NTY Nbty Inc.

NBTY Reports Second Quarter Results BOHEMIA, N.Y., April 26 /PRNewswire-FirstCall/ -- NBTY, Inc. (NYSE:NTY) (http://www.nbty.com/), a leading global manufacturer and marketer of nutritional supplements, today announced results for the fiscal second quarter ended March 31, 2005. For the fiscal second quarter ended March 31, 2005, sales increased to $443 million compared to sales of $440 million for the fiscal second quarter ended March 31, 2004. Net income for the fiscal second quarter ended March 31, 2005 was $21 million, or $0.30 per diluted share, compared to $41 million, or $0.60 per diluted share for the fiscal second quarter ended March 31, 2004. At March 31, 2005, NBTY's total assets were $1.3 billion and working capital was $412 million. The Company increased inventory by $52 million for the fiscal second quarter of 2005. Approximately 75% of this increase was to ensure supply of scarce ingredients for the Company's joint care products, including Osteo Bi-Flex, Flex-a-min and Knox NutraJoint, with the balance of the increase representing inventories built to ensure adequate raw material supplies for other popular items in short supply. Results for the fiscal second quarter of 2005 were affected by certain factors including an increase in raw material costs not passed on to customers. In addition, results were also adversely impacted by a $15 million increase in advertising costs, representing a 79% increase over the prior like period. The Company undertook this initiative to build brand awareness and to retain market share in a difficult environment. The Company expects no change in its advertising strategy in the near future. The industry has continued to be highly competitive, and the Company's strategy is to increase its market share in this overall weak period. For the first six months of fiscal 2005, sales increased 5% to $863 million compared to $825 for the first six months of fiscal 2004. Net income for the first six months of fiscal 2005 was $51 million, or $0.73 per diluted share, compared to $65 million, or $0.94 per diluted share, for the first six months of fiscal 2004. OPERATIONS FOR THE FISCAL SECOND QUARTER ENDED MARCH 31, 2005 During fiscal second quarter of 2005, sales for the US Nutrition wholesale division, which markets Nature's Bounty and Sundown brands, decreased 4% to $183 million from $189 million for the comparable prior period of fiscal 2004. The decrease is due primarily to negative publicity surrounding Vitamin E and a contraction in the market for low carb related products. US Nutrition continues to provide its mass market customers with consumer sales and preference data generated by the Company's Vitamin World retail stores and Puritan's Pride direct response/e-commerce operations. On February 25, 2005, NBTY expanded its retail presence into Canada with a $5 million acquisition of Le Naturiste Jean-Marc Brunet, a chain of 103 stores located throughout Quebec. Le Naturiste is a premier retail establishment in business for more than 35 years. This acquisition generated sales of approximately $2 million. Following this acquisition, NBTY now refers to its US Retail Division as North American Retail. North American Retail/Vitamin World division sales remain unchanged from the prior like period at $56 million. North American Retail operations reported a pre-tax loss of $5 million during this quarter. EBITDA (as defined in non-GAAP financial measures below) was also negative at $3 million for the fiscal second quarter of 2005, compared to a positive EBITDA of $4 million for the fiscal second quarter of 2004. Same store sales decreased 5% during this quarter. Vitamin World opened 4 new stores, closed 7 stores and at the end of the quarter operated 557 stores nationwide. NBTY's European Retail sales for the fiscal second quarter increased 19% to $147 million from $123 million for the fiscal second quarter a year ago. The European Retail same store sales for the fiscal second quarter 2005 increased 15% (12% in local currency). The European Retail division continues to leverage its premier status, high street locations and brand awareness to achieve these results. The European Retail divisions' increased sales include sales generated by 37 GNC stores in the UK and 67 DeTuinen stores in the Netherlands. During the fiscal second quarter, the European Retail division opened 5 new stores, closed 3 stores and at the end of the quarter operated a total of 605 stores. Revenues from Direct Response/Puritan's Pride operations for the fiscal second quarter decreased 19% to $57 million from $71 million for the comparable prior period. This decrease reflects the stagnant market for nutritional supplements, negative news on Vitamin E and Puritan's Pride's substantial reduction in pricing. The Company adopted this aggressive pricing strategy to maintain its customer base and to put pressure on competition. On-line sales accounted for 28% of sales for the fiscal second quarter of 2005. NBTY remains the leader in the direct response and e-commerce sector and continues to increase the number of products available via its catalog and web sites. NBTY Chairman and CEO, Scott Rudolph, said: "Although the industry, as a whole, continues to struggle in this environment, we believe our financial strength positions us not only to ride out the current market, but to capitalize on the opportunities this market presents. We will continue to maintain an aggressive posture to increase market share in a difficult and highly competitive marketplace. We remain confident in the long-term outlook for the Company and anticipate continued long term growth in revenue and market share for NBTY." ABOUT NBTY NBTY is a leading vertically integrated manufacturer and distributor of a broad line of high-quality, value-priced nutritional supplements in the United States and throughout the world. The Company markets approximately 2,000 products under several brands, including Nature's Bounty(R), Vitamin World(R), Puritan's Pride(R), Holland & Barrett(R), Rexall(R), Sundown(R), MET-Rx(R), WORLDWIDE Sport Nutrition(R), American Health(R), GNC (UK)(R), DeTuinen(R) and Le Naturiste(TM). This release refers to non-GAAP financial measures, such as EBITDA. "EBITDA" is defined as earnings before interest, taxes, depreciation and amortization. This non-GAAP financial measure is not prepared in accordance with generally accepted accounting principles and may be different from non- GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation of the non-GAAP measure to the comparable GAAP measure is included in the attached financial tables. Management believes the presentation of EBITDA is relevant and useful because EBITDA is a measurement industry analysts utilize when evaluating NBTY's operating performance. Management also believes EBITDA enhances an investor's understanding of NBTY's results of operations because it measures NBTY's operating performance exclusive of interest and non-cash charges for depreciation and amortization. Management also provides this non-GAAP measurement as a way to help investors better understand its core operating performance, enhance comparisons of NBTY's core operating performance from period to period and to allow better comparisons of NBTY's operating performance to that of its competitors. This release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations and business. All of these forward-looking statements, which can be identified by the use of terminology such as "subject to," "believe," "expects," "plan," "project," "estimate," "intend," "may," "will," "should," "can," or "anticipates," or the negative thereof, or variations thereon, or comparable terminology, or by discussions of strategy which, although believed to be reasonable, are inherently uncertain. Factors which may materially affect such forward-looking statements include: (i) slow or negative growth in the nutritional supplement industry; (ii) interruption of business or negative impact on sales and earnings due to acts of war, terrorism, bio-terrorism, civil unrest or disruption of mail service; (iii) adverse publicity regarding nutritional supplements; (iv) inability to retain customers of companies (or mailing lists) recently acquired; (v) increased competition; (vi) increased costs; (vii) loss or retirement of key members of management; (viii) increases in the cost of borrowings and/or unavailability of additional debt or equity capital; (ix) unavailability of, or inability to consummate, advantageous acquisitions in the future, including those that may be subject to bankruptcy approval or the inability of NBTY to integrate acquisitions into the mainstream of its business; (x) changes in general worldwide economic and political conditions in the markets in which NBTY may compete from time to time; (xi) the inability of NBTY to gain and/or hold market share of its wholesale and/or retail customers anywhere in the world; (xii) unavailability of electricity in certain geographical areas; (xiii) the inability of NBTY to obtain and/or renew insurance and/or the costs of the same; (xiv) exposure to and expense of defending and resolving, product liability claims and other litigation; (xv) the ability of NBTY to successfully implement its business strategy; (xvi) the inability of NBTY to manage its retail, wholesale, manufacturing and other operations efficiently; (xvii) consumer acceptance of NBTY's products; (xviii) the inability of NBTY to renew leases for its retail locations; (xix) inability of NBTY's retail stores to attain or maintain profitability; (xx) the absence of clinical trials for many of NBTY's products; (xxi) sales and earnings volatility and/or trends for the Company and its market segments; (xxii) the efficacy of NBTY's Internet and on-line sales and marketing; (xxiii) fluctuations in foreign currencies, including the British Pound; (xxiv) import-export controls on sales to foreign countries; (xxv) the inability of NBTY to secure favorable new sites for, and delays in opening, new retail locations; (xxvi) introduction of new federal, state, local or foreign legislation or regulation or adverse determinations by regulators anywhere in the world (including the banning of products) and more particularly proposed Good Manufacturing Practices in the United States and the Food Supplements Directive and Traditional Herbal Medicinal Products Directive in Europe; (xxvii) the mix of NBTY's products and the profit margins thereon; (xxviii) the availability and pricing of raw materials; (xxix) risk factors discussed in NBTY's filings with the U.S. Securities and Exchange Commission; (xxx) adverse effects on NBTY as a result of increased gasoline prices and potentially reduced traffic flow to NBTY's retail locations; (xxxi) adverse tax determinations; (xxxii) the loss of a significant customer of the Company; and (xxxiii) other factors beyond the Company's control. Readers are cautioned not to place undue reliance on forward-looking statements. NBTY cannot guarantee future results, trends, events, levels of activity, performance or achievements. NBTY does not undertake and specifically declines any obligation to update, republish or revise forward- looking statements to reflect events or circumstances after the date hereof or to reflect the occurrences of unanticipated events. Consequently, such forward looking statements should be regarded solely as NBTY's current plans, estimates and beliefs. -Tables Follow- NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Dollars and shares in thousands, except per share amounts) For the three months ended March 31, 2005 2004 Net sales $ 442,714 $ 439,594 Costs and expenses: Cost of sales 226,081 213,248 Catalog printing, postage and promotion 34,515 19,322 Selling, general and administrative 144,634 138,294 405,230 370,864 Income from operations 37,484 68,730 Other income (expense): Interest (5,881) (6,759) Miscellaneous, net 110 540 (5,771) (6,219) Income before provision for income taxes 31,713 62,511 Provision for income taxes 10,846 21,254 Net income $ 20,867 $ 41,257 Net income per share: Basic $ 0.31 $ 0.62 Diluted $ 0.30 $ 0.60 Weighted average common shares outstanding: Basic 67,290 66,730 Diluted 69,291 69,098 NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Dollars and shares in thousands, except per share amounts) For the six months ended March 31, 2005 2004 Net sales $ 862,983 $ 824,647 Costs and expenses: Cost of sales 438,034 406,134 Catalog printing, postage and promotion 55,298 39,459 Selling, general and administrative 283,036 268,665 776,368 714,258 Income from operations 86,615 110,389 Other income (expense): Interest (11,573) (13,564) Miscellaneous, net 2,101 2,047 (9,472) (11,517) Income before provision for income taxes 77,143 98,872 Provision for income taxes 26,383 33,970 Net income $ 50,760 $ 64,902 Net income per share: Basic $ 0.76 $ 0.97 Diluted $ 0.73 $ 0.94 Weighted average common shares outstanding: Basic 67,130 66,686 Diluted 69,137 68,997 SALES (Thousands) (Unaudited) THREE MONTHS ENDED SIX MONTHS ENDED MARCH 31, MARCH 31, (% Decrease) (% Decrease) 2005 2004 % Increase 2005 2004 % Increase Wholesale / US Nutrition $182,556 $189,425 -4% $362,174 $368,620 -2% North American Retail/ Vitamin World 55,975 56,100 0% 109,359 109,511 0% European Retail/ Holland & Barrett / GNC (UK) 146,963 123,416 19% 288,870 240,466 20% Direct Response /Puritan's Pride 57,220 70,653 -19% 102,580 106,050 -3% Total $442,714 $439,594 1% $862,983 $824,647 5% GROSS PROFIT PERCENTAGES (Unaudited) THREE MONTHS ENDED SIX MONTHS ENDED MARCH 31, MARCH 31, (% Decrease) (% Decrease) 2005 2004 % Increase 2005 2004 % Increase Wholesale / US Nutrition 34% 39% -5% 34% 38% -4% North American Retail / Vitamin World 53% 60% -7% 54% 60% -6% European Retail / Holland & Barrett / GNC (UK) 62% 62% 0% 63% 61% 2% Direct Response / Puritan's Pride 59% 61% -2% 59% 61% -2% Total 49% 52% -3% 49% 51% -2% Reconciliation of GAAP Measures to Non-GAAP Measures (Thousands) (Unaudited) THREE MONTHS ENDED MARCH 31, 2005 Pretax Income Depreciation and (Loss) amortization Interest EBITDA Wholesale / US Nutrition $ 12,376 $ 2,461 $ - $ 14,837 North American Retail / Vitamin World (4,549) 1,838 (2,711) European Retail / Holland & Barrett / GNC (UK) 40,080 3,094 43,174 Direct Response / Puritan's Pride 15,269 1,293 16,562 Segment Results 63,176 8,686 - 71,862 Corporate (31,463) 5,826 5,881 (19,756) Total $ 31,713 $ 14,512 $ 5,881 $ 52,106 THREE MONTHS ENDED MARCH 31, 2004 Pretax Income Depreciation and (Loss) amortization Interest EBITDA Wholesale / US Nutrition $ 40,999 $ 2,764 $ - $ 43,763 North American Retail / Vitamin World 1,193 3,027 4,220 European Retail / Holland & Barrett / GNC (UK) 29,683 3,394 33,077 Direct Response / Puritan's Pride 23,418 1,393 24,811 Segment Results 95,293 10,578 - 105,871 Corporate (32,782) 5,501 6,759 (20,522) Total $ 62,511 $ 16,079 $ 6,759 $ 85,349 Reconciliation of GAAP Measures to Non-GAAP Measures (Thousands) (Unaudited) SIX MONTHS ENDED MARCH 31, 2005 Pretax Income Depreciation and (Loss) amortization Interest EBITDA Wholesale / US Nutrition $ 36,098 $ 4,955 $ - $ 41,053 North American Retail / Vitamin World (7,683) 3,610 (4,073) European Retail / Holland & Barrett / GNC (UK) 80,348 6,428 86,776 Direct Response / Puritan's Pride 29,146 2,582 31,728 Segment Results 137,909 17,575 - 155,484 Corporate (60,766) 11,552 11,573 (37,641) Total $ 77,143 $ 29,127 $ 11,573 $ 117,843 SIX MONTHS ENDED MARCH 31, 2004 Pretax Income Depreciation and (Loss) amortization Interest EBITDA Wholesale / US Nutrition $ 71,007 $ 5,442 $ - $ 76,449 North American Retail / Vitamin World 1,389 6,186 7,575 European Retail / Holland & Barrett / GNC (UK) 55,982 5,900 61,882 Direct Response / Puritan's Pride 32,686 2,808 35,494 Segment Results 161,064 20,336 - 181,400 Corporate (62,192) 10,922 13,564 (37,706) Total $ 98,872 $ 31,258 $ 13,564 $ 143,694 NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) ASSETS (Dollars and shares in thousands) March 31, September 30, 2005 2004 Current assets: Cash and cash equivalents $ 38,268 $ 21,751 Accounts receivable, less allowance for doubtful accounts of $9,090 and $9,389, respectively 67,176 86,113 Inventories 461,633 374,559 Deferred income taxes 32,062 32,062 Prepaid expenses and other current assets 47,441 62,835 Total current assets 646,580 577,320 Property, plant and equipment, net of accumulated depreciation of $265,344 and $241,822, respectively 281,562 280,075 Goodwill 228,576 221,429 Intangible assets, net 131,944 136,541 Other assets 15,224 17,288 Total assets $1,303,886 $1,232,653 NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY (Dollars and shares in thousands) March 31, September 30, 2005 2004 Current liabilities: Current portion of long-term debt $ 2,021 $ 3,205 Accounts payable 98,636 97,635 Accrued expenses and other current liabilities 133,936 116,633 Total current liabilities 234,593 217,473 Long-term debt 289,836 306,531 Deferred income taxes 73,635 64,675 Other liabilities 5,354 4,176 Total liabilities 603,418 592,855 Commitments and contingencies Stockholders' equity: Common stock, $0.008 par; authorized 175,000 shares; issued and outstanding 67,185 shares at March 31, 2005 and 67,060 shares at September 30, 2004 537 536 Capital in excess of par 138,597 135,787 Retained earnings 531,898 481,302 Accumulated other comprehensive income 29,436 22,173 Total stockholders' equity 700,468 639,798 Total liabilities and stockholders' equity $1,303,886 $1,232,653 NBTY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands) For the six months ended March 31, 2005 2004 Cash flows from operating activities: Net income $ 50,760 $ 64,902 Adjustments to reconcile net income to net cash provided by operating activities: Loss on disposal/sale of property, plant and equipment 25 492 Depreciation and amortization 29,127 31,258 Foreign currency transaction gain (451) (240) Amortization of deferred financing costs 1,216 1,812 Amortization of bond discount 80 62 Compensation expense for ESOP 1,135 2,473 Impairment on asset held for sale 1,902 - Gain on sale of business assets (1,999) - (Recovery) / provision for doubtful accounts (672) 1,298 Inventory reserves 1,828 2,360 Deferred income taxes 3,957 5,095 Tax benefit from exercise of stock options 194 132 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable 19,900 (12,738) Inventories (85,296) 7,545 Prepaid expenses and other current assets 16,400 16,444 Other assets 335 367 Accounts payable (1,154) (3,597) Accrued expenses and other liabilities 16,790 (3,809) Net cash provided by operating activities 54,077 113,856 Cash flows from investing activities: Purchase of property, plant and equipment (21,605) (21,916) Proceeds from sale of property, plant, and equipment 70 83 Proceeds from sale of trademark 30 - Proceeds from sale of business assets 5,766 - Cash paid for acquisitions, net of cash acquired (5,327) - Proceeds from sale of bond investment - 4,158 Net cash used in investing activities (21,066) (17,675) Cash flows from financing activities: Principal payments under long-term debt agreements (17,977) (98,027) Payments for financing fees - (500) Proceeds from stock options exercised 191 88 Purchase of treasury stock (176) - Net cash used in financing activities (17,962) (98,439) Effect of exchange rate changes on cash and cash equivalents 1,468 7,618 Net increase in cash and cash equivalents 16,517 5,360 Cash and cash equivalents at beginning of period 21,751 49,349 Cash and cash equivalents at end of period $ 38,268 $ 54,709 Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 10,134 $ 11,798 Cash paid during the period for income taxes $ 17,398 $ 16,780 DATASOURCE: NBTY, Inc. CONTACT: Harvey Kamil, President and Chief Financial Officer of NBTY, Inc., +1-631-200-2020; or Carl Hymans of G.S. Schwartz & Co., +1-212-725-4500, , for NBTY, Inc. Web site: http://www.nbty.com/

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