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TheStreet Open House

Nutrisystem Reports Third Quarter 2012 Results

Stocks in this article: NTRI

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. (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. 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   (15,731 )   (16,968 )
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,080 51,839
CASH AND CASH EQUIVALENTS, beginning of period   47,594     20,376  
CASH AND CASH EQUIVALENTS, end of period $ 48,674   $ 72,215  
 

NUTRISYSTEM, INC. AND SUBSIDIARIES

ADJUSTED EBITDA RECONCILIATION TO GAAP RESULTS

(in thousands)

   
Three Months Ended September 30, Nine Months Ended September 30,
  2012  

 

 

2011

    2012  

 

 

2011

 
 
Adjusted EBITDA $ 8,851 $ 14,680 $ 24,558 $ 38,091
Non-cash employee compensation
expense (1,500 ) (2,075 ) (4,679 ) (7,377 )
Other expense 0 0 (78 ) 0
Interest expense, net (244 ) (52 ) (754 ) (408 )
Income tax benefit (expense) 911 (3,524 ) 1,045 (7,709 )
Depreciation and amortization (2,570 ) (2,961 ) (8,112 ) (9,186 )
Severance and related charges (758 ) 0 (7,656 ) 0
Impairment of supplier advance   (2,100 )   0     (2,100 )   0  
Net income $ 2,590   $ 6,068   $ 2,224   $ 13,411  
 

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. 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.

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