FitLife Brands Announces Fiscal Second Quarter 2015 Results

OMAHA, Neb.--()--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) and Metis Nutrition™ (www.metisnutrition.com) today announced results for its fiscal second quarter ended June 30, 2015.

“During the second quarter we achieved many significant strategic milestones that lay the foundation for accelerated profitable growth in the coming years”

Highlights for the quarter-ended June 30, 2015 include:

  • Non-GAAP net income excluding merger and non-cash issuance costs was $0.05 versus $0.08 during the prior year
  • Launched Metis Nutrition brand with first shipments to 2,400 GNC corporate and 400 GNC franchise stores
  • Proposed Merger with iSatori, Inc. announced with expected close prior to the end of the third quarter of 2015
  • Continued with aggressive new product development schedule introducing more than 20 new products at the GNC Annual Franchise Convention
  • Non-GAAP net margin for the quarter and six-months was 8.0%, and 9.0%, within and above the Company’s targeted range of 6.0% - 8.0%

"During the second quarter we achieved many significant strategic milestones that lay the foundation for accelerated profitable growth in the coming years,” said John S. Wilson Chief Executive Officer of FitLife Brands. “We continued to build on our track record of innovation and new product development, introducing our new Metis Brand and over 20 new products, all of which were met with very positive feedback from our customers. We also announced plans to merge with iSatori, Inc., a leading nutritional supplement provider, in what we believe is a great strategic fit for both companies. We expect that this merger and new product initiatives will create meaningful near- and long-term incremental value for shareholders.”

During the second quarter ended June 30, 2015, revenue was $5.0 million compared to $6.0 million during the same period in 2014. Revenue for the first six months of 2015 was $8.9 million, as compared to $12.3 million for the first six months of last year. The year-over-year comparison in sales is made difficult due to the previously disclosed changes in distribution methodology. Company expects to anniversary difficult comparisons due to this change during the fourth quarter of 2015 when comparisons are expected to more accurately reflect retail sell through, or consumer demand. In addition, the company maintained an elevated backlog level of $1.2 million as of July 1, primarily due to previously disclosed supply chain disruptions.

Net income for the second quarter of 2015 was $243,537, or $0.03 per diluted share, versus $725,215, or $0.08 per diluted share, for the same quarter last year. Net income for the first six months of the year was $201,274, or $0.02 per diluted share, compared to $1,618,561, or $0.19 per diluted share, for the six months ended June 30, 2014. The decrease was due primarily to decreased sales volume and expenses incurred from the proposed merger with iSatori, Inc. Excluding the merger costs and non-cash issuance costs, non-GAAP net income would have been $402,251, and $794,480, or $0.05 and $0.09 per diluted share for the second quarter and six months, respectively.

Gross margin for the quarter was 38.5 percent of sales, an almost 100 basis point improvement from the comparable period last year. Because gross margin can be impacted by product mix, some variability can be expected from time to time. That said, our continued strong and consistent gross margins in light of the discounted pricing model associated with the shift to GNC’s distribution platform further validates the strength of the business.

Selling and marketing expense for the three and six months ended June 30, 2015 increased to $910,953 and $1,514,757, as compared to $588,512 and $1,156,878 for the three and six months ended June 30, 2014, respectively. The increase in selling and marketing expense for the three- and six-month period ended June 30, 2015 is primarily attributable to increased product rebate volume associated with the transition to GNC’s centralized distribution platform versus the comparable periods during 2014, as well as expenses incurred in connection with the launch of the Metis Nutrition line of products and attending GNC’s franchisee convention.

General and administrative expense for the three months ended June 30, 2015 decreased to $682,891 as compared to $786,799 for the three months ended June 30, 2014. G&A expense for the six months ended June 30, 2015 increased to $1,615,137, as compared to $1,592,026 for the six months ended June 30, 2014. Without the expenses incurred in connection with the proposed acquisition of iSatori, which totaled approximately $223,000, G&A expense for the second quarter would have been $460,177 and $1,360,342 for the six months ended June 30, 2015, a 58 percent expense reduction from the 2014 second quarter. Additionally, the first quarter of this year included substantially higher non-cash compensation expense that was related to the partial vesting of a previously issued stock grant, as well as an option grant for key employees.

The Company ended the second quarter with $4.3 million in cash, which is unchanged compared to beginning of the year. During that same period, the Company repurchased $324,688 of its own stock and paid down $251,312 in principal on its outstanding debt.

“We remain committed to our strategy of building a portfolio of authentic and innovative, best-in-class nutritional supplement brands that have a strong value proposition for consumers as well as our distribution partners. This strategy has led to continued strong sell-through at retail, and with the incremental contribution from expanded distribution, we expect significant revenue and earnings growth for FitLife in the coming quarters,” concluded Mr. Wilson.

Following the issuance of this release, the Company will provide recorded comments which can be accessed on the FitLife Brands' website under the "Investor Relations" section.

About FitLife Brands
FitLife Brands is a marketer and manufacturer of innovative and proprietary nutritional supplements for health conscious consumers. FitLife markets over 60 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: June 30, December 31,
2015 2014
 
CURRENT ASSETS
Cash $ 4,335,640 $ 4,353,699
Accounts receivable, net 2,973,249 1,685,623
Inventory 1,842,068 2,284,922
Deferred tax asset 689,000 689,000
Prepaid expenses and other current assets   141,981     47,202  
Total current assets 9,981,937 9,060,446
 
PROPERTY AND EQUIPMENT, net 4,530 3,107
 
Intangible assets, net 957,967 1,037,369
Deposits   3,048     3,048  
TOTAL ASSETS $ 10,947,483   $ 10,103,970  
 
LIABILITIES AND STOCKHOLDERS' EQUITY:
 
CURRENT LIABILITIES:
Accounts payable $ 1,582,614 $ 813,600
Accrued expenses and other liabilities 309,550 152,736
Income tax payable (6,000 ) 40,000
Line of Credit 437,089 437,089
Current portion of term loan agreement   516,227     507,031  
Total current liabilities 2,839,480 1,950,456
 
LONG-TERM DEBT 1,179,292 1,439,799
   
TOTAL LIABILITIES 4,018,772 3,390,255
 
CONTINGENCIES AND COMMITMENTS - -
 
STOCKHOLDERS' EQUITY:

Common stock, $.01 par value, 150,000,000 shares authorized; 8,043,525 and 8,198,516 issued and outstanding as of June 30, 2015 and December 31, 2014, respectively

80,435 81,985
Subscribed common stock 58 38
Additional paid-in capital 26,295,640 26,280,388
Accumulated deficit   (19,447,423 )   (19,648,697 )
Total stockholders' equity $ 6,928,711   $ 6,713,714  
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,947,483   $ 10,103,970  
 
The accompanying notes are an integral part of these condensed consolidated financial statements
 
 

FITLIFE BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014

    (Unaudited)     (Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
2015     2014 2015     2014
 
Revenue $ 5,027,003 $ 5,986,686 $ 8,869,425 $ 12,319,763  
Total 5,027,003 5,986,686 8,869,425 12,319,763
 
Cost of Goods Sold   3,090,595   3,738,337   5,357,305   7,714,736  
Gross Profit 1,936,408 2,248,350 3,512,120 4,605,027
 
OPERATING EXPENSES:
General and administrative 682,891 786,799 1,615,137 1,592,026
Selling and marketing 910,953 588,512 1,514,757 1,156,878
Depreciation and amortization   55,388   56,448   110,665   112,897  
Total operating expenses   1,649,233   1,431,759   3,240,559   2,861,801  
OPERATING INCOME   287,175   816,591   271,561   1,743,226  
 
OTHER (INCOME) AND EXPENSES
Interest expense 19,880 24,375 40,528 49,393
Other income   -   -   -   (87,500 )
Total other (income) expense 19,880 24,375 40,528 (38,107 )
 
INCOME TAXES (BENEFIT) 23,758 67,000 29,758 162,771
       
NET INCOME $ 243,537 $ 725,215 $ 201,274 $ 1,618,561  
 
NET INCOME PER SHARE:
Basic $ 0.03 $ 0.09 $ 0.02 $ 0.20  
 
Diluted $ 0.03 $ 0.08 $ 0.02 $ 0.19  
 
Basic   8,092,281   8,190,368   8,138,204   8,164,193  
 
Diluted   8,790,132   8,613,227   8,732,810   8,570,527  
 
The accompanying notes are an integral part of these condensed consolidated financial statements
 
 
FITLIFE BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014
       
(Unaudited)
2015 2014
 
Net income $ 201,274 $ 1,618,561

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 110,665 112,897
Capitalization of select merger costs (30,472 )
Common stock and options issued for services 338,411 129,014
Gain on write-up of investment - (137,500 )
Changes in operating assets and liabilities:
Accounts receivable (1,287,626 ) (1,242,527 )
Inventory 442,854 (422,569 )
Prepaid expenses (94,778 ) 42,874
Deposits - -
Accounts payable 769,015 770,960
Accrued liabilities 156,814 (99,019 )
Income tax payable   (46,000 )   39,000  
Net cash provided by / (used in) operating activities   560,156     811,692  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (2,214 ) -
Long-term investment - 50,000
Repurchases of common stock   (324,688 )   -  
Net cash provided by / (used in) investing activities   (326,902 )   50,000  
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of note payable   (251,312 )   (242,397 )
Net cash provided by / (used in) financing activities   (251,312 )   (242,397 )
 
INCREASE (DECREASE) IN CASH (18,058 ) 619,295
CASH, BEGINNING OF PERIOD   4,353,699     3,305,179  
CASH, END OF PERIOD $ 4,335,640   $ 3,924,474  
 
Supplemental disclosure operating activities
 
Cash paid for interest $ 40,528   $ 49,393  
 
The accompanying notes are an integral part of these condensed consolidated financial statements
 
       
FitLife Brands, Inc.
Non-GAAP Net Income and EPS Reconciliation
      Three Months Ended June 30, 2015     Six Months Ended June 30, 2015
 
Revenue $ 5,027,003 $ 8,869,425
 
Net Income $ 243,537 $ 201,274
 
Weighted Average Shares, Diluted $ 8,790,132 $ 8,732,810
EPS, Diluted $ 0.03 $ 0.02
 
Non-GAAP Net Income Reconciliation Adjustments
Merger Costs $ 222,714 $ 254,795
Non-cash Issuance Costs $ (64,000 ) $ 338,411
Non-GAAP Net Income $ 402,251 $ 794,480
 
Weighted Average Shares, Diluted 8,790,132 8,732,810
Non-GAAP EPS, Diluted $ 0.05 $ 0.09
Non-GAAP Net Margin 8.0 % 9.0 %
 

Contacts

Three Part Advisors, LLC
Jeff Elliott, 972-423-7070
or
Phillip Kupper, 817-778-8339

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