SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q (Mark One) ( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: December 31, 2000 ( ) 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) Delaware 59-2225346 (State or other jurisdiction of incorporation (IRS Employer Identification No.) or organization) 1901 Main Street, Suite 1200, Mail Code 1105, Columbia, SC 29201 (Address of principal executive offices) (803) 252-3661 (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: 9,650,515 shares of $.05 common stock outstanding at December 31, 2000 Transitional Small Business Disclosure Format (check one): ( )Yes ( X ) No UCI MEDICAL AFFILIATES, INC. INDEX Page Number PART I FINANCIAL INFORMATION Item 1 Financial Statements Condensed Consolidated Balance Sheets - December 31, 2000 and September 30, 2000 3 Condensed Consolidated Statements of Operations for the quarters ended December 31, 2000 and December 31, 1999 4 Condensed Consolidated Statements of Cash Flows for the quarters ended December 31, 2000 and December 31, 1999 5 Notes to Condensed Consolidated Financial Statements 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 11 Item 3 Quantitative and Qualitative Disclosures About Market Risk 12 PART II OTHER INFORMATION Items 1-6 13 SIGNATURES 14 UCI Medical Affiliates, Inc. Condensed Consolidated Balance Sheets December 31, 2000 September 30, 2000 ------------------- ----------------- (unaudited) (audited) Assets Current assets Cash and cash equivalents $ 345,136 $ 302,927 Accounts receivable, less allowance for doubtful accounts of $1,627,149 and $1,549,048 7,519,869 6,958,745 Inventory 623,497 623,497 Prepaid expenses and other current assets 1,042,517 933,130 ------------------- ----------------- Total current assets ------------------ ---------------- 9,531,020 8,818,299 Property and equipment less accumulated depreciation of $6,311,126 and $6,035,106 4,198,768 4,326,093 Excess of cost over fair value of assets acquired, less accumulated amortization of $2,720,471 and $2,616,455 4,491,674 4,595,690 Other assets 41,500 41,500 ------------------- ----------------- Total Assets $18,262,962 $ 17,781,582 =================== ================= Liabilities and Stockholders' Equity Current liabilities Book overdraft $1,186,821 $ 1,184,257 Current portion of long-term debt 6,525,105 6,489,280 Accounts payable 3,028,602 3,511,545 Accrued salaries and payroll taxes 3,591,375 2,544,102 Other accrued liabilities 1,176,466 ---------------- 1,318,362 ----------------- ------------------- Total current liabilities 15,508,369 15,047,546 Long-term debt, net of current portion 2,415,540 2,463,034 ------------------- ----------------- Total Liabilities 17,923,909 17,510,580 ------------------- ----------------- 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 and 50,000,000 Issued and outstanding- 9,650,515 and 9,650,515 shares 482,526 482,526 Paid-in capital 21,723,628 21,723,628 Accumulated deficit (21,867,101) (21,935,152) ------------------- ----------------- Total Stockholders' Equity 339,053 271,002 ------------------- ----------------- Total Liabilities and Stockholders' Equity $18,262,962 $ 17,781,582 =================== ================= The accompanying notes are an integral part of these condensed consolidated financial statements. UCI Medical Affiliates, Inc. Condensed Consolidated Statements of Operations (unaudited) Three Months Ended December 31, 2000 1999 -------------------- ------------------ Revenues $9,441,662 $10,198,849 Operating costs 8,622,349 9,218,809 -------------------- ------------------ Operating margin 819,313 980,040 General and administrative expenses 9,658 25,843 Depreciation and amortization 380,038 466,147 -------------------- ------------------ Income (loss) from operations 429,617 488,050 Other income (expense) Interest expense, net of interest income (361,566) (337,930) Income before benefit (provision ) for income taxes 68,051 150,120 Benefit (provision )for income taxes 0 0 -------------------- ------------------ Net income $ 68,051 $ 150,120 ================== ==================== Basic earnings per share $ .01 $ .02 ==================== ================== Basic weighted average common shares outstanding 9,650,515 9,650,515 ==================== ================== Diluted earnings per share $ .01 $ .02 ==================== ================== Diluted weighted average common shares outstanding 9,657,675 9,657,258 ==================== ================== The accompanying notes are an integral part of these condensed consolidated financial statements. UCI Medical Affiliates, Inc. Condensed Consolidated Statements of Cash Flows (unaudited) Three Months Ended December 31, 2000 1999 ------------------ ----------------- Operating activities: Net income (loss) $ 68,051 $ 150,120 Adjustments to reconcile net income (loss) to net cash provided by (used-in) operating activities: Provision for losses on accounts receivable 371,750 403,164 Depreciation and amortization 380,037 466,147 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable (932,874) (434,000) (Increase) decrease in inventory 0 (12,540) (Increase) decrease in prepaid expenses and other current assets (109,387) (165,750) Increase (decrease) in accounts payable and accrued expenses 424,351 101,544 ----------------- ------------------ Cash provided by (used in) operating activities 201,928 508,685 ------------------ ----------------- Investing activities: Purchases of property and equipment (150,614) (222,006) (Increase) decrease in other assets 0 0 ----------------- ------------------ Cash provided by (used in) investing activities (150,614) (222,006) ------------------ ----------------- Financing activities: Net borrowings (payments) under line-of-credit agreement 216,316 303,826 Increase (decrease) in book overdraft 2,564 (82,966) Payments on long-term debt (227,985) (344,650) ------------------ ----------------- Cash provided by (used in) financing activities (9,105) (123,790) ------------------ ----------------- Increase (decrease) in cash and cash equivalents 42,209 162,889 Cash and cash equivalents at beginning of period 302,927 66,159 ------------------ ----------------- ------------------ Cash and cash equivalents at end of period $ 345,136 $ 229,048 ================== ================= The accompanying notes are an integral part of these condensed consolidated financial statements. UCI MEDICAL AFFILIATES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) BASIS OF PRESENTATION: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of those of a normal recurring nature) considered necessary for a fair presentation have been included. Operating results for the three-month period ended December 31, 2000 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2001. For further information, refer to the audited consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended September 30, 2000. The consolidated financial statements include the accounts of UCI Medical Affiliates, Inc. ("UCI"), UCI Medical Affiliates of South Carolina, Inc. ("UCI-SC"), UCI Medical Affiliates of Georgia, Inc. ("UCI-GA"), Doctor's Care, P.A., Doctor's Care of Georgia, P.C., and Doctor's Care of Tennessee, P.C. (the three together as the "P.A."). (As used herein, the term "Company" refers to UCI, UCI-SC, UCI-GA, and the P.A., collectively.) Because of the corporate practice of medicine laws in the states in which the Company operates, the Company does not own medical practices but instead enters into an exclusive long-term management services agreements with the P.A. which operate the medical practices. Consolidation of the financial statements is required under Emerging Issues Task Force (EITF) 97-2 as a consequence of the nominee shareholder arrangement that exists with respect to each of the P.A.'s. In each case, the nominee (and sole) shareholder of the P.A. has entered into an agreement with UCI-SC or UCI-GA, as applicable, which satisfies the requirements set forth in footnote 1 of EITF 97-2. Under the agreement, UCI-SC or UCI-GA, as applicable, in its sole discretion, can effect a change in the nominee shareholder at any time for a payment of $100 from the new nominee shareholder to the old nominee shareholder, with no limits placed on the identity of any new nominee shareholder and no adverse impact resulting to any of UCI-SC, UCI-GA or the P.A. resulting from such change. In addition to the nominee shareholder arrangements described above, each of UCI-SC and UCI-GA have entered into Administrative Service Agreements with the P.A.'s. As a consequence of the nominee shareholder arrangements and the Administrative Service Agreements, the Company has a long-term financial interest in the affiliated practices of the P.A.'s. Through the Administrative Services Agreement, the Company has exclusive authority over decision making relating to all major on-going operations. The Company establishes annual operating and capital budgets for the P.A. and compensation guidelines for the licensed medical professionals. The Administrative Services Agreements have an initial term of forty years. According to EITF 97-2, the application of FASB Statement No. 94 (Consolidation of All Majority-Owned Subsidiaries), and APB No. 16 (Business Combinations), the Company must consolidate the results of the affiliated practices with those of the Company. All significant intercompany accounts and transactions are eliminated in consolidation, including management fees. The method of computing the management fees is based on billings of the affiliated practices less the amounts necessary to pay professional compensation and other professional expenses. In all cases, these fees are meant to compensate the Company for expenses incurred in providing covered services, plus a profit. These interests are unilaterally salable and transferable by the Company and fluctuate based upon the actual performance of the operations of the professional corporation. The P.A. enters into employment agreements with physicians for terms ranging from one to ten years. All employment agreements have clauses that allow for early termination of the agreement if certain events occur such as the loss of a medical license. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates and assumptions. Significant estimates are discussed in the footnotes, as applicable, of the Form 10-K for the year ended September 30, 2000. The inventory of medical supplies and drugs is carried at the lower of average cost (first in, first out) or market. The volume of supplies carried at a center varies very little from month to month and management, therefore, does only an annual physical inventory count and does not maintain a perpetual inventory system. The Company operates as one segment. EARNINGS PER SHARE The computation of basic earnings (loss) per share and diluted earnings (loss) per share is in conformity with the provisions of Statement of Financial Accounting Standards No. 128. Going Concern Matters The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the financial statements, the Company has a working capital deficiency and an accumulated deficit. Ultimately, the Company's viability as a going concern is dependent upon its ability to continue to generate positive cash flows from operations, maintain adequate working capital and obtain satisfactory long-term financing. The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company plans include the following, although it is not possible to predict the ultimate outcome of the Company's efforts. The closure of the Atlanta centers, which were unprofitable, had an immediate positive effect on the Company in the fourth quarter of fiscal year 2000 and continued into the first quarter of fiscal year 2001. This improvement is expected to continue into fiscal year 2001 and beyond. However, there can be no assurances that such improvement will occur. 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. The consolidated financial statements of the Company include the accounts of UCI, UCI-SC, UCI-GA and the P.A.'s. Such consolidation is required under Emerging Issues Task Force (EITF) 97-2 as a consequence of the nominee shareholder arrangement that exists with respect to each of the PA's. In each case, the nominee (and sole) shareholder of the P.A. has entered into an agreement with UCI-SC or UCI-GA, as applicable, which satisfies the requirements set forth in footnote 1 of EITF 97-2. Under the agreement, UCI-SC or UCI-GA, as applicable, in its sole discretion, can effect a change in the nominee shareholder at any time for a payment of $100 from the new nominee shareholder to the old nominee shareholder, with no limits placed on the identity of any new nominee shareholder and no adverse impact resulting to any of UCI-SC, UCI-GA or the P.A. resulting from such change. In addition to the nominee shareholder arrangements described above, each of UCI-SC and UCI-GA have entered into Administrative Service Agreements with the P.A.'s. As a consequence of the nominee shareholder arrangements and the Administrative Service Agreements, the Company has a long-term financial interest in the affiliated practices of the P.A.'s. According to EITF 97-2, the application of FASB Statement No. 94 (Consolidation of All Majority-Owned Subsidiaries), and APB No. 16 (Business Combinations), the Company must consolidate the results of the affiliated practices with those of the Company. The P.A.'s enter into employment agreements with physicians for terms ranging from one to ten years. All employment agreements have clauses that allow for early termination of the agreement if certain events occur such as the loss of a medical license. Over 79% of the physicians employed by the P.A.'s are paid on an hourly basis for time scheduled and worked at the medical centers. The other physicians are salaried. Approximately 25 of the physicians have incentive compensation arrangements; however, no amounts were accrued or paid during the Company's three prior fiscal years that were significant. Any incentive compensation is based upon a percentage of non-ancillary collectible charges for services performed by a provider. Percentages range from 3% to 17% and vary by individual employment contract. As of December 31, 2000 and 1999, the P.A.'s employed 106 and 121 medical providers, respectively. The net assets of the P.A.'s are not material for any period presented, and intercompany accounts and transactions have been eliminated. The Company does not allocate all indirect costs incurred at the corporate offices to the Centers on a center-by-center basis. Therefore, all discussions below are intended to be in the aggregate for the Company as a whole. Results of Operations UCI provides nonmedical management and administrative services for a network of 34 freestanding medical centers (the "Centers"), 32 of which are located throughout South Carolina and two are located in Knoxville, Tennessee (28 operating as Doctor's Care in South Carolina, two as Doctor's Care in Knoxville, Tennessee, and four as Progressive Physical Therapy Services in South Carolina). Revenues of $9,442,000 for the quarter ended December 31, 2000 reflect a decrease of $757,000 or 7% from those of the quarter ended December 31, 1999. Of this decrease $564,000 is related to the closure of the company's Atlanta centers to be discussed below. The remaining decrease is due to the timing of the flu season being earlier in fiscal year 2000 and later in fiscal year 2001. The Company continually evaluates the operations of its physician practice centers and assesses the centers for impairment when certain indicators of impairment are present. In May 2000, the Company announced its intention to close its seven Georgia physician practice centers effective June 30, 2000. The performance of these centers, which were originally acquired in May 1998, did not meet the expectations of the Company during fiscal year 2000 and the Company was no longer committed to the Georgia market. The Company sold the property and equipment at these centers for an amount approximating the net book value of the fixed assets or transferred the property and equipment to other Company locations. The long-lived assets and related goodwill for these centers was assessed for impairment under a held for use model as of March 31, 2000. As a result of the decision to close these centers coupled with the fact that the remaining projected undiscounted cash flows were less than the carrying value of the long-lived assets and goodwill for these centers, the Company recorded an impairment in the quarter ended March 31, 2000 of approximately $3,567,000 to reduce the goodwill to its fair value. This decrease in revenue is the result of the decrease in the number of centers in operation for 41 locations at December 31, 1999 to 34 at December 31, 2000. Patient encounters decreased to approximately 119,000 in the first quarter of fiscal year 2001 from 131,000 in the first quarter of fiscal year 2000. During the past three fiscal years, the Company has continued its services provided to members of HMOs. In these arrangements, the Company, through the P.A., acts as the designated primary caregiver for members of HMOs who have selected one of the Company's centers or providers as their primary care provider. In fiscal year 1994, the Company began participating in an HMO operated by Companion HealthCare Corporation ("CHC"), a wholly owned subsidiary of Blue Cross Blue Shield of South Carolina ("BCBS"). BCBS, through CHC, is a primary stockholder of UCI. Including its arrangement with CHC, the Company now participates in four HMOs and is the primary care "gatekeeper" for more than 18,000 lives at December 31, 2000. As of December 31, 2000, all of these HMOs use a discounted fee-for-service basis for payment. HMOs do not, at this time, have a significant penetration into the South Carolina market. The Company is not certain if there will be growth in the market share of HMOs in the areas in which it operates clinics. Capitated revenue decreased from approximately $340,000 in the first quarter of fiscal year 2000 to $0 in the first quarter of fiscal year 2001. Sustained revenues in fiscal years 2001 and 2000 also reflect the Company's heightened focus on occupational medicine and industrial health services (these revenues are referred to as "employer paid" on the table below). Focused marketing materials, including quarterly newsletters for employers, were developed to spotlight the Company's services for industry. Approximately 25% of the Company's total revenues were derived from these occupational medicine services in both 2001 and 2000. The following table breaks out the Company's revenue and patient visits by revenue source for the first quarter of fiscal years 2001 and 2000. Percent of Percent of Payor Patient Visits Revenue ------------------------------------------------ ------------------------ ----------------------- 2001 2000 2001 2000 ------------ ----------- ------------ ---------- 17 17 16 16 Patient Pay 11 9 7 5 Employer Paid 12 13 14 15 HMO 7 6 15 12 Workers Compensation 9 8 6 6 Medicare/Medicaid 38 38 33 33 Managed Care Insurance 6 9 9 13 Other (Commercial Indemnity, Champus, etc.) An operating margin of $819,000 was earned during the first quarter of fiscal 2001 as compared to an operating margin of $980,000 for the first quarter of fiscal 2000. If the Atlanta centers had not been operating in the first quarter of fiscal year 2000, the operating margin for that quarter would have been $1,275,000. Management believes that the decline in margin was the result of personnel and supply costs overruns that it is in the process of reducing. However, the personnel cost increases are in part attributable to increased cost-cutting pressures being applied by managed care insurance payors that cover many of the Company's patients. As managed care plans attempt to cut costs, they typically increase the administrative burden of providers such as the Company by requiring referral approvals and by requesting hard copies of medical records before they will pay claims. The number of patients at the Company's Centers that are covered by a managed care plan versus a traditional indemnity plan continues to grow. Management expects this trend to continue. Additionally, the annual flu season hit in November and December of 1999 for fiscal year 2000 and not until January 2001 in fiscal year 2001 which had an effect on this year's margin. Depreciation and amortization expense decreased to $380,000 in the first quarter of fiscal 2001, down from $466,000 in the first quarter of fiscal 2000. This decrease reflects higher depreciation expense as a result of leasehold improvements and equipment upgrades at a number of the Company's medical centers, offset by a greater reduction in amortization expense for fully amortized acquisitions and the closure of the Atlanta sites. Interest expense increased from $338,000 in the first quarter of fiscal 2000 to $362,000 in the first quarter of fiscal 2001 primarily as a result of the higher interest rates in the first quarter of fiscal year 2001. Going Concern Matters The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the financial statements, the Company has a working capital deficiency and an accumulated deficit. Ultimately, the Company's viability as a going concern is dependent upon its ability to continue to generate positive cash flows from operations, maintain adequate working capital and obtain satisfactory long-term financing. The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company plans include the following, although it is not possible to predict the ultimate outcome of the Company's efforts. The closure of the Atlanta centers, which were unprofitable, had an immediate positive effect on the Company in the fourth quarter of fiscal year 2000 and continued into the first quarter of fiscal year 2001. This improvement is expected to continue into fiscal year 2001 and beyond. However, there can be no assurances that such improvement will occur. Financial Condition at December 31, 2000 Cash and cash equivalents increased by $42,000 during the quarter ended December 31, 2000 mainly as a result of the continuing profitability. Accounts receivable increased by $561,000 during the quarter and is a temporary increase that reversed in January 2001 and is related to the timing of the keying of remittances from insurance carriers. The reduction in goodwill is attributable to regularly scheduled amortization. Long-term debt decreased from $8,952,000 at September 30, 2000 to $8,941,000 at December 31, 2000. Regular principal pay-downs of approximately $228,000 during the quarter were offset by a temporary increase in the Company's line of credit balance. This balance fluctuates daily. Management believes that it will be able to fund debt service requirements out of cash generated through operations and does not anticipate the availability of additional debt financing. 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 CHC and CP&C), and credit extended by suppliers. The Company has a $4,000,000 bank line of credit with an outstanding indebtedness of approximately $3,800,000 at December 31, 2000. The availability under this line of credit is limited by accounts receivable type and age as defined in the agreement. As of December 31, 2000, the Company had borrowed approximately the maximum allowable amounts. The line of credit bears interest of prime plus 2.5% with a maturity of August 2001. (Prime rate was 9.50% at December 31, 2000.) The line of credit is used to fund the working capital needs of the Company. As of December 31, 2000, the Company had no material commitments for capital expenditures or for acquisition or start-ups. Operating activities produced $202,000 of cash during the first quarter of fiscal year 2001, compared with $509,000 during the first quarter of fiscal year 2000. Investing activities used $151,000 in the first quarter of fiscal year 2001 as compared to $222,000 in the first quarter of fiscal year 2000 in cash to purchase needed equipment for its operating sites. Financing activities utilized $228,000 in cash during the quarter for debt reduction offset by an approximate $216,000 increase in the line of credit that was temporary in nature due to the daily fluctuation of the primary line of credit. Advisory Note Regarding Forward-Looking Statements Certain of the statements contained in this PART I, Item 2 (Management's Discussion and Analysis of Financial Condition and Results of Operations) that are not historical facts are forward-looking statements subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. The Company cautions readers of this Quarterly Report on Form 10-Q that such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements. Although the Company's management believes that their expectations of future performance are based on reasonable assumptions within the bounds of their knowledge of their business and operations, there can be no assurance that actual results will not differ materially from their expectations. Factors which could cause actual results to differ from expectations include, among other things, the difficulty in controlling the Company's costs of providing healthcare and administering its network of Centers; the possible negative effects from changes in reimbursement and capitation payment levels and payment practices by insurance companies, healthcare plans, government payors and other payment sources; the difficulty of attracting primary care physicians; the increasing competition for patients among healthcare providers; possible government regulations negatively impacting the existing organizational structure of the Company; the possible negative effects of prospective healthcare reform; the challenges and uncertainties in the implementation of the Company's expansion and development strategy; the dependence on key personnel, the ability to successfully integrate the management structures and consolidate the operations of recently acquired entities or practices with those of the Company, and other factors described in this report and in other reports filed by the Company with the Securities and Exchange Commission. ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to changes in interest rates primarily as a result of its borrowing activities, which includes credit facilities with financial institutions used to maintain liquidity and fund the Company's business operations, as well as notes payable to various third parties in connection with certain acquisitions of property and equipment. The nature and amount of the Company's debt may vary as a result of future business requirements, market conditions and other factors. The definitive extent of the Company's interest rate risk is not quantifiable or predictable because of the variability of future interest rates and business financing requirements. The Company does not currently use derivative instruments to adjust the Company's interest rate risk profile. Approximately $3,800,000 of the Company's debt at December 31, 2000 was subject to fixed interest rates and principal payments. Approximately $5,000,000 of the Company's debt at December 31, 2000 was subject to variable interest rates. Based on the outstanding amounts of variable rate debt at December 31, 2000, the Company's interest expense on an annualized basis would increase approximately $40,000 for each increase of one percent in the prime rate. The Company does not utilize financial instruments for trading or other speculative purposes, nor does it utilize leveraged financial instruments. 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 (a) Exhibits. The exhibits included on the attached Exhibit Index are filed as part of this report. (b) Reports on Form 8-K. None. 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, Executive Vice President of Finance, and Chairman of the Board Chief Financial Officer and Principal Accounting Officer Date: February 20, 2001 UCI MEDICAL AFFILIATES, INC. EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION PAGE NUMBER - ----------------- ------------------------------------------------------- ------------------------------------ 27 Financial Data Schedule Filed separately as Article Type 5 via Edgar