UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ______________ to
______________
Commission file Number 0-19824
NUTRITION MANAGEMENT SERVICES COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-2095332
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
BOX 725 KIMBERTON ROAD, KIMBERTON, PA 19442
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (610) 935-2050
-----------------------------
N/A
Former name, former address and former fiscal year, if change since last
report.
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 / /. 2,810,569 shares of
Registrant's Class A Common Stock, without par value, and 100,000 shares of
Registrant's Class B Common Stock, without par value, are outstanding as of
November 19, 1996.
<PAGE>
INDEX
Part I. FINANCIAL INFORMATION PAGE NO.
Consolidated Balance Sheets as of
September 30, 1996 and June 30, 1996 2 - 3
Consolidated Statements of Operations for the
Three Months Ended September 30, 1996 and 1995 4
Consolidated Statements of Cash Flows for the
Three Months Ended September 30, 1996 and 1995 5
Notes to Financial Statements 6
Management's Discussion and Analysis of Financial Condition
and Results of Operations 7 - 8
Part II. OTHER INFORMATION 9
Signatures 10
1
<PAGE>
NUTRITION MANAGEMENT SERVICES COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
----------- -----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,989,234 $ 3,026,607
Accounts receivable, less allowance for doubtful
accounts of $396,428 and $362,065, respectively 5,667,106 5,863,105
Unbilled revenue 721,204 273,132
Notes and leases receivable 792,220 823,602
Advances to employees 262,918 257,415
Deferred income taxes 387,265 387,183
Inventory and other 549,956 407,221
----------- -----------
Total current assets 10,369,903 11,038,265
Property and equipment, net of accumulated
depreciation of $741,191 and $663,250, respectively 4,897,837 4,450,309
Other assets:
Restricted Cash 69,885 146,827
Long-term accounts receivable, less allowance for doubt-
ful accounts of $57,509 and $57,509,respectively 50,815 50,815
Deferred income taxes 111,918 112,000
Investment in contracts, net of accumulated amort-
tization of $1,022,588 and $937,263,respectively 683,901 769,226
Lease receivable 276,417 289,882
Advances to employees 5,000 5,000
Deferred costs and other 87,524 100,028
----------- -----------
Total assets $16,553,200 $16,962,352
=========== ===========
</TABLE>
2
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
----------- -----------
(unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 4,646,075 $ 5,042,025
Accrued expenses 368,316 397,054
Accrued payroll and related expenses 468,318 471,806
Current portion of long-term debt 896,666 896,667
Accrued income taxes 72,980 45,063
Other 430,080 349,013
----------- -----------
Total current liabilities 6,882,435 7,201,628
Long-term debt, net of current portion 3,043,641 3,267,808
Other 246,504 262,824
Stockholders' equity:
Undesignated preferred stock - no par,
2,000,000 shares authorized, none outstanding -- --
Common stock:
Class A - no par, 10,000,000 shares authorized;
3,012,500 issued, 2,810,569 outstanding 3,826,926 3,826,926
Class B - no par, 100,000 shares authorized,
issued and outstanding 48 48
Retained earnings 2,963,427 2,838,934
----------- -----------
6,790,401 6,665,908
Less: treasury stock (class A common: 224,431
shares) - at cost (409,781) (435,816)
----------- -----------
Total stockholders' equity 6,380,620 6,230,092
----------- -----------
Total liabilities and stockholders' equity $16,553,200 $16,962,352
=========== ===========
</TABLE>
3
<PAGE>
NUTRITION MANAGEMENT SERVICES COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended
September 30,
1996 1995
----------- -----------
Revenues $ 8,552,087 $ 9,246,352
Operating costs and expenses:
Cost of services provided 7,063,757 7,536,547
General and administrative expenses 1,262,178 1,654,181
----------- -----------
Income from operations 226,152 55,624
Other income:
Other income (expense) 76,536 73,810
Other (76,276) (53,514)
----------- -----------
Income before income taxes 226,412 75,920
Provision for income taxes 101,919 35,348
----------- -----------
Net income $ 124,493 $ 40,572
=========== ===========
Earnings per common share $ 0.04 $ 0.01
=========== ===========
Weighted average shares outstanding 2,947,433 2,975,000
=========== ===========
4
<PAGE>
NUTRITION MANAGEMENT SERVICES COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
September 30,
1996 1995
----------- ------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 124,493 $ 40,572
Adjustments to reconcile net income to net
cash (used in) operating activities:
Depreciation and amortization 155,646 164,042
Deferred income taxes -- (10,000)
Provision for doubtful accounts 45,024 30,000
Gain on sale of assets (6,591) (6,593)
Amortization of lease receivable 39,488 39,488
Changes in assets and liabilities:
Accounts receivable 150,215 (817,579)
Inventory (21,533) (50,599)
Prepaid expenses (79,909) (61,076)
Accrued income receivable (448,072) (82,745)
Deferred costs 12,504 51,731
Notes receivable 31,382 93,185
Accounts payable (395,950) 819,549
Accrued expenses (28,738) (134,925)
Customer deposits -- 13,281
Accrued payroll (3,488) (11,653)
Accrued/prepaid income taxes 27,917 (218,522)
Unearned interest income -- (12,101)
Other (1,064) (25,917)
----------- -----------
Total adjustments (523,169) (220,434)
----------- -----------
----------- -----------
Net cash (used in) operating activities (398,676) (179,862)
----------- -----------
INVESTING ACTIVITIES:
Proceeds from sale of marketable securities -- 669,781
Advances to employees and officers (5,503) (47,727)
Repayments - mortgage to related party -- 2,052
Payment of lease receivable 13,465 --
Transfer of restricted cash to cash 76,942 --
Acquisition of fixed assets (525,469) (506,806)
----------- -----------
----------- -----------
Net cash (used in)/provided by investing activities (440,565) 117,300
----------- -----------
FINANCING ACTIVITIES:
Repayments of long term debt (224,167) (224,166)
(Purchase)/sale of treasury stock 26,035 --
Other -- 163,200
-----------
----------- -----------
Net cash (used in) financing activities (198,132) (60,966)
----------- -----------
Net (decrease) in cash (1,037,373) (123,528)
Cash and cash equivalents at begin-
ning of period 3,026,607 1,444,558
----------- -----------
Cash and cash equivalents at end
of period $ 1,989,234 $1,321,030
=========== ===========
Supplemental cash flow information:
Interest paid $ 68,379 $ 106,336
Income taxes paid $ 68,330 $ 263,870
</TABLE>
5
<PAGE>
NUTRITION MANAGEMENT SERVICES COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements were prepared
in accordance with generally accepted accounting principles for interim
financial information for quarterly reports on Form 10-Q and, therefore, do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. However,
all adjustments which, in the opinion of management are necessary for fair
presentation of the financial statements, have been included. The results
of operations for the interim periods presented are not necessarily
indicative of the results which may be expected for the entire fiscal year
ending June 30, 1997. The financial information presented should be read in
conjunction with the Company's financial statements which were filed under
Form 10-K.
2. EARNINGS PER COMMON SHARE
Earnings per common share amounts are based on the weighted average number
of shares of common stock outstanding during the years ended June 30,1996,
1995 and 1994. Shares issued in connection with the employee stock purchase
plan were included as common stock equivalents. Stock options and warrants
did not impact earnings per share each quarter as they were anti-dilutive.
3. REDEEMABLE WARRANTS
In connection with the public offering on January 29, 1992, there are
warrants outstanding to purchase 1,150,000 shares of the Company's Class A
Common Stock. Effective February 28, 1992, each registered warrant holder
is entitled to purchase from the Company one share of Class A Common Stock
of the Company at the exercise price of $6.00 (120% of the initial public
offering price of a Unit) per share. These warrants expire on January 29,
1997.
4. LITIGATION
A civil action is pending against the Company for approximately $105,000.
The action relates to the alleged purchase price of equipment purchased by
the Company via assignment from Service America Corporation. The Company
has responded by answering the complaint and asserting a number of defenses
and counterclaims. The parties are in the discovery phase of the
litigation. The Company has contested the case vigorously and will continue
to do so.
In the normal course of its business, the Company is exposed to asserted
and unasserted claims. In the opinion of management, the resolution of
these matters will not have a material adverse affect on the Company's
financial position, results of operations or cash flows.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto.
RESULTS OF OPERATIONS
Revenues for the quarter ended September 30, 1996 decreased by $694,265
or 7.5% to $8,552,087, compared to revenues of $9,246,352 in the corresponding
quarter last year. This decrease is the result of three accounts being sold to a
non-contracted nursing home chain and the termination of an account at the end
of the first quarter last year.
General and administrative expenses for the current quarter were 14.8%
of revenue, compared to 17.9% of revenue for the same quarter last year, a
decrease of $392,003 or 3.1% of revenue.
Interest income/(expense) for the three month period totaled $260
compared to $20,296 for the same period last year.
Net income after taxes for the quarter ended September 30, 1996 was
$124,493 compared to $40,572 for the corresponding quarter last year. Earnings
per share for the current quarter were $0.04 compared to $0.01 for the same
quarter last year, an increase of 400%.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had working capital of $3,487,468.
Operating Activities. Cash consumed by operations for the three months
ended September 30, 1996 was $398,676 compared to $179,862 in cash consumed by
operations for the three months ended September 30, 1995. An increase in
accounts receivable/accrued income receivable of $297,857 and a decrease in
accounts payable of $395,950 were responsible for the current quarter's
activity.
Investing Activities. Investing activities during the current quarter
consumed $440,565 in cash compared to $117,300 provided by similar activities in
the same quarter last year. Investing activities for the three month periods
ended September 30, 1996 included $517,468 in purchases on property and
equipment at the Collegeville Inn & Conference Center. The prior year's activity
provided cash of $117,300 due to the proceeds of $669,781 from the sale of
marketable securities, partially off-set by capital expenditures of $431,507 for
the Collegeville Inn & Conference Center.
7
<PAGE>
Financing Activities. During the three months ended September 30, 1996,
financing activities consumed $198,132 in cash compared to $60,966 in cash
consumed by similar activities in the same period last year. Repayment of
$224,167 in long term debt accounted for the majority of the cash consumed in
this activity.
Capital Resources. The Company has certain credit facilities with its
bank including a line of credit and three term loans. As of September 30, 1996,
the Company had $370,447 available on its line of credit. The Company is current
with all its obligations to its Bank and has met all financial covenants in its
loan documents.
A substantial portion of the Company's revenues are dependent upon the
payment of its fees by customer healthcare facilities, which, in turn, are
dependent upon third-party payers such as state governments, Medicare and
Medicaid. Delays in payment by third-party payers, particularly state and local
governments, may lead to delays in collection of accounts receivable.
The Company has no material commitments for capital expenditures (aside
from the Collegeville Inn & Conference Center) and believes that its cash from
operations, existing balances, and available credit line are adequate for the
foreseeable future to satisfy the needs of its operations and to fund its
continued growth. However, if the need arose, the Company would seek to obtain
capital from such sources as continuing debt financing or equity financing.
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS None
ITEM 2. CHANGES IN SECURITIES None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None
ITEM 5. OTHER INFORMATION None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits None
(b) Reports on Form 8-K None
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Nutrition Management Services Company
/s/ Joseph V. Roberts
-----------------------------
Joseph V. Roberts
Chairman and Chief Executive
Officer
/s/ Francis J. Ford
------------------------------
Francis J. Ford
Controller
Date: November 19, 1996
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFOMRATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S 10-Q FOR THE QUARTER
ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 1,989,234
<SECURITIES> 0
<RECEIVABLES> 5,667,106
<ALLOWANCES> (396,428)
<INVENTORY> 396,383
<CURRENT-ASSETS> 10,369,903
<PP&E> 4,897,837
<DEPRECIATION> (741,191)
<TOTAL-ASSETS> 16,553,200
<CURRENT-LIABILITIES> 6,882,435
<BONDS> 0
0
0
<COMMON> 3,826,926
<OTHER-SE> 2,553,646
<TOTAL-LIABILITY-AND-EQUITY> 16,553,200
<SALES> 8,552,087
<TOTAL-REVENUES> 8,552,087
<CGS> 7,063,757
<TOTAL-COSTS> 8,325,935
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,276
<INCOME-PRETAX> 226,412
<INCOME-TAX> 101,919
<INCOME-CONTINUING> 124,493
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 124,493
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
