Use these links to rapidly review the document
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES DecemberMarch 31, 20152016
(435) 655-6106(Registrant's telephone number, including area code)ýx NO oýx NO o ýx ýxJanuaryApril 26, 2016, the registrant had 9,418,4199,339,532 shares of common stock outstanding.
ASSETS Current assets: Cash Accounts receivable, net Inventories Prepaid expenses and other current assets Deferred income taxes Total current assets Property, plant and equipment, net Goodwill Intangible assets, net Deferred income taxes Other non-current assets Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable Accrued expenses Total current liabilities Long-term debt Other non-current liabilities Total liabilities Stockholders' equity: Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive income Treasury stock Total stockholders' equity Total liabilities and stockholders' equity Net sales Cost of sales Gross profit Operating expenses Selling, general and administrative Amortization of intangible assets Income from operations Interest and other expense, net Income before provision for income taxes Provision for income taxes Net income Other comprehensive loss: Foreign currency translation adjustment, net of tax Comprehensive income Net income per common share Basic Diluted Weighted average common shares outstanding Basic Dilutive effect of stock options Diluted Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Amortization of deferred financing fees Losses on disposals of property, plant and equipment Deferred income taxes Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable, net Inventories Prepaid expenses and other current assets Other non-current assets Accounts payable Accrued expenses Other non-current liabilities Net cash provided by operating activities Cash flows from investing activities: Purchases of property, plant and equipment Acquisitions of businesses Net cash used in investing activities Cash flows from financing activities: Proceeds from debt Payments on debt Payments of deferred financing fees Proceeds from issuances of common stock Purchases of common stock for treasury Net cash provided by (used in) financing activities Effect of exchange rate changes on cash Net increase (decrease) in cash Cash at beginning of period Cash at end of period Accounts receivable Less allowances Raw materials Work-in-process Finished goods Aggregate assets acquired: Current assets Property, plant and equipment Goodwill Intangible assets Net sales Net income This information has not been adjusted to reflect any changes in the operations of the business subsequent to acquisition. Changes in the operations of the acquired business may include, but are not limited to, discontinuation of certain customers and/or products, application of the Company's pricing and credit policies, integration of systems and personnel, changes in manufacturing processes, relocation of facilities, potential cost synergies and changes in marketing and sales programs. Due to these changes, future results could be materially different than the pro forma information provided. Balance as of October 1, 2015 Goodwill attributable to fiscal 2016 acquisition Balance as of December 31, 2015 Intangible assets subject to amortization: Trademarks/tradenames/licenses Customer relationships/non-compete agreements Developed software and technology Intangible assets not subject to amortization: Trademarks/tradenames/licenses Estimated future amortization expense related to the 2016(1) 2017 2018 2019 2020 Thereafter Long-term debt—revolving credit facility the lenders and compliance with certain covenants and conditions. The lenders under the Credit Agreement continue to be Rabobank International and Wells Fargo. To date, the Company has not experienced any difficulties in accessing the available funds under the Credit Agreement. Deferred financing fees of $420 related to the Credit Agreement are being amortized over the term of the Credit Agreement. 2015, the Company received proceeds of $9 related to the exercise of stock options. During this same period, the Company recorded a tax benefit of $1and optionees realized an aggregate pre-tax gain of $3 from these stock option exercises. On January 28, 2013, stockholders approved the Nutraceutical International Corporation 2013 Long-Term Equity Incentive Plan (the "2013 Plan") and the reservation of 800,000 shares of the Company's common stock for issuance under the 2013 Plan. Equity awards available under the 2013 Plan include stock options, stock appreciation rights and stock awards. In conjunction with the Company's fiscal 2015 and fiscal 2014 incentive compensation (bonus) payments, 22,664 and 24,827 shares of the Company's common stock were issued, respectively. These non-cash stock awards were granted on December 11, 2015 and December 11, 2014 at an aggregate fair value of $556 and $504, respectively, with fair value being determined by the closing price of the Company's common stock on the grant date. These stock awards were registered, unrestricted and fully vested on the grant date. As of United States Foreign countries Branded nutritional supplements and other natural products Other(1) adjustments for slow-moving, obsolete and/or damaged inventory may be required, which could have a material impact on the consolidated financial statements. presented, as well as specific known claims, if any. No other significant deductions from revenue must be estimated at the point in time that revenue is recognized. Net sales Cost of sales Gross profit Selling, general and administrative Amortization of intangible assets Income from operations Interest and other expense, net Income before provision for income taxes Provision for income taxes Net income Adjusted EBITDA(1) 2015. This increase in gross profit was primarily related to the increase in net sales and, to a lesser extent, a decrease in certain manufacturing overhead costs. Net income Provision for income taxes Interest and other expense, net(1) Depreciation and amortization Adjusted EBITDA inventories. During the and Aubrey Organics, Inc. Revolving credit facility Interest on revolving credit facility(a) Operating leases Total Important factors that may cause our results to differ from these forward-looking statements include, but are not limited to: (i) changes in or new government regulations or increased enforcement of the same including adverse determinations by regulators; (ii) unavailability of desirable acquisitions, inability to complete them or inability to integrate them; (iii) increased costs, including from increased raw material or energy prices; (iv) changes in general worldwide economic or political conditions; (v) adverse publicity or negative consumer perception regarding nutritional supplements; (vi) issues with obtaining raw materials of adequate quality or quantity; (vii) litigation and claims, including product liability, intellectual property and other types; 2015. officers, of the effectiveness of the design and operation of our disclosure controls and procedures as of 2016. 2016. October 1 - 31, 2015 November 1 - 30, 2015 December 1 - 31, 2015Description Page No.Part I.Financial Information Page
Item 1.
Item 2.
Item 3.
Item 4. Part II.
Other Information24
Item 1.Legal Proceedings24
Item 1A.Risk Factors24
Item 1.Item 1A. Item 2.
Item 6. Exhibits25 December 31,
2015 September 30,
2015(1) $ 5,344 $ 4,615 18,365 16,798 61,843 59,440 3,899 4,195 1,176 1,167 90,627 86,215
77,908
77,645 30,925 24,384 24,651 17,605 3,473 4,932 1,632 1,668 $ 229,216 $ 212,449 $ 13,211 $ 14,023 4,452 6,505 17,663 20,528
48,000
31,500 178 174 65,841 52,202 95 95 5,879 6,961 157,859 153,618 (458 ) (379 ) — (48 ) 163,375 160,247 $ 229,216 $ 212,449 (1)The condensed consolidated balance sheet as of September 30, 2015 has been prepared using information from the audited financial statements at that date. March 31,
2016
2015 (1)ASSETS Current assets: Cash $ 4,162 $ 4,615 Accounts receivable, net 19,277 16,798 Inventories 61,491 59,440 Prepaid expenses and other current assets 3,715 4,195 Deferred income taxes 1,169 1,167 Total current assets 89,814 86,215 Property, plant and equipment, net 83,460 77,645 Goodwill 30,925 24,384 Intangible assets, net 24,148 17,605 Deferred income taxes 4,555 4,932 Other non-current assets 1,613 1,668 Total assets $ 234,515 $ 212,449 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 13,915 $ 14,023 Accrued expenses 6,797 6,505 Total current liabilities 20,712 20,528 Long-term debt 47,500 31,500 Other non-current liabilities 184 174 Total liabilities 68,396 52,202 Stockholders' equity: Common stock 94 95 Additional paid-in capital 4,026 6,961 Retained earnings 162,477 153,618 Accumulated other comprehensive income (396 ) (379 ) Treasury stock (82 ) (48 ) Total stockholders' equity 166,119 160,247 Total liabilities and stockholders' equity $ 234,515 $ 212,449 (1) The condensed consolidated balance sheet as of September 30, 2015 has been prepared using information from the audited financial statements at that date. Three months ended
December 31, Three Months Ended
March 31, Six Months Ended
March 31, 2015 2014 2016 2015 2016 2015 $ 55,959 $ 53,044 $ 59,492 $ 55,404 $ 115,451 $ 108,448 27,851 27,189 29,163 28,149 57,014 55,338 28,108 25,855 30,329 27,255 58,437 53,110 20,342 19,554 21,779 19,789 42,121 39,343 981 732 999 728 1,980 1,460 6,785 5,569 7,551 6,738 14,336 12,307 274 297 322 273 596 570 6,511 5,272 7,229 6,465 13,740 11,737 2,270 1,921 2,611 2,369 4,881 4,290 $ 4,241 $ 3,351 $ 4,618 $ 4,096 $ 8,859 $ 7,447
Other comprehensive income (loss): (79 ) (221 ) 62 (109 ) (17 ) (330 ) $ 4,162 $ 3,130 $ 4,680 $ 3,987 $ 8,842 $ 7,117 $ 0.45 $ 0.35 $ 0.49 $ 0.43 $ 0.94 $ 0.77 0.45 0.35 0.49 0.43 0.94 0.77
9,459,470 9,653,113 9,401,972 9,622,051 9,430,878 9,637,753 — 6,894 — 4,874 — 5,884 9,459,470 9,660,007 9,401,972 9,626,925 9,430,878 9,643,637 Three months ended
December 31, Six Months Ended
March 31, 2015 2014 2016 2015 $ 4,241 $ 3,351 $ 8,859 $ 7,447 3,482 3,239 7,020 6,507 31 36 63 67 — 1 4 7 Tax benefit from stock option exercises — (1 ) 1,450 (75 ) 375 (77 ) (365 ) 47 (1,139 ) (1,706 ) (146 ) 907 771 1,137 658 (11 ) 894 517 (2 ) 60 (61 ) 81 (853 ) (2,817 ) (296 ) (1,136 ) (1,558 ) (1,735 ) 804 (1,685 ) 4 4 10 10 6,942 3,007 17,304 11,168 (2,079 ) (2,634 ) (4,023 ) (4,217 ) (19,026 ) (81 ) (26,235 ) (81 ) (21,105 ) (2,715 ) (30,258 ) (4,298 ) 20,000 1,000 25,500 2,000 (3,500 ) (2,000 ) (9,500 ) (7,000 ) — (420 ) — (420 ) 14 25 40 64 (1,604 ) (1,074 ) (3,566 ) (2,352 ) Tax benefit from stock option exercises — 1 14,910 (2,469 ) 12,474 (7,707 ) (18 ) (132 ) 27 (179 ) 729 (2,309 ) Net decrease in cash (453 ) (1,016 ) 4,615 6,232 4,615 6,232 $ 5,344 $ 3,923 $ 4,162 $ 5,216 HealthHealth™™,Nature's Life®,LifeTime®,Natural Balance®, NaturalCare®,Health from the Sun®,Pioneer®,Nutra BioGenesisBioGenesis™™,Life-flo®,Organix South®,Heritage Store® andMonarch NutraceuticalsNutraceuticals™™.CompanyCompany™™,Thom's Natural FoodsFoods™™,Cornucopia Community Market™ andGranola'sGranola's™™. The Company also owns health food stores, which operate under various trade names, includingFresh VitaminsVitamins™™ andPeachtree Natural Foods®.DecemberMarch 31, 2015,2016, the results of its operations for the three and six months ended DecemberMarch 31, 20152016 and 20142015 and its cash flows for the threesix months ended DecemberMarch 31, 20152016 and 2014,2015, in conformity with accounting principles generally accepted in the United States of America ("US GAAP") for interim financial information applied on a consistent basis. Results for the three and six months ended DecemberMarch 31, 20152016 are not necessarily indicative of the results to be expected for the full fiscal year.NUTRACEUTICAL INTERNATIONAL CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)(unaudited)(dollars in thousands, except per share data)1. BASIS OF PRESENTATION (Continued)November 2015,February 2016, the Financial Accounting Standards Board ("FASB") issued authoritative guidance, which is included in Accounting Standards Codification ("ASC") 842, "Leases." This guidance requires lessees to recognize most leases on the balance sheet by recording a right-of-use asset and a lease liability. This guidance is effectiveis currently evaluating thedoes not expect this guidance to have a material impact this standard may have on its consolidated financial statements.is currently evaluating thedoes not expect this guidance to have a material impact this standard may have on its consolidated financial statements. December 31,
2015 September 30,
2015 March 31,
2016 September 30,
2015 $ 19,417 $ 17,882 $ 20,344 $ 17,882 (1,052 ) (1,084 ) (1,067 ) (1,084 ) $ 18,365 $ 16,798 $ 19,277 $ 16,798 (Continued) December 31,
2015 September 30,
2015 March 31,
2016 September 30,
2015 $ 26,137 $ 23,106 $ 26,508 $ 23,106 10,299 9,755 11,576 9,755 25,407 26,579 23,407 26,579 $ 61,843 $ 59,440 $ 61,491 $ 59,440 threesix months ended DecemberMarch 31, 2015,2016, the Company made one acquisitiontwo acquisitions of a business.businesses. On October 6, 2015, the Company acquired certain operating assets of Dynamic Health Laboratories, Inc. ("Dynamic Health"), a manufacturer. On February 18, 2016, the Company acquired certain operating assets of primarily organic and natural liquid nutritional products, for $19,026Aubrey Organics, Inc. ("Aubrey Organics"). The aggregate purchase price of these acquisitions was $26,235 in cash.threesix months ended DecemberMarch 31, 2014,2015, the Company made one acquisition of a business. On November 18, 2014, the Company acquired certain operating assets of Agape Health Products for $81 in cash. The Condensed Consolidated Statements of Comprehensive Income and the Condensed Consolidated Statements of Cash Flows presented herein include the activities of these acquired businesses from their respective dates of acquisition. Since the date of acquisition, net sales of $3,858 and gross profit of $1,527 for Dynamic Health were included in the Condensed Consolidated Statements of Comprehensive Income for the three months ended December 31, 2015. The Company tracks selling, general and administrative expenses on a consolidated basis, not on a brand-by-brand basis. As a result, the disclosure of any results after gross profit is impracticable. The expected long-term sales and expense synergies of acquired businesses generally are not realized immediately following acquisition, as certain transition and integration matters must be completed.aggregate purchase price was assigned to the assets acquired based on their fair values at their respective dates of acquisition. The excess of aggregate purchase price over the fair values of the assets acquired was classified as goodwill. The goodwill relates to expected synergies from these acquisitions. The following reflects the preliminary allocation of theNUTRACEUTICAL INTERNATIONAL CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)(unaudited)(dollars in thousands, except per share data)4. ACQUISITIONS (Continued)aggregate purchase priceprices for the fiscal 2016 acquisitionacquisitions and the final allocation of the aggregate purchase price for the fiscal 2015 acquisition to the aggregate assets acquired: Fiscal 2016
Acquisition Fiscal 2015
Acquisition Fiscal 2016 Acquisition - Dynamic Health Fiscal 2016 Acquisition - Aubrey Organics Fiscal 2015 Acquisition Assets acquired: $ 3,821 $ 41 $ 3,821 $ 755 $ 41 644 — 644 6,004 — 6,541 — 6,541 — — 8,020 40 8,020 450 40 $ 19,026 $ 81 $ 19,026 $ 7,209 $ 81 $8,020$8,470 and $40, respectively, related to trademarks, tradenames and customer relationships, and are being amortized over periods of six to fifteen years for financial statement purposes. The fiscal 2016 and fiscal 2015 acquired intangible assets are expected to be deductible for tax purposes over fifteen years. Goodwill whichof $6,541 for fiscal 2016 is not subject to amortization for financial statement purposes of $6,541 for fiscal 2016,and is expected to be deductible for tax purposes over fifteen years.resultsCondensed Consolidated Statements of Dynamic Health have been includedComprehensive Income and the Condensed Consolidated Statements of Cash Flows presented herein include the activities of these acquired businesses from their respective dates of acquisition. The expected long-term sales and expense synergies of acquired businesses generally are not realized immediately following acquisition, as certain transition and integration matters must be completed.the consolidated financial statements fromthousands, except per share data)., net sales of $8,355 and gross profit of $3,207 for Dynamic Health were included in the Condensed Consolidated Statements of Comprehensive Income for the six months ended March 31, 2016. The Company tracks selling, general and administrative expenses on a consolidated basis, not on a brand-by-brand basis. As a result, the disclosure of any results after gross profit is impracticable. The following table provides unaudited pro forma information for the three and six months ended DecemberMarch 31, 2014,2015, as if the acquisition of Dynamic Health had been completed on October 1, 2014. Pro forma information was not provided for the three and six months ended DecemberMarch 31, 2015 as2016 since the acquisition was completed near the beginning of this periodthese periods and the pro forma results are not materially different than actual results. The information has been provided for illustrative purposes only and is not necessarily indicative of the actual results that would have been achieved by the Company for the periodperiods presented or that will be achieved in the future. The pro forma information has been adjusted to give effect to items directly attributable to the Dynamic Health acquisition. These adjustments include acquisition costs, amortization expense associated with acquired intangible assets, interest expense associated with borrowings on the Company's revolving credit facility to fund the acquisition, application of the Company's depreciable lives policy for property, plant and equipment, elimination of intercompany transactions and any consequential tax effects. Three Months Ended
March 31, 2015 Six Months Ended
March 31, 2015Net sales $ 59,970 $ 117,591 Net income $ 4,161 $ 7,580 Three Months
Ended
December 31, 2014 $ 57,621 $ 3,419
The actual and pro forma net sales and earnings related to the Aubrey Organics acquisition were not material.Table of ContentsNUTRACEUTICAL INTERNATIONAL CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)(unaudited)(dollars in thousands, except per share data)DecemberMarch 31, 20152016 was as follows: Goodwill Accumulated
Impairment Net $ 64,778 $ (40,394 ) $ 24,384
6,541
—
6,541 71,319 (40,394 ) 30,925 Goodwill Net Balance as of September 30, 2015 $ 64,778 $ (40,394 ) $ 24,384 Goodwill attributable to fiscal 2016 acquisitions 6,541 — 6,541 Balance as of March 31, 2016 $ 71,319 $ (40,394 ) $ 30,925 DecemberMarch 31, 20152016 and September 30, 2015 were as follows: December 31, 2015 September 30, 2015 Weighted-
Average
Amortization
Period
(Years) Gross
Carrying
Amount(1) Accumulated
Amortization(1) Net
Carrying
Amount Gross
Carrying
Amount(1) Accumulated
Amortization(1) Net
Carrying
Amount $ 13,555 $ (2,277 ) $ 11,278 $ 12,470 $ (1,966 ) $ 10,504 11 23,815 (10,442 ) 13,373 16,836 (9,773 ) 7,063 7 772 (772 ) — 772 (772 ) — 5 38,142 (13,491 ) 24,651 30,078 (12,511 ) 17,567
— — — 38 — 38 $ 38,142 $ (13,491 ) $ 24,651 $ 30,116 $ (12,511 ) $ 17,605 March 31, 2016 September 30, 2015 Intangible assets subject to amortization: Trademarks/tradenames/licenses $ 13,893 $ (2,587 ) $ 11,306 $ 12,470 $ (1,966 ) $ 10,504 11 Customer relationships/non-compete agreements 23,975 (11,133 ) 12,842 16,836 (9,773 ) 7,063 7 Developed software and technology 772 (772 ) — 772 (772 ) — 5 38,640 (14,492 ) 24,148 30,078 (12,511 ) 17,567 Intangible assets not subject to amortization: Trademarks/tradenames/licenses — — — 38 — 38 $ 38,640 $ (14,492 ) $ 24,148 $ 30,116 $ (12,511 ) $ 17,605 NUTRACEUTICAL INTERNATIONAL CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)(unaudited)(dollars in thousands, except per share data)5. GOODWILL AND INTANGIBLE ASSETS (Continued)DecemberMarch 31, 20152016 net carrying amount of $24,651$24,148 for intangible assets subject to amortization is as follows: Estimated
Amortization
Expense $ 2,898 3,506 3,315 2,888 2,799 9,245 $ 24,651 (1)Estimated amortization expense for the year ending September 30, 2016 includes only amortization to be recorded after December 31, 2015.Year Ending September 30, 2016(1) $ 1,944 2017 3,582 2018 3,391 2019 2,964 2020 2,875 Thereafter 9,392 $ 24,148 (1) Estimated amortization expense for the year ending September 30, 2016 includes only amortization to be recorded after March 31, 2016. December 31,
2015 September 30,
2015 $ 48,000 $ 31,500 March 31,
2016 September 30,
2015Long-term debt—revolving credit facility $ 47,500 $ 31,500 DecemberMarch 31, 20152016 and September 30, 2015. Estimated fair values for debt have been determined based on borrowing rates currently available to the Company for bank loans with similar terms and maturities and are classified as Level 2 (significant observable inputs other than quoted prices) in the FASB's fair value hierarchy.NUTRACEUTICAL INTERNATIONAL CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)(unaudited)(dollars in thousands, except per share data)6. DEBT (Continued)DecemberMarch 31, 2015,2016, the Company had outstanding revolving credit borrowings of $48,000$47,500 under the Credit Agreement. Borrowings under the Credit Agreement are collateralized by substantially all assets of the Company. At the Company's election, borrowings bear interest at the applicable Eurodollar Rate plus a variable margin or at a Base Rate plus a variable margin. Base Rate is the higher of: (i) the Prime Lending Rate, (ii) the Federal Funds Rate plus 0.5% or (iii) the one-month Eurodollar Rate multiplied by the Statutory Reserve Rate plus 1.0% (capitalized terms are defined in the Credit Agreement, a copy of which was filed with the Securities and Exchange Commission on November 5, 2014). At DecemberMarch 31, 2015,2016, the applicable weighted-average interest rate for outstanding borrowings was 1.66%2.12%. The Company is also required to pay a variable quarterly fee on the unused balance under the Credit Agreement. At DecemberMarch 31, 2015,2016, the applicable rate was 0.25%. Accrued interest on Eurodollar Rate borrowings is payable based on elected intervals of one, two or three months. Accrued interest on Base Rate borrowings is payable quarterly. The Credit Agreement matures on November 4, 2019, and the Company is required to repay all principal and interest outstanding under the Credit Agreement on such date.DecemberMarch 31, 2015,2016, the Company was in compliance with the restrictive covenants. Upon the occurrence of a default, the lender has various remedies or rights, which may include proceeding against the collateral or requiring the Company to repay all amounts outstanding under the Credit Agreement.DecemberMarch 31, 2015 and 2014,2016, the Company purchased 65,41180,529 and 48,562145,940 shares of common stock for an aggregate price of $1,604$1,962 and $1,074,$3,566, respectively. During the three and six months ended March 31, 2015, the Company purchased 68,463 and 117,025 shares of common stock for an aggregate price of $1,278 and $2,352, respectively. All of these shares of common stock held in treasury were retired prior to DecemberMarch 31 in the respective quarter of purchase.purchase, except at March 31, 2016 and 2015, the Company held 3,354 and 2,000 shares of common stock in treasury. As of DecemberMarch 31, 2015,2016, the Company was permitted to purchase up to 415,850 335,321DecemberMarch 31, 2015,2016, the Company had no outstanding options to purchase shares of common stock, as all previously issued options were exercised or expired prior to September 30, 2015. There were no stock options exercised duringthreesix months ended DecemberMarch 31, 2014.DecemberMarch 31, 20142015 were excluded from the computation of diluted earnings per share because none of the stock options were anti-dilutive.NUTRACEUTICAL INTERNATIONAL CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)(unaudited)(dollars in thousands, except per share data)8. STOCK OPTIONS AND OTHER EQUITY AWARDS (Continued)DecemberMarch 31, 2015,2016, 720,721 shares of the Company's common stock were available for issuance under the 2013 Plan.DecemberMarch 31, 20152016 and 20142015 were as follows: Three Months Ended
December 31, Three Months Ended
March 31, Six Months Ended
March 31, 2015 2014 2016 2015 2016 2015 $ 50,050 $ 46,725 $ 52,350 $ 48,807 $ 102,400 $ 95,532 5,909 6,319 7,142 6,597 13,051 12,916 $ 55,959 $ 53,044 $ 59,492 $ 55,404 $ 115,451 $ 108,448 (Continued)9. SEGMENTS (Continued)DecemberMarch 31, 20152016 and 20142015 were as follows: Three Months Ended
December 31, 2015 2014 $ 50,499 $ 47,088 5,460 5,956 $ 55,959 $ 53,044 (1)Net sales for any other product or group of similar products are less than 10% of consolidated net sales. Three Months Ended
March 31, Six Months Ended
March 31, 2016 2015 2016 2015 Branded nutritional supplements and other natural products $ 53,687 $ 49,102 $ 104,186 $ 96,190 Other(1) 5,805 6,302 11,265 12,258 $ 59,492 $ 55,404 $ 115,451 $ 108,448 (1) Net sales for any other product or group of similar products are less than 10% of consolidated net sales. DecemberMarch 31, 20142015 has been increased by $789$781 and $1,570, respectively, from the prior year's presentation.HealthHealth™™,Nature's Life®,LifeTime®,Natural Balance®, NaturalCare®,Health from the Sun®,Pioneer®,Nutra BioGenesisBioGenesis™™,Life-flo®,Organix South®,Heritage Store® andMonarch NutraceuticalsNutraceuticals™™.CompanyCompany™™,Thom's Natural FoodsFoods™™,Cornucopia Community Market™ andGranola'sGranola's™™. We also own health food stores, which operate under various trade names, includingFresh VitaminsVitamins™™ andPeachtree Natural Foods®. Three Months
Ended
December 31, 2015 2014 100.0 % 100.0 % 49.8 % 51.3 % 50.2 % 48.7 % 36.4 % 36.9 % 1.8 % 1.4 % 12.0 % 10.4 % 0.4 % 0.5 % 11.6 % 9.9 % 4.0 % 3.6 % 7.6 % 6.3 % 18.3 % 16.6 % Three Months Ended
March 31, Six Months Ended
March 31, 2016 2015 2016 2015 Net sales 100.0 % 100.0 % 100.0 % 100.0 % Cost of sales 49.0 % 50.8 % 49.4 % 51.0 % Gross profit 51.0 % 49.2 % 50.6 % 49.0 % Selling, general and administrative 36.6 % 35.7 % 36.5 % 36.3 % Amortization of intangible assets 1.7 % 1.3 % 1.7 % 1.3 % Income from operations 12.7 % 12.2 % 12.4 % 11.4 % Interest and other expense, net 0.5 % 0.5 % 0.5 % 0.5 % Income before provision for income taxes 12.2 % 11.7 % 11.9 % 10.9 % Provision for income taxes 4.4 % 4.3 % 4.2 % 4.0 % Net income 7.8 % 7.4 % 7.7 % 6.9 % Adjusted EBITDA(1) 18.6 % 18.1 % 18.5 % 17.3 % DecemberMarch 31, 20152016 to the Three Months Ended DecemberMarch 31, 2014
2015$3.0$4.1 million, or 5.5%7.4%, to $56.0$59.5 million for the three months ended DecemberMarch 31, 20152016 (the "first"second quarter of fiscal 2016") from $53.0$55.4 million for the three months ended DecemberMarch 31, 20142015 (the "first"second quarter of fiscal 2015"). Net sales of branded nutritional supplements and other natural products increased by $3.5$4.6 million, or 7.2%9.3%, to $50.5$53.7 million for the firstsecond quarter of fiscal 2016, compared to $47.0$49.1 million for the firstsecond quarter of fiscal 2015. The increase in net sales of branded nutritional supplements and other natural products was primarily related to the net sales contributions of the fiscal 2015 and fiscal 2016 acquisitions and, to a lesser extent, price increases of $1.6$1.0 million, partially offset by a decrease in sales volume of branded products to certain customers. Other net sales were $5.5$5.8 million for the firstsecond quarter of fiscal 2016 and $6.0$6.3 million for the firstsecond quarter of fiscal 2015.$2.2$3.0 million, or 8.7%11.3%, to $28.1$30.3 million for the firstsecond quarter of fiscal 2016 from $25.9$27.3 million for the firstsecond quarter of fiscal 2015. As a percentage of net sales, gross profit increased to 50.2%51.0% for the firstsecond quarter of fiscal 2016 from 48.7%49.2% for the firstsecond quarter of fiscal$0.7$2.0 million, or 4.0%10.1%, to $20.3$21.8 million for the firstsecond quarter of fiscal 2016 from $19.6$19.8 million for the firstsecond quarter of fiscal 2015. As a percentage of net sales, selling, general and administrative expenses increased to 36.6% for the second quarter of fiscal 2016, compared to 35.7% for the second quarter of fiscal 2015. This increase in selling, general and administrative expenses was primarily attributable to operational and transition costs related to the fiscal 2015 and fiscal 2016 acquisitions.36.4%36.5% for the first quarter of fiscalsix months ended March 31, 2016 and 36.9%36.3% for the first quarter of fiscalsix months ended March 31, 2015.$1.0$2.0 million for first quarter of fiscalsix months ended March 31, 2016 and $0.7$1.5 million for the first quarter of fiscalsix months ended March 31, 2015. For each period, amortization expense was primarily related to intangible assets recorded in connection with acquisitions.$0.3$0.6 million for both the first quarter of fiscalsix months ended March 31, 2016 and fiscal 2015 and primarily consisted of interest expense on indebtedness under our revolving credit facility.34.9%35.5% for the first quarter of fiscalsix months ended March 31, 2016 and 36.4%36.6% for the first quarter of fiscalsix months ended March 31, 2015. The decrease in theIn each period, our effective tax rate was primarily related tohigher than the federal reinstatement of the credit for increasing research activities.statutory rate primarily due to state taxes.••••Analysts—who estimate our projected Adjusted EBITDA and other EBITDA-based metrics in their independently-developed financial models for investors;•Creditors—who evaluate our operating performance based on compliance with certain EBITDA-based debt covenants;•Investment Bankers—who use EBITDA-based metrics in their written evaluations and comparisons of companies within our industry; and•Board of Directors and Executive Management—who use EBITDA-based metrics for evaluating management performance relative to our operating budget and bank covenant compliance, as well as our ability to service debt and raise capital for growth opportunities,including acquisitions, which are a critical component of our stated strategy. Generally, we have recorded a monthly accrual for incentive compensation as a percentage of Adjusted EBITDA, which has been paid out to executive management, as well as other employees, upon completion of our annual audit.▪ ▪ ▪ ▪ Three Months Ended
December 31, 2015 2014 (dollars in thousands) $ 4,241 $ 3,351 2,270 1,921 274 297 3,482 3,239 $ 10,267 $ 8,808 (1)Includes amortization of deferred financing fees. Three Months Ended
March 31, Six Months Ended
March 31, 2016 2015 2016 2015 (dollars in thousands) Net income $ 4,618 $ 4,096 $ 8,859 $ 7,447 Provision for income taxes 2,611 2,369 4,881 4,290 Interest and other expense, net(1) 322 273 596 570 Depreciation and amortization 3,538 3,268 7,020 6,507 Adjusted EBITDA $ 11,089 $ 10,006 $ 21,356 $ 18,814 (1) Includes amortization of deferred financing fees. $10.3$11.1 million for the firstsecond quarter of fiscal 2016 from $8.8$10.0 million for the firstsecond quarter of fiscal 2015. Adjusted EBITDA as a percentage of net sales increased to 18.3%18.6% for the firstsecond quarter of fiscal 2016 from 16.6%18.1% for the firstsecond quarter of fiscal 2015.$73.0$69.1 million as of DecemberMarch 31, 2015,2016, compared to $65.7 million as of September 30, 2015. The increase in working capital was primarily the result of increases in accounts receivable and inventories and a decrease in accrued expenses.threesix months ended DecemberMarch 31, 20152016 was $6.9$17.3 million, compared to $3.0$11.2 million for the comparable period in fiscal 2015. This increase in net cash provided by operating activities for the threesix months ended DecemberMarch 31, 20152016 was primarily attributable to an increase in net income as well as changes in operating assets and liabilities.$21.1$30.3 million for the threesix months ended DecemberMarch 31, 2015,2016, compared to $2.7$4.3 million for the comparable period in fiscal 2015. Our investing activities consisted of acquisitions of businesses and capital expenditures. The capital expenditures primarily related to buildings, building improvements, distribution and manufacturing equipment and information systems.threesix months ended DecemberMarch 31, 2015,2016, we made one acquisitiontwo acquisitions of a business.businesses. On October 6, 2015, we acquired certain operating assets of Dynamic Health Laboratories, Inc., a manufacturer On February 18, 2016, we acquired certain operating assets of primarily organic and natural liquid nutritional products, for $19.0Aubrey Organics, Inc. The aggregate purchase price of these acquisitions was $26.2 million in cash.threesix months ended DecemberMarch 31, 2014,2015, we made one acquisition of a business. On November 18, 2014, we acquired certain operating assets of Agape Health Products for $0.1 million in cash.$14.9$12.5 million for the threesix months ended DecemberMarch 31, 20152016 and net cash used in financing activities was $2.5$7.7 million for the comparable period in fiscal 2015. During these periods, financing activities primarily related to borrowings and repayments under our revolving credit facility, payments of deferred financing fees, purchases of common stock for treasury and proceeds from the issuance of common stock related to stock option exercises and the direct stock purchase plan. During the threesix months ended DecemberMarch 31, 2015,2016, net borrowings under our revolving credit facility were $16.5$16.0 million and primarily related to the acquisition of certain operating assets of Dynamic Health Laboratories, Inc.6061,665 shares purchased during the threesix months ended DecemberMarch 31, 2015.2016. As of DecemberMarch 31, 2015,2016, there were 1,376,8381,375,779 shares of common stock available for purchase.DecemberMarch 31, 2015,2016, we had outstanding revolving credit borrowings of $48.0$47.5 million under the Credit Agreement. Borrowings under the Credit Agreement are collateralized by substantially all of our assets. At our election, borrowings bear interest at the applicable Eurodollar Rate plus a variable margin or at a Base Rate plus a variable margin. Base Rate is the higher of: (i) the Prime Lending Rate, (ii) the Federal Funds Rate plus 0.5% or (iii) the one-month Eurodollar Rate multiplied by the Statutory Reserve Rate plus 1.0% (capitalized terms are defined in the Credit Agreement, a copy of which was filed with the Securities and Exchange Commission on November 5, 2014). At DecemberMarch 31, 2015,2016, the applicable weighted-average interest rate for outstanding borrowings was 1.66%2.12%. We are also required to pay a quarterly fee on the unused balance under the Credit Agreement. At DecemberMarch 31, 2015,2016, the applicable rate was 0.25%. Accrued interest on Eurodollar Rate borrowings is payable based on elected intervals of one, two or three months. Accrued interest on base rate borrowings is payable quarterly. The Credit Agreement matures on November 4, 2019, and we are required to repay all principal and interest outstanding under the Credit Agreement on such date.DecemberMarch 31, 2015,2016, we were in compliance with the restrictive covenants. Upon the occurrence of a default, the lender has various remedies or rights, which may include proceeding against the collateral or requiring us to repay all amounts outstanding under the Credit Agreement.DecemberMarch 31, 20152016 were as follows: Payments Due By Period Total Less Than
1 Year 1 - 3 Years 4 - 5 Years After
5 Years (dollars in thousands) $ 48,000 $ — $ — $ 48,000 $ — 3,676 956 1,911 809 — 6,600 3,972 2,014 564 50 $ 58,276 $ 4,928 $ 3,925 $ 49,373 $ 50 (a)Represents estimated interest obligations associated with our outstanding revolving credit facility balance of $48.0 million at December 31, 2015, assuming no principal payments are made before maturity, a weighted-average interest rate of 1.66% and an underutilization fee rate of 0.25%. Payments Due By Period Contractual Obligations and Other Commitments Total 1 - 3 Years 4 - 5 Years (dollars in thousands) Revolving credit facility $ 47,500 $ — $ — $ 47,500 $ — Interest on revolving credit facility(a) 4,209 1,170 2,340 699 — Operating leases 6,274 3,917 2,040 297 20 Total $ 57,983 $ 5,087 $ 4,380 $ 48,496 $ 20 (a) Represents estimated interest obligations associated with our outstanding revolving credit facility balance of $47.5 million at March 31, 2016, assuming no principal payments are made before maturity, a weighted-average interest rate of 2.12% and an underutilization fee rate of 0.25%. DecemberMarch 31, 2015,2016, we had no other off-balance sheet arrangements that have had, or are reasonably likely to have, a material effect on our consolidated financial statements.DecemberMarch 31, 2015,2016, the applicable weighted-average interest rate for borrowings was 1.66%2.12% and we had total borrowings outstanding of $48.0$47.5 million. A hypothetical 100 basis point change in interest rates would not have had a material impact on our reported net income or cash flows for the threesix months ended DecemberMarch 31, 20152016 and 2014.DecemberMarch 31, 2015.2016. Based on the foregoing, our principal executive and principal financial officers have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of DecemberMarch 31, 2015.DecemberMarch 31, 2015.DecemberMarch 31, 2015,2016, there were 415,850335,321 shares available for purchase under this program. The shares available for purchase under this program have no expiration date. Purchases under this program during the three months ended DecemberMarch 31, 20152016 occurred in October, NovemberJanuary, February and DecemberMarch as follows: Total Number
of Shares
Purchased Average Price
Paid Per
Share Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plan Maximum
Number of
Shares that
May Yet Be
Purchased Under
the Plan 22,000 $ 23.74 22,000 20,000 24.56 20,000 23,411 25.25 23,411 65,411 24.53 65,411 415,850 Period January 1-31, 2016 33,500 $ 24.34 33,500 February 1-29, 2016 24,076 24.15 24,076 March 1-31, 2016 22,953 24.61 22,953 80,529 24.36 80,529 335,321 31.1 Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
XBRL Instance Document(1)
101.SCH
XBRL Taxonomy Extension Schema Document(1)
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document(1)
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document(1)
101.LAB
XBRL Taxonomy Extension Labels Linkbase Document(1)
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document(1)(1)Filed herewith.(1) Filed herewith.
Date: JanuaryApril 28, 2016
By:By:
/s/ CORY J. MCQUEEN