Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Mar. 31, 2016 | Apr. 26, 2016 | |
Document and Entity Information | ||
Entity Registrant Name | NUTRACEUTICAL INTERNATIONAL CORP | |
Entity Central Index Key | 1,050,007 | |
Current Fiscal Year End Date | --09-30 | |
Entity Filer Category | Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 9,339,532 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands | Mar. 31, 2016 | Sep. 30, 2015 | [1] |
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 | |
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. |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Mar. 31, 2016 | Mar. 31, 2015 | |
Income Statement [Abstract] | ||||
Net sales | $ 59,492 | $ 55,404 | $ 115,451 | $ 108,448 |
Cost of sales | 29,163 | 28,149 | 57,014 | 55,338 |
Gross profit | 30,329 | 27,255 | 58,437 | 53,110 |
Operating expenses | ||||
Selling, general and administrative | 21,779 | 19,789 | 42,121 | 39,343 |
Amortization of intangible assets | 999 | 728 | 1,980 | 1,460 |
Income from operations | 7,551 | 6,738 | 14,336 | 12,307 |
Interest and other expense, net | 322 | 273 | 596 | 570 |
Income before provision for income taxes | 7,229 | 6,465 | 13,740 | 11,737 |
Provision for income taxes | 2,611 | 2,369 | 4,881 | 4,290 |
Net income | 4,618 | 4,096 | 8,859 | 7,447 |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustment, net of tax | 62 | (109) | (17) | (330) |
Comprehensive income | $ 4,680 | $ 3,987 | $ 8,842 | $ 7,117 |
Net income per common share | ||||
Basic (in dollars per share) | $ 0.49 | $ 0.43 | $ 0.94 | $ 0.77 |
Diluted (in dollars per share) | $ 0.49 | $ 0.43 | $ 0.94 | $ 0.77 |
Weighted average common shares outstanding | ||||
Basic (in shares) | 9,401,972 | 9,622,051 | 9,430,878 | 9,637,753 |
Dilutive effect of stock options (in shares) | 0 | 4,874 | 0 | 5,884 |
Diluted (in shares) | 9,401,972 | 9,626,925 | 9,430,878 | 9,643,637 |
CONDENSED CONSOLIDATED STATEME4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 6 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | ||
Cash flows from operating activities: | |||
Net income | $ 8,859 | $ 7,447 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 7,020 | 6,507 | |
Amortization of deferred financing fees | 63 | 67 | |
Losses on disposals of property, plant and equipment | 4 | 7 | |
Tax benefit from stock option exercises | 0 | (1) | |
Deferred income taxes | 375 | (77) | |
Changes in assets and liabilities, net of effects of acquisitions: | |||
Accounts receivable, net | (1,139) | (1,706) | |
Inventories | 771 | 1,137 | |
Prepaid expenses and other current assets | 894 | 517 | |
Other non-current assets | (61) | 81 | |
Accounts payable | (296) | (1,136) | |
Accrued expenses | 804 | (1,685) | |
Other non-current liabilities | 10 | 10 | |
Net cash provided by operating activities | 17,304 | 11,168 | |
Cash flows from investing activities: | |||
Purchases of property, plant and equipment | (4,023) | (4,217) | |
Acquisitions of businesses | (26,235) | (81) | |
Net cash used in investing activities | (30,258) | (4,298) | |
Cash flows from financing activities: | |||
Proceeds from debt | 25,500 | 2,000 | |
Payments on debt | (9,500) | (7,000) | |
Payments of deferred financing fees | 0 | (420) | |
Proceeds from issuances of common stock | 40 | 64 | |
Purchases of common stock for treasury | (3,566) | (2,352) | |
Tax benefit from stock option exercises | 0 | 1 | |
Net cash provided by (used in) financing activities | 12,474 | (7,707) | |
Effect of exchange rate changes on cash | 27 | (179) | |
Net decrease in cash | (453) | (1,016) | |
Cash at beginning of period | 4,615 | [1] | 6,232 |
Cash at end of period | $ 4,162 | $ 5,216 | |
[1] | The condensed consolidated balance sheet as of September 30, 2015 has been prepared using information from the audited financial statements at that date. |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 6 Months Ended |
Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | BASIS OF PRESENTATION Nutraceutical International Corporation and its subsidiaries (the "Company") is an integrated manufacturer, marketer, distributor and retailer of branded nutritional supplements and other natural products sold primarily to and through domestic health and natural food stores. Internationally, the Company markets and distributes branded nutritional supplements and other natural products to and through health and natural product distributors and retailers. The Company's core business strategy is to acquire, integrate and operate businesses in the natural products industry that manufacture, market and distribute branded nutritional supplements. The Company believes that the consolidation and integration of these acquired businesses provide ongoing financial synergies through increased scale and market penetration, as well as strengthened customer relationships. The Company manufactures and sells nutritional supplements and other natural products under numerous brands, including Solaray ®, KAL ®, Dynamic Health™ , Nature's Life ®, LifeTime ®, Natural Balance ® , NaturalCare ®, Health from the Sun ®, Pioneer ®, Nutra BioGenesis™ , Life-flo ®, Organix South ®, Heritage Store ® and Monarch Nutraceuticals™ . The Company owns neighborhood natural food markets, which operate under the trade names The Real Food Company™ , Thom's Natural Foods™ , Cornucopia Community Market™ and Granola's™ . The Company also owns health food stores, which operate under various trade names, including Fresh Vitamins™ and Peachtree Natural Foods ®. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all necessary adjustments, consisting of normal recurring adjustments, to state fairly the consolidated financial position of the Company as of March 31, 2016 , the results of its operations for the three and six months ended March 31, 2016 and 2015 and its cash flows for the six months ended March 31, 2016 and 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 March 31, 2016 are not necessarily indicative of the results to be expected for the full fiscal year. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with US GAAP have been omitted. Accordingly, these financial statements should be read in conjunction with the Company's Form 10-K for the fiscal year ended September 30, 2015 , which was filed with the Securities and Exchange Commission on November 19, 2015. Use of Estimates The preparation of these financial statements in conformity with US GAAP required management to make estimates and assumptions that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of net sales and expenses during the reported periods. Significant estimates included values and lives assigned to acquired intangible assets, reserves for customer returns and allowances, uncollectible accounts receivable, valuation adjustments for slow-moving, obsolete and/or damaged inventory and valuation and recoverability of long-lived assets. Actual results may differ from these estimates. New Accounting Standards In 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 effective for the Company as of October 1, 2019. The Company is currently evaluating the impact this standard may have on its consolidated financial statements. In November 2015, the FASB issued authoritative guidance, which is included in ASC 740, " Income Taxes ." This guidance simplifies the presentation of deferred income taxes and requires that deferred tax assets and liabilities be classified as noncurrent in the classified statement of financial position. This guidance is effective for the Company as of October 1, 2017 and is not expected to have a material impact on the consolidated financial statements as the guidance only changes the classification of deferred income taxes. In September 2015, the FASB issued authoritative guidance, which is included in ASC 805, " Business Combinations ." This guidance simplifies the accounting for measurement-period adjustments and is effective for the Company as of October 1, 2016. The Company does not expect this guidance to have a material impact on its consolidated financial statements. In July 2015, the FASB issued authoritative guidance, which is included in ASC 330, " Inventory ." This guidance simplifies the accounting for measuring inventory at the lower of cost and net realizable value and is effective for the Company as of October 1, 2017. The Company does not expect this guidance to have a material impact on its consolidated financial statements. In May 2014, the FASB issued authoritative guidance, which is included in ASC 606, " Revenue from Contracts with Customers ." This guidance provides a single, comprehensive revenue recognition model for all contracts with customers and requires that a company recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In July 2015, the FASB delayed the effective date of this guidance by one year. As a result, this guidance is effective for the Company as of October 1, 2018 and shall be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the impact this standard may have on its consolidated financial statements. The Company periodically reviews new accounting standards that are issued. Although some of these accounting standards may be applicable to the Company, the Company has not identified any other new standards that it believes merit further discussion, and the Company expects that none would have a significant impact on its consolidated financial statements. |
ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE | 6 Months Ended |
Mar. 31, 2016 | |
Receivables [Abstract] | |
Accounts Receivable | ACCOUNTS RECEIVABLE Accounts receivable, net of allowances for sales returns and doubtful accounts, consisted of the following: March 31, September 30, Accounts receivable $ 20,344 $ 17,882 Less allowances (1,067 ) (1,084 ) $ 19,277 $ 16,798 |
INVENTORIES
INVENTORIES | 6 Months Ended |
Mar. 31, 2016 | |
Inventory Disclosure [Abstract] | |
Inventories | INVENTORIES Inventories were comprised of the following: March 31, September 30, Raw materials $ 26,508 $ 23,106 Work-in-process 11,576 9,755 Finished goods 23,407 26,579 $ 61,491 $ 59,440 |
ACQUISITIONS
ACQUISITIONS | 6 Months Ended |
Mar. 31, 2016 | |
Business Combinations [Abstract] | |
Acquisitions | ACQUISITIONS During the six months ended March 31, 2016 , the Company made two acquisitions of businesses. On October 6, 2015, the Company acquired certain operating assets of Dynamic Health Laboratories, Inc. ("Dynamic Health"). On February 18, 2016, the Company acquired certain operating assets of Aubrey Organics, Inc. ("Aubrey Organics"). The aggregate purchase price of these acquisitions was $26,235 in cash. During the six months ended March 31, 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. These acquisitions are in keeping with the Company's business strategy of consolidating the fragmented industry in which it competes. These acquisitions were accounted for using the acquisition method of accounting. Accordingly, the purchase price was assigned to the assets acquired based on their fair values at their respective dates of acquisition. The excess of 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 the purchase prices for the fiscal 2016 acquisitions and the final allocation of the purchase price for the fiscal 2015 acquisition to the assets acquired: Fiscal 2016 Acquisition - Dynamic Health Fiscal 2016 Acquisition - Aubrey Organics Fiscal 2015 Acquisition Assets acquired: Current assets $ 3,821 $ 755 $ 41 Property, plant and equipment 644 6,004 — Goodwill 6,541 — — Intangible assets 8,020 450 40 $ 19,026 $ 7,209 $ 81 The fiscal 2016 and fiscal 2015 acquired intangible assets totaling $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 of $6,541 for fiscal 2016 is not subject to amortization for financial statement purposes and is expected to be deductible for tax purposes over fifteen years. 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. 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. Since the date of acquisition (October 6, 2015), 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 March 31, 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 March 31, 2016 since the acquisition was completed near the beginning of these 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 periods 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 Six Months Ended Net sales $ 59,970 $ 117,591 Net income $ 4,161 $ 7,580 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. The actual and pro forma net sales and earnings related to the Aubrey Organics acquisition were not material. |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS | 6 Months Ended |
Mar. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | GOODWILL AND INTANGIBLE ASSETS The change in the carrying amount of goodwill from September 30, 2015 to March 31, 2016 was as follows: Goodwill Accumulated Impairment 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 The carrying amounts of intangible assets at March 31, 2016 and September 30, 2015 were as follows: March 31, 2016 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 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 (1) Amounts include the impact of foreign currency translation adjustments. Estimated future amortization expense related to the March 31, 2016 net carrying amount of $24,148 for intangible assets subject to amortization is as follows: Year Ending September 30, Estimated Amortization Expense 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 . General and economic conditions may impact retail and consumer demand, as well as the market price of the Company's common stock, and could negatively impact the Company's future operating performance, cash flow and/or stock price and could result in goodwill and/or intangible asset impairment charges being recorded in future periods. Also, the Company periodically reviews its brands to achieve marketing, sales and operational synergies. These reviews could result in brands being consolidated or discontinued and could result in intangible asset impairment charges being recorded in future periods. Goodwill and/or intangible asset impairment charges could materially impact the Company's consolidated financial statements. The valuation of goodwill and intangible assets is subject to a high degree of judgment, uncertainty and complexity. |
DEBT
DEBT | 6 Months Ended |
Mar. 31, 2016 | |
Debt Disclosure [Abstract] | |
Debt | DEBT Debt was comprised of the following: March 31, September 30, Long-term debt—revolving credit facility $ 47,500 $ 31,500 The carrying value of the Company's debt approximates fair value at March 31, 2016 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. On November 4, 2014, the Company amended its revolving credit facility (the "Credit Agreement"). The Credit Agreement extends the term of the credit facility to November 2019, increases the available credit borrowings to $100,000 with no automatic reductions and provides an accordion feature that can increase the available credit borrowings to $130,000 , subject to approval by 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. At March 31, 2016 , the Company had outstanding revolving credit borrowings of $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 March 31, 2016 , the applicable weighted-average interest rate for outstanding borrowings was 2.12% . The Company is also required to pay a variable quarterly fee on the unused balance under the Credit Agreement. At March 31, 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. The Credit Agreement contains restrictive covenants, including limitations on incurring other indebtedness and requirements that the Company maintain certain financial ratios. As of March 31, 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. |
SHARE PURCHASES
SHARE PURCHASES | 6 Months Ended |
Mar. 31, 2016 | |
Stockholders' Equity Note [Abstract] | |
Share Purchases | SHARE PURCHASES During the three and six months ended March 31, 2016 , the Company purchased 80,529 and 145,940 shares of common stock for an aggregate price of $1,962 and $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 March 31 in the respective quarter of purchase, except at March 31, 2016 and 2015 , the Company held 3,354 and 2,000 shares of common stock in treasury. As of March 31, 2016 , the Company was permitted to purchase up to 335,321 additional shares under its approved purchase plan, with no expiration date or restrictions. The Company accounts for treasury shares using the cost method. |
STOCK OPTIONS AND OTHER EQUITY
STOCK OPTIONS AND OTHER EQUITY AWARDS | 6 Months Ended |
Mar. 31, 2016 | |
Equity [Abstract] | |
Stock Options and Other Equity Awards | STOCK OPTIONS AND OTHER EQUITY AWARDS As of March 31, 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 . During the six months ended March 31, 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 $1 and optionees realized an aggregate pre-tax gain of $3 from these stock option exercises. No options to purchase shares of common stock for the three and six months ended March 31, 2015 were excluded from the computation of diluted earnings per share because none of the stock options were anti-dilutive. 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 March 31, 2016 , 720,721 shares of the Company's common stock were available for issuance under the 2013 Plan. |
SEGMENTS
SEGMENTS | 6 Months Ended |
Mar. 31, 2016 | |
Segment Reporting [Abstract] | |
Segments | SEGMENTS Segment identification and selection is consistent with the management structure used by the Company's chief operating decision maker to evaluate performance and make decisions regarding resource allocation, as well as the materiality of financial results consistent with that structure. Based on the Company's management structure and method of internal reporting, the Company has one operating segment. The Company's chief operating decision maker does not review operating results on a disaggregated basis; rather, the chief operating decision maker reviews operating results on an aggregate basis. Net sales attributed to customers in the United States and foreign countries for the three and six months ended March 31, 2016 and 2015 were as follows: Three Months Ended Six Months Ended 2016 2015 2016 2015 United States $ 52,350 $ 48,807 $ 102,400 $ 95,532 Foreign countries 7,142 6,597 13,051 12,916 $ 59,492 $ 55,404 $ 115,451 $ 108,448 Certain net sales attributed to customers in the United States are sold to customers who in turn may sell such products to customers in foreign countries, while certain net sales attributed to customers in foreign countries are sold to customers who in turn may sell such products to customers in the United States. The Company's net sales by product group for the three and six months ended March 31, 2016 and 2015 were as follows: Three Months Ended Six Months Ended 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. In October 2015, the Company made a decision to classify certain net sales in the other product group that were previously included in the branded nutritional supplements and other natural products group. As a result of this decision, the other product group net sales amount for the three and six months ended March 31, 2015 has been increased by $781 and $1,570 , respectively, from the prior year's presentation. |
BASIS OF PRESENTATION (Policies
BASIS OF PRESENTATION (Policies) | 6 Months Ended |
Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all necessary adjustments, consisting of normal recurring adjustments, to state fairly the consolidated financial position of the Company as of March 31, 2016 , the results of its operations for the three and six months ended March 31, 2016 and 2015 and its cash flows for the six months ended March 31, 2016 and 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 March 31, 2016 are not necessarily indicative of the results to be expected for the full fiscal year. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with US GAAP have been omitted. Accordingly, these financial statements should be read in conjunction with the Company's Form 10-K for the fiscal year ended September 30, 2015 , which was filed with the Securities and Exchange Commission on November 19, 2015. |
Use of Estimates | Use of Estimates The preparation of these financial statements in conformity with US GAAP required management to make estimates and assumptions that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of net sales and expenses during the reported periods. Significant estimates included values and lives assigned to acquired intangible assets, reserves for customer returns and allowances, uncollectible accounts receivable, valuation adjustments for slow-moving, obsolete and/or damaged inventory and valuation and recoverability of long-lived assets. Actual results may differ from these estimates. |
New Accounting Standards | New Accounting Standards In 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 effective for the Company as of October 1, 2019. The Company is currently evaluating the impact this standard may have on its consolidated financial statements. In November 2015, the FASB issued authoritative guidance, which is included in ASC 740, " Income Taxes ." This guidance simplifies the presentation of deferred income taxes and requires that deferred tax assets and liabilities be classified as noncurrent in the classified statement of financial position. This guidance is effective for the Company as of October 1, 2017 and is not expected to have a material impact on the consolidated financial statements as the guidance only changes the classification of deferred income taxes. In September 2015, the FASB issued authoritative guidance, which is included in ASC 805, " Business Combinations ." This guidance simplifies the accounting for measurement-period adjustments and is effective for the Company as of October 1, 2016. The Company does not expect this guidance to have a material impact on its consolidated financial statements. In July 2015, the FASB issued authoritative guidance, which is included in ASC 330, " Inventory ." This guidance simplifies the accounting for measuring inventory at the lower of cost and net realizable value and is effective for the Company as of October 1, 2017. The Company does not expect this guidance to have a material impact on its consolidated financial statements. In May 2014, the FASB issued authoritative guidance, which is included in ASC 606, " Revenue from Contracts with Customers ." This guidance provides a single, comprehensive revenue recognition model for all contracts with customers and requires that a company recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In July 2015, the FASB delayed the effective date of this guidance by one year. As a result, this guidance is effective for the Company as of October 1, 2018 and shall be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the impact this standard may have on its consolidated financial statements. The Company periodically reviews new accounting standards that are issued. Although some of these accounting standards may be applicable to the Company, the Company has not identified any other new standards that it believes merit further discussion, and the Company expects that none would have a significant impact on its consolidated financial statements. |
ACCOUNTS RECEIVABLE (Tables)
ACCOUNTS RECEIVABLE (Tables) | 6 Months Ended |
Mar. 31, 2016 | |
Receivables [Abstract] | |
Schedule of accounts receivable, net of allowances for sales returns and doubtful accounts | Accounts receivable, net of allowances for sales returns and doubtful accounts, consisted of the following: March 31, September 30, Accounts receivable $ 20,344 $ 17,882 Less allowances (1,067 ) (1,084 ) $ 19,277 $ 16,798 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 6 Months Ended |
Mar. 31, 2016 | |
Inventory Disclosure [Abstract] | |
Schedule of inventories | Inventories were comprised of the following: March 31, September 30, Raw materials $ 26,508 $ 23,106 Work-in-process 11,576 9,755 Finished goods 23,407 26,579 $ 61,491 $ 59,440 |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 6 Months Ended |
Mar. 31, 2016 | |
Business Combinations [Abstract] | |
Schedule of preliminary allocation of the aggregate purchase price for the acquisitions to the aggregate assets acquired | The following reflects the preliminary allocation of the purchase prices for the fiscal 2016 acquisitions and the final allocation of the purchase price for the fiscal 2015 acquisition to the assets acquired: Fiscal 2016 Acquisition - Dynamic Health Fiscal 2016 Acquisition - Aubrey Organics Fiscal 2015 Acquisition Assets acquired: Current assets $ 3,821 $ 755 $ 41 Property, plant and equipment 644 6,004 — Goodwill 6,541 — — Intangible assets 8,020 450 40 $ 19,026 $ 7,209 $ 81 |
Schedule of unaudited pro forma information | Three Months Ended Six Months Ended Net sales $ 59,970 $ 117,591 Net income $ 4,161 $ 7,580 |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS (Tables) | 6 Months Ended |
Mar. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of changes in the carrying amount of goodwill | The change in the carrying amount of goodwill from September 30, 2015 to March 31, 2016 was as follows: Goodwill Accumulated Impairment 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 |
Schedule of carrying amounts of intangible assets | The carrying amounts of intangible assets at March 31, 2016 and September 30, 2015 were as follows: March 31, 2016 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 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 (1) Amounts include the impact of foreign currency translation adjustments. |
Schedule of estimated amortization expense related to intangible assets subject to amortization | Estimated future amortization expense related to the March 31, 2016 net carrying amount of $24,148 for intangible assets subject to amortization is as follows: Year Ending September 30, Estimated Amortization Expense 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 . |
DEBT (Tables)
DEBT (Tables) | 6 Months Ended |
Mar. 31, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of debt | Debt was comprised of the following: March 31, September 30, Long-term debt—revolving credit facility $ 47,500 $ 31,500 |
SEGMENTS (Tables)
SEGMENTS (Tables) | 6 Months Ended |
Mar. 31, 2016 | |
Segment Reporting [Abstract] | |
Schedule of net sales attributed to customers in the United States and foreign countries | Net sales attributed to customers in the United States and foreign countries for the three and six months ended March 31, 2016 and 2015 were as follows: Three Months Ended Six Months Ended 2016 2015 2016 2015 United States $ 52,350 $ 48,807 $ 102,400 $ 95,532 Foreign countries 7,142 6,597 13,051 12,916 $ 59,492 $ 55,404 $ 115,451 $ 108,448 |
Schedule of net sales by product group | The Company's net sales by product group for the three and six months ended March 31, 2016 and 2015 were as follows: Three Months Ended Six Months Ended 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. |
ACCOUNTS RECEIVABLE (Details)
ACCOUNTS RECEIVABLE (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Sep. 30, 2015 | |
Receivables [Abstract] | |||
Accounts receivable | $ 20,344 | $ 17,882 | |
Less allowances | (1,067) | (1,084) | |
Accounts receivable, net | $ 19,277 | $ 16,798 | [1] |
[1] | The condensed consolidated balance sheet as of September 30, 2015 has been prepared using information from the audited financial statements at that date. |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Sep. 30, 2015 | |
Inventory Disclosure [Abstract] | |||
Raw materials | $ 26,508 | $ 23,106 | |
Work-in-process | 11,576 | 9,755 | |
Finished goods | 23,407 | 26,579 | |
Inventories | $ 61,491 | $ 59,440 | [1] |
[1] | The condensed consolidated balance sheet as of September 30, 2015 has been prepared using information from the audited financial statements at that date. |
ACQUISITIONS (Details)
ACQUISITIONS (Details) $ in Thousands | Nov. 18, 2014USD ($) | Mar. 31, 2016USD ($) | Mar. 31, 2015USD ($) | Mar. 31, 2016USD ($)acquisition | Mar. 31, 2015USD ($)acquisition | Sep. 30, 2015USD ($) | |
ACQUISITIONS | |||||||
Number of business acquisitions | acquisition | 2 | 1 | |||||
Expected period for deduction of acquired intangible assets for tax purposes | 15 years | 15 years | |||||
Business acquisition goodwill amount | $ 6,541 | $ 6,541 | |||||
Expected period for deduction of acquired goodwill for tax purposes (years) | 15 years | ||||||
Net sales | 59,492 | $ 55,404 | $ 115,451 | $ 108,448 | |||
Gross profit | 30,329 | 27,255 | 58,437 | 53,110 | |||
Assets acquired: | |||||||
Goodwill | 30,925 | $ 30,925 | $ 24,384 | [1] | |||
Minimum | |||||||
ACQUISITIONS | |||||||
Amortization period | 6 years | 6 years | |||||
Maximum | |||||||
ACQUISITIONS | |||||||
Amortization period | 15 years | 15 years | |||||
Acquisitions | |||||||
ACQUISITIONS | |||||||
Aggregate purchase price in cash | $ 81 | $ 26,235 | |||||
Assets acquired: | |||||||
Current assets | $ 41 | ||||||
Property, plant and equipment | 0 | ||||||
Goodwill | 0 | ||||||
Intangible assets | 8,470 | 8,470 | 40 | ||||
Aggregate purchase price | $ 81 | ||||||
Dynamic Health Laboratories Inc. | |||||||
ACQUISITIONS | |||||||
Net sales | 8,355 | ||||||
Gross profit | 3,207 | ||||||
Assets acquired: | |||||||
Current assets | 3,821 | 3,821 | |||||
Property, plant and equipment | 644 | 644 | |||||
Goodwill | 6,541 | 6,541 | |||||
Intangible assets | 8,020 | 8,020 | |||||
Aggregate purchase price | 19,026 | 19,026 | |||||
Unaudited pro forma information | |||||||
Net sales | 59,970 | 117,591 | |||||
Net income | $ 4,161 | $ 7,580 | |||||
Aubrey Organics | |||||||
Assets acquired: | |||||||
Current assets | 755 | 755 | |||||
Property, plant and equipment | 6,004 | 6,004 | |||||
Goodwill | 0 | 0 | |||||
Intangible assets | 450 | 450 | |||||
Aggregate purchase price | $ 7,209 | $ 7,209 | |||||
[1] | The condensed consolidated balance sheet as of September 30, 2015 has been prepared using information from the audited financial statements at that date. |
GOODWILL AND INTANGIBLE ASSET24
GOODWILL AND INTANGIBLE ASSETS (Schedule of Goodwill) (Details) $ in Thousands | 6 Months Ended | |
Mar. 31, 2016USD ($) | ||
Goodwill [Roll Forward] | ||
Goodwill, Balance as of September 30, 2015 | $ 64,778 | |
Accumulated Impairment, Balance as of September 30, 2015 | (40,394) | |
Goodwill, net, Balance as of September 30, 2015 | 24,384 | [1] |
Goodwill attributable to fiscal 2016 acquisitions | 6,541 | |
Goodwill, Accumulated Impairment | 0 | |
Goodwill, Balance as of March 1, 2016 | 71,319 | |
Accumulated Impairment, Balance as of March 31, 2016 | (40,394) | |
Goodwill, net, Balance as of March 31, 2016 | $ 30,925 | |
[1] | The condensed consolidated balance sheet as of September 30, 2015 has been prepared using information from the audited financial statements at that date. |
GOODWILL AND INTANGIBLE ASSET25
GOODWILL AND INTANGIBLE ASSETS (Carrying Amounts of Intangible Assets) (Details) - USD ($) $ in Thousands | 6 Months Ended | ||
Mar. 31, 2016 | Sep. 30, 2015 | ||
Intangible assets subject to amortization: | |||
Gross Carrying Amount | $ 38,640 | $ 30,078 | |
Accumulated Amortization | (14,492) | (12,511) | |
Net Carrying Amount | 24,148 | 17,567 | |
Total intangible assets | |||
Gross Carrying Amount | 38,640 | 30,116 | |
Accumulated Amortization | (14,492) | (12,511) | |
Net Carrying Amount | 24,148 | 17,605 | [1] |
Trademarks/tradenames/licenses | |||
Intangible assets not subject to amortization: | |||
Carrying Amount | 0 | 38 | |
Trademarks/tradenames/licenses | |||
Intangible assets subject to amortization: | |||
Gross Carrying Amount | 13,893 | 12,470 | |
Accumulated Amortization | (2,587) | (1,966) | |
Net Carrying Amount | $ 11,306 | 10,504 | |
Weighted- Average Amortization Period (Years) | 11 years | ||
Total intangible assets | |||
Accumulated Amortization | $ (2,587) | (1,966) | |
Customer relationships/non-compete agreements | |||
Intangible assets subject to amortization: | |||
Gross Carrying Amount | 23,975 | 16,836 | |
Accumulated Amortization | (11,133) | (9,773) | |
Net Carrying Amount | $ 12,842 | 7,063 | |
Weighted- Average Amortization Period (Years) | 7 years | ||
Total intangible assets | |||
Accumulated Amortization | $ (11,133) | (9,773) | |
Developed software and technology | |||
Intangible assets subject to amortization: | |||
Gross Carrying Amount | 772 | 772 | |
Accumulated Amortization | (772) | (772) | |
Net Carrying Amount | $ 0 | 0 | |
Weighted- Average Amortization Period (Years) | 5 years | ||
Total intangible assets | |||
Accumulated Amortization | $ (772) | $ (772) | |
[1] | The condensed consolidated balance sheet as of September 30, 2015 has been prepared using information from the audited financial statements at that date. |
GOODWILL AND INTANGIBLE ASSET26
GOODWILL AND INTANGIBLE ASSETS (Schedule of Estimated Future Amortization Expense) (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Sep. 30, 2015 |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||
2,016 | $ 1,944 | |
2,017 | 3,582 | |
2,018 | 3,391 | |
2,019 | 2,964 | |
2,020 | 2,875 | |
Thereafter | 9,392 | |
Net Carrying Amount | $ 24,148 | $ 17,567 |
DEBT (Details)
DEBT (Details) - USD ($) | 6 Months Ended | |||
Mar. 31, 2016 | Sep. 30, 2015 | [1] | Nov. 04, 2014 | |
Debt Instruments [Line Items] | ||||
Long-term debt—revolving credit facility | $ 47,500,000 | $ 31,500,000 | ||
Statutory Reserve Rate | ||||
Debt Instruments [Line Items] | ||||
Reference rate | one-month Eurodollar Rate | |||
Margin over reference rate (as a percent) | 1.00% | |||
Restated Credit Agreement | ||||
Debt Instruments [Line Items] | ||||
Available credit borrowings | $ 100,000,000 | |||
Deferred financing cost | 420,000 | |||
Outstanding revolving credit borrowings | $ 47,500,000 | |||
Weighted-average interest rate (as a percent) | 2.12% | |||
Quarterly fee on the unused balance (as a percent) | 0.25% | |||
Restated Credit Agreement | Eurodollar Rate | ||||
Debt Instruments [Line Items] | ||||
Reference rate | Eurodollar Rate | |||
Interval for payment of accrued interest under option one | 1 month | |||
Interval for payment of accrued interest under option two | 2 months | |||
Interval for payment of accrued interest under option three | 3 months | |||
Restated Credit Agreement | Prime Lending Rate | ||||
Debt Instruments [Line Items] | ||||
Reference rate | Prime Lending Rate | |||
Restated Credit Agreement | Federal Funds Rate | ||||
Debt Instruments [Line Items] | ||||
Reference rate | Federal Funds Rate | |||
Margin over reference rate (as a percent) | 0.50% | |||
Credit Agreement, accordion feature | ||||
Debt Instruments [Line Items] | ||||
Available credit borrowings | $ 130,000,000 | |||
[1] | The condensed consolidated balance sheet as of September 30, 2015 has been prepared using information from the audited financial statements at that date. |
SHARE PURCHASES (Details)
SHARE PURCHASES (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Mar. 31, 2016 | Mar. 31, 2015 | |
Share purchases | ||||
Additional number of shares authorized to be repurchased (in shares) | 335,321 | 335,321 | ||
Common Stock | ||||
Share purchases | ||||
Shares of common stock purchased (in shares) | 80,529 | 68,463 | 145,940 | 117,025 |
Aggregate price at which shares of common stock purchased | $ 1,962 | $ 1,278 | $ 3,566 | $ 2,352 |
Treasury stock (in shares) | 3,354 | 2,000 | 3,354 | 2,000 |
STOCK OPTIONS AND OTHER EQUIT29
STOCK OPTIONS AND OTHER EQUITY AWARDS (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Proceeds from Stock Options exercised | $ 9 | |
Tax benefit realized from exercise of stock options | 1 | |
Gain on exercise of stock options by optionees | $ 3 | |
Stock options | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Options outstanding (in shares) | 0 |
STOCK OPTIONS AND OTHER EQUIT30
STOCK OPTIONS AND OTHER EQUITY AWARDS (Details 2) - shares | 3 Months Ended | 6 Months Ended |
Mar. 31, 2015 | Mar. 31, 2015 | |
Stock options | ||
Antidilutive securities | ||
Anti-dilutive stock options (in shares) | 0 | 0 |
STOCK OPTIONS AND OTHER EQUIT31
STOCK OPTIONS AND OTHER EQUITY AWARDS (Details 3) - 2013 Plan - USD ($) $ in Thousands | Dec. 11, 2015 | Dec. 11, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Mar. 31, 2016 | Jan. 28, 2013 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Shares of common stock reserved for issuance (in shares) | 800,000 | |||||
Equity compensation payments (in shares) | 22,664 | 24,827 | ||||
Equity compensation payments | $ 556 | $ 504 | ||||
Shares of common stock available for issuance (in shares) | 720,721 |
SEGMENTS (Details)
SEGMENTS (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2016USD ($) | Mar. 31, 2015USD ($) | Mar. 31, 2016USD ($)segment | Mar. 31, 2015USD ($) | |
Segment Reporting [Abstract] | ||||
Number of operating segments | segment | 1 | |||
SEGMENTS | ||||
Net sales | $ 59,492 | $ 55,404 | $ 115,451 | $ 108,448 |
Branded nutritional supplements and other natural products | ||||
SEGMENTS | ||||
Net sales | 53,687 | 49,102 | 104,186 | 96,190 |
Other | ||||
SEGMENTS | ||||
Net sales | 5,805 | 6,302 | 11,265 | 12,258 |
Increase in product group net sales from prior year due to classify certain net sales | 781 | 1,570 | ||
United States | ||||
SEGMENTS | ||||
Net sales | 52,350 | 48,807 | 102,400 | 95,532 |
Foreign countries | ||||
SEGMENTS | ||||
Net sales | $ 7,142 | $ 6,597 | $ 13,051 | $ 12,916 |