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, 1997
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
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Box 725, Kimberton Road, Kimberton, PA 19442
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 935-2050
----------------------------
N/A
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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 report), and (2) has been subject to such filing
requirements for the past 90 days Yes /X/ No / /.
2,763,799 shares of Registrant's Class A Common Stock, with no par value, and
100,000 shares of Registrant's Class B Common Stock, with no par value, are
outstanding as of November 14, 1997.
<PAGE>
TABLE OF CONTENTS
Part I. Financial Information Page No.
--------------------- --------
Consolidated Balance Sheets of
September 30, 1997 (unaudited) and June 30, 1997 2 - 3
Consolidated Statements of Operations for the
Three Months Ended September 30, 1997 (unaudited) and
1996 (unaudited) 4
Consolidated Statements of Cash Flows for the
Three Months Ended September 30, 1997 (unaudited)
and 1996 (unaudited) 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,
1997 1997
------------- --------
(unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 751,153 $ 2,267,813
Accounts receivable, net of allowance for doubtful
accounts of $591,428 and $531,428, respectively. 5,599,965 5,900,572
Unbilled revenue 207,445 244,107
Notes and leases receivable 208,598 202,124
Advances to employees 281,929 281,026
Deferred income taxes 643,600 599,000
Inventory and Other 387,225 409,068
-------------- -------------
Total current assets 8,079,915 9,903,710
-------------- -------------
Property and equipment, net of accumulated depreciation of
$1,059,613 and $969,175, respectively. 10,259,641 8,143,131
Other assets:
Restricted cash 1,086,526 1,096,076
Long-term accounts receivable, net of allowance for doubtful
accounts of $57,509. 50,815 50,815
Investment in contracts, net of accumulated amortization of
$1,363,885 and $1,278,561, respectively. 342,604 427,928
Deferred income taxes 252,900 233,000
Lease receivable 118,464 157,952
Deferred costs and other assets 441,635 368,945
-------------- -------------
Total assets $ 20,632,500 $ 20,381,557
============== =============
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
- 2 -
<PAGE>
NUTRITION MANAGEMENT SERVICES COMPANY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
------------- --------
(unaudited)
Current liabilities:
<S> <C> <C>
Accounts payable $5,022,573 $ 4,322,662
Accrued expenses 509,244 757,286
Accrued payroll and related expenses 502,449 460,898
Accrued professional fees 397,198 392,012
Current portion of long-term debt 551,588 744,504
Accrued income taxes 104,764 232,521
Other 306,151 193,453
---------- -----------
Total current liabilities 7,393,967 7,103,336
---------- ----------
Long-term debt, net of current portion
Other 6,052,061 6,083,851
Total long-term liabilities 177,567 222,217
----------- -----------
6,229,628 6,306,068
----------- ----------
Commitments and Contingencies ----- -----
Stockholders' equity:
Undesignated preferred stock - no par, 2,000,000 shared authorized, none
issued or outstanding. ----- -----
Common stock:
Class A - no par, 10,000,000 shares authorized; 3,000,000 and
3,000,000 issued, 2,763,799 and 2,797,665 outstanding, respectively. 3,801,926 3,801,926
Class B - no par, 100,000 shares authorized, issued and outstanding. 48 48
Retained earnings 3,676,483 3,591,210
------------- -------------
7,478,457 7,393,184
Less: treasury stock (Class A common: 236,201 and 202,335
shares, respectively) - at cost (469,552) (421,031)
------------- ------------
Total stockholders' equity 7,008,905 6,972,153
------------- ------------
Total liabilities and stockholders' equity $20,632,500 $20,381,557
============= ============
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
- 3 -
<PAGE>
NUTRITION MANAGEMENT SERVICES COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1997 1996
---- ----
<S> <C> <C>
Revenues $9,128,381 $8,552,087
Operating costs and expenses
Cost of services provided 7,375,458 7,063,757
General and administrative expenses 1,559,749 1,262,178
---------- -----------
Income from operations 193,174 226,152
Other income
Other income 56,068 76,536
Interest expense (68,898) (76,276)
-------- ---------
Income before income taxes 180,344 226,412
Provision for income taxes 95,072 101,919
------- ---------
Net income $ 85,272 $ 124,493
========== ==========
Earnings per common share $ 0.03 $ 0.04
========== ==========
Weighted average share outstanding 2,866,619 2,947,433
========== ==========
</TABLE>
- 4 -
<PAGE>
NUTRITION MANAGEMENT SERVICES COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1997 1996
------ -------
Operating activities:
<S> <C> <C>
Net Income $ 85,272 $ 124,493
Adjustment to reconcile net income to net cash used in operating activities:
Depreciation and amortization 175,762 155,646
Provision for doubtful accounts 60,000 45,024
Amortization of deferred gain (6,591) (6,591)
Amortization of lease receivable (6,474) 39,488
Changes in assets and liabilities:
Accounts receivable 240,607 150,215
Notes receivable ----- 31,382
Prepaid expenses ----- (79,909)
Deferred Taxes 64,500 -----
Unbilled revenue 36,662 (448,072)
Accounts payable 699,911 (395,950)
Accrued legal and expenses (242,856) (28,738)
Accrued payroll 41,551 (3,488)
Accrued income taxes (256,757) 27,917
Other 23,793 (22,597)
---------- ------------
Net cash (used in) operating activities 915,380 (411,180)
---------- ------------
Investing activities:
Advances to employees and officers (903) (5,503)
Payment of lease receivable 39,488 13,465
Transfer restricted cash to cash 9,550 76,942
Acquisition of fixed assets (2,206,948) (525,469)
Deferred cost ----- 12,504
---------- ------------
Net cash (used in) provided by investing activities (2,158,813) (428,061)
--------- ------------
Financing activities:
Repayments of long term debt (224,706) (224,167)
Sale of treasury stock ---- 26,035
Purchase of treasury stock (48,521) -----
---------- ------------
Net cash (used in) financing activities (273,227) (198,132)
---------- ------------
Net (decrease) in cash (1,516,660) (1,037,373)
Cash and cash equivalents at beginning of period 2,267,813 3,026,607
---------- -----------
Cash and cash equivalents at end of period $751,153 $1,989,234
========== ===========
Supplemental cash flow information:
Interest paid $116,628 $68,379
Income taxes paid $292,184 $68,330
</TABLE>
- 5 -
<PAGE>
NUTRITION MANAGEMENT SERVICES COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
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, 1998.
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 three month
period ending September 30, 1997 and 1996. Stock options and warrants
did not impact earnings per share each quarter as they were
anti-dilutive.
3. Litigation
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 effect 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 note thereto.
Results of Operations
Revenues for the quarter ended September 30, 1997 were $9,128,381, an
increase of $576,294 or 6.7%, compared to revenues of $8,552,087 in the
corresponding quarter last year. This increase is the result of new contracts
and revenues from the Company's Collegeville Inn & Conference Center
(Collegeville), which opened on September 14, 1997.
General and administrative expenses for the quarter were 17.1% of
revenue, compared to 14.8% of revenue for the same quarter last year, an
increase of $297,571 or 23.6%. The increase is the result of a increase in
overhead associated with the new buisiness start-up. Collegeville contributed
2.8% of total general and administrative expense for the current quarter.
Interest expense for the three month period totaled $68,898 compared to
$76,276 for the same period last year. The increase in interest expense is
attributable to the increased debt, including $3,560,548 of Industrial
Development bonds issued in December 1996, used to finance construction of the
Collegeville Inn.
Net income after taxes for the quarter ended September 30, 1997 was
$85,272 compared to $124,493 for the corresponding quarter last year. Earnings
per share for the current quarter were $0.03 compared to $0.04 for the same
quarter last year. The decrease in current quarter net income and earnings per
share are the result of the increased costs associated with the start up of the
Collegeville Inn. Excluding Collegeville Inn, net income would have increased
approximately $36,000 for a earnings per share of $0.05. Over the same quarter
last year, this is an increase of $0.01 per share.
- 7 -
<PAGE>
Liquidity and Capital Resources
At September 30, 1997 the Company had working capital of $719,765.
Operating Activities. Cash provided by operations for the three months
ended September 30, 1997 was $915,380 compared to $411,180 consumed by
operations for the three months ended September 30, 1996. An increase in
accounts receivable and accounts payable of $240,607 and $699,911, respectively,
and a decrease in accrued expenses of $242,856 were responsible for the current
quarter's activity.
Investing Activities. Investing activities consumed $2,158,813 in cash
in the current quarter compared to $428,061 in cash consumed in the same period
last year. Current year investing activities included $2,189,427 in purchases of
property and equipment at the Collegeville Inn & Conference Center.
Financing Activities. Current quarter financing activities consumed
$273,227 in cash compared to $198,132 consumed in the same quarter last year.
Repayment of long term debt consumed approximately $224,000 in cash. The Company
also purchased 33,866 shares of its Class A Common Stock at a cost of $48,521 in
the current quarter.
Capital Resources. The Company has certain credit facilities with its
bank including a line of credit and three term loans. The Company issued two
series of Industrial Development Bonds totaling $3,560,548 in December 1996. As
of September 30, 1997, the Company has approximately $1,500,000 available on its
line of credit. The Company is current with all its obligations to its Bank and
on its bonds 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,
including the Collegeville Inn & Conference Center, and believes that is cash
from operations, existing balances, and available credit facilities are adequate
for the foreseeable future to satisfy the needs of its operations and to fund
continued growth.
Forward Looking Statements
This form 10-Q contains 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 are intended to be covered by the safe
harbors created thereby. Investors are cautioned that all forward-looking
statements involve risks and uncertainty, including without limitatation, the
adequacy of the Company's cash from operations, existing balances and available
credit line. Although the Company believes that the assumptions underlying the
forward-looking statments contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward-looking statements included in this Form 10-Q will prove to be
accurate. In light of significant uncertainties inherent in the forward-looking
statements included herein, the inclusion of such information should not be
regarded as a representation by the Company or any other person that the
objectives and plans of the Company will be achieved.
-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/ Ralph M. Van
------------------------------
Ralph M. Van
Controller
Date: November 19, 1997
- 10 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S 10-Q FOR THE PERIOD
ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 751,153
<SECURITIES> 0
<RECEIVABLES> 5,999,965
<ALLOWANCES> (591,428)
<INVENTORY> 387,225
<CURRENT-ASSETS> 8,079,915
<PP&E> 10,259,641
<DEPRECIATION> (1,059,613)
<TOTAL-ASSETS> 20,632,500
<CURRENT-LIABILITIES> 7,393,967
<BONDS> 0
0
0
<COMMON> 3,801,926
<OTHER-SE> 3,206,979
<TOTAL-LIABILITY-AND-EQUITY> 20,632,500
<SALES> 9,128,381
<TOTAL-REVENUES> 9,128,381
<CGS> 7,375,458
<TOTAL-COSTS> 8,935,207
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68,898
<INCOME-PRETAX> 180,344
<INCOME-TAX> 95,072
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 85,272
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
