Contact:
Joe Crivelli
Senior Vice President
Gregory FCA
Direct: 610-228-2100
Mobile: 610-299-6700
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NUTRISYSTEM REPORTS THIRD QUARTER 2011 RESULTS
Q3 results and Q4 forecast include additional investments to support 2012 new program launch EPS of 21 cents driven by improved marketing efficiency and G&A cost containment Board of Directors declares dividend of 17.5 cents per share
Fort Washington, PA—November 2, 2011—Nutrisystem, Inc. (NASDAQ: NTRI), a leading provider of weight management products and services, today reported financial results for the third quarter 2011.
The following are key financial metrics for the third quarter ended September 30, 2011:
| · | Revenues were $85.6 million, compared to $121.2 million for Q3 2010. |
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| · | Operating income from continuing operations was $9.6 million, compared to operating income from continuing operations of $13.9 million for Q3 2010. |
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| · | Net income was $6.1 million, compared to net income of $9.2 million for Q3 2010. |
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| · | Net income per diluted share was 21 cents, compared to net income of 32 cents per diluted share for Q3 2010. |
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| · | Additional expenses to support 2012 growth initiatives impacted Q3 results by $600,000 pretax or two cents per diluted share. |
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| · | Adjusted EBITDA was $14.7 million, compared to $19.8 million for Q3 2010. EBITDA margin was 17.1%, compared to 16.3% a year ago. Adjusted EBITDA is defined as income from continuing operations excluding non-cash employee compensation, other income (expense), interest, income taxes and depreciation and amortization. |
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| · | Cash and cash equivalents and marketable securities were $72.2 million at September 30, 2011, compared to $41.2 million at December 31, 2010. |
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Joe Redling, Chairman and Chief Executive Officer, said, “While we are disappointed in our third quarter results, we have worked hard this year to position Nutrisystem to recapture revenue momentum and believe that we have an exciting plan for 2012. We are making a significant investment in new programs as we intend to roll out a completely revamped Nutrisystem plan during the upcoming diet season. In support of our launch we have also secured new brand ambassadors for both our women’s and men’s programs.
While this investment represents a short term drag on Q4 earnings, we believe this will better position us for success in 2012. We are excited about the potential of combining both a new product launch and new spokespersons during the same diet season.”
Mr. Redling continued, “The revenue environment deteriorated in the third quarter, especially in August when negative headlines about the U.S. debt downgrade and European debt crisis were prevalent. Our revenues have always been strongly correlated to consumer confidence, and we saw revenue traction decline considerably once questions about the economic recovery hit the news. Careful management of operating expenses enabled us to deliver bottom line results that were in line with our expectations for the quarter, and the company remains soundly profitable. However, we see continued revenue pressure in Q4 as consumer confidence remains at historic lows and, in fact, fell to one of the lowest levels in the past 30 years during October.”
David Clark, Chief Financial Officer, added, “To take full advantage of our planned new program launch for 2012 diet season and continue support of additional growth initiatives we have made the strategic decision to accelerate certain expenditures into the third and fourth quarters. The impact of this investment on Q3 results was $600,000 pretax or two cents per diluted share, and we expect Q4 net income to be impacted by $5 million pretax or 11 cents per diluted share. In addition, we expect our typical sequential revenue decrease to be steeper than historic norms due to the continued difficult consumer spending environment. As a result, we now expect earnings in the range of $0.45 to $0.50 per diluted share for the full year.”
The company also announced that the Board of Directors has declared a quarterly dividend of $0.175 per share, payable November 25, 2011, to shareholders of record as of November 14, 2011.
Conference Call and Webcast
Management will host a webcast to discuss third quarter 2011 financial results today at 4:30 PM Eastern time. The webcast will include remarks from Chairman and Chief Executive Officer Joe Redling and Chief Financial Officer David Clark.
A webcast of the conference call will be available live on the Investor Relations section of Nutrisystem's website for 30 days. Interested parties unable to access the conference call via the webcast may dial 1-913-312-1434, and reference conference ID 4967358. A replay of the conference call will be available on the Company website for 30 days following the event.
About Nutrisystem
Nutrisystem, Inc. (NASDAQ: NTRI) is the number one home delivery weight-loss company. Nutrisystem® products are sold direct to the consumer through nutrisystem.com, by phone, and at select retailers, with convenient home delivery. The Company offers proven nutritionally balanced weight loss programs designed for women, men, and seniors, as well as the Nutrisystem® D® program, specifically designed to help people with type 2 diabetes who want to lose weight and manage their diabetes. The Nutrisystem® program is based on nearly 40 years of nutrition research and the science of the low glycemic index, and offers a variety of great tasting, satisfying, good carbohydrate meals that are designed to be heart healthy. The program was named the "Least Expensive Home Delivery Program” by CBS Money Watch in January 2011. The program has no membership fees and provides weight management support and counseling by trained weight-loss coaches and online and mobile weight management tools free of charge. Nutrisystem proudly supports the American Diabetes Association in its movement to Stop Diabetes™, as well as to help in increasing awareness of the correlation between weight loss and improvements in diabetes control. For more information or to become a customer, visit http://www.nutrisystem.com or call 1-800-891-3215. For the healthcare professional, please visit http://www.nutrisystem.com/hcp. Follow Nutrisystem on Twitter @nutrisystem and on Facebook at www.Facebook.com/nutrisystem.
Forward-Looking Statement Disclaimer
This press release may contain forward-looking statements that are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements regarding Nutrisystem's plans and expectations for 2011 and 2012, continuing to pay regular quarterly dividends and other statements that are not statements of historical fact constitute forward-looking statements. These forward-looking statements involve a number of risks and uncertainties, which are described in Nutrisystem, Inc.'s Annual Report on Form 10-K and its other filings with the Securities and Exchange Commission. The actual results may differ materially from any forward-looking statements due to such risks and uncertainties. Nutrisystem, Inc. undertakes no obligation to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this 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, |
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| | | | | 2011 | | | | 2010 | | | | 2011 | | | | 2010 |
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| REVENUE | | $ | | 85,643 | | $ | | 121,189 | | $ | | 334,444 | | $ | | 421,653 |
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| COSTS AND EXPENSES: | | | | | | | | | | | | | | | | |
| Cost of revenue | | | | 41,257 | | | | 52,654 | | | | 162,711 | | | | 186,585 |
| Marketing | | | | 20,279 | | | | 33,349 | | | | 92,833 | | | | 127,177 |
| General and administrative | | | | 11,502 | | | | 18,114 | | | | 48,186 | | | | 57,031 |
| Depreciation and amortization | | | | 2,961 | | | | 3,133 | | | | 9,186 | | | | 9,064 |
| Total costs and expenses | | | | 75,999 | | | | 107,250 | | | | 312,916 | | | | 379,857 |
| Operating income from continuing operations | | | | 9,644 | | | | 13,939 | | | | 21,528 | | | | 41,796 |
| OTHER INCOME (EXPENSE) | | | | 0 | | | | 3 | | | | 0 | | | | (32) |
| INTEREST (EXPENSE) INCOME, net | | | | (52) | | | | (31) | | | | (408) | | | | 73 |
| Income from continuing operations before income taxes | | | | 9,592 | | | | 13,911 | | | | 21,120 | | | | 41,837 |
| INCOME TAXES | | | | 3,524 | | | | 4,690 | | | | 7,709 | | | | 15,037 |
| Income from continuing operations | | | | 6,068 | | | | 9,221 | | | | 13,411 | | | | 26,800 |
| DISCONTINUED OPERATION: | | | | | | | | | | | | | | | | |
| Loss on discontinued operation, net of income tax benefit | | | | 0 | | | | (66) | | | | 0 | | | | (253) |
| Net income | | $ | | 6,068 | | $ | | 9,155 | | $ | | 13,411 | | $ | | 26,547 |
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| BASIC INCOME PER COMMON SHARE: | | | | | | | | | | | | | | | | |
| Income from continuing operations | | $ | | 0.22 | | $ | | 0.32 | | $ | | 0.48 | | $ | | 0.89 |
| Loss on discontinued operation | | | | 0 | | | | 0 | | | | 0 | | | | (0.01) |
| Net income | | $ | | 0.22 | | $ | | 0.32 | | $ | | 0.48 | | $ | | 0.88 |
| DILUTED INCOME PER COMMON SHARE: | | | | | | | | | | | | | | | | |
| Income from continuing operations | | $ | | 0.21 | | $ | | 0.32 | | $ | | 0.47 | | $ | | 0.87 |
| Loss on discontinued operation | | | | 0 | | | | 0 | | | | 0 | | | | 0 |
| Net income | | $ | | 0.21 | | $ | | 0.32 | | $ | | 0.47 | | $ | | 0.87 |
| WEIGHTED AVERAGE SHARES OUTSTANDING: | | | | | | | | | | | | | | | | |
| Basic | | | | 27,092 | | | | 27,106 | | | | 26,948 | | | | 28,835 |
| Diluted | | | | 27,335 | | | | 27,505 | | | | 27,272 | | | | 29,205 |
| Dividends declared per common share | | $ | | 0.18 | | $ | | 0.18 | | $ | | 0.53 | | $ | | 0.53 |
| NUTRISYSTEM, INC. AND SUBSIDIARIES | | |
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| CONSOLIDATED BALANCE SHEETS | | |
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| (Unaudited, in thousands, except share and per share amounts) | | |
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| | | September 30, | | December 31, |
| | | | | 2011 | | 2010 |
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| ASSETS | | | | | | |
| CURRENT ASSETS: | | | | | | |
| Cash and cash equivalents | | $ | | 72,215 | | $ 20,376 |
| Marketable securities | | | | 0 | | 20,843 |
| Receivables | | | | 6,390 | | 9,256 |
| Inventories, net | | | | 25,104 | | 28,747 |
| Prepaid income taxes | | | | 0 | | 5,513 |
| Deferred income taxes | | | | 1,912 | | 1,854 |
| Supplier advances | | | | 593 | | 15,240 |
| Other current assets | | | | 5,002 | | 11,855 |
| Total current assets | | | | 111,216 | | 113,684 |
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| FIXED ASSETS, net | | | | 30,703 | | 34,324 |
| OTHER ASSETS | | | | 1,776 | | 1,945 |
| | | $ | | 143,695 | | $ 149,953 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | |
| CURRENT LIABILITIES: | | | | | | |
| Accounts payable | | $ | | 19,031 | | $ 26,435 |
| Accrued payroll and related benefits | | | | 2,027 | | 4,874 |
| Income taxes payable | | | | 1,316 | | 0 |
| Deferred revenue | | | | 1,174 | | 4,488 |
| Other accrued expenses and current liabilities | | | | 5,151 | | 3,867 |
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| Total current liabilities | | | | 28,699 | | 39,664 |
| BORROWINGS UNDER CREDIT FACILITY | | | | 30,000 | | 30,000 |
| NON-CURRENT LIABILITIES | | | | 5,945 | | 5,313 |
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| Total liabilities | | | | 64,644 | | 74,977 |
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| 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 – 28,015,750 at September 30, 2011 and | | | | | | |
| 28,099,812 at December 31, 2010) | | | | 28 | | 28 |
| Additional paid-in capital | | | | 8,138 | | 3,086 |
| Retained earnings | | | | 70,997 | | 71,990 |
| Accumulated other comprehensive loss | | | | (112) | | (128) |
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| Total stockholders’ equity | | | | 79,051 | | 74,976 |
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| | | $ 143,695 | | $ 149,953 |
| NUTRISYSTEM, INC. AND SUBSIDIARIES |
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| CONSOLIDATED STATEMENTS OF CASH FLOWS |
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| (Unaudited, in thousands) |
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| | | Nine Months Ended September 30, |
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| | | 2011 | | 2010 |
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| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | |
| Net income | | $ 13,411 | | $ 26,547 |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
| Loss on discontinued operation | | 0 | | 253 |
| Depreciation and amortization | | 9,186 | | 9,064 |
| (Gain) loss on disposal of fixed assets | | (17) | | 68 |
| Share–based compensation expense | | 7,502 | | 8,129 |
| Deferred income tax (benefit) expense | | (364) | | 630 |
| Loss on sales of marketable securities | | 26 | | 0 |
| Changes in operating assets and liabilities: | | | | |
| Receivables | | 2,866 | | 3,892 |
| Inventories, net | | 3,643 | | 35,281 |
| Supplier advances, net | | 14,647 | | 0 |
| Other assets | | 6,971 | | 3,882 |
| Accounts payable | | (6,496) | | (6,243) |
| Accrued payroll and related benefits | | (2,847) | | 3,974 |
| Deferred revenue | | (3,314) | | (2,446) |
| Income taxes | | 7,296 | | (405) |
| Other accrued expenses and liabilities | | 1,966 | | 1,867 |
| Net cash provided by operating activities of continuing operations | | 54,476 | | 84,493 |
| Net cash used in operating activities of discontinued operation | | 0 | | (145) |
| Net cash provided by operating activities | | 54,476 | | 84,348 |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | |
| Purchases of marketable securities | | (54) | | (422) |
| Sales of marketable securities | | 20,897 | | 10,000 |
| Capital additions | | (6,570) | | (16,822) |
| Proceeds from the sale of fixed assets | | 58 | | 0 |
| Net cash provided by (used in) investing activities of continuing operations | | 14,331 | | (7,244) |
| Net cash provided by investing activities of discontinued operation | | 0 | | 112 |
| Net cash provided by (used in) investing activities | | 14,331 | | (7,132) |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | |
| Borrowings under credit facility | | 0 | | 20,000 |
| Exercise of stock options | | 128 | | 119 |
| Taxes related to equity compensation awards, net | | (2,692) | | (2,346) |
| Payment of dividends | | (14,404) | | (15,757) |
| Repurchase and retirement of common stock | | 0 | | (74,997) |
| Net cash used in financing activities | | (16,968) | | (72,981) |
| Effect of exchange rate changes on cash and cash equivalents | | | | 0 | | | | 9 |
| NET INCREASE IN CASH AND CASH EQUIVALENTS | | | | 51,839 | | | | 4,244 |
| CASH AND CASH EQUIVALENTS, beginning of period | | | | 20,376 | | | | 32,364 |
| CASH AND CASH EQUIVALENTS, end of period | | $ | | 72,215 | | $ | | 36,608 |
| NUTRISYSTEM, INC. AND SUBSIDIARIES |
| ADJUSTED EBITDA RECONCILIATION TO GAAP RESULTS |
| (in thousands) |
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| | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | 2011 | | 2010 | | 2011 | | 2010 |
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| Adjusted EBITDA | | $ 14,680 | | $ 19,781 | | $ 38,091 | | $ 58,865 |
| Non-cash employee compensation | | | | | | | | |
| expense | | (2,075) | | (2,709) | | (7,377) | | (8,005) |
| Other income (expense) | | 0 | | 3 | | 0 | | (32) |
| Interest (expense) income, net | | (52) | | (31) | | (408) | | 73 |
| Income taxes | | (3,524) | | (4,690) | | (7,709) | | (15,037) |
| Depreciation and amortization | | (2,961) | | (3,133) | | (9,186) | | (9,064) |
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| Income from continuing operations | | $ 6,068 | | $ 9,221 | | $ 13,411 | | $ 26,800 |
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Adjusted EBITDA is defined as income from continuing operations excluding non-cash employee compensation, other income (expense), interest, income taxes and depreciation and amortization. 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.
