NTRI Nutrisystem

Nutrisystem, Inc. (NASDAQ: NTRI), a leading provider of weight management products and services, today reported financial results for the second quarter 2012. The company also announced that the Board of Directors has declared a quarterly dividend of $0.175 per share, payable August 16, 2012, to stockholders of record as of August 6, 2012.

The following are financial highlights for the second quarter ended June 30, 2012:

• Revenues were $124.6 million, up 7.3 percent compared to $116.1 million in Q2 2011.
• Operating income for the quarter was $6.9 million.
• Net income in the quarter was $4.1 million.
• Net income in the quarter per diluted share was 14 cents.
• Adjusted EBITDA excluding one-time charges was $17.7 million. Adjusted EBITDA is defined as net income (loss) excluding non-cash employee compensation, other expense, interest, income taxes, depreciation and amortization, and severance and related charges.
• One-time charges related to the upcoming management transition as well as related charges totaled $6.6 million on a pretax basis or $4.9 million after tax, and negatively impacted earnings per share by 17 cents in the quarter.
• Cash, cash equivalents, and short term investments were $70.5 million at June 30, 2012.

Joe Redling, President and Chief Executive Officer, said, “Revenue growth was solid in the second quarter as the early Easter enabled us to quickly kick off the summer shape-up season, the Janet Jackson weight loss reveal generated significant customer excitement, and the countdown of our 40th Anniversary Promotion produced good results. Our objectives for the remainder of 2012 are to continue to leverage our new tiered pricing structure to improve gross margins; to execute on the retail rollout which began this quarter; and to build momentum for our diabetes product offering in conjunction with our recently being announced as a National Strategic Partner of the American Diabetes Association.”

David Clark, Chief Financial Officer, added, “We continue to forecast mid-single-digit revenue growth for the year, as well as earnings per share in the range of 45 to 55 cents before one-time charges. For the third quarter, we expect earnings per share in the range of 13 to 18 cents per share before one-time charges. These charges of $6.6 million in the second quarter were lower than our original forecast of $7.2 million due to timing differences; we expect approximately $600,000 of these charges in the third quarter.”

Conference Call and Webcast

Management will host a webcast to discuss second quarter 2012 financial results today at 4:30 PM Eastern time. The webcast will include remarks from President and Chief Executive Officer Joe Redling, Chief Financial Officer David Clark and Chief Marketing Officer Mike Amburgey. 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 800-946-0722, and reference conference ID 4077214.

About Nutrisystem, Inc.

Having helped Americans lose millions of pounds over the last 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 diabetes or at risk for type 2 diabetes. Nutrisystem® plans include a wide variety of pantry and fresh-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. The Company has also introduced a new in-store retail line, Nutrisystem® Everyday™ products, comprised of nutritionally balanced bars, smoothies, bakery and breakfast items aimed at consumers who aspire to eat healthier. Nutrisystem is available directly to consumers through www.nutrisystem.com, by phone (1-800-435-4074) and at select retailers.

Forward-Looking Statement Disclaimer

Information provided and statements contained in this press release that are not purely historical, such as 2012 third quarter and full year guidance, 2012 objectives and management transition, 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.

        NUTRISYSTEM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)

 

Three Months Ended

June 30,

Six Months Ended

June 30,

2012

2011

2012

2011

  REVENUE $ 124,560   $ 116,129   $ 253,077   $ 248,801     COSTS AND EXPENSES: Cost of revenue 66,419 57,627 136,948 121,454 Marketing 28,283 23,369 73,751 72,554 General and administrative 20,234 14,841 36,748 36,684 Depreciation and amortization   2,706     3,217     5,542     6,225   Total costs and expenses   117,642     99,054     252,989     236,917   Operating income 6,918 17,075 88 11,884 OTHER EXPENSE (78 ) 0 (78 ) 0 INTEREST EXPENSE, net   (236 )   (69 )   (510 )   (356 ) Income (loss) before income taxes 6,604 17,006 (500 ) 11,528

INCOME TAXES (BENEFIT)

  2,489     6,239     (134 )   4,185   Net income (loss) $ 4,115   $ 10,767   $ (366 ) $ 7,343     BASIC INCOME (LOSS) PER COMMON SHARE $ 0.14   $ 0.39   $ (0.01 ) $ 0.26   DILUTED INCOME (LOSS) PER COMMON SHARE $ 0.14   $ 0.38   $ (0.01 ) $ 0.26     WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 27,441 26,973 27,381 26,888 Diluted 27,622 27,296 27,381 27,253 DIVIDENDS DECLARED PER COMMON SHARE $ 0.175 $ 0.175 $ 0.35 $ 0.35       NUTRISYSTEM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except share and per share amounts)

  June 30, December 31, 2012 2011  

ASSETS

CURRENT ASSETS: Cash and cash equivalents $ 51,982 $ 47,594 Short term investments 18,543 10,013 Receivables 9,372 11,198 Inventories, net 23,158 31,514 Prepaid income taxes 0 3,350 Deferred income taxes 3,975 1,584 Supplier advances 3,509 2,637 Other current assets   5,128     9,011   Total current assets 115,667 116,901   FIXED ASSETS, net 31,064 29,771 OTHER ASSETS   5,194     3,682   Total assets $ 151,925   $ 150,354    

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES: Accounts payable $ 33,991 $ 32,581 Accrued payroll and related benefits 3,735 679 Income taxes payable 569 0 Deferred revenue 2,283 2,916 Other accrued expenses and current liabilities   5,719     4,486   Total current liabilities 46,297 40,662 BORROWINGS UNDER CREDIT FACILITY 30,000 30,000 NON-CURRENT LIABILITIES   4,717     4,734   Total liabilities   81,014     75,396     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 and outstanding – 28,542,029 at June 30, 2012 and 28,180,705 at December 31, 2011) 28 28 Additional paid-in capital 16,269 10,091 Retained earnings 54,671 64,931 Accumulated other comprehensive loss   (57 )   (92 ) Total stockholders’ equity   70,911     74,958   Total liabilities and stockholders’ equity $ 151,925   $ 150,354         NUTRISYSTEM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 

Six Months Ended June 30,

2012

2011 CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $ (366 ) $ 7,343 Adjustments to reconcile net (loss) income to net cash provided by

operating activities:

Depreciation and amortization 5,542 6,225 Loss (gain) on disposal of fixed assets 6 (17 ) Share–based compensation expense 6,574 5,386 Deferred income tax benefit (3,162 ) (87 ) Realized loss on sales of marketable securities 0 26 Realized loss on foreign currency translation adjustment 57 0 Changes in operating assets and liabilities: Receivables 1,826 (67 ) Inventories, net 8,356 (548 ) Supplier advances (602 ) 13,908 Other assets 4,398 5,619 Accounts payable 726 (366 ) Accrued payroll and related benefits 3,056 (2,190 ) Deferred revenue (633 ) (3,353 ) Income taxes 2,859 4,417 Other accrued expenses and liabilities   486     1,611   Net cash provided by operating activities   29,123     37,907   CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of marketable securities (8,527 ) (54 ) Proceeds from sales of marketable securities 0 20,897 Capital additions (5,496 ) (3,099 ) Proceeds from the sale of fixed assets   0     58   Net cash (used in) provided by investing activities   (14,023 )   17,802   CASH FLOWS FROM FINANCING ACTIVITIES: Debt issuance costs (200 ) 0 Exercise of stock options 9 128 Taxes related to equity compensation awards, net (627 ) (1,121 ) Payment of dividends   (9,894 )   (9,543 ) Net cash used in financing activities   (10,712 )   (10,536 ) NET INCREASE IN CASH AND CASH EQUIVALENTS 4,388 45,173 CASH AND CASH EQUIVALENTS, beginning of period   47,594     20,376   CASH AND CASH EQUIVALENTS, end of period $ 51,982   $ 65,549            

NUTRISYSTEM, INC. AND SUBSIDIARIES

ADJUSTED EBITDA RECONCILIATION TO GAAP RESULTS

(in thousands)

  Three Months Ended June 30, Six Months Ended June 30, 2012 2011 2012 2011   Adjusted EBITDA $ 17,653 $ 22,267 $ 15,707 $ 23,411

Non-cash employee compensation expense

(1,428 ) (1,975 ) (3,179 ) (5,302 ) Other expense (78 ) 0 (78 ) 0 Interest expense, net (236 ) (69 ) (510 ) (356 ) Income (taxes) benefit (2,489 ) (6,239 ) 134 (4,185 ) Depreciation and amortization (2,706 ) (3,217 ) (5,542 ) (6,225 ) Severance and related charges   (6,601 )   0     (6,898 )   0   Net income (loss) $ 4,115   $ 10,767   $ (366 ) $ 7,343    

Adjusted EBITDA is defined as net income (loss) excluding non-cash employee compensation, other expense, interest, income taxes, depreciation and amortization, and severance and related charges. We believe Adjusted EBITDA is a useful performance metric for management and investors because it is more indicative of the ongoing operations of the Company. Adjusted EBITDA excludes 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.

Severance and related charges include cash and non-cash severance of $5,567 related to the upcoming management transition and other related matters of $1,034 for the three months ended June 30, 2012.