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, 2001
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
incorporation or organization) Identification No.)
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
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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 November 9, 2001.
TABLE OF CONTENTS
Part I. Financial Information Page No.
--------------------- --------
Consolidated Balance Sheets of
September 30, 2001 (unaudited) and June 30, 2001 2 - 3
Consolidated Statements of Operations for the Three
Months Ended September 30, 2001 (unaudited) and
2000 (unaudited) 4
Consolidated Statements of Cash Flows for the Three
Months Ended September 30, 2001 (unaudited) and
2000 (unaudited) 5
Notes to Financial Statements 6 - 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations 8 - 10
Part II. Other Information 11
Signatures 12
- 1 -
NUTRITION MANAGEMENT SERVICES COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, June 30,
2001 2001
---- ----
(unaudited)
Current assets:
Cash and cash equivalents $ 438,156 $ 451,875
Accounts receivable, net of allowance for doubtful
accounts of $1,400,586 and 1,175,596, respectively 6,660,866 6,424,629
Accrued Income 65,810 177,967
Deferred income taxes 636,617 636,617
Inventory 238,823 232,869
Prepaid and other 375,354 417,009
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Total current assets 8,415,626 8,340,966
----------- -----------
Property and equipment, net 8,998,529 9,127,742
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Construction in Progress -- --
----------- -----------
Other assets:
Investment in contracts 240,000 280,000
Advances to employees 484,763 328,988
Deferred income taxes 192,269 192,269
Bond issue costs 221,021 224,562
Deferred costs and other assets 10,021 10,020
----------- -----------
Total other assets 1,148,074 1,035,839
----------- -----------
$18,562,229 $18,504,547
=========== ===========
See Notes to Unaudited Consolidated Financial Statements
- 2 -
NUTRITION MANAGEMENT SERVICES COMPANY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, June 30,
2001 2001
---- -----
(unaudited)
Current liabilities:
Current portion of long-term debt $ 186,814 $ 186,813
Accounts payable 4,155,117 4,537,741
Accrued expenses 398,626 341,286
Accrued payroll and related expenses 296,437 273,217
Other 119,286 125,960
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Total current liabilities 5,156,280 5,465,017
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Long-Term liabilities:
Long-term debt, net of current portion 6,011,914 5,386,120
Long-term note payable 982,881 1,067,128
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Total long-term liabilities 6,994,795 6,453,248
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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
2,747,000 and 2,747,000 outstanding, respectively 3,801,926 3,801,926
Class B - no par, 100,000 shares authorized, issued and outstanding 48 48
Retained earnings 3,108,743 3,283,871
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6,910,717 7,085,845
Less: treasury stock (Class A common: 253,000 and 253,000
shares, respectively) - at cost (499,563) (499,563)
Total stockholders' equity 6,411,154 6,586,282
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$ 18,562,229 $ 18,504,547
============ ============
See Notes to Unaudited Consolidated Financial Statements
- 3 -
NUTRITION MANAGEMENT SERVICES COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended
September 30,
2001 2000
---- ----
Food Service Revenue $ 7,422,218 $ 12,192,563
Cost of Operations
Payroll and related expenses 2,394,289 3,755,366
Other costs of operations 3,433,335 6,455,074
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Cost of operations 5,827,624 10,210,440
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Gross Profit 1,594,594 1,982,123
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Expenses
General and administrative expenses 1,214,849 1,563,123
Depreciation and amortization 210,448 156,272
Provision for doubtful accounts 225,000 180,000
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Expenses 1,650,297 1,899,395
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Income/(Loss) from operations (55,703) 82,728
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Other income (expense)
Other (23,323) 6,115
Interest income 3,143 12,160
Interest expense (99,252) (144,591)
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Other income (expense) - net (119,432) (126,316)
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Loss before income taxes (175,135) (43,588)
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Provision for income taxes -- 23,334
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Net loss ($175,135) ($ 66,922)
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Net loss per share - basic and diluted ($ 0.06) ($ 0.02)
========== ============
Weighted average number of shares 2,847,000 2,847,000
========== ============
See Notes to Unaudited Consolidated Financial Statements
- 4 -
NUTRITION MANAGEMENT SERVICES COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months-Ended
September 30,
2001 2000
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Operating activities:
Net loss ($ 175,135) ($ 66,922)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 210,448 146,039
Provision for bad debts 225,000 180,000
Amortization of deferred gain 0 (6,591)
Amortization of bond costs 3,641 3,642
Changes in assets and liabilities:
Accounts receivable (461,237) (1,301,081)
Accrued Income 112,157 153,413
Inventory and other 35,701 113,295
Accounts payable (382,625) 709,700
Accrued expenses 41,048 114,198
Accrued payroll and related expenses 23,220 24,312
Accrued professional 13,179 (8,824)
Accrued incomes taxes 3,113 26,173
Other 33,236 41,750
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Net cash (used in)/provided by operating activities (318,254) 129,104
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Investing activities:
(Advances)/Repayment to employees (155,776) (21,957)
Purchase of property and equipment, (net) (81,236) (51,445)
Deferred costs 0 0
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Net cash used in investing activities (237,012) (73,402)
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Financing activities:
Repayments of long-term debt (125,000) (1,150,000)
Repayments of long-term note payable (84,247) (84,294)
Repayments of term loan (15,206) (13,964)
Proceeds from line of credit 766,000 700,000
----------- -----------
Net cash provided by/(used in) financing activities 541,547 (584,258)
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Net decrease in cash (13,719) (492,556)
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Cash and cash equivalents - beginning of period 451,875 1,134,720
Cash and cash equivalents - end of period $ 438,156 $ 642,164
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
Interest $ 100,485 $ 90,721
Income taxes $ 0 $ 200
See Notes to Unaudited Consolidated Financial Statements
- 5 -
NUTRITION MANAGEMENT SERVICES COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,2001
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, 2002. 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-month
period ending September 30, 2001 and 2000. Stock options and
warrants did not impact earnings per share each period as they were
anti-dilutive.
3. LITIGATION
On February 7, 2001, Nutrition Management Services Company filed
suit against a major client in the Court of Common Pleas of Chester
County, Pennsylvania. In the lawsuit, Nutrition Management Services
Company claims that the client failed to pay $2.4 million on account
of services Nutrition Management Services Company rendered, and that
the client should be required to reimburse Nutrition Management
Services Company for over $400,000 in start up expenses, in addition
to other claims.
In addition to the litigation described above, 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 -
NUTRITION MANAGEMENT SERVICES COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001
4. BUSINESS SEGMENTS
The Company follows the disclosure provisions of SFAS No. 131, DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. This management approach
focuses on internal financial information that is used by management to assess
performance and to make operating decisions. SFAS No. 131 also requires
disclosures about products, services, geographic areas, and major customers. The
adoption of SFAS No. 131 had no effect on the Company's results of operations or
financial position.
The Company's reportable segments are (1) food service management and (2)
training and conference center. The Company reports segment performance on an
after tax basis. Deferred taxes are not allocated to segments. The management
accounting policies and processes utilized in compiling segment financial
information are highly subjective and, unlike financial accounting, are not
based on authoritative guidance similar to accounting principals generally
accepted in the United States of America. As a result, reported segment results
are not necessarily comparable with similar information reported by other
similar companies.
Food Service Training and
Management Conference Center Total
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For the quarter ended Sept. 30, 2001:
Food service revenue $7,335,314 $ 86,904 $7,422,218
Depreciation and amortization 84,454 125,993 210,448
Income (loss) from operations 265,404 (321,103) (55,702)
Interest income 3,143 0 3,143
Interest expense (45,280) (53,972) (99,252)
Income (loss) before taxes (benefit) 220,599 (395,734) (175,135)
Net income (loss) 220,599 (395,734) (175,135)
Total assets 9,638,925 8,923,305 18,562,229
Capital expenditures 81,236 0 81,236
Food Service Training and
Management ConferenceCenter Total
For the quarter ended Sept. 30, 2000:
Food service revenue $12,010,657 $ 181,906 $12,192,563
Depreciation and amortization 32,083 124,189 156,272
Income (loss) from operations 370,981 (288,254) 82,728
Interest income 12,160 0 12,160
Interest expense (84,084) (60,507) (144,591)
Income (loss) before taxes (benefit) 305,173 (348,761) (43,588)
Net income (loss) 281,839 (348,761) (66,922)
Total assets 11,095,473 9,356,919 20,452,392
Capital expenditures 51,445 0 51,445
- 7 -
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, 2001 were $7,422,218, a
decrease of $4,770,345 or 39.13% compared to revenues of $12,192,563 in the
corresponding quarter last year. This decrease is a result of cancelled
contracts during the period offset by growth within existing contracts.
Cost of operations provided for the current quarter was $5,827,624,
compared to $10,210,440 for similar expenses in the same period last year, a
decrease of $4,382,816 or 42.92%. This decrease in costs of services provided is
due to lower revenues during the period offset by inflationary price, wage, and
expense increases.
Gross Profit for the current quarter was $1,594,594, compared to
$1,982,123 for the same period last year, a decrease of $387,529 or 19.55%. This
decrease is due to lower revenues in the period. As a percentage of revenue,
gross profit increased from 16.26% to 21.48%.
General and administrative expenses for the quarter were $1,214,849
or 16.37% of revenue, compared to $1,563,123 or 12.82% of revenue for the same
quarter last year, a decrease of $348,274 or 22.28%. The decrease is the result
of certain cost cutting measures implemented by the Company.
Provision for doubtful accounts for the quarter was $225,000
compared to $180,000 for the corresponding quarter last year. This increase of
$45,000 is attributable to an increase in business activities and a change in
contractual relationships.
Interest expense for the three-month period totaled $99,252 compared
to $144,591 for the same period last year. The decrease in interest expense is a
result of repayment in borrowings as well as a reduction in interest rates.
For the reasons stated above, net loss after taxes for the quarter
ended September 30, 2001 was ($175,135) compared to ($66,922) for the
corresponding quarter last year. Net loss per share for the current quarter was
($0.06) compared to net loss per share of ($0.02) for the same quarter last
year.
- 8 -
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2001 the Company had working capital of $3,259,396.
OPERATING ACTIVITIES. Cash used in operations for the three months
ended September 30, 2001 was $318,254 compared to $129,104 provided by
operations for the three months ended September 30, 2000. A decrease in current
liabilities and noncash items of $142,983 offset by an increase in accounts
receivable of $461,237 was primarily responsible for the current quarter's
activity.
INVESTING ACTIVITIES. Investing activities consumed $237,012 in cash
in the current quarter compared to $73,402 in cash consumed in the same period
last year.
FINANCING ACTIVITIES. Current quarter financing activities provided
$541,547 in cash compared to $584,258 consumed in the same period last year.
Proceeds of $766,000 offset by repayment of long term debt of $224,453 were
responsible for the current quarter's activity.
CAPITAL RESOURCES. In February 2001, the Company refinanced its
outstanding indebtedness. These credit facilities include a $4,000,000 line of
credit and letters of credit for $878,379 and $2,258,404 guaranteeing two
industrial revenue bond issues. The new loan agreement requires the Company to
maintain certain financial covenants. The Company is current with all its
obligations to its bank and on its bonds and is in compliance with their
financial convenants.
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 the 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 fiscal year June 30, 2002 to satisfy the needs of its
operations.
- 9 -
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.
- 10 -
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 None
(a) Exhibits
(b) Reports on Form 8-K None
- 11 -
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/ Linda J. Haines
-------------------------------
Linda J. Haines
(Principal Financial Officer)
Date: November 14, 2001
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