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 March 31, 2000
---------------
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
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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
incorporation or organization) Identification No.)
Box 725, 2071 Kimberton Road, Kimberton, PA 19442
- --------------------------------------------------------------------------------
(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
----- -----.
2,747,000 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 May 9, 2000.
<PAGE>
TABLE OF CONTENTS
Part I. Financial Information Page No.
--------------------- --------
Consolidated Balance Sheets as of
March 31, 2000 (unaudited) and June 30, 1999 2 - 3
Consolidated Statements of Operations for the Three
and Nine Months Ended March 31, 2000 (unaudited) and
1999 (unaudited) 4
Consolidated Statements of Cash Flows for the Nine
Months Ended March 31, 2000 (unaudited) and 1999
(unaudited) 5
Notes to unaudited Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 - 9
Part II. Other Information 10
Signatures 11
- 1 -
<PAGE>
NUTRITION MANAGEMENT SERVICES COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
---- ----
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,091,191 $ 43,282
Accounts receivable, net of allowance for doubtful
accounts of $940,883 and $637,900, respectively 6,186,865 8,214,229
Unbilled revenue 655,043 435,663
Deferred income taxes 492,666 492,666
Inventory and other 878,294 785,943
----------- -----------
Total current assets 9,304,059 9,971,783
----------- -----------
Property and equipment, net 9,677,905 9,912,797
----------- -----------
Construction in Progress 12,810 12,810
----------- -----------
Other assets:
Advances to officers and employees 294,318 346,871
Investment in contracts, net of accumulated
amortization of $1,721,489 and $1,709,136, respectively -- 12,353
Deferred income taxes 404,315 404,315
Bond issue costs 242,770 253,694
Deferred costs and other assets 16,021 29,772
----------- -----------
Total other assets 957,424 1,047,005
----------- -----------
$19,952,198 $20,944,395
=========== ===========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
- 2 -
<PAGE>
NUTRITION MANAGEMENT SERVICES COMPANY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
---- ----
(unaudited
<S> <C> <C>
Current liabilities:
Accounts payable $ 4,459,800 $ 5,476,019
Accrued expenses 771,008 414,205
Accrued payroll and related expenses 241,514 458,370
Accrued professional 59,982 155,937
Accrued income taxes 11,760 13,992
Current portion of long-term debt 174,000 110,000
Other 434,465 338,878
------------ ------------
Total current liabilities 6,152,529 6,967,401
------------ ------------
Long-Term liabilities:
Long-term debt, net of current portion 7,062,551 7,185,000
Other 33,005 52,778
------------ ------------
Total long-term liabilities 7,095,556 7,237,778
------------ ------------
Stockholders' equity:
Undesignated preferred stock - no par, 2,000,000 shares authorized, none
issued or outstanding -- --
Common stock:
Class A - no par, 10,000,000 shares authorized; 3,000,000 issued and
2,747,000 outstanding 3,801,926 3,801,926
Class B - no par, 100,000 shares authorized, issued and outstanding 48 48
Retained earnings 3,401,702 3,436,805
------------ ------------
7,203,676 7,238,779
Less: treasury stock (Class A common: 253,000 shares) - at cost (499,563) (499,563)
------------ ------------
Total stockholders' equity 6,704,113 6,739,216
------------ ------------
$ 19,952,198 $ 20,944,395
============ ============
</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 Nine months ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Food Service Revenue $ 9,964,677 $ 9,711,904 $ 29,855,588 $ 28,823,513
Cost of operations
Payroll and related expenses 3,746,042 3,851,386 11,564,672 11,511,377
Other costs of operations 4,192,257 4,185,211 12,351,408 12,244,729
------------ ------------ ------------ ------------
Cost of operations 7,938,299 8,036,597 23,916,080 23,756,106
------------ ------------ ------------ ------------
Gross profit 2,026,378 1,675,307 5,939,508 5,067,407
------------ ------------ ------------ ------------
Expenses
General and administrative expenses 1,473,437 1,338,737 4,649,361 4,082,993
Depreciation and amortization 163,578 152,629 566,954 500,376
Provision for doubtful accounts 120,000 140,000 320,000 265,534
------------ ------------ ------------ ------------
Expenses 1,757,015 1,631,366 5,536,315 4,848,903
------------ ------------ ------------ ------------
Income from operations 269,363 43,941 403,193 218,504
------------ ------------ ------------ ------------
Other income (expense)
Other 6,591 28,241 22,001 35,695
Interest income 24,224 45,868 64,298 71,738
Interest expense (155,616) (109,508) (445,202) (347,251)
------------ ------------ ------------ ------------
Other income (expense) - net (124,801) (35,399) (358,903) (239,818)
------------ ------------ ------------ ------------
Income/(Loss) before income taxes 144,562 8,542 44,290 (21,314)
Provision for income taxes 33,443 0 79,393 50,000
------------ ------------ ------------ ------------
Net income/(loss) $ 111,119 $ 8,542 $ (35,103) $ (71,314)
------------ ------------ ------------ ------------
Basic and diluted earnings/(loss)
- basic and diluted $ .04 $ .00 $ (0.01) $ (0.03)
------------ ------------ ------------ ------------
Weighted average number of shares 2,847,000 2,727,734 2,847,000 2,734,799
============ ============ ============ ============
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
- 4 -
<PAGE>
NUTRITION MANAGEMENT SERVICES COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
2000 1999
---- ----
<S> <C> <C>
Operating activities:
Net loss $ (35,103) $ (71,314)
Adjustments to reconcile net loss to net cash provided by(used in)
operating activities:
Depreciation and amortization 536,257 500,376
Provision for bad debts 320,000 265,534
Amortization of deferred gain (19,773) 65,925
Amortization of bond costs 10,924 10,924
Changes in assets and liabilities:
Accounts receivable 1,707,364 (2,994,763)
Unbilled revenue (219,380) 51,515
Inventory and other (92,351) (171,733)
Accounts payable (1,016,219) 1,099,464
Accrued expenses 356,803 (15,803)
Accrued payroll and related expenses (216,856) 113,257
Accrued professional (95,955) (173,852)
Accrued incomes taxes (2,232) (5,092)
Other 95,587 45,261
----------- -----------
Net cash provided by (used in) operating activities 1,329,066 (1,280,301)
----------- -----------
Investing activities:
Repayment (Advances) to officers 52,553 (23,248)
Transfer restricted cash to/(from) cash -- 895,539
Purchase of property and equipment (289,012) (244,991)
Deferred costs and other assets 13,751 (7,715)
----------- -----------
Net cash provided from/ (used in) investing activities (222,708) 619,585
----------- -----------
Financing activities:
Repayments of long-term debt (283,449) (199,310)
Proceeds from line of credit -- 772,500
Proceeds from term note 225,000 --
Purchase of treasury stock -- (15,000)
Net cash provided by/(used in) financing activities (58,449) 558,190
----------- -----------
Net increase(decrease) in cash 1,047,909 (102,526)
----------- -----------
Cash and cash equivalents - beginning of period 43,282 131,517
----------- -----------
Cash and cash equivalents - end of period $ 1,091,191 $ 28,991
----------- -----------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 439,932 $ 347,251
Income taxes $ 60,323 $ 143,629
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
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<PAGE>
NUTRITION MANAGEMENT SERVICES COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
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 that, 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
that may be expected for the entire fiscal year ending June 30,
2000. The financial information presented should be read in
conjunction with the Company's financial statements that 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 nine month periods ending March 31, 2000
and 1999. Stock options and warrants did not impact earnings
per share each period 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 notes thereto.
Results of Operations
Revenues for the quarter ended March 31, 2000 were $9,964,677,
an increase of $252,773 or 2.6% compared to revenues of $9,711,904 for the
corresponding quarter last year. Revenues for the nine month period ended March
31, 2000 were $29,855,588, an increase of $1,032,075 or 3.6% compared to the
corresponding period in 1999. The increases are a result of new contracts,
growth within existing contracts, offset by contracts canceled during the
period.
Costs of operations for the current quarter were $7,938,299, compared
to $8,036,597 for similar expenses in the same period last year, a decrease of
$98,298 or 1.2%. This decrease is due to a reduction in payroll and related
expenses. For the nine month period ended March 31, 2000, cost of operations
were $23,916,080, compared to $23,756,106 for the same period last year, an
increase of $159,974 or 0.7% compared to the corresponding period in 1999. This
increase in cost of operations is due primarily to an increase in the cost of
food and supplies.
Gross Profit for the quarter was $2,026,378, compared to
$1,675,307 for the same period last year, an increase of $351,071 or 21.0%. As a
percentage of revenue, gross profit increased from 17.25% in 1999 to 20.34% in
2000. For the nine month period ended March 31, 2000 gross profit was $5,939,508
versus $5,067,407 for the same period last year, an increase of $872,101 or
17.2%. These increases in gross profit are due to revenues increasing at a
greater percentage than direct expenses.
General and administrative expenses for the quarter were
$1,473,437 or 14.8% of revenue, compared to $1,338,737 or 13.8% of revenue for
the same quarter last year. For the nine month period ended March 31, 2000
general and administrative expenses were $4,649,361 or 15.6% of revenue as
compared to $4,082,993 or 14.2% of revenue for the same period last year. These
increases were the result of an increase in overhead and additional costs
incurred to support operations.
Interest expense for the three-month period totaled $155,616
compared to $109,508 for the same period last year. For the nine month period
ended March 31, 2000, interest expense was $445,202 versus $347,251 in the
corresponding period in 1999. The increase in interest expense is attributable
to increased short-term borrowings for working capital purposes.
Net income after taxes for the quarter ended March 31, 2000 was
$111,119 compared to $8,542 for the corresponding quarter last year, an increase
of 1201%. Net income per share for the current quarter was $0.04 compared to net
income per share of $0.00 for the corresponding quarter last year. The increase
in current quarter net income and earnings per share are primarily the result of
the gross profit increasing at a greater rate than the general and
administrative expenses for the current quarter.
- 7 -
<PAGE>
Net loss for the nine month period was $35,103 versus $71,314
for the corresponding period last year. Net loss per share was $0.01 compared to
$0.03 for the same period last year. The decrease in current period net loss and
loss per share are primarily the result of the gross profit increasing at a
greater rate than the general and administrative expenses for the current
quarter.
Liquidity and Capital Resources
At March 31, 2000, the Company had working capital of
$3,151,530.
Operating Activities. Cash provided by operations for the nine
month period ended March 31, 2000 was $1,329,066 compared to $1,280,301 used by
operations for the nine months ended March 31, 1999. A decrease in accounts
receivable of $1,707,364 partially offset by a decrease in accounts payable of
$1,016,219 was primarily responsible for the current period's activity.
Investing Activities. Investing activities consumed $222,708 in
cash in the current period compared to $619,585 in cash provided in the same
period last year. The current period's use of cash is primarily associated with
the purchase of property and equipment. During the prior year period, $895,539
in restricted cash related to reimbursement for equipment purchased under the
terms of an Industrial Development Bond was transferred to the Company's
operating accounts.
Financing Activities. Current period financing activities
consumed $58,449 in cash compared to $558,190 provided in the same period last
year. Repayment of long term debt consumed approximately $283,449 in cash during
the current period. The Company also received proceeds of $225,000 in the form
of a term note from its existing bank.
Capital Resources. The Company has certain credit facilities
with its bank for a total of $7,236,551, including a line of credit, a term
note, and two industrial revenue bond issues. 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 except those that were specifically waived by the bank.
A substantial portion of the Company's revenues are dependent
upon the payment of its fees by customer healthcare facilities, that, 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 its cash from operations, existing balances, and available credit
facilities are adequate for the foreseeable future to satisfy the needs of its
operations.
- 8 -
<PAGE>
NASDAQ Notification
On June 23, 1999, the NASDAQ Small Cap Market ("NASDAQ") notified the Company
that it's shares of Class A common stock ("Class A Common Stock"), traded under
the symbol NMSCA, were delisted from the NASDAQ Small Cap market. This action
was taken as a result of the Company's failure to meet the market value of
public float requirement in Marketplace Rule 4310 (c) (07) and 4310 (c) (4).
Upon delisting, the securities of the Company immediately became eligible to
trade on the OTC Bulletin Board. Now that the Class A Common Stock is delisted
from NASDAQ, it is a penny stock. Securities and Exchange Commission regulations
generally define a penny stock to be an equity security that is not listed on
NASDAQ or a national securities exchange and that has a market price of less
than $5.00 per share, subject to certain exceptions. The regulations of the
Securities and Exchange Commission require broker-dealers to deliver to a
purchaser of the Company's Class A Common stock a disclosure schedule explaining
the penny stock market and the risks associated with it. Various sales practice
requirements are also imposed on broker-dealers who sell penny stocks to persons
other than established customers and accredited investors (generally
institutions). In addition, broker-dealers must provide the customer with
current bid and offer quotations for the penny stock, the compensation to the
broker-dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customer's
account.
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, that 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.
- 9 -
<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 Exhibit 27
(b) Reports on Form 8-K None
- 10 -
<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
Date: May 14, 2000
<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, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,091
<SECURITIES> 0
<RECEIVABLES> 7,128
<ALLOWANCES> 941
<INVENTORY> 878
<CURRENT-ASSETS> 9,304
<PP&E> 12,438
<DEPRECIATION> 2,747
<TOTAL-ASSETS> 19,952
<CURRENT-LIABILITIES> 6,152
<BONDS> 3,065
0
0
<COMMON> 3,802
<OTHER-SE> 2,902
<TOTAL-LIABILITY-AND-EQUITY> 19,952
<SALES> 9,965
<TOTAL-REVENUES> 9,989
<CGS> 7,938
<TOTAL-COSTS> 9,695
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 120
<INTEREST-EXPENSE> 156
<INCOME-PRETAX> 145
<INCOME-TAX> 33
<INCOME-CONTINUING> 111
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 111
<EPS-BASIC> 0.04
<EPS-DILUTED> 0.04
</TABLE>
