Attached files
| file | filename |
|---|---|
| 8-K - Vitacost.com, Inc. | v194482_8-k.htm |
| EX-99.2 - Vitacost.com, Inc. | v194482_ex99-2.htm |
Investor
Contact:
Vitacost.com
Kathleen
Reed
Director
of Investor Relations
561-982-4180
or
ICR,
Inc
John
Mills
Senior
Managing Director
310-954-1105
VITACOST.COM,
INC. ANNOUNCES SECOND QUARTER 2010 RESULTS
BOCA
RATON, Fla., August 16, 2010 – Vitacost.com, Inc. (NASDAQ: VITC), a leading
online retailer and direct marketer of health and wellness products, today
reported financial results for the second quarter ended June 30,
2010.
|
·
|
Net
Sales increased 14.1% year-over-year to $54.0 million, compared to $47.3
million for the second quarter of
2009
|
|
·
|
Back
Orders improved to normalized levels by the end of the
quarter
|
Second
Quarter 2010 Results
For the
second quarter of 2010, net sales increased 14.1% to $54.0 million from net
sales of $47.3 million for the second quarter of the prior year. This
increase was driven primarily by both of the Company's main sales categories;
proprietary and third party products. Excluding advertising and fees
earned from affiliate programs, sales of third party products increased 18.9%
year-over-year in the second quarter of 2010. Sales of the Company’s
proprietary brands increased 4.7% year-over-year in the second
quarter.
Despite
growth on a year-over-year basis in both primary sales categories, second
quarter reported revenue declined 5.6% sequentially from the $57.2 million in
revenue reported in the first quarter of 2010. In addition, second
quarter revenue was below prior Company expectations for revenue to be in the
range of $57.2 to $58.2 million. Sales were negatively impacted in
the early part of the quarter as the Company continued to work through the
manufacturing logistics issue, previously disclosed in the first
quarter. During the process of reducing the level of back orders to
normalized levels, the Company reduced marketing spending to not exacerbate the
fulfillment issue on its proprietary products.
Sales
were also negatively impacted in the latter part of the second quarter from an
increased competitive environment as many companies offered deep
discounts. Vitacost responded and increased promotional spending
including offering “free shipping” with various order sizes and product
combinations.
Gross
profit for the second quarter of 2010 decreased 5.5% to $14.3 million, compared
to $15.1 million in the second quarter of the prior year. The Company's gross
profit margin decreased 550 basis points to 26.4% in the second quarter versus
31.9% in the second quarter of 2009. Gross margin was negatively impacted by a
negative mix shift with roughly 70.0% of total product sales stemming from lower
margin third party revenue in the second quarter of 2010 compared to 67.3% in
the second quarter of 2009. In addition, gross margin was also
negatively impacted by increased shipping expenses due to continued high levels
of split shipments as the Company worked to decrease back orders to normalized
levels in the early part of the quarter, as well as the introduction of “free
shipping” promotions which began in June in response to the competitive
environment.
Fulfillment
expense was $3.8 million compared to $2.0 million in the same period last year.
As a percent of sales, fulfillment expense increased 270 basis points
year-over-year to 7.0% compared to 4.3% in the same period last
year. The year-over-year increase on a percentage basis, was
partially due to the lower sales base. As previously communicated,
the Company expected fulfillment expenses to be higher in 2010 due to the
expansion of its distribution centers in Las Vegas, NV and in Lexington,
NC. In the early part of the second quarter, the Company operated
duplicate distribution centers in Las Vegas to ensure there were no disruptions
to service levels as it transitioned over to the new facility. The
Company expects the North Carolina distribution center expansion and upgrade to
be complete in 2011.
Sales and
marketing expense increased approximately $2.0 million, or 62.9%, to $5.1
million for the three months ended June 30, 2010 from $3.2 million for the three
months ended June 30, 2009. As a percentage of sales, sales and marketing
expense increased to 9.5% for the three months ended June 30, 2010 from 6.7% for
the three months ended June 30, 2009. Sales and marketing expense
both on a dollar basis and as a percentage of sales increased sequentially as
the Company moved throughout the quarter and began to increase marketing
spending as the proprietary out of stock issue was eliminated and in response to
increased competition. The increase in sales and marketing expense
was primarily due to increased spending on renting of certain customer lists of
approximately $650,000, increased on-line advertising of approximately $600,000
and an increase in staffing levels in our call center to meet increased call
volume of approximately $200,000.
Total
general and administrative expense was $7.3 million in the second quarter, up
$3.3 million year-over-year. Depreciation and amortization expense
increased from $863 thousand in the second quarter of 2009 to $1.3 million in
the second quarter of 2010 primarily related to the Las Vegas distribution
center. Total general and administrative expenses also included an
estimated $1.4 million of expense associated with the contested proxy
solicitation and other non-recurring items. Excluding depreciation and
amortization, and the $1.4 million in one-time legal/non-recurring expenses,
general and administrative expenses were $4.7 million, compared to $3.2 million
in the same period last year. The majority of this increase was due to increased
costs associated with being a public company.
The
Company reported an operating loss of $2.0 million for the second quarter of
2010 compared to operating income of $5.8 million in the same period a year
ago. Due to the net operating loss, Vitacost reported a tax benefit of $692,000 in the
quarter. Excluding the $1.4 million in one-time legal and other
non-recurring items in the quarter, the company would have reported a tax benefit of $247,000 in the
quarter.
Reported
net income for the second quarter of 2010 was a loss of $1.4 million or $0.05
per share calculated on a weighted average basic share count of 27.7 million
shares versus net income of $3.5 million or $0.15 per share for the comparable
period last year calculated off a base of 23.5 million shares
outstanding. Excluding the $1.4 million in one-time legal and
non-recurring expenses previously mentioned, the Company would have reported a
loss per share of $0.02. We are using basic shares outstanding in our
EPS calculation as the quarter was anti-dilutive. Second quarter 2010
earnings per share came in below prior company expectations of $0.09 to
$0.10. Adjusted EBITDA (earnings before interest, taxes,
depreciation, amortization and related non-cash compensation expense) for the
second quarter of 2010 was a loss of $484 thousand, compared to $6.8 million in
the previous year.
Balance
Sheet/Cash Flow Highlights
The
Company ended the second quarter of 2010 with cash, cash equivalents, and
securities available for sale of $40.4 million as of June 30, 2010 compared to
$44.4 million as of December 31, 2009. Cash flow from operations for
the six-months ended June 30, 2010 was $7.4 million, up $1.6 million from the
same period a year ago.
Strategic
Business Review and Management Change
As
previously announced on July 30, 2010, the Board of Directors has undertaken a
strategic review of the business and will provide updates as
appropriate. As a result, the Company will not be providing updated
guidance for the remainder of this year. Separately, the Board has
named industry veteran and the former founder and CEO of Vitamin Shoppe, Inc.,
Jeffrey Horowitz, as the company’s interim Chief Executive Officer effective
immediately.
The
Company will not be holding its previously announced second quarter earnings
call which was originally scheduled for 5:00 p.m. EDT today.
About
Vitacost.com, Inc.
Vitacost.com,
Inc. (NASDAQ: VITC) is a leading online retailer and direct marketer of health
and wellness products, including dietary supplements such as vitamins, minerals,
herbs or other botanicals, amino acids and metabolites, as well as cosmetics,
organic body and personal care products, sports nutrition and health
foods. Vitacost.com, Inc. sells these products directly to consumers
through its website, www.vitacost.com, as well as through its
catalogs. Vitacost.com, Inc. strives to offer its customers the
broadest product selection of healthy living products, while providing superior
customer service and timely and accurate delivery.
Forward-Looking
Statements
Except
for historical information contained herein, the statements in this release are
forward-looking and made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements made
herein, which include management's expected results of operations for the second
quarter of 2010, and the full year of 2010, involve known and unknown risks and
uncertainties, which may cause Vitacost's actual results in current or future
periods to differ materially from forecasted results. Those risks and
uncertainties include, among other things, the current global economic downturn
or recession; difficulty expanding its manufacturing and distribution
facilities; significant competition in its industry; unfavorable publicity or
consumer perception of its products on the Internet; the incurrence of material
product liability and product recall costs; Inability to defend intellectual
property claims; costs of compliance and its failure to comply with government
regulations; its failure to keep pace with the demands of our customers for new
products; disruptions in its manufacturing system, including information
technology systems, or losses of manufacturing certifications; and the lack of
long-term experience with human consumption of some of its products with
innovative ingredients. Those and other risks are more fully described in
Vitacost's filings with the Securities and Exchange Commission, including the
Registration Statement on Form S-1, as amended, filed in connection with the
Company's initial public offering as well as the Company's form 10-K filed for
the full year ending December 31, 2009.
VITACOST.COM,
INC. BALANCE SHEET
Balance
Sheets
June
30, 2010 and December 31, 2009
|
June
30, 2010
(unaudited)
|
December
31, 2009
|
|||||||
|
Assets
|
||||||||
|
Current
Assets
|
||||||||
|
Cash
and cash equivalents
|
$ | 5,200,757 | $ | 8,658,157 | ||||
|
Securities
available for sale
|
35,173,777 | 35,787,227 | ||||||
|
Accounts
receivable
|
850,565 | 735,355 | ||||||
|
Other
receivables
|
1,107,741 | 1,055,372 | ||||||
|
Inventory,
net
|
30,603,063 | 28,096,884 | ||||||
|
Prepaid
expenses
|
2,816,430 | 1,988,538 | ||||||
|
Deferred
tax asset
|
1,067,966 | 1,167,724 | ||||||
|
Total
current assets
|
76,820,299 | 77,489,257 | ||||||
|
Property
and Equipment, net
|
33,854,239 | 21,961,903 | ||||||
|
Goodwill
|
2,200,000 | 2,200,000 | ||||||
|
Intangible
Assets, net
|
7,196 | 9,446 | ||||||
|
Deposits
|
191,568 | 4,656,128 | ||||||
|
Deferred
Tax Asset
|
1,377,605 | 1,361,817 | ||||||
| 3,776,369 | 8,227,391 | |||||||
|
Total
assets
|
$ | 114,450,907 | $ | 107,678,551 | ||||
|
Liability
and Stockholders' Equity
|
||||||||
|
Current
Liabilities
|
||||||||
|
Line
of credit
|
$ | 1,322,075 | $ | 3,458,183 | ||||
|
Current
maturities of note payable
|
1,107,881 | 1,090,969 | ||||||
|
Current
maturities of capital lease obligation
|
4,935 | 35,452 | ||||||
|
Accounts
payable
|
23,975,073 | 18,052,495 | ||||||
|
Deferred
revenue
|
754,461 | 1,919,352 | ||||||
|
Accrued
expenses
|
5,198,090 | 3,282,476 | ||||||
|
Income
taxes payable
|
- | 51,221 | ||||||
|
Total
current liabilities
|
32,362,515 | 27,890,148 | ||||||
|
Notes
Payable, less current maturities
|
4,254,340 | 4,820,042 | ||||||
|
Interest
Rate Swap Liability
|
517,194 | 468,719 | ||||||
|
Total
liabilities
|
$ | 37,134,049 | $ | 33,178,909 | ||||
|
Commitments
and Contingencies
|
||||||||
|
Stockholders'
Equity
|
||||||||
|
Preferred
stock, par value $.00001 per share; authorized 25,000,000; no shares
issued and outstanding at June 30, 2010 and December 31,
2009
|
$ | - | $ | - | ||||
|
Common
stock, par value $.00001 per share; authorized 100,000,000; 27,755,453 and
27,488,353 shares issued and outstanding at June 30, 2010 and December 31,
2009, respectively
|
278 | 275 | ||||||
|
Additional
paid-in capital
|
73,661,567 | 71,932,256 | ||||||
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Accumulated
other comprehensive Income
|
3,838 | - | ||||||
|
Retained
earnings (deficit)
|
3,651,175 | 2,567,111 | ||||||
|
Total
stockholders' equity
|
77,316,858 | 74,499,642 | ||||||
|
Total
liabilities and stockholders' equity
|
$ | 114,450,907 | $ | 107,678,551 | ||||
VITACOST.COM,
INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
– For the
Three Months Ended June 30, 2010 and June 30, 2009
Income
Statement ($ in
000s)
(Unaudited)
|
Quarter
Ended
|
|||||||||||||||||||||
|
June
30, 2010
|
June
30, 2009
|
||||||||||||||||||||
|
As
|
Excluding
|
As
|
Excluding
|
||||||||||||||||||
|
Reported
|
Adjustments
|
Adjustments
|
Reported
|
Adjustments
|
Adjustments
|
||||||||||||||||
|
Net
Sales
|
$ | 53,951.9 | $ | 53,951.9 | $ | 47,278.5 | $ | 47,278.5 | |||||||||||||
|
Cost
of Goods Sold
|
39,691.9 | 39,691.9 | 32,183.4 | 32,183.4 | |||||||||||||||||
|
Gross
Profit
|
14,260.0 | 14,260.0 | 15,095.1 | 15,095.1 | |||||||||||||||||
|
Fulfillment
|
3,782.8 | 3,782.8 | 2,026.0 | 2,026.0 | |||||||||||||||||
|
Sales
& Marketing
|
5,134.2 | 5,134.2 | 3,151.0 | 3,151.0 | |||||||||||||||||
|
General
& Administrative
|
7,343.0 | 1,358.5 | 5,984.5 | 4,088.5 | 4,088.5 | ||||||||||||||||
|
Total
Operating Expenses
|
16,260.0 | 14,901.5 | 9,265.5 | 9,265.5 | |||||||||||||||||
|
Operating
Income
|
(2,000.0 | ) | (641.5 | ) | 5,829.6 | 5,829.6 | |||||||||||||||
|
Interest
Income
|
32.4 | 32.4 | 21.1 | 21.1 | |||||||||||||||||
|
Interest
Expense
|
(150.1 | ) | (150.1 | ) | (56.6 | ) | (56.6 | ) | |||||||||||||
|
Other
Income (Expense)
|
4.5 | 4.5 | 1.3 | 1.3 | |||||||||||||||||
|
Income
(loss) before taxes
|
(2,113.3 | ) | (754.8 | ) | 5,795.5 | 5,795.5 | |||||||||||||||
|
Income
tax (expense) benefit
|
692.1 | 444.9 | 247.2 | (2,256.8 | ) | (2,256.8 | ) | ||||||||||||||
|
Net
Income (loss)
|
$ | (1,421.3 | ) | $ | (507.6 | ) | $ | 3,538.7 | $ | 3,538.7 | |||||||||||
|
EPS
|
|||||||||||||||||||||
|
Basic
|
$ | (0.05 | ) | $ | (0.02 | ) | $ | 0.15 | $ | 0.15 | |||||||||||
|
Fully
Diluted*
|
$ | (0.05 | ) | $ | (0.02 | ) | $ | 0.15 | $ | 0.15 | |||||||||||
|
Basic
Shares Outstanding
|
27,730.7 | 27,730.7 | 22,880.8 | 22,880.8 | |||||||||||||||||
|
Fully
Diluted Shares Outstanding*
|
27,730.7 | 27,730.7 | 23,476.0 | 23,476.0 | |||||||||||||||||
*Basic
Shares outstanding used for fully diluted calculation in 2Q2010 as quarter was
anti-dilutive
Source:
Vitacost.com
VITACOST.COM,
INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
– For the
Six Months Ended June 30, 2010 and June 30, 2009
Income
Statement ($ in 000s)
(Unaudited)
|
Six
Months Ended
|
|||||||||||||||||||||
|
June
30, 2010
|
June
30, 2009
|
||||||||||||||||||||
|
As
|
Excluding
|
As
|
Excluding
|
||||||||||||||||||
|
Reported
|
Adjustments
|
Adjustments
|
Reported
|
Adjustments
|
Adjustments
|
||||||||||||||||
|
Net
Sales
|
$ | 111,128.0 | $ | 111,128.0 | $ | 93,162.5 | $ | 93,162.5 | |||||||||||||
|
Cost
of Goods Sold
|
80,500.3 | 80,500.3 | 63,065.5 | 63,065.5 | |||||||||||||||||
|
Gross
Profit
|
30,627.8 | 30,627.8 | 30,097.0 | 30,097.0 | |||||||||||||||||
|
Fulfillment
|
6,986.0 | 6,986.0 | 3,732.2 | 3,732.2 | |||||||||||||||||
|
Sales
& Marketing
|
8,883.4 | 8,883.4 | 6,298.1 | 6,298.1 | |||||||||||||||||
|
General
& Administrative
|
12,969.9 | 1,358.5 | 11,611.4 | 8,150.4 | 8,150.4 | ||||||||||||||||
|
Total
Operating Expenses
|
28,839.3 | 27,480.8 | 18,180.7 | 18,180.7 | |||||||||||||||||
|
Operating
Income
|
1,788.4 | 3,147.0 | 11,916.3 | 11,916.3 | |||||||||||||||||
|
Interest
Income
|
60.9 | 60.9 | 42.3 | 42.3 | |||||||||||||||||
|
Interest
Expense
|
(277.3 | ) | (277.3 | ) | (238.8 | ) | (238.8 | ) | |||||||||||||
|
Other
Income (Expense)
|
16.1 | 16.1 | 23.9 | 23.9 | |||||||||||||||||
|
Income
(loss) before taxes
|
1,588.1 | 2,946.7 | 11,743.6 | 11,743.6 | |||||||||||||||||
|
Income
Tax (expense) benefit
|
(504.1 | ) | 444.9 | (948.9 | ) | (4,554.5 | ) | (4,554.5 | ) | ||||||||||||
|
Net
Income (loss)
|
$ | 1,084.1 | $ | 1,997.7 | $ | 7,189.2 | $ | 7,189.2 | |||||||||||||
|
EPS
|
|||||||||||||||||||||
|
Basic
|
$ | 0.04 | $ | 0.07 | $ | 0.31 | $ | 0.31 | |||||||||||||
|
Fully
Diluted
|
$ | 0.04 | $ | 0.07 | $ | 0.31 | $ | 0.31 | |||||||||||||
|
Basic
Shares Outstanding
|
27,643.0 | 27,643.0 | 22,880.8 | 22,880.8 | |||||||||||||||||
|
Fully
Diluted Shares Outstanding
|
28,448.9 | 28,448.9 | 23,481.6 | 23,481.6 | |||||||||||||||||
Source: Vitacost.com
VITACOST.COM,
INC. RECONCILIATION OF GAAP OPERATING INCOME TO ADJUSTED EBITDA
EBITDA
(earnings before interest, income taxes, depreciation, and amortization,
including goodwill and intangible asset impairment) is not a measure of
financial performance under generally accepted accounting principles, or GAAP,
but is used by some investors to determine the strength of a company's cash
flow. The presentation of this additional information should not be considered
in isolation or as a substitute for results prepared in accordance with
generally accepted accounting principles. The reconciliation set forth above is
provided in accordance with Regulation G and reconciles EBITDA, with the most
directly comparable GAAP-based financial measure. EBITDA is not calculated in
the same manner by all companies and accordingly is not necessarily comparable
to similarly entitled measures of other companies and may not be an appropriate
measure for performance relative to other companies. EBITDA is not intended to
represent and should not be considered more meaningful than, or as an
alternative to, measures of operating performance as determined in accordance
with GAAP.
|
Three
Months Ended
|
||||||||
|
June 30, 2010
|
June
30, 2009
|
|||||||
|
Operating
(loss) income
|
(2,000.0 | ) | 5,829.6 | |||||
|
FAS
123R - Stock Option Expense
|
193.0 | 126.3 | ||||||
|
Depreciation
and amortization
|
1,322.8 | 863.0 | ||||||
|
Adjusted
EBITDA
|
$ | (484.2 | ) | $ | 6,818.9 | |||
|
Six
Months Ended
|
||||||||
|
June 30, 2010
|
June
30, 2009
|
|||||||
|
Operating
(loss) income
|
1,788.4 | 11,916.3 | ||||||
|
FAS
123R - Stock Option Expense
|
349.5 | 226.3 | ||||||
|
Depreciation
and amortization
|
2,405.6 | 1,702.3 | ||||||
|
Adjusted
EBITDA
|
$ | 4,543.5 | $ | 13,844.9 | ||||
|
Source: Vitacost.com
|
||||||||
QUARTERLY
NET SALES BY PRODUCT LINE – For the Three and Six Months Ended June 30, 2010 and
June 30, 2009
|
Three
Months Ended
|
||||||||
|
June
30, (unaudited)
|
||||||||
|
Third-party
product (1)
|
$ | 35,203.0 | $ | 29,956.0 | ||||
|
Nutraceutical
Sciences Institute and other proprietary products
|
15,007.0 | 14,334.0 | ||||||
|
Billed
shipping and handling
|
3,742.0 | 2,989.0 | ||||||
| $ | 53,952.0 | $ | 47,279.0 | |||||
(1)
Third-party product sales include advertising and fees earned from affiliate
programs of $186K in 2Q10 and $512K in 2Q09.
|
Six
Months Ended
|
||||||||
|
June
30, (unaudited)
|
||||||||
|
Third-party
product (1)
|
$ | 72,351.0 | $ | 58,329.0 | ||||
|
Nutraceutical
Sciences Institute and other proprietary products
|
30,896.0 | 28,339.0 | ||||||
|
Billed
shipping and handling
|
7,881.0 | 6,495.0 | ||||||
| $ | 111,128.0 | $ | 93,163.0 | |||||
(1)
Third-party product sales include advertising and fees earned from affiliate
programs of $529K for the six months ended June 30, 2010 and $1.04M
for the six months ended June 30, 2009