Quarterly earnings of 15 cents per share up 50%
from comparable year ago before one-time charges
Board of Directors declares dividend of 17.5
cents per share
Nutrisystem, Inc. (NASDAQ: NTRI), a leading provider of weight
management products and services, today reported financial results
for the third quarter 2013. The Company also announced that the
Board of Directors has declared a quarterly dividend of $0.175 per
share, payable November 18, 2013, to shareholders of record as of
November 7, 2013.
The following are financial highlights for the third quarter
ended September 30, 2013:
- Revenues for the quarter were $85.4
million, an increase of 5% from revenues of $81.3 million in the
third quarter a year ago;
- Supplier dispute over a historical
contract settled, resulting in a one-time charge reducing gross
margin by $5.0 million and earnings per share by $0.14;
- Adjusted operating income, which is
defined as operating income excluding the one-time supplier dispute
charge, was $6.5 million, up 36% from $4.8 million in the third
quarter of 2012. On a GAAP basis, operating income for the quarter
was $1.5 million. A reconciliation of GAAP to non-GAAP measures is
provided later in this press release;
- Adjusted EBITDA for the quarter was
$9.6 million, an increase of 8% from $8.9 million in the third
quarter of 2012. Adjusted EBITDA is defined as net income excluding
non-cash employee compensation, other expense, interest, income
taxes, depreciation and amortization, and one-time charges;
- Adjusted net income for the quarter was
$4.3 million or $0.15 per share versus $2.9 million or $0.10 per
share in the third quarter of 2012. Net income for the quarter was
$356,000 or $0.01 per share; and
- Cash, cash equivalents, and short term
investments were $41.1 million at September 30, 2013. The Company
had no borrowings outstanding under its bank facility.
Dawn Zier, President and Chief Executive Officer, said, “We are
pleased with the continued progress of our turnaround. The
year-over-year growth in acquisition revenues and customer starts
across all channels for the quarter is a strong sign that our
strategy is beginning to take hold. The sophisticated segmentation
and targeting methodologies implemented over the past year not only
attracted and reactivated more customers in the third quarter, but
also increased length of stay and the corresponding lifetime value.
And, the bottom line continues to reflect adjusted gross margin
improvement as well as increased operating leverage."
Ms. Zier continued, “Over the last year, we have researched and
demonstrated that the Nutrisystem brand has strength and relevance
across many platforms and configurations, as was seen with our
expansion into retail. Consumers are giving us permission to do
more with our brand. Consequently, based on our strategic wins and
operational excellence over the past year, we are approaching this
upcoming diet season with cautious optimism. Although there is
still significant work that we need to do to realize our vision for
the brand, with each quarter we grow increasingly confident that
our plan will create both a strong Nutrisystem franchise and value
for shareholders over the long term.”
Mike Monahan, Chief Financial Officer, said, “During the third
quarter, the Company worked with a key supplier to settle a dispute
connected to a legacy contract. Both companies worked diligently to
resolve the matter, and ultimately we believe it was in the best
interest of the Company and our shareholders to put the matter
behind us so that we can continue to focus on executing our
turnaround plan. As a result, the third quarter GAAP financials
were impacted as we recorded a charge of $5 million, or $0.14 per
share, in connection with the settlement of the dispute. There will
be no impact on our financials going forward, and we will continue
to work with the supplier in the future.”
Mr. Monahan continued, “Excluding the one-time charge, we
achieved a number of important financial objectives in the quarter,
including a 5% increase in revenues and a 400 basis point
improvement in adjusted gross margins, generating nearly $10
million in adjusted EBITDA. These continued strong results are
providing us with the resources to build the business and return
cash to our shareholders. The upside in adjusted third quarter
earnings per share has enabled us to increase our guidance for FY
2013. Adjusted earnings per share for nine months ended September
30, 2013 was $0.38. We are projecting fourth quarter earnings per
share in the range of ($0.02) to $0.02, and expect year-over-year
revenue growth in the mid-single digits in the fourth quarter.”
Conference Call and Webcast
Management will host a webcast to discuss third quarter 2013
financial results today at 4:30 PM Eastern time. The webcast will
include remarks from President and Chief Executive Officer Dawn
Zier, Chief Financial Officer Mike Monahan, and Chief Marketing
Officer Keira Krausz. A webcast of the conference call will be
available live on the Investor Relations section of the Nutrisystem
website (www.nutrisystem.com) and a replay will be available for 30
days. Interested parties unable to access the conference call via
the webcast may dial 913-312-0677, and reference conference ID
2112826.
Forward-Looking Statements
Information provided and statements contained in this press
release that are not purely historical, such as fourth quarter and
full year 2013 guidance, and the Company’s financial and
operational outlook, are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, Section 21E
of the Securities Exchange Act of 1934 and the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements only
speak as of the date of this press release and the Company assumes
no obligation to update the information included in this press
release. Statements made in this press release that are
forward-looking in nature may involve risks and uncertainties.
Accordingly, readers are cautioned that any such forward-looking
statements are not guarantees and are subject to certain risks,
uncertainties and assumptions that are difficult to predict,
including, without limitation, specific factors discussed herein
and in other releases and public filings made by the Company
(including filings by the Company with the Securities and Exchange
Commission). Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable as of
the date made, expectations may prove to have been materially
different from the results expressed or implied by such
forward-looking statements. Unless otherwise required by law, the
Company also disclaims any obligation to update its view of any
such risks or uncertainties or to announce publicly the result of
any revisions to the forward-looking statements made in this press
release.
About Nutrisystem
Having helped Americans lose millions of pounds for over 40
years, Nutrisystem, Inc. (NASDAQ: NTRI) develops evidence-based
programs for healthy weight management, and is the leading provider
of home-delivered weight loss meal plans. Nutrisystem offers
balanced nutrition in the form of low glycemic index meal plans
designed for men and women, including seniors, vegetarians and the
Nutrisystem® D® program for people with, or at risk for, type 2
diabetes. Nutrisystem® plans include a wide variety of pantry and
frozen entrees and snacks to aid in program satisfaction and
adherence, as well as transition plans to support long-term
success. The Fort Washington, PA-based company also provides weight
management support and counseling by trained weight-loss coaches
and registered dietitians, as well as through an engaged online
community, online tools and trackers, mobile apps, cookbooks and
more. Healthcare professionals may learn more about the programs by
visiting www.nutrisystem.com/hcp. Nutrisystem® weight loss plans
are available directly to consumers through www.nutrisystem.com, by
phone (1-800-435-4074) and at select retailers.
NUTRISYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share
amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2013
2012
2013
2012
REVENUE
$ 85,360
$ 81,276 $
288,213 $ 334,353
COSTS AND EXPENSES: Cost of revenue 47,627 43,835
147,696 180,783 Marketing 19,983 18,458 80,549 92,671 General and
administrative 14,336 14,490 42,937 50,776 Depreciation and
amortization
1,912
2,570 6,803
8,112 Total costs and expenses
83,858 79,353
277,985 332,342
Operating income 1,502 1,923 10,228 2,011 OTHER EXPENSE 0 0 0 (78 )
INTEREST EXPENSE, net
(41 )
(244 ) (123
) (754 ) Income
before income taxes 1,461 1,679 10,105 1,179
INCOME TAX EXPENSE (BENEFIT)
1,105 (911
) 4,030
(1,045 ) Net income
$
356 $ 2,590
$ 6,075 $
2,224 BASIC INCOME PER COMMON SHARE
$ 0.01 $
0.09 $ 0.21
$ 0.07 DILUTED INCOME PER COMMON
SHARE
$ 0.01 $
0.09 $ 0.21
$ 0.07 WEIGHTED AVERAGE
SHARES OUTSTANDING: Basic 27,983 27,562 27,974 27,442 Diluted
28,261 27,801 28,160 27,642 DIVIDENDS DECLARED PER COMMON
SHARE
$ 0.175 $
0.175 $ 0.525
$ 0.525
NUTRISYSTEM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS
(Unaudited, in thousands, except share and
par value amounts)
September 30, December 31, 2013 2012
ASSETS
CURRENT ASSETS: Cash and cash equivalents $ 18,353 $ 16,186 Short
term investments 22,765 3,205 Receivables 9,281 8,487 Inventories
15,856 23,637 Prepaid income taxes 241 4,531 Deferred income taxes
2,158 2,969 Other current assets
4,251
7,160 Total current assets 72,905 66,175
FIXED ASSETS, net 27,195 28,003 OTHER ASSETS
5,100 4,228 Total
assets
$ 105,200 $
98,406
LIABILITIES AND
STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES: Accounts payable $ 24,788 $ 23,192 Accrued
payroll and related benefits 5,498 1,326 Deferred revenue 5,174
3,343 Accrued settlement 5,000 0 Other accrued expenses and current
liabilities
7,298
6,911 Total current liabilities 47,758 34,772
NON-CURRENT LIABILITIES
3,243
3,525 Total liabilities
51,001 38,297
STOCKHOLDERS’ EQUITY: Preferred stock, $.001 par value (5,000,000
shares authorized, no shares issued and outstanding) 0 0
Common stock, $.001 par value (100,000,000
shares authorized; shares issued – 28,865,396 at September 30, 2013
and 28,631,464 at December 31, 2012)
29
29
Additional paid-in capital 22,011 18,466 Treasury stock, at cost,
141,342 shares at September 30, 2013 and 72,561 shares at December
31, 2012 (1,259 ) (636 ) Retained earnings 33,406 42,254
Accumulated other comprehensive income (loss)
12 (4 ) Total
stockholders’ equity
54,199
60,109 Total liabilities and stockholders’
equity
$ 105,200 $
98,406 NUTRISYSTEM, INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Nine Months Ended
September 30,
2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $
6,075 $ 2,224 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation and amortization
6,803 8,112 Loss on disposal of fixed assets 110 6 Share–based
compensation expense 4,031 8,181 Deferred income tax benefit (642 )
(4,229 ) Other non-cash charges 43 57 Changes in operating assets
and liabilities: Accrued interest 0 (11 ) Receivables (794 ) 6,221
Inventories 7,781 14,806 Other assets 2,952 5,207 Accounts payable
1,402 (11,052 ) Accrued payroll and related benefits 4,172 2,927
Deferred revenue 1,831 (630 ) Income taxes 4,264 3,063 Accrued
settlement 5,000 0 Other accrued expenses and liabilities
517 288 Net cash
provided by operating activities
43,545
35,170 CASH FLOWS FROM INVESTING
ACTIVITIES: Purchases of short term investments (23,536 ) (10,298 )
Proceeds from sales of short term investments 3,952 245 Capital
additions (6,351 ) (8,306 ) Proceeds from the sale of fixed assets
28 0 Net cash
used in investing activities
(25,907
) (18,359 ) CASH
FLOWS FROM FINANCING ACTIVITIES: Exercise of stock options 0 10
Taxes related to equity compensation awards, net (548 ) (859 )
Payment of dividends
(14,923 )
(14,882 ) Net cash used in
financing activities
(15,471 )
(15,731 ) NET INCREASE IN CASH AND
CASH EQUIVALENTS 2,167 1,080 CASH AND CASH EQUIVALENTS, beginning
of period
16,186
47,594 CASH AND CASH EQUIVALENTS, end of period
$ 18,353 $
48,674 NUTRISYSTEM,
INC. AND SUBSIDIARIES ADJUSTED EBITDA RECONCILIATION TO GAAP
RESULTS
(Unaudited, in thousands)
Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
2013 2012 2013 2012 Adjusted EBITDA $ 9,555 $
8,851 $ 26,982 $ 24,558 Non-cash employee compensation expense
(1,141 ) (1,500 ) (3,510 ) (4,679 ) Other expense 0 0 0 (78 )
Interest expense, net (41 ) (244 ) (123 ) (754 ) Income tax
(expense) benefit (1,105 ) 911 (4,030 ) 1,045 Depreciation and
amortization (1,912 ) (2,570 ) (6,803 ) (8,112 ) One-time charges:
Settlement with supplier (5,000 ) 0 (5,000 ) 0 Severance and
related charges 0 (758 ) (1,441 ) (7,656 ) Impairment of supplier
advance
0 (2,100
) 0
(2,100 ) Total one-time charges
(5,000 ) (2,858
) (6,441 )
(9,756 ) Net income
$
356 $ 2,590
$ 6,075 $
2,224
Adjusted EBITDA is defined as net income excluding non-cash
employee compensation, other expense, interest, income taxes,
depreciation and amortization, and one-time charges.
NUTRISYSTEM, INC. AND SUBSIDIARIES ADJUSTED
OPERATING INCOME RECONCILIATION TO GAAP RESULTS
(Unaudited, in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2013 2012 2013 2012 Operating income as
reported $ 1,502 $ 1,923 $ 10,228 $ 2,011 Adjustment for one-time
charges 5,000 2,858 6,441 9,756
Adjusted operating income $ 6,502 $ 4,781 $ 16,669 $ 11,767
NUTRISYSTEM, INC. AND SUBSIDIARIES ADJUSTED
NET INCOME RECONCILIATION TO GAAP RESULTS
(Unaudited, in thousands, except per share
amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2013 2012 2013 2012 Net income as reported $
356 $ 2,590 $ 6,075 $ 2,224 Income tax expense (benefit) as
reported
1,105 (911 ) 4,030 (1,045 ) Income before
income taxes 1,461 1,679 10,105 1,179 Adjustment for one-time
charges 5,000 2,858 6,441 9,756
Adjusted income before income taxes 6,461 4,537 16,546 10,935
Adjusted income tax expense 2,132 1,588 5,460
3,827 Adjusted net income $ 4,329 $ 2,949 $
11,086 $ 7,108 Adjusted diluted income per common
share $ 0.15 $ 0.10 $ 0.38 $ 0.25 Diluted weighted average
shares outstanding as reported 28,261 27,801 28,160 27,642
Adjusted income tax expense for the three and nine months ended
September 30, 2013 has been calculated using a tax rate of 33%. For
the three and nine months ended September 30, 2012, the adjusted
income tax expense was calculated using a tax rate of 35%.
Statement Regarding Non-GAAP Financial Measures
We believe Adjusted EBITDA, Adjusted operating income and
Adjusted net income are useful performance metrics for management
and investors because they are indicative of the ongoing operations
of the Company. These non-GAAP measures exclude certain non-cash
and non-operating items to facilitate comparisons and provide a
meaningful measurement that is focused on the performance of the
ongoing operations of the Company.
Gregory FCAJoe Hassett, SVPDirect: 610-228-2110Mobile:
484-686-6600
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