FitLife Brands Announces Fiscal 2016 Third Quarter, Nine Months Results

FitLife Brands, Inc. ("FitLife") (OTCBB: FTLF), an international provider of innovative and proprietary nutritional supplements for health conscious consumers marketed under the brand names NDS Nutrition Products™ ("NDS") ( www.ndsnutrition.com), PMD® ( www.pmdsports.com), SirenLabs® ( www.sirenlabs.com), CoreActive® ( www.coreactivenutrition.com), Metis Nutrition™ ( www.metisnutrition.com), iSatori™ ( www.isatori.com), Energize ( www.tryenergize.com), and BioGenetic Laboratories, ( www.biogeneticlabs.com), today announced results for its fiscal third quarter ended September 30, 2016.

Highlights for the third quarter and nine months ended September 30, 2016 include:
  • Total revenue for the third quarter was $5.3 million
  • Net loss for the third quarter was $0.4 million or $0.03 per share.
  • For the nine months ended September 30, total revenue was $21.6 million versus $15.1 million as reported or $14.1 million on an adjusted basis for the first nine months of 2015.
  • Core FitLife revenue for the nine months was $15.5 million, an increase of 10% over the adjusted $14.1 million in the same period a year ago.
  • iSatori contributed $6.2 million in revenue for the nine-month period.
  • Net income for the nine months ended September 30 was $1.5 million or $0.13 per share compared to $0.6 million or $0.07 per share last year.

For the third quarter ended September 30, 2016, total revenue was $5.3 million compared to $6.3 million reported in the third quarter of 2015. As previously announced, 3Q15 revenue included $0.6 million in vendor funded discounts (VFD). Using the same accounting treatment as the third quarter of 2016, revenue in the same period a year ago would have been $5.7 million. Core FitLife revenue during the third quarter was $4.2 million and iSatori contributed $1.1 million. The decline in core FitLife revenue from $5.7 million adjusted revenue last year was primarily attributable to the movement of GNC's franchise convention from the third to the end of the second quarter. As a result, the Company recognized $1.3 million in convention-related revenue in the second quarter 2016, whereas the company did not record any convention-related revenue until the third quarter of 2015.

Gross margin was 37.2% for the quarter compared to 41.7% on an as reported basis in the same period a year ago. However, when adjusting for VFD, gross margin was 35.8%. Operating expenses increased to 43.9% of revenue in the third quarter from 28.1% on an adjusted basis. The increase was due to lower sales levels and the inclusion of iSatori. On an absolute dollar basis, operating expenses were in line or lower than each of the first two quarters of 2016.

Net loss for the third quarter was $0.4 million or $0.03 per share versus net income of $0.4 million or $0.04 per share last year. The core FitLife business generated net income of $0.2 million or $0.01 per diluted share, but was offset by iSatori's loss of $0.6 million.

For the nine months ended September 30, total revenue was $21.6 million versus $15.1 million as reported or $14.1 million on an adjusted basis for the first nine months of 2015. Core FitLife revenue for the nine months was $15.5 million, an increase of 10% over the adjusted $14.1 million in the same period a year ago. The organic growth in our core FitLife brands is consistent with unit movement at retail growth, which remains strong and a key metric for our business. iSatori contributed $6.2 million in revenue for the nine-month period.

Net income for the nine months ended September 30 was $1.5 million or $0.13 per share compared to $0.6 million or $0.07 per share last year. The core FitLife business generated $1.6 million which was offset by a small loss at iSatori.

The Company ended the second quarter with $2.0 million in cash, versus $3.1 million at the same time a year ago, and $1.5 million at December 31, 2015. At quarter end, total debt decreased to $3.1 million from $3.4 million at the end of the first quarter.

"We faced some headwinds during the third quarter this year," said John S. Wilson, Chief Executive Officer of FitLife Brands. "The timing GNC's franchise convention created a difficult comparison in this year's third quarter, as a significant portion of convention-related revenue was booked in the second quarter 2016. Additionally, after a profitable first half of the year, we saw declines in the iSatori division during the third quarter. However, the investment merits for the acquisition remain intact, including access to additional distribution channels, and we remain excited about the prospects going forward. Since we completed the acquisition last year, we have been hard at work on our rebranding strategy for iSatori, which will include a complete design and packaging overhaul for the majority of products. We plan to roll out the new iSatori branding during the fourth quarter of this year and we are very excited about the work our team has done and look forward to a successful rollout of the newly branded products. We continue to work hard to improve the operating performance of iSatori and are confident that it will be a positive for revenue growth and will be accretive to our earnings in the future."

Mr. Wilson continued, "We believe there are several catalysts in front of us that will drive the growth of our business. First, GNC's re-franchising strategy has the potential to effectively double our customer base over the next several years and be a significant revenue driver going forward. Second, we will continue to develop new products for our Metis Nutrition line and expand the brand's reach within GNC corporate and franchise stores. Additionally, while iSatori remains a work in progress, we are excited about the new branding initiative and we have many new SKU's to be launched next year, including the first two in the fourth quarter this year."

About FitLife Brands

FitLife Brands is a marketer and manufacturer of innovative and proprietary nutritional supplements for health conscious consumers. FitLife markets over 80 different dietary supplements to promote sports nutrition, improved performance, weight loss and general health primarily through domestic and international GNC® franchise locations. FitLife is headquartered in Omaha, Nebraska. For more information, please visit our new website at www.fitlifebrands.com.

Forward-Looking Statement

Statements in this release that are forward looking involve known and unknown risks and uncertainties, which may cause the Company's actual results in future periods to be materially different from any future performance that may be suggested in this news release. Such factors may include, but are not limited to: the ability to of the Company to continue to grow revenue; and the Company's ability to continue to achieve positive cash flow given the Company's existing and anticipated operating and other costs. Many of these risks and uncertainties are beyond the Company's control. Reference is made to the discussion of risk factors detailed in The Company's filings with the Securities and Exchange Commission including its reports on Form 10-K and 10-Q. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they are made.

Non-GAAP Financial Measures

This press release includes the following financial measures defined as "non-GAAP financial measures" by the Securities and Exchange Commission: non-GAAP net income, non-GAAP earnings per share. These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles. Reconciliations of these non-GAAP financial measures to the nearest comparable GAAP measures will be provided upon the completion of the Company's annual audit.

Non-GAAP net income excludes items such as impairment charges, allowance for doubtful accounts, charges to consolidate and integrate recently acquired businesses, costs of closing corporate facilities, non-cash stock based compensation and other one-time cash and non-cash charges. Non-GAAP EPS excludes items such as non-cash stock based compensation, charges to consolidate and integrate recently acquired businesses, costs for closing corporate facilities, amortization of acquired intangible assets and other one-time cash and non-cash charges. The Company believes the non-GAAP measures provide useful information to both management and investors by excluding certain expenses, gains and losses or net purchases of property and equipment, as the case may be, which may not be indicative of its core operation results and business outlook.

FITLIFE BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
  (Unaudited)  
ASSETS: September 30, December 31,
2016 2015
 
CURRENT ASSETS
Cash $ 1,986,362 $ 1,532,550
Accounts receivable, net 4,054,240 2,684,567
Security deposits 24,956 26,077
Inventory 4,432,975 4,790,301
Note receivable, current portion 6,532 16,517
Prepaid income tax 1,000 152,000
Prepaid expenses and other current assets   189,316     334,483  
Total current assets 10,695,380 9,536,494
 
PROPERTY AND EQUIPMENT, net 187,514 226,804
 
Note receivable, net of current portion 52,695 52,695
Deferred Taxes 689,000 812,879
Intangibles assets, net   6,613,005     6,929,505  
TOTAL ASSETS $ 18,237,595   $ 17,558,378  
 
LIABILITIES AND STOCKHOLDERS' EQUITY:
 
CURRENT LIABILITIES:
Accounts payable $ 2,697,100 $ 3,363,906
Accrued expenses and other liabilities 633,891 1,003,832
Litigation Reserve - 95,775
Income tax payable 13,000 -
Line of credit 2,010,305 1,490,305
Term loan agreement, current portion 539,951 525,589
Notes payable   42,211     54,036  
Total current liabilities 5,936,457 6,533,443
 
LONG-TERM DEBT, net of current portion 507,340 914,138
   
TOTAL LIABILITIES 6,443,797 7,447,581
 
CONTINGENCIES AND COMMITMENTS - -
 
STOCKHOLDERS' EQUITY:

Common stock, $.01 par value, 150,000,000 shares authorized; 10,413,621 and 10,444,357 issued and outstanding as of September 30, 2016 and December 31, 2015, respectively
104,136 104,443
Subscribed common stock 373 97
Treasury stock - (142,228 )
Additional paid-in capital 30,971,453 30,963,122
Accumulated deficit   (19,282,165 )   (20,814,637 )
Total stockholders' equity $ 11,793,798   $ 10,110,797  
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 18,237,595   $ 17,558,378  
 
The accompanying notes are an integral part of these consolidated financial statements
 
FITLIFE BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
       
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
2016 2015 2016 2015
 
Revenue $ 5,340,616   $ 6,270,524 $ 21,615,605   $ 15,139,949
Total 5,340,616 6,270,524 21,615,605 15,139,949
 
Cost of Goods Sold   3,353,224     3,658,541   12,469,081     9,015,846
Gross Profit 1,987,391 2,611,983 9,146,523 6,124,103
 
OPERATING EXPENSES:
General and administrative 1,131,692 854,729 3,854,128 2,469,866
Selling and marketing 1,088,400 1,258,537 3,138,323 2,773,293
Depreciation and amortization   125,751     55,472   376,502     166,137
Total operating expenses   2,345,844     2,168,738   7,368,952     5,409,296
OPERATING INCOME (LOSS)   (358,452 )   443,245   1,777,571     714,807
 
OTHER (INCOME) AND EXPENSES
Interest expense 27,415 18,745 84,016 59,273
Other expense (income)   (150 )   -   (2,917 )   -
Total other (income) expense 27,266 18,745 81,099 59,273
 
INCOME TAXES (BENEFIT) (25,000 ) 41,242 164,000 71,000
       
NET INCOME (LOSS) $ (360,718 ) $ 383,259 $ 1,532,472   $ 584,535
 
NET INCOME (LOSS) PER SHARE:
Basic $ (0.03 ) $ 0.05 $ 0.15   $ 0.07
 
Diluted $ (0.03 ) $ 0.04 $ 0.13   $ 0.07
 
Basic   10,446,954     8,069,900   10,413,703     8,115,436
 
Diluted   10,446,954     8,721,259   11,515,169     8,728,959
 
The accompanying notes are an integral part of these consolidated financial statements
 
FITLIFE BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
   
(Unaudited)
2016 2015
 
Net income $ 1,532,472 $ 584,533

Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 376,502 166,137
Capitalization of select merger costs - (57,507 )
Common stock issued (cancelled) for services 105,501 405,741
Warrants and options issued (cancelled) for services 45,028 -
Gain on write-up of investment - -
Intercompany transfer - -
Changes in operating assets and liabilities:
Accounts receivable (1,369,673 ) (3,153,711 )
Inventory 357,326 614,659
Deferred tax asset 123,879 -
Prepaid income tax 151,000 -
Prepaid expenses 145,167 (184,250 )
Note receivable 9,985 (750,000 )
Deposits - -
Accounts payable (666,806 ) 1,720,559
Accrued liabilities (369,941 ) 172,681
Litigation reserve (95,775 ) -

Income tax payable
  13,000     (37,000 )
Net cash provided by (used in) operating activities   357,665     (518,158 )
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (21,619 ) (4,106 )
Long-term investment 2,027 -
Repurchases of common stock   -     (398,209 )
Net cash provided by (used in) investing activities   (19,592 )   (402,316 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from draw down on credit line 520,000 -
Payments for redemption of preferred stock - -
Repayments of note payable   (404,261 )   (378,561 )
Net cash provided by (used in) financing activities   115,739     (378,561 )
 
INCREASE (DECREASE) IN CASH 453,811 (1,299,035 )
CASH, BEGINNING OF PERIOD   1,532,550     4,353,699  
CASH, END OF PERIOD $ 1,986,362   $ 3,054,663  
 
Supplemental disclosure operating activities
 
Cash paid for interest $ 84,016   $ 18,745  
 
The accompanying notes are an integral part of these consolidated financial statements

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