Nutrisystem Reports Third Quarter 2012 Results

Nutrisystem Reports Third Quarter 2012 Results

Board of Directors declares dividend of 17.5 cents per share

FORT WASHINGTON, Pa.--(BUSINESS WIRE)-- Nutrisystem, Inc. (NAS: NTRI) , a leading provider of weight management products and services, today reported financial results for the third quarter 2012. The company also announced that the Board of Directors has declared a quarterly dividend of $0.175 per share, payable November 29, 2012, to stockholders of record as of November 19, 2012.


The following are financial highlights for the third quarter ended September 30, 2012:

  • Revenues were $81.3 million, compared to $85.6 million in Q3 2011.

  • Operating income for the quarter was $1.9 million.

  • Net income in the quarter was $2.6 million.

  • Net income per diluted share in the quarter was 9 cents.

  • Adjusted EBITDA was $8.9 million. Adjusted EBITDA is defined as net income excluding non-cash employee compensation, other expense, interest, income taxes, depreciation and amortization, severance and related charges, and impairment of supplier advance.

  • One-time charges, the majority of which were related to the writedown of a supplier advance as well as the previously disclosed management transition, totaled $2.9 million on a pretax basis or $2.0 million after tax. These one-time charges negatively impacted earnings per share by 7 cents in the quarter.

  • Cash, cash equivalents, and short term investments were $68.8 million at September 30, 2012.

Mike Hagan, chairman of the Nutrisystem board of directors, said, "As we announced earlier this week, Dawn Zier is joining Nutrisystem as president and chief executive officer and a member of our board of directors, and we are looking forward to her contributions. Clearly the past few years have been challenging for Nutrisystem as a tough economy and intense competition have negatively impacted financial results, and this continued in the third quarter. With a fresh outside perspective from a long-time direct-to-consumer marketing professional, along with a sound strategic plan for the 2013 diet season launch, we are confident that we can turn around the company's financial performance."

David Clark, chief financial officer, added, "Based on current trends, we are forecasting full year earnings per share before one-time charges in the range of 15 to 20 cents. Additionally, we will be evaluating a range of decisions that could further reduce earnings for both the fourth quarter and the full year. We expect revenue for the year to be flat or slightly down from 2011 levels."

Conference Call and Webcast

Management will host a webcast to discuss third quarter 2012 financial results today at 8:30 AM Eastern time. The webcast will include remarks from chairman of the board of directors Mike Hagan, 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 719-325-2495, and reference conference ID 5447181.

About Nutrisystem, Inc.

Having helped Americans lose millions of pounds over the last 40 years, Nutrisystem, Inc. (NAS: 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. Nutrisystem® weight loss plans are available directly to consumers through www.nutrisystem.com, by phone (1-800-435-4074) and at select retailers. 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.

Forward-Looking Statement Disclaimer

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

NUTRISYSTEM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

REVENUE

$

81,276

$

85,643

$

334,353

$

334,444

COSTS AND EXPENSES:

Cost of revenue

43,835

41,257

180,783

162,711

Marketing

18,176

20,279

91,927

92,833

General and administrative

14,772

11,502

51,520

48,186

Depreciation and amortization

2,570

2,961

8,112

9,186

Total costs and expenses

79,353

75,999

332,342

312,916

Operating income

1,923

9,644

2,011

21,528

OTHER EXPENSE

0

0

(78

)

0

INTEREST EXPENSE, net

(244

)

(52

)

(754

)

(408

)

Income before income taxes

1,679

9,592

1,179

21,120

INCOME TAX (BENEFIT) EXPENSE

(911

)

3,524

(1,045

)

7,709

Net income

$

2,590

$

6,068

$

2,224

$

13,411

BASIC INCOME PER COMMON SHARE

$

0.09

$

0.22

$

0.07

$

0.48

DILUTED INCOME PER COMMON SHARE

$

0.09

$

0.21

$

0.07

$

0.47

WEIGHTED AVERAGE SHARES OUTSTANDING:

Basic

27,562

27,092

27,442

26,948

Diluted

27,801

27,335

27,642

27,272

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 per share amounts)

September 30,

December 31,

2012

2011

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

48,674

$

47,594

Short term investments

20,135

10,013

Receivables

4,977

11,198

Inventories, net

16,708

31,514

Prepaid income taxes

430

3,350

Deferred income taxes

3,609

1,584

Supplier advances

1,308

2,637

Other current assets

5,630

9,011

Total current assets

101,471

116,901

FIXED ASSETS, net

29,515

29,771

OTHER ASSETS

5,082

3,682

Total assets

$

136,068

$

150,354

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable

$

21,297

$

32,581

Accrued payroll and related benefits

3,606

679

Deferred revenue

2,286

2,916

Other accrued expenses and current liabilities

5,394

4,486

Total current liabilities

32,583

40,662

BORROWINGS UNDER CREDIT FACILITY

30,000

30,000

NON-CURRENT LIABILITIES

4,017

4,734

Total liabilities

66,600

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 - 28,553,225 at September 30, 2012 and 28,180,705 at December 31, 2011)

28

28

Additional paid-in capital

17,302

10,091

Treasury stock, at cost, 7,691 shares at September 30, 2012 and 0 shares at December 31, 2011

(83

)

0

Retained earnings

52,273

64,931

Accumulated other comprehensive loss

(52

)

(92

)

Total stockholders' equity

69,468

74,958

Total liabilities and stockholders' equity

$

136,068

$

150,354

NUTRISYSTEM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

Nine Months Ended

September 30,

2012

2011

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

2,224

$

13,411

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

8,112

9,186

Loss (gain) on disposal of fixed assets

6

(17

)

Share-based compensation expense

8,181

7,502

Deferred income tax benefit

(4,229

)

(364

)

Realized loss on sales of marketable securities

0

26

Realized loss on foreign currency translation adjustment

57

0

Changes in operating assets and liabilities:

Accrued interest

(11

)

0

Receivables

6,221

2,866

Inventories, net

14,806

3,643

Supplier advances

1,599

14,647

Other assets

3,608

6,971

Accounts payable

(11,052

)

(6,496

)

Accrued payroll and related benefits

2,927

(2,847

)

Deferred revenue

(630

)

(3,314

)

Income taxes

3,063

7,296

Other accrued expenses and liabilities

288

1,966

Net cash provided by operating activities

35,170

54,476

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of short term investments

(10,298

)

(54

)

Proceeds from sales of short term investments

245

20,897

Capital additions

(8,306

)

(6,570

)

Proceeds from the sale of fixed assets

0

58

Net cash (used in) provided by investing activities

(18,359

)

14,331

CASH FLOWS FROM FINANCING ACTIVITIES:

Exercise of stock options

10

128

Taxes related to equity compensation awards, net

(859

)

(2,692

)

Payment of dividends

(14,882

)

(14,404

)

Net cash used in financing activities