NTY Nbty Inc.

BOHEMIA, N.Y., Nov. 13 /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 fourth quarter and fiscal year ended September 30, 2006 and preliminary unaudited net sales results for the month of October 2006. For the fiscal fourth quarter ended September 30, 2006, net sales increased $33 million, or 8%, to $468 million compared to net sales of $435 million for the fiscal fourth quarter ended September 30, 2005. Net income for the fiscal fourth quarter ended September 30, 2006 was $38 million, or $0.54 per diluted share, an increase of 230%, compared to $11 million, or $0.17 per diluted share, for the fiscal fourth quarter ended September 30, 2005. The rise in net income for the fiscal fourth quarter resulted from the aforementioned sales increase of $33 million, an improvement in gross profit, greater manufacturing efficiencies, the continued profitability in the North American Retail operations and a decrease in interest expense. For the year ended September 30, 2006, net sales increased $143 million, or 8%, to $1.9 billion, compared to net sales of $1.7 billion for the prior like period. Net income for the year ended September 30, 2006 was $112 million, or $1.62 per diluted share, an increase of 43% as compared to $78 million, or $1.13 per diluted share, for the year ended September 30, 2005. Included in the results for the year ended September 30, 2006 and 2005 were non-cash charges, primarily asset and goodwill impairment, of $0.15 and $0.14 per diluted share respectively. Without these non-cash charges, earnings per diluted share for the year ended September 30, 2006 and 2005 would have been $1.77 and $1.27 respectively. In fiscal 2006, the Company also benefited from the Homeland Investment Act's treatment of the repatriation of foreign earnings, which allowed the Company to lower its effective tax rate from 35% to 27%. At September 30, 2006, NBTY had working capital of $392 million and total assets of $1.3 billion. During fiscal 2006, the Company decreased inventory by $137 million while still providing uninterrupted product supply to customers. The Company's strong cash flow in fiscal 2006 allowed for the accelerated repayment of $236 million of long-term debt. Effective November 3, 2006, the Company put into place a $325 million bank revolving credit agreement to provide funds, if needed, for future growth. Presently, there are no borrowings under this agreement. OPERATIONS FOR THE FISCAL FOURTH QUARTER ENDED SEPTEMBER 30, 2006 Sales for the Wholesale/US Nutrition division, which markets Nature's Bounty, Sundown and Solgar brands, increased $21 million, or 10%, to $217 million, from $197 million for the prior like quarter. Product returns for the fiscal fourth quarter were $8 million, compared with $11 million for the fiscal fourth quarter 2005. Total product returns for the year ended September 30, 2006 were $28 million, a 36% decrease as compared to $44 million for the previous year. Gross margin in the Wholesale operation increased to 35%, compared with 30% for the fiscal fourth quarter of 2005. During 2005, gross margins were hampered by aggressive promotional incentives, competitive pricing for the joint care category and high prices paid for certain raw materials. That year, the Company purchased raw materials that were in short supply. Market prices for these raw materials decreased during fiscal 2006 as the supply shortage dissipated. The US Nutrition/Wholesale division continues to utilize valuable consumer preference sales data generated by the Company's Vitamin World retail stores and Puritan's Pride Direct Response/E-Commerce operations to empower its wholesale customers with this latest information. The Vitamin World stores are effectively used as a laboratory for new ideas and have become a significant tool for determining and monitoring consumer preferences. This information, as well as scanned sales data from the Vitamin World stores, is shared with NBTY's wholesale customers. The North American Retail operation continued to achieve profitability in the fiscal fourth quarter 2006. The division's sales remained constant at $56 million, even though there were 71 fewer stores. Vitamin World closed a total of 75 underperforming stores and opened 9 new stores during fiscal 2006. At the end of the fiscal fourth quarter, the North American Retail division operated a total of 572 stores with 476 stores in the United States and 96 in Canada. It is anticipated that approximately 20 under-performing stores will be closed in fiscal 2007. Same store sales for Vitamin World increased 7% from the prior like quarter. These results reflect continued improvements in the retail environment. European Retail sales for the fiscal fourth quarter ended September 30, 2006 increased $8 million or 6% to $142 million from $134 million for the fiscal fourth quarter ended September 30, 2005. In local currency, same store sales increased 3% from the prior like period. The European Retail business continues to leverage its premier status, high street locations and brand awareness. The European Retail business is comprised of 498 Holland & Barrett and 32 GNC stores in the UK, 19 Nature's Way stores in Ireland and 68 DeTuinen stores in the Netherlands. During the fiscal fourth quarter ended September 30, 2006, the European Retail division opened 3 stores and closed 2 stores. For the year ended September 30, 2006, the European Retail operation opened 11 stores and closed 6. A total of 617 stores were in operation at September 30, 2006. Revenues from Direct Response/Puritan's Pride operations for the fiscal fourth quarter of 2006 increased $4 million or 9% from the comparable like period. The average order size increased to $73 from $70. Online sales constituted 34% of total Direct Response/E-Commerce sales. NBTY remains the leader in the direct response and e-commerce sectors. NBTY Chairman and CEO, Scott Rudolph, said: "We are pleased with our results which lend further credence to our ability to drive sales, increase profitability and enhance our dominant market share position. We remain confident in the long-term outlook for NBTY as we continue to strive to grow the business while controlling costs and increasing long-term shareholder value." ABOUT NBTY NBTY is a global leading vertically integrated manufacturer, marketer and distributor of a broad line of high-quality, value-priced nutritional supplements in the United States and throughout the world. Under a number of NBTY and third party brands, the Company offers over 22,000 products, including products marketed by the Company's 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), LeNaturiste(TM), SISU(R), Solgar(R) and Ester-C(R) brands. This release refers to non-GAAP financial measures, such as Adjusted EBITDA. "ADJUSTED EBITDA" is defined as net income, excluding the aggregate amount of all non-cash losses reducing net income, plus 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 Adjusted EBITDA is relevant and useful because Adjusted EBITDA is a measurement industry analysts utilize when evaluating NBTY's operating performance. Management also believes Adjusted 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. These forward-looking statements 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. Although all of these forward looking statements are believed to be reasonable, they 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 God, 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 and intellectual property 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) the 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 strategies; (xxiii) fluctuations in foreign currencies, including the British Pound, the Euro and the Canadian dollar; (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 and compliance with 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, the Food Supplements Directive and Traditional Herbal Medicinal Products Directive in Europe and Section 404 requirements of the Sarbanes-Oxley Act of 2002; (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. Contact: Harvey Kamil Carl Hymans NBTY, Inc. G.S. Schwartz & Co. President and Chief Financial Officer 212-725-4500 631-200-2020 NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Dollars and shares in thousands, except per share amounts) For the three months ended September 30, 2006 2005 Net sales $467,912 $435,218 Costs and expenses: Cost of sales 238,523 236,650 Advertising, promotion and catalog 23,276 25,308 Selling, general and administrative 151,910 151,668 413,709 413,626 Income from operations 54,203 21,592 Other income (expense): Interest (4,516) (9,238) Miscellaneous, net 1,603 2,323 (2,913) (6,915) Income before provision for income taxes 51,290 14,677 Provision for income taxes 13,627 3,265 Net income $37,663 $11,412 Net income per share: Basic $0.56 $0.17 Diluted $0.54 $0.17 Weighted average common shares outstanding: Basic 67,206 67,189 Diluted 69,242 69,116 NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Dollars and shares in thousands, except per share amounts) For the fiscal years ended September 30, 2006 2005 Net sales $1,880,222 $1,737,187 Costs and expenses: Cost of sales 992,197 895,644 Advertising, promotion and catalog 103,614 108,005 Selling, general and administrative 598,742 588,166 Trademark / goodwill impairments 10,450 7,686 1,705,003 1,599,501 Income from operations 175,219 137,686 Other income (expense): Interest (25,924) (26,475) Miscellaneous, net 3,532 8,051 (22,392) (18,424) Income before provision for income taxes 152,827 119,262 Provision for income taxes 41,042 41,125 Net income $111,785 $78,137 Net income per share: Basic $1.66 $1.16 Diluted $1.62 $1.13 Weighted average common shares outstanding: Basic 67,199 67,162 Diluted 69,130 69,137 SALES (Thousands) THREE MONTHS ENDED FISCAL YEARS ENDED SEPTEMBER 30, SEPTEMBER 30, Percentage Percentage 2006 2005 Change 2006 2005 Change Wholesale / US Nutrition $217,484 $196,832 10% $885,146 $747,234 18% North American Retail / Vitamin World 56,105 56,136 0% 234,215 224,008 5% European Retail / Holland & Barrett / GNC (UK) 141,888 134,078 6% 564,933 566,140 0% Direct Response / Puritan's Pride 52,435 48,172 9% 195,928 199,805 -2% Total $467,912 $435,218 8% $1,880,222 $1,737,187 8% GROSS PROFIT PERCENTAGES THREE MONTHS ENDED FISCAL YEARS ENDED SEPTEMBER 30, SEPTEMBER 30, - % Decrease 2006 2005 % Increase 2006 2005 % Increase Wholesale / US Nutrition 35% 30% 5% 32% 34% -2% North American Retail / Vitamin World 59% 57% 2% 58% 55% 3% European Retail / Holland & Barrett / GNC (UK) 63% 61% 2% 62% 62% 0% Direct Response / Puritan's Pride 58% 52% 6% 59% 57% 2% Total 49% 46% 3% 47% 48% -1% Reconciliation of GAAP Measures to Non-GAAP Measures (Thousands) (Unaudited) THREE MONTHS ENDED SEPTEMBER 30, 2006 Pretax Depreciation Income and Non-cash Adjusted (Loss) amortization Interest charges EBITDA Wholesale / US Nutrition $27,661 $2,550 $- $(128) $30,083 North American Retail / Vitamin World 199 1,188 736 2,123 European Retail / Holland & Barrett / GNC (UK) 34,283 2,843 37,126 Direct Response / Puritan's Pride 14,202 1,261 15,463 Segment Results 76,345 7,842 - 608 84,795 Corporate / Manufacturing (25,055) 6,222 4,516 (14,317) Total $51,290 $14,064 $4,516 $608 $70,478 THREE MONTHS ENDED SEPTEMBER 30, 2005 Pretax Depreciation Income and Non-cash Adjusted (Loss) amortization Interest charges EBITDA Wholesale / US Nutrition $10,564 $2,482 $- $- $13,046 North American Retail / Vitamin World (3,881) 1,507 215 (2,159) European Retail / Holland & Barrett / GNC (UK) 32,479 2,559 35,038 Direct Response / Puritan's Pride 10,731 1,253 11,984 Segment Results 49,893 7,801 - 215 57,909 Corporate / Manufacturing (35,216) 6,206 9,238 - (19,772) Total $14,677 $14,007 $9,238 $215 $38,137 Reconciliation of GAAP Measures to Non-GAAP Measures (Thousands) (Unaudited) FISCAL YEAR ENDED SEPTEMBER 30, 2006 Pretax Depreciation Income and Non-cash Adjusted (Loss) amortization Interest charges EBITDA Wholesale / US Nutrition $75,823 $10,159 $- $11,370 $97,352 North American Retail / Vitamin World 332 4,884 - 3,141 8,357 European Retail / Holland & Barrett / GNC (UK) 143,456 11,174 - - 154,630 Direct Response / Puritan's Pride 52,748 5,051 - - 57,799 Segment Results 272,359 31,268 - 14,511 318,138 Corporate / Manufacturing (119,532) 24,780 25,924 - (68,828) Total $152,827 $56,048 $25,924 $14,511 $249,310 FISCAL YEAR ENDED SEPTEMBER 30, 2005 Pretax Depreciation Income and Non-cash Adjusted (Loss) amortization Interest charges EBITDA Wholesale / US Nutrition $67,873 $9,923 $- $- $77,796 North American Retail / Vitamin World (26,216) 6,756 11,204 (8,256) European Retail / Holland & Barrett / GNC (UK) 151,459 13,175 164,634 Direct Response / Puritan's Pride 52,254 5,079 57,333 Segment Results 245,370 34,933 - 11,204 291,507 Corporate / Manufacturing (126,108) 23,350 26,475 - (76,283) Total $119,262 $58,283 $26,475 $11,204 $215,224 NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) ASSETS (Dollars and shares in thousands) September 30, September 30, 2006 2005 Current assets: Cash and cash equivalents $89,805 $67,282 Investments - 39,900 Accounts receivable, less allowance for doubtful accounts of $10,361 and $9,155, respectively 89,154 73,226 Inventories 354,496 491,335 Deferred income taxes 26,636 23,645 Prepaid expenses and other current assets 42,261 54,469 Total current assets 602,352 749,857 Property, plant and equipment, net of accumulated depreciation of $296,069 and $279,883, respectively 309,437 320,528 Goodwill 235,959 228,747 Other intangible assets, net 146,169 166,325 Other assets 10,393 16,845 Total assets $1,304,310 $1,482,302 NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY (Dollars and shares in thousands) September 30, September 30, 2006 2005 Current liabilities: Current portion of long-term debt $18,660 $80,922 Accounts payable 64,211 72,720 Accrued expenses and other current liabilities 127,768 120,487 Total current liabilities 210,639 274,129 Long-term debt, net of current of portion 191,045 428,204 Deferred income taxes 55,276 57,092 Other liabilities 7,918 6,822 Total liabilities 464,878 766,247 Commitments and contingencies Stockholders' equity: Common stock, $0.008 par; authorized 175,000 shares; issued and outstanding 67,212 shares and 67,191 shares at September 30, 2006 and 2005 538 537 Capital in excess of par 138,777 138,657 Retained earnings 671,060 559,275 Accumulated other comprehensive income 29,057 17,586 Total stockholders' equity 839,432 716,055 Total liabilities and stockholders' equity $1,304,310 $1,482,302 NBTY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands) For the fiscal year ended September 30, 2006 2005 Cash flows from operating activities: Net income $111,785 $78,137 Adjustments to reconcile net income to cash and cash equivalents provided by operating activities: Provision relating to impairments and disposals of property, plant and equipment 4,420 5,471 Depreciation and amortization 56,048 58,283 Foreign currency transaction loss / (gain) 1,851 (4,286) Amortization and write-off of deferred financing costs 3,975 2,398 Amortization and write-off of bond discount 379 152 Loss on bond redemption - 790 Gain on extinguishment of debt (425) - Gain on settlement of interest rate SWAP (353) - Compensation expense for ESOP - 2,583 Impairment on asset held for sale - 1,908 Gain on sale of business assets - (1,999) Trademark / goodwill impairments 10,450 7,686 Provision for doubtful accounts 1,427 182 Inventory reserves 8,908 9,500 Excess income tax benefit from exercise of stock options (15) 220 Deferred income taxes (12,019) 4,527 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable (16,056) 29,354 Inventories 131,469 (87,434) Prepaid expenses and other current assets 11,105 (1,613) Other assets 1,954 (139) Accounts payable (4,852) (28,519) Accrued expenses and other liabilities 2,912 8,647 Net cash provided by operating activities 312,963 85,848 Cash flows from investing activities: Purchase of property, plant and equipment (35,308) (71,516) Proceeds from sale of property, plant, and equipment 1,426 298 Proceeds from sale of property, plant, and equipment held for sale 9,950 Proceeds from sale of business assets - 5,766 Proceeds from sale / (purchase) of available-for-sale marketable securities 39,900 (39,900) Cash paid for acquisitions, net of cash acquired - (131,397) Purchase price settlements, net 1,845 (8,236) Purchase / sale of intangible assets (478) (533) Purchase of industrial revenue bonds - (14,973) Net cash provided by (used in) investing activities 7,385 (250,541) Cash flows from financing activities: Principal payments under long-term debt agreements and capital leases (312,107) (138,544) Proceeds from borrowings under long-term agreements - 132,950 Proceeds from short-term borrowings 18,204 - Principal payments under the Revolving Credit Facility (11,000) (20,000) Proceeds from borrowings under the Revolving Credit Facility 5,000 26,000 Proceeds from sale-leaseback - 14,973 Proceeds from bond offering, net of discount - 198,234 Bond issuance costs - (3,329) Proceeds from settlement of interest rate SWAP 353 - Excess income tax benefit from exercise of stock options 15 - Proceeds from stock options exercised 105 225 Purchase of treasury stock - (176) Net cash (used in) provided by financing activities (299,430) 210,333 Effect of exchange rate changes on cash and cash equivalents 1,605 (109) Net increase in cash and cash equivalents 22,523 45,531 Cash and cash equivalents at beginning of year 67,282 21,751 Cash and cash equivalents at end of year $89,805 $67,282 NBTY's preliminary unaudited net sales results for October 2006 by segment are as follows (amounts are rounded): NET SALES (Preliminary and Unaudited) FOR THE MONTH OF OCTOBER ($ In Millions) 2006 2005 % Change Wholesale/ US Nutrition $87 $78 13 % North American Retail / Vitamin World $18 $19 -4 % European Retail / Holland & Barrett / GNC (UK) $50 $48 4 % Direct Response/ Puritan's Pride $12 $10 17 % Total $168 $155 8 % European Retail net sales in local currency decreased 4% in October 2006. Vitamin World same store sales increased 4% in October 2006. 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, Web site: http://www.nbty.com/

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