Bill Gay, CEO of Nutraceutical, said most of the sales growth came from acquisitions. “Fiscal 2014 growth came primarily from acquisitions completed during the last two fiscal years. Our fundamental business strategy of acquiring and consolidating brands and products is critical to our long-term objective of profitable and sustainable growth,” he said.
Nutraceutical now has a stable of dozens of brands in supplements, healthy foods and cosmetics sold in the natural food store channel. Acquiring so many businesses so rapidly can bring with it some hurdles, Gay said, including finding it necessary to reformulate some products.
“Fiscal 2014 net sales growth from certain acquisitions was less than expected primarily because of the integration complexity encountered in the internal reformulation of several hundred previously co-packed products in order to ensure predecessor label claims are met. As a result, operational synergies and further anticipated net sales growth from these recent acquisitions are targeted for the later part of fiscal 2015,” Gay said.
“The decrease in fiscal 2014 net income was primarily a result of increased amortization and depreciation expense relating to acquisitions and capital investments made to enhance future growth and reduce costs, including a substantial investment in new laboratory facilities and equipment. These and similar investments we have made and continue to make in technology, acquisitions and expanding manufacturing capacity are important for future growth capacity and reduced operational costs,” he said.
Earnings details
Net sales for the fiscal 2014 fourth quarter were $52.4 million compared to $51.3 million for the same quarter of fiscal 2013. For the fourth quarter of fiscal 2014, net income was $3.4 million, or $0.35 diluted earnings per share, compared to net income of $4.1 million, or $0.42 diluted earnings per share, for the same quarter of fiscal 2013. Net income for the fourth quarter of fiscal 2014 included a non-cash intangible asset impairment charge related to a trade name of $0.2 million, net of tax, or $.02 per diluted share. Net income for the fourth quarter of fiscal 2013 included non-cash intangible asset impairment charges related to certain trade names of $0.1 million, net of tax, or $0.01 per diluted share.
Net sales for the fiscal year ended September 30, 2014 were $214.5 million compared to $208.4 million for fiscal 2013. For the fiscal year ended September 30, 2014, net income was $15.9 million, or $1.62 diluted earnings per share (including the intangible asset impairment charge), compared to net income of $17.0 million, or $1.73 diluted earnings per share (including the intangible asset impairment charges), for fiscal 2013.
Operating cash flow for the fiscal year ended September 30, 2014 was $20.0 million compared to $26.8 million for fiscal 2013. The operating cash flow for the fiscal year ended September 30, 2014, combined with net borrowings of $10.5 million and existing cash, was primarily used to invest $16.4 million in acquisitions of natural product businesses, $11.3 million in purchases of property, plant and equipment and $5.1 million in purchases of common stock for treasury.