Nutraceutical International reports fiscal 2016 Q1 results

The acquisition and integration of innovative brands such as Dynamic Health, which has liquid manufacturing capabilities, is fundamentally important to the company's long-term growth objectives

Nutraceutical International has reported results for the fiscal 2016 first quarter ended 31 December 2015. Net sales for the fiscal 2016 first quarter were US$56.0m, compared with $53.0m for the same quarter of fiscal 2015.

For the first quarter of fiscal 2016, net income was $4.2m, or $0.45 diluted earnings per share, compared with a net income of $3.4m, or $0.35 diluted earnings per share, for the same quarter of fiscal 2015.

Operating cash flow for the fiscal 2016 first quarter was $6.9m, compared with $3.0m for the same quarter of fiscal 2015. The fiscal 2016 first quarter operating cash flow, combined with net borrowings of $16.5m, was primarily used to invest $19.0m in an acquisition of a natural product business, $2.1m in purchases of property, plant and equipment and $1.6m in purchases of common stock for treasury.

Bill Gay, Chairman and Chief Executive Officer, commented: 'Our fiscal 2016 first quarter net sales growth of 5.5% was primarily generated from our October 2015 acquisition of Dynamic Health. Operational leverage relating to this acquisition enabled quarterly Adjusted EBITDA to expand by $1.5m to $10.3m and net income to increase by $0.8m to $4.2m. We are hopeful that future potential synergies from this acquisition will continue to strengthen our business following the relocation of Dynamic Health's manufacturing operations to Tulsa, OK, which we are targeting for the last half of calendar 2016.'

Mr Gay stated: 'The acquisition and integration of innovative brands such as Dynamic Health, which has liquid manufacturing capabilities, is fundamentally important to our long-term growth objectives. Management seeks to acquire unique brands and products that are complementary to our existing business model and enhance our ability to serve our key customer base, the health and natural food channel. Dynamic Health's liquid production expertise expands our product offerings into faster growing product categories such as therapeutic organic fruit juice concentrates, organic and non-organic liquid nutritional supplements, organic liquid consumable juice drinks and organic vegetable drinks. Business integrations of any size are complex and time-consuming, but we believe we have the management talent and resources to accomplish this relocation and integration while minimising disruption.'

Mr Gay continued: 'Our balance sheet and cash flows remain strong and this recent purchase will provide a solid base for additional acquisitions during the coming years. Key stakeholders such as our lending group continue to be supportive of our strategy. The integration of numerous acquisitions during the past 20 plus years has demonstrated the potential of our platform business model. Our focus remains on identifying acquisition opportunities that offer a unique add-on to our existing product mix. Equally important is leveraging anticipated operational synergies to achieve our long-term growth and financial objectives. For more than 20 years, our strategy has been to actively acquire quality brands and integrate their operations, which includes centralizing and consolidating distribution, marketing, sales and administrative functions and costs.'

Mr Gay also stated: 'These integration steps have been critical to the long-term success of the business model. For example, depending on the size of the business acquired, we have made an effort to discontinue underperforming products where possible and we have successfully combined brands into brand collections. Eliminating or combining duplicative products across brands has the effect of reducing sales slightly while enhancing gross margins. We have also tried to limit product and customer concentrations, which helps to reduce excessive financial exposure and volatility. However, as we have repeated this acquisition and integration process many times, we believe the overall result is becoming more obvious — the creation of a business that has the potential to generate positive returns on a relatively consistent basis, even in difficult environments. We thank our shareholders, managers, employees and customers for their ongoing support of this effort and of our business.'

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