SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2003
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 0-21333
RMH TELESERVICES, INC.
(Exact name of registrant as specified in its charter)
| Pennsylvania | 23-2250564 | |
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
15 Campus Boulevard
Newtown Square, PA 19073
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (610) 325-3100
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 reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes x No ¨
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date: 16,026,830 shares of common stock outstanding as of February 17, 2004.
RMH TELESERVICES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
| PART I. |
FINANCIAL INFORMATION | |||||
| Item 1. | ||||||
| Condensed Consolidated Balance Sheets at December 31, 2003 and September 30, 2003 |
2 | |||||
| 3 | ||||||
| 4 | ||||||
| 5 | ||||||
| 6 | ||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
19 | ||||
| Item 3. | 27 | |||||
| Item 4. | 28 | |||||
| PART II. |
OTHER INFORMATION | |||||
| Item 1. | 29 | |||||
| Item 2. | 29 | |||||
| Item 3. | 29 | |||||
| Item 4. | 29 | |||||
| Item 5. | 29 | |||||
| Item 6. | 29 | |||||
| 30 | ||||||
1
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
RMH TELESERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except share and per share amounts)
| December 31, 2003 |
September 30, 2003 |
|||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 383 | $ | 1,112 | ||||
| Restricted cash |
50 | 50 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $147 and $247, respectively |
21,536 | 22,058 | ||||||
| Other receivables |
1,883 | 1,471 | ||||||
| Refundable income taxes |
131 | 106 | ||||||
| Prepaid expenses and other current assets |
3,422 | 3,017 | ||||||
| Total current assets |
27,405 | 27,814 | ||||||
| Property and equipment, net |
51,803 | 51,512 | ||||||
| Other assets |
9,278 | 9,123 | ||||||
| Total assets |
$ | 88,486 | $ | 88,449 | ||||
| Liabilities and shareholders’ equity |
||||||||
| Current liabilities: |
||||||||
| Credit facility |
$ | 8,905 | $ | 6,030 | ||||
| Current portion of obligation under capital leases |
11,224 | 11,346 | ||||||
| Current portion of notes payable |
717 | 760 | ||||||
| Accounts payable |
7,638 | 6,355 | ||||||
| Accrued expenses and other current liabilities |
16,162 | 17,892 | ||||||
| Total current liabilities |
44,646 | 42,383 | ||||||
| Long-term liabilities: |
||||||||
| Notes payable |
624 | 730 | ||||||
| Obligation under capital leases |
7,167 | 8,741 | ||||||
| Other long-term liabilities |
16,706 | 16,946 | ||||||
| Total long-term liabilities |
24,497 | 26,417 | ||||||
| Commitments and contingencies |
||||||||
| Shareholders’ equity: |
||||||||
| Preferred stock, $1.00 par value; 5,000,000 shares authorized, no shares issued and outstanding |
— | — | ||||||
| Common stock, no par value; 20,000,000 shares authorized, 16,011,830 and 13,805,580 shares issued and outstanding, respectively |
89,404 | 84,234 | ||||||
| Common stock warrants |
8,193 | 6,736 | ||||||
| Deferred compensation |
(23 | ) | (299 | ) | ||||
| Accumulated deficit |
(78,138 | ) | (70,844 | ) | ||||
| Accumulated other comprehensive loss |
(93 | ) | (178 | ) | ||||
| Total shareholders’ equity |
19,343 | 19,649 | ||||||
| Total liabilities and shareholders’ equity |
$ | 88,486 | $ | 88,449 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
RMH TELESERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share amounts)
| Three Months Ended December 31, | |||||||
| 2003 |
2002 | ||||||
| Net revenues |
$ | 63,865 | $ | 77,646 | |||
| Operating expenses: |
|||||||
| Cost of services |
59,222 | 59,217 | |||||
| Selling, general and administrative |
10,916 | 13,145 | |||||
| Impairment and restructuring charges |
— | 30 | |||||
| Total operating expenses |
70,138 | 72,392 | |||||
| Operating (loss) income |
(6,273 | ) | 5,254 | ||||
| Other expense |
265 | 86 | |||||
| Interest income |
21 | 15 | |||||
| Interest expense |
745 | 837 | |||||
| (Loss) income before income taxes |
(7,262 | ) | 4,346 | ||||
| Income tax expense |
32 | 40 | |||||
| Net (loss) income |
$ | (7,294 | ) | $ | 4,306 | ||
| Basic (loss) income per common share |
$ | (0.46 | ) | $ | 0.32 | ||
| Diluted (loss) income per common share |
$ | (0.46 | ) | $ | 0.30 | ||
| Shares used in computing basic (loss) income per common share |
15,821 | 13,484 | |||||
| Shares used in computing diluted (loss) income per common share |
15,821 | 14,252 | |||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
RMH TELESERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
| Three Months Ended December 31, |
||||||||
| 2003 |
2002 |
|||||||
| Operating activities: |
||||||||
| Net (loss) income |
$ | (7,294 | ) | $ | 4,306 | |||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities- |
||||||||
| Impairment and restructuring charges |
— | 30 | ||||||
| Stock-based compensation |
232 | — | ||||||
| Loss on disposal of fixed assets |
6 | 238 | ||||||
| Amortization of deferred compensation |
149 | 214 | ||||||
| Amortization of sales incentives |
— | 249 | ||||||
| Depreciation and amortization |
4,660 | 3,726 | ||||||
| Changes in operating assets and liabilities- |
||||||||
| Accounts receivable |
535 | 127 | ||||||
| Prepaid expenses and other current assets |
(649 | ) | (439 | ) | ||||
| Refundable income taxes |
(25 | ) | 54 | |||||
| Other assets |
(129 | ) | (1,903 | ) | ||||
| Accounts payable, accrued expenses and other current liabilities |
(1,365 | ) | 1,455 | |||||
| Other liabilities |
(295 | ) | 2,129 | |||||
| Net cash (used in) provided by operating activities |
(4,175 | ) | 10,186 | |||||
| Investing activities: |
||||||||
| Capital expenditures |
(3,338 | ) | (1,993 | ) | ||||
| Proceeds from sale of assets |
— | 8 | ||||||
| Net cash used in investing activities |
(3,338 | ) | (1,985 | ) | ||||
| Financing activities: |
||||||||
| Restricted cash |
— | 1,000 | ||||||
| Proceeds from (repayment of) line of credit |
2,875 | (3,546 | ) | |||||
| (Repayment of) proceeds from notes payable |
(180 | ) | 357 | |||||
| Capital lease payments |
(2,535 | ) | (2,333 | ) | ||||
| Proceeds from issuance of common stock and warrants |
6,520 | — | ||||||
| Exercise of common stock options |
2 | 276 | ||||||
| Net cash provided by (used in) financing activities |
6,682 | (4,246 | ) | |||||
| Effect of exchange rate changes |
102 | (170 | ) | |||||
| Net (decrease) increase in cash and cash equivalents |
(729 | ) | 3,785 | |||||
| Cash and cash equivalents, beginning of period |
1,112 | 1,390 | ||||||
| Cash and cash equivalents, end of period |
$ | 383 | $ | 5,175 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
RMH TELESERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
THREE MONTHS ENDED DECEMBER 31, 2003
(unaudited)
(in thousands, except share amounts)
| Preferred Stock |
Common Stock |
Common Stock Warrants |
Deferred Compensation |
Accumulated Deficit |
Accumulated Other Comprehensive Income (Loss) |
Total Shareholders’ Equity |
|||||||||||||||||||||||
| Shares |
Amount |
Shares |
Amount |
||||||||||||||||||||||||||
| Balance, September 30, 2003 |
— | $ | — | 13,805,580 | $ | 84,234 | $ | 6,736 | $ | (299 | ) | $ | (70,844 | ) | $ | (178 | ) | $ | 19,649 | ||||||||||
| Comprehensive loss: |
|||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | — | (7,294 | ) | — | (7,294 | ) | ||||||||||||||||||
| Change in fair value of cash flow hedge |
— | — | — | — | — | — | — | 82 | 82 | ||||||||||||||||||||
| Foreign currency translation adjustment |
— | — | — | — | — | — | — | 3 | 3 | ||||||||||||||||||||
| Total comprehensive loss |
— | — | — | — | — | — | (7,294 | ||||||||||||||||||||||