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 December 31, 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
- --------------------------------------------------------------------------------
(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
- --------------------------------------------------------------------------------
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 / /.
2,750,628 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 February 14, 1998.
<PAGE>
TABLE OF CONTENTS
Part I. Financial Information Page No.
Consolidated Balance Sheets of
December 31, 1997 (unaudited) and June 30,1997 2 - 3
Consolidated Statements of Operations for the Three and
Six Months Ended December 31, 1997 (unaudited) and
1996 (unaudited) 4
Consolidated Statements of Cash Flows for the
Six Months Ended December 31, 1997 (unaudited)
and 1996 (unaudited) 5
Notes to Financial Statements 6
Management 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>
December 31, June 30,
1997 1997
---- ----
(unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 271,910 $ 2,267,813
Restricted Cash 913,762 ---
Accounts receivable, net of allowance for doubtful
accounts of $597,373 and $531,428, respectively. 5,459,382 5,900,572
Unbilled revenue 255,767 244,107
Notes and leases receivable 157,953 202,124
Advances to employees 299,778 281,026
Deferred income taxes 664,108 599,000
Inventory and Other 429,268 409,068
---------- ------------
Total current assets 8,451,928 9,903,710
---------- ------------
Property and equipment, net of accumulated depreciation of
$1,229,327 and $969,175, respectively. 10,486,661 8,143,131
Other assets:
Restricted Cash ----- 1,096,076
Long-term accounts receivable, net of allowance for doubtful
accounts of $93,062 and $57,509 , respectively. 15,262 50,815
Investment in contracts, net of accumulated amortization of
$1,458,959 and $1,278,561, respectively. 262,529 427,928
Deferred income taxes 230,555 233,000
Lease receivable 78,976 157,952
Deferred costs and other assets 461,108 368,945
-------------- -------------
Total assets $ 19,987,019 $ 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>
December 31, June 30,
1997 1997
---- ----
(unaudited)
Current liabilities:
<S> <C> <C>
Accounts payable $4,806,526 $ 4,322,662
Accrued expenses 739,627 757,286
Accrued payroll and related expenses 412,009 460,898
Accrued professional fees 207,185 392,012
Current portion of long-term debt 258,672 744,504
Accrued income taxes 120,018 232,521
Other 288,591 193,453
---------- -----------
Total current liabilities 6,832,628 7,103,336
---------- ----------
Long-term debt, net of current portion
Other 6,021,350 6,083,851
Total long-term liabilities 146,493 222,217
------------ -----------
6,167,843 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, 2,750,628 and 2,797,665 outstanding, respectively.
Class B - no par, 100,000 shares authorized, issued and outstanding.
Retained earnings 3,801,926 3,801,926
48 48
3,695,253 3,591,210
7,497,227 7,393,184
Less: treasury stock (Class A common: 249,372 and 202,335
shares, respectively) - at cost
Total stockholders' equity
( 510,679) ( 421,031)
--------------- ------------
Total liabilities and stockholders' equity 6,986,548 6,972,153
--------------- ------------
$19,987,019 $20,381,557
=============== ============
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
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<PAGE>
NUTRITION MANAGEMENT SERVICES COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
1997 1996 1997 1996
---- ---- ---- =---
<S> <C> <C> <C> <C>
Revenues $9,421,397 $8,428,595 $18,549,778 $16,980,682
Operating costs and expenses
Cost of services provided 7,717,027 6,747,298 15,092,485 13,811,055
General and administrative Exp. 1,589,205 1,343,811 3,148,954 2,605,989
---------- ----------- ------------ -----------
Income from operations 115,165 337,486 308,339 563,638
Other income
Other income 37,409 63,645 93,477 140,181
Interest expense (101,371) (70,434) (170,269) (146,710)
---------- ----------- ----------- -----------
Income before income taxes 51,203 330,697 231,547 557,109
Provision for income taxes 32,433 156,272 127,505 258,191
---------- ----------- ----------- -----------
Net income $ 18,770 $ 174,425 $104,042 298,918
========== =========== =========== ===========
Basic & Diluted Earnings per common share $ 0.01 $ 0.06 $ 0.04 $ 0.10
========== =========== =========== ===========
Weighted average share outstanding 2,866,619 2,942,933 2,869,609 2,945,059
========= =========== =========== ===========
</TABLE>
- 4 -
<PAGE>
NUTRITION MANAGEMENT SERVICES COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended December 31
1997 1996
Operating activities:
<S> <C> <C>
Net Income $104,042 $ 298,918
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 425,551 318,203
Deferred income taxes (62,663) ----
Provision for doubtful accounts 147,884 90,000
Amortization of unearned interest income (16,714) (20,833)
Changes in assets and liabilities:
Accounts receivable 328,859 (134,885)
Notes receivable 4,546 678,812
Prepaid expenses (71,934) (369,298)
Inventory (51,636) (49,123)
Accrued Income Receivable (11,660) (37,260)
Deferred Costs 84,259 105,468
Accrued Expenses 35,258 84,998
Accounts payable 483,864 (887,921)
Accrued/Prepaid income taxes (112,503) 72,189
Other (25,894) 180,198
------------ ------------
Total adjustments 1,157,217 30,548
------------ ------------
Net cash provided by operating activities 1,261,259 329,466
------------ ------------
Investing activities:
Advances to employees and officers (18,752) 36,760
Payment of lease receivable 78,976 68,520
Purchase of property and equipment (2,603,682) (1,170,527)
------------ --------------
Net cash provided by investing activities (2,543,458) (1,065.247)
------------ --------------
Financing activities:
Proceeds of long-term debt ---- 2,551,956
Repayments of long term debt (548,332) (448,334)
Other (165,372) (74,822)
------------ --------------
Net cash (used in) financing activities (713,704) 2,028,800
------------ --------------
Net (decrease) in cash (1,995,903) 1,293,019
Cash and cash equivalents at beginning of period 2,267,813 3,026,607
------------ --------------
Cash and cash equivalents at end of period $271,910 $4,319,626
============ ==============
Supplemental cash flow information:
Interest paid $170,089 $146,680
Income taxes paid $41,067 $184,034
</TABLE>
- 5 -
<PAGE>
NUTRITION MANAGEMENT SERVICES COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 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 and six
month periods ending December 31, 1997 and 1996. Stock options and
warrants did not impact earnings per share each quarter as they were
anti-dilutive.
The Company adopted Financial Accounting Standards Board
["FASB"] Statement of Financial Accounting Standards ["SFAS"] No. 128,
"Earnings per Share", which was issued in February, 1997. SFAS No. 128
simplifies the Earnings per Share ["EPS"] calculations required by
Accounting Principles Board ["APB"] opinion No. 15, and related
interpretations, by replacing the presentation of primary EPS with a
presentation of basic EPS. SFAS No. 128 requires Dual presentation of
Basic and Diluted EPS by entities with complex capital structures.
Basic EPS includes no dilution and is computed by dividing Income
Available to Common Stockholders by the Weighted-Average Number of
Common Shares Outstanding for the period. Diluted EPS reflects the
potential dilution of securities that could share in the earnings of an
entity, similar to the fully diluted EPS of APB Opinion No. 15. SFAS
No. 128 is effective for Financial Statements issued for periods ending
after December 15, 1997, including interim periods. When adopted, SFAS
No. 128 will require restatement of all prior-period EPS data presented
and accordingly, the Company Calculated Earnings Per Share in
accordance with FASB 128 and all prior-period EPS data was restated.
There was no material effect on The Company as a result of the
restatement of prior periods.
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 December 31, 1997 were $9,421,397, an
increase of $992,802 or 11.8% compared to revenues of $8,428,595 in the
corresponding quarter last year. Revenues for the six month period ended
December 31,1997 were $18,549,778 a increase of $1,569,096 and 9.2% compared to
the corresponding period in 1996. 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.
Gross Profit for the current quarter amounted to $1,704,370 and 18.1%
of revenues for an increase of $23,073 and 1.4%, compared to the second quarter
last year. For the six month period ended December 31,1997 Gross Profit totaled
$3,457,293 or 18.6% of revenue, compared to $3,167,627 or 18.7% for the same
period last year.
General and administrative expenses for the current quarter were 16.9%
of revenue, compared to 15.9% of revenue for the same quarter last year, an
increase of $245,394 or 18.3%. For the six month period , general and
administrative expenses were 16.9% of revenue, compared to 15.3% for the same
period last year. The increase is the result of a increase in overhead
associated with the new operating positions added and additional General and
Administrative expenses associated with the Collegeville Inn Training and
conference center.
Other income (expense) for the three month period totaled ($63,962)
compared to ($6,789) for the same period last year. For the six months ended
December 31,1997, other income (expense) was ($76,792) compared to ($6,529) for
the corresponding 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 December 31, 1997 was
$18,770 compared to net income of $174,425 for the corresponding quarter last
year a decrease of 89.2%. Earnings per share for the current quarter were $0.01
compared to $0.06 for the same quarter last year. For the six month period ended
December 31,1997, net income was $104,042 as compared to $298,918 for the
corresponding period last year a decrease of 65.2%. Earnings per share for the
six month period were $.04 as compared to $.10 for the corresponding period last
year. Excluding Collegeville Inn, net income would have increased $ 195,871 over
the same quarter last year , an increase of $0.07 per share or 112.3%.For the
six month period net income would have increased $231,468 or 77.4% for a
earnings per share of $0.18 compared to $0.10 for the same period last year.
- 7 -
<PAGE>
Liquidity and Capital Resources
At December 31, 1997 the Company had working capital of $1,619,300
Operating Activities. Cash provided by operations for the six months
ended December 31, 1997 was $1,261,259 compared to $329,466 provided by
operations for the six months ended December 31, 1996. An decrease in accounts
receivable of $328,859 and a increase in accounts payable of $483,864, were
primarily responsible for the current quarter's activity.
Investing Activities. Investing activities consumed $2,543,458 in cash
in the current quarter compared to $1,065,247 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
$713,704 in cash compared to a $2,028,800 increase in the same quarter last
year. Repayment of long term debt consumed approximately $548,332 in cash.
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 December 31, 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 (aside
from the Collegeville Inn & Conference Center) and believes that its cash from
operations, existing balances, and available credit line are adequate for the
near term to satisfy the needs of its operations and to fund continued growth.
However, if the need arose, the Company would seek to obtain capital from such
sources as continuing debt financing or equity financing.
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 limitation, 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 statements 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 27 -- Financial Data Schedule
(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: February 17, 1998
- 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 DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 271,910
<SECURITIES> 0
<RECEIVABLES> 6,252,649
<ALLOWANCES> (597,373)
<INVENTORY> 356,215
<CURRENT-ASSETS> 8,828,696
<PP&E> 11,715,988
<DEPRECIATION> (1,229,327)
<TOTAL-ASSETS> 19,987,019
<CURRENT-LIABILITIES> 6,832,628
<BONDS> 0
0
0
<COMMON> 3,801,926
<OTHER-SE> 3,695,253
<TOTAL-LIABILITY-AND-EQUITY> 19,987,019
<SALES> 18,549,778
<TOTAL-REVENUES> 18,549,778
<CGS> 15,092,485
<TOTAL-COSTS> 18,241,439
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 170,269
<INCOME-PRETAX> 231,547
<INCOME-TAX> 127,505
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 104,042
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
