EXHIBIT 20.1
NUTRITIONAL SOURCING CORPORATION
(THE "COMPANY")
UPDATE TO THE "CAPITALIZATION" AND "CERTAIN RECENT EVENTS"
SECTIONS (PAGES 12, 13, AND 14) OF THE INVITATION DATED MAY 17, 2005
CAPITALIZATION
The following table sets forth the unaudited historical consolidated
capitalization of the Company and unaudited pro forma consolidated
capitalization of the Company as of May 14, 2005. The unaudited pro forma
consolidated capitalization has been adjusted to reflect (i) borrowings under
the Senior Credit Facility to finance the Invitation and (ii) the
effectiveness of the Invitation assuming a clearing price of $830 per Note
and the purchase of Notes with an aggregate principal amount of
$38,000,000. The capitalization information set forth below should be
read in conjunction with the Consolidated Financial Statements of the Company
incorporated herein by reference (dollars in thousands).
As of May 14, 2005
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Actual Pro forma
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Short-term debt:
Current maturities (1). . . . . . . . . . . $ 18,928 $ 21,856
Long-term debt:
Existing notes (2). . . . . . . . . . . . . 75,699 37,699
Term Loans. . . . . . . . . . . . . . . . . 43,573 74,619
Capital lease obligations, net of current portion 9,650 9,650
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Total long-term debt, net of current portion. . 128,922 121,968
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Total debt. . . . . . . . . . . . . . . . . . . 147,850 143,824
Total Stockholder's equity (3). . . . . . . . . . (74,049) (68,741)
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Total capitalization. . . . . . . . . . . . . . . $ 73,801 $ 75,084
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(1) Actual includes $13,409 of revolver payable, $4,982 of the current
portion of term loans and $537 of the current portion of long-term lease
obligations.
(2) Reflects $38,000 principal amount of Notes tendered.
(3) Pro forma stockholder's equity includes the tax affected impact of a
$5,308 gain, net of expenses, in connection with the Invitation on the
assumptions set forth above.
CERTAIN RECENT EVENTS
The Company's most recent fiscal year ended on October 30, 2004 and its
related annual report on Form 10-K which was filed with the Securities and
Exchange Commission (the "SEC") on December 23, 2004 is incorporated herein
by reference. The first quarter of the current fiscal year, which ends on
October 29, 2005, ended on February 19, 2005 and its related quarterly report
on Form 10-Q which was filed with the SEC on April 5, 2005 is also
incorporated herein by reference. The Company's second quarter of the
current fiscal year ended on May 14, 2005. Since the Company has not yet
filed its quarterly report on Form 10-Q for the second quarter, management is
presenting the unaudited operating information below.
Unaudited
(dollars in thousands)
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28 Weeks Ended...
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May 14, 2005 May 15, 2004
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Net Sales $296,445 100.00% $298,834 100.00%
Cost of goods sold 199,451 67.28% 201,357 67.38%
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GROSS PROFIT $96,994 32.72% $97,477 32.62%
OPERATING EXPENSES
Selling, general and administrative
expenses 82,644 27.88% 80,770 27.03%
Gain on lease amendments (875) -0.30% (400) -0.13%
Depreciation and amortization 9,891 3.34% 10,435 3.49%
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OPERATING PROFIT $5,334 1.80% $6,672 2.23%
Interest expense, net of interest
income 8,014 2.70% 8,323 2.79%
Gain from early extinguishment of debt (2,718) -0.92% - 0.00%
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INCOME (LOSS) BEFORE TAXES 38 0.01% (1,651) -0.55%
Income tax expense 96
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NET INCOME (LOSS) $38 $(1,747)
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Sales comparisons (dollars in millions)
28 weeks ended
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05/14/05 05/15/04 %Change
-------- -------- -------
Total Sales $296.4 $298.8 -0.80%
Total same store sales $295.4 $295.5 -0.03%
Retail food division
Total sales $276.1 $276.6 -0.18%
Same store sales $275.1 $273.4 0.62%
In-home movies and games entertainment
division
Total sales $20.3 $22.2 -8.56%
Same store sales $20.3 $22.1 -8.14%
13
Cash at May 14, 2005 was $1,836. After giving effect to cash
borrowings of $13,409 and outstanding stand-by letters of credit of $2,400,
all at May 14, 2005, availability under the revolving credit facility was
$5,896.
PUERTO RICO TAXES:
In NOTE 7 - INCOME TAXES - to the Company's consolidated financial
statements included in its annual report to the SEC on Form 10-K for the 52
weeks ended October 30, 2004 the Company disclosed that the Treasury
Department of the Government of Puerto Rico is auditing the Company's
operating subsidiaries' tax years that ended January 1999 and 2000 for
compliance with the various income tax and excise tax laws of the
Commonwealth of Puerto Rico. At that time the Treasury Department had
asserted, preliminarily, the disallowance of certain deductions and the
assessment of certain excise taxes that would, if sustained, result in
charging the subsidiaries a total of $6,600 in a combination of additional
taxes and related interest. Since that time the Treasury Department of
Puerto Rico has updated its preliminary findings to disallow the deferral of
certain income associated with the insurance proceeds the subsidiaries
received as a result of a hurricane that damaged many of the operating
subsidiaries' locations. Consequently, the Treasury Department of Puerto is
currently asserting disallowances and additional assessments that would, if
sustained, result in charging the subsidiaries additional taxes and interest
totaling approximately $12,813.
The Company believes it has complied with the various tax laws and
regulations involved and the likelihood of paying these additional taxes and
related interest is remote. However, the ultimate outcome and any related
amount due are not determinable at this time. Consequently, no provision for
this preliminary assertion has been made in the accompanying unaudited
operating information.