Schiff Nutrition International, Inc. Announces Fiscal 2012 Fourth Quarter And Year-End Results

Schiff Nutrition International, Inc., (NYSE: SHF), announced results for the three- and twelve-month periods ended May 31, 2012.

“We are pleased with our fourth quarter performance as it reflects strong execution against our growth strategy,” stated Tarang Amin, president and chief executive officer. “Net sales grew 30%, driven by a 59% increase in our branded business. Our gross profit margin grew 1,100 basis points to 49.5%, reflecting our progress building premium brands, leading innovation, expanding the channel and geographic footprint of the company, pursuing acquisitions, and driving world-class operations. Our probiotics and Airborne ® acquisitions added to the strong contribution of our core brands MegaRed ® and Move Free ®."

Fiscal 2012 Fourth Quarter Results

For the fiscal 2012 fourth quarter ended May 31, 2012, net sales were $67.4 million, compared to $51.9 million for the same period in fiscal 2011. The 30% increase reflects growth in key brands, new product introductions and contribution from acquisitions. Branded sales of $59.9 million were partially offset by an expected decline in the private label business. The higher mix of branded sales resulted in gross profit margin of 49.5%, compared to 38.2% a year ago. Total operating expenses increased to $27.1 million from $14.9 million a year ago reflecting the anticipated increase in selling and marketing expenses and $3.4 million in acquisition related costs, $2.0 million of which was non-deductible for income tax purposes. Net income for the fiscal 2012 fourth quarter was $2.0 million, compared to net income of $3.1 million for the same period in fiscal 2011. Earnings per diluted share were $0.07 for the fiscal 2012 fourth quarter, compared to $0.10 for the same period in fiscal 2011. Adjusted EBITDA, which is defined as income from operations before depreciation, amortization, stock-based compensation and completed acquisition related costs, was $12.4 million for the fiscal 2012 fourth quarter, compared to $7.5 million for the same period in fiscal 2011.

Fiscal 2012 Full Year Results

For the fiscal year 2012, net sales were $258.9 million, compared to $213.6 million for fiscal 2011. Selling and marketing expenses were $60.3 million, or 23% of revenue, compared to $34.7 million, or 16% of revenue. Gross margin for the fiscal year 2012 was 46.1%, compared to 38.0% for fiscal 2011. Net income for the fiscal year 2012 was $13.7 million, compared to net income of $12.6 million for fiscal 2011. Earnings per diluted share were $0.47 for the fiscal year 2012, compared to $0.43 for fiscal 2011. Adjusted EBITDA was $38.7 million for the fiscal year 2012, compared to $28.9 million for fiscal 2011.

“We are positioning Schiff as a leader in the nutritional supplements category. Our fiscal year 2012 investments in brand building and innovation drove strong sales and gross margin growth. For fiscal 2013, we are committed to building upon this momentum,” concluded Amin.

Company Outlook

Fiscal 2013 net sales are expected to grow 40.0% to 43.0% as compared to fiscal year 2012 net sales of $258.9 million. Expected sales growth includes contributions from new products, brand building and Airborne, which was acquired on March 30 th. As previously announced, Airborne had net sales of approximately $72 million for the twelve months ended February 29, 2012. Gross profit percentage is expected to be in the range of 48.0% to 50.0%. Selling and marketing expenses, as a percentage of net sales, are estimated to be in the range of 25.0% to 27.0%. Other operating expenses are estimated at approximately $35.0 million to $37.0 million. The company anticipates its operating margin will be in the range of 12.5% to 14.0%.

Conference Call Information

Schiff will hold a conference call today, July 31 st, at 11:00 a.m. ET. The event will be webcast at http://www.schiffnutrition.com/press_conference_calls.asp. The webcast replay will be available for 90 days. If you do not have Internet access, the dial-in number will be 800-265-0241 for domestic callers and 617-847-8704 for international callers. The participant access code is 36087437. A replay of the call will be available by dialing 888-286-8010 for domestic callers and 617-801-6888 for international callers, and entering access code 27609818. The telephone replay will be available through August 7, 2012.

Reconciliation of Adjusted EBITDA to Income from Operations

This press release refers to non-GAAP financial measures. The company defines "Adjusted EBITDA" as income from operations before depreciation, amortization, stock-based compensation and completed acquisition related costs. This non-GAAP financial measure is not prepared in accordance with generally accepted accounting principles (GAAP) and may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation of the non-GAAP measure to the comparable GAAP measure is included in the attached financial tables. Management believes the presentation of Adjusted EBITDA is relevant and useful because Adjusted EBITDA is a measurement industry analysts utilize when evaluating the company’s operating performance. Management also believes Adjusted EBITDA enhances an investor's understanding of the company’s results of operations because it measures the company’s operating performance exclusive of completed acquisition related costs and non-cash charges for depreciation, amortization and stock-based compensation. Management also provides this non-GAAP measurement as a way to help investors better understand the company’s core operating performance, enhance comparisons of the company’s core operating performance from period to period and to allow better comparisons of the company’s operating performance to that of its competitors.

About Schiff Nutrition

Schiff Nutrition International, Inc. is a leading nutritional supplement company offering vitamins, nutritional supplements and nutrition bars in the United States and abroad. Schiff’s portfolio of well-known brands includes MegaRed®, Move Free®, Airborne®, Tiger's Milk®, Sustenex®, Digestive Advantage® and Schiff® Vitamins. Focused on quality for 75 years, Schiff’s headquarters and award-winning manufacturing and distribution facility are based in Salt Lake City, Utah. To learn more about Schiff, please visit the web site www.schiffnutrition.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are based on management’s beliefs and assumptions, current expectations, estimates, and projections. These statements, including those under the heading “Company Outlook,” are subject to known and unknown risks and uncertainties, certain of which are beyond the company’s ability to control or predict, and therefore, actual results may differ materially. For example, statements concerning Schiff’s financial condition, possible or expected results of operations, commercialization of new products, growth opportunities and plans of management are all forward-looking statements. Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date hereof. Schiff disclaims any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. You are cautioned not to place undue reliance on these forward-looking statements.

Important factors that may cause actual results of Schiff to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to: dependence on sales of Move Free, MegaRed and Airborne products, dependence on individual customers, adverse publicity or consumer perception regarding our nutritional supplements and/or their ingredients, similar products distributed by other companies or the nutritional supplement industry generally, the impact of competitive products and pricing pressure (including expansion of private label products), the inability to successfully bid on new and existing private label business, the impact of raw material pricing, availability and quality (particularly relating to joint care products and ingredients from third-party suppliers outside the United States, including China), claims that our products infringe the intellectual property rights of others, the inability to enforce or protect our intellectual property rights and proprietary techniques against infringement, the inability to successfully launch and maintain sales outside of the United States while maintaining the integrity of the products sold and complying with local regulations, the inability to appropriately respond to changing consumer preferences and demand for new products, the inability to gain or maintain market distribution for new products or product enhancements, litigation and government or administrative regulatory action in the United States and internationally, including FDA enforcement and product liability claims, the inability or increased cost to obtain sufficient levels of product liability and general insurance, the inability to comply with existing or new regulations, both in the United States and abroad, and adverse actions regarding product formulation, claims or advertising, product recalls or a significant amount of product returns, dependence on a single manufacturing facility and potential disruptions of our manufacturing operations, the inability to find strategic transaction opportunities or the inability to successfully consummate or integrate a strategic transaction, the inability to maintain or attract key personnel, interruptions to our information technology systems, control by our principal stockholders, and other factors indicated from time to time in the company’s SEC reports, copies of which are available upon request from the company’s investor relations department or may be obtained at the SEC's web site ( www.sec.gov). These risks and uncertainties should be carefully considered before making an investment decision with respect to shares of our common stock.

– Tables to Follow –

SCHIFF NUTRITION INTERNATIONAL, INC.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)
 
  Three Months Ended   Year Ended
May 31, May 31,
2012   2011 2012   2011
 
Net sales $ 67,432 $ 51,872 $ 258,911 $ 213,648
Cost of goods sold   34,030   32,078   139,553   132,472
 
Gross profit   33,402   19,794   119,358   81,176
Operating expenses:
Selling and marketing 15,286 8,427 60,330 34,666
Other operating expenses   11,768   6,449   33,566   26,317
Total operating expenses   27,054   14,876   93,896   60,983
 
Income from operations 6,348 4,918 25,462 20,193
Other expense, net   (1,967 )   (104 )   (2,661 )   (303 )
 
Income before income taxes 4,381 4,814 22,801 19,890
Income tax expense   2,423   1,742   9,074   7,248
 
Net income $ 1,958 $ 3,072 $ 13,727 $ 12,642
 
Weighted average common shares outstanding - diluted   29,568   29,473   29,447   29,252
 
Net income per share - diluted $ 0.07 $ 0.10 $ 0.47 $

0.43
 

SCHIFF NUTRITION INTERNATIONAL, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands)

(unaudited)
 
  May 31,
2012     2011
 
Cash and cash equivalents $ 8,607 $ 39,547
Available-for-sale securities 5,162 5,938
Receivables, net 29,778 27,339
Inventories 41,408 34,923
Other current assets   5,658   4,812
 
Total current assets 90,613 112,559
 
Property and equipment, net 13,130 14,219
 
Intangible assets, net 225,190 4,346
 
Other assets, net   3,333   1,442
 
Total assets $ 332,266 $ 132,566
 

Current liabilities (1)
$ 38,588 $ 32,938
 
Long-term debt, net (2) 132,362

 
Other long-term liabilities (3) 48,137 3,168
 
Stockholders’ equity   113,179   96,460
 
Total liabilities & stockholders’ equity $ 332,266 $ 132,566
 

(1) Includes current portion of long-term debt totaling $3,400 at May 31, 2012.

(2) Amount is net of unamortized debt issue costs of $6,238 at May 31, 2012.

(3) Includes deferred income taxes of $45,352 and $1,383, respectively, at May 31, 2012 and 2011.
   

SCHIFF NUTRITION INTERNATIONAL, INC.

ADJUSTED EBITDA RECONCILIATION

(in thousands)

(unaudited)
 
Three Months Ended May 31, Year Ended May 31,
2012     2011 2012     2011
 
Income from operations $ 6,348 $ 4,918 $ 25,462 $ 20,193
 
Depreciation 1,161 971 4,034 3,563
 
Amortization 643 1,888
 
Stock based compensation, non-cash 834 367 2,911 3,971
 
Completed acquisition related costs   3,397   1,216   4,395   1,216
 
Adjusted EBITDA $ 12,383 $ 7,472 $ 38,690 $ 28,943

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