obligations and commitments under capital leases which mature over the next five to ten years. IMPACT OF YEAR 2000 As previously reported in the Company's Form 10-K for the year ended May 31, 1998, most of the Company's laboratories are faced with "Year 2000" remediation issues. Many computer programs were written with a two digit date field and if these programs are not made Year 2000 compliant, they will be unable to correctly process date information on or after the Year 2000. While these issues impact all of the Company's data processing systems to some extent, they are most significant in connection with patient- related computer programs. Moreover, remediation efforts go beyond the Company's internal computer systems and require coordination with clients, suppliers and other third parties to assure that their systems and related interfaces are compliant. Given the different computer systems operated by the Company's business units, the type and extent of the Year 2000 issues and the cost of remediation vary significantly among the Company's laboratories. Failure to achieve timely remediation of computer systems that process client information and transactions, and of all other systems with embedded technologies that are critical to the Company's operations, would have a material adverse effect on the Company's business, operations and financial results. In response to the Year 2000 concerns, the Company created a Year 2000 Task Force to coordinate and monitor the laboratories' progress in their Year 2000 remediation efforts. The Task Force reports directly to the Company's executive management, provides regular progress reports to executive management, and regularly meets with executive management to discuss its reports. The Company's initial plans called for all critical systems to be renovated and compliance testing underway by the end of calendar 1998. As of April 13, 1999, the Company estimated that approximately 50 to 60% of its 14 critical systems had been renovated and compliance testing underway, and that the balance will be renovated by June 30, 1999. As the Company uses many computerized laboratory machinery manufactured, provided and maintained by third-party vendors, it has requested each of those vendors to provide the Company with appropriate certification that the machinery is Year 2000 compliant. The Company currently estimates that approximately 50% of such certification has been received, and it continuously presses those vendors that have not responded. Acceptance testing is scheduled to take place through mid-1999 with time frames differing by laboratory unit. Completion of any third party interface testing is dependent upon those third parties completing their own internal remediation. The Company could be adversely affected to the extent third parties with which it interfaces (including some of the Company's customers) have not properly addressed their Year 2000 issues. The Company currently develops contingency plans to handle critical areas in the event remediation is not fully successful or is beyond the Company's control. In fiscal 1998, the Company spent approximately $0.5 million on its Year 2000 remediation efforts. The Company currently anticipates expenditures for Year 2000 remediation efforts and testing in the range of $0.5 million to $1.0 million in fiscal 1999, out of which approximately $0.6 million were spent in the nine months ended February 28, 1999, and of approximately $0.2 million in fiscal 2000. Substantially all of the expenditures already made are related to internal payroll and external consultants, while future expenditures include approximately $0.5 for computer equipment that was not compliant and should be replaced. The costs of the project and the date on which the Company believes it will complete the Year 2000 modifications are based on management's best estimates, which were derived utilizing numerous assumptions of future events, including the continued availability of certain resources and other factors. However, there can be no guarantee that these estimates will be achieved and actual results could differ materially from those anticipated. CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Management's Discussion and Analysis contains various "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company's expectations or beliefs concerning the Company's operations, economic performance and financial condition, including, in particular, forward-looking statements regarding the Company's expectation of future performance following implementation of its new business strategy. Such statements are subject to various risks and uncertainties. Accordingly, the Company hereby identifies the following important factors that could cause the Company's actual financial results to differ materially from those projected, forecast, estimated, or budgeted by the Company in such forward- looking statements. (a) Inability to carry out marketing and sales plans. (b) Inability to recover the carrying value of the preferred stock in GUCT. (c) Inability to recover the carrying value of the preferred stock in FHL. As well as other factors listed in the Company's 1998 Annual Report on Form 10-K, which are incorporated herein by reference. 15 PART II - OTHER INFORMATION Item 1. Legal Proceedings Arbitration As described and discussed more thoroughly in the Company's Annual Report on Form 10-K for the year ended May 31, 1998, the Company is entitled to 80% of the net recovery (less legal fees and costs) of any settlement or successful resolution of the pending arbitration instituted by Americanino Capital Corp. ("ACC") pursuant to an agreement by which the Company sold its remaining interest in ACC. The Company's management will continue to monitor and report the progress of the proceedings. See also the discussion on Foreclosure Proceedings and Attachment Claim in the 1998 Annual Report on Form 10-K. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. 27 Financial Data Schedule (b) Reports on Form 8-K. None 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. UniHolding Corporation By: /s/ Bruno Adam ----------------------- Bruno Adam, CFO Date: April 16, 1999 17 EX-27 2 FDS UNIHOLDING CORPORATION
5 This schedule contains summary financial information extracted from this Consolidated Statement of Financial Condition at February 28, 1999 (Unaudited) and the Consolidated Statement of Income for the Nine Months Ended February 28, 1999 (Unaudited) and is qualified in its entirety by reference to such financial statements. 1,000 9-mos May-31-1998 Dec-1-1998 Feb-28-1999 8,960 0 20,083 0 1,842 36,235 7,879 2,152 116,773 28,245 0 0 0 76 32,082 116,773 71,953 71,953 61,332 65,872 129 0 (1,550) 4,402 (1,550) 2,852 0 0 0 1,001 0.17 0.17
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