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
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27 Financial Data Schedule Filed separately as Article Type 5 via Edgar