NTY Nbty Inc.

BOHEMIA, N.Y., Jan. 25 /PRNewswire-FirstCall/ -- NBTY, Inc. (NYSE:NTY) (http://www.nbty.com/), a leading global manufacturer and marketer of nutritional supplements, today announced record results for the fiscal first quarter ended December 31, 2006. For the fiscal first quarter ended December 31, 2006, net sales were $506 million compared to $455 million for the fiscal first quarter ended December 31, 2005, an increase of $51 million or 11%. Net income for the fiscal first quarter ended December 31, 2006 increased 122% to $51 million, or $0.73 per diluted share, compared to $23 million, or $0.33 per diluted share, for the fiscal first quarter ended December 31, 2005. The rise in net income for the fiscal first quarter reflects the following: the aforementioned sales increase of $51 million along with an increase in total gross profit margin to 51% from 46%; greater overall manufacturing efficiencies; a significant reduction in SG&A costs as a percentage of sales and a decrease in interest expense. NBTY remains focused on controlling costs. During this quarter, SG&A costs decreased as a percentage of sales to 30% from 32% in the prior like quarter. At December 31, 2006, NBTY had working capital of $422 million and total assets of $1.4 billion. OPERATIONS FOR THE FISCAL FIRST QUARTER ENDED DECEMBER 31, 2006 Net sales for the Wholesale/US Nutrition division, which markets Nature's Bounty, Sundown and Solgar brands, increased $22 million or 10% to $247 million from $224 million for the prior like quarter. Gross profit for the Wholesale operation increased to 40%, compared with 32% for the prior like quarter. Product returns for the fiscal first quarter were $5 million compared with $11 million for the prior like quarter. The net sales increases are primarily due to a higher level of promotional activity which we expect to continue throughout the entire fiscal year. As US Nutrition offered a mix of better selling products, we experienced improved product placement on customer shelves. This had the effect of increasing sales and reducing returns. The Wholesale/US Nutrition 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. While the North American Retail division's net sales decreased $3 million, or 6% to $55 million compared with $58 million for the fiscal first quarter ended December 31, 2005, the operation achieved its fourth consecutive quarter of profitability. Same store sales for Vitamin World increased 2% for the fiscal first quarter ended December 31, 2006. Vitamin World closed a total of 4 underperforming stores and opened 1 new store during the fiscal first quarter. At the end of the fiscal first quarter, the North American Retail division operated a total of 566 stores with 473 stores in the United States and 93 in Canada. In addition, approximately 19 under-performing stores will be closed during the remainder of fiscal 2007. European Retail is operating in a difficult retail environment. European Retail net sales for the fiscal first quarter ended December 31, 2006 increased $13 million, or 10% to $153 million from $140 million for the prior like period. European Retail division same store sales in local currency were unchanged. The European Retail division continues to leverage its premier status, high street locations and brand awareness to achieve these results. The European Retail division's results include sales generated by 499 Holland & Barrett and 32 GNC stores in the UK, 19 Nature's Way stores in Ireland, and 69 DeTuinen stores in the Netherlands. During the fiscal first quarter ended December 31, 2006, the European Retail division opened 2 stores and at the end of the fiscal first quarter operated a total of 619 stores. Net sales from Direct Response/Puritan's Pride operations for the fiscal first quarter ended December 31, 2006 increased $19 million, or 56% to $52 million from $33 million for the comparable prior period. The net sales increase reflects a strong consumer response to a highly promotional catalog offered in this quarter. This promotional program proved very effective as Puritan's Pride received 137,000 more orders than in the prior like quarter, a 31% increase, and the average order size increased to $85 as compared to $66. Puritan's Pride varies its promotional strategy throughout the fiscal year. Therefore, in less promotional quarters, Puritan Pride would anticipate lower results. Puritan's Pride historical results reflect this pattern and should therefore be viewed on an annual and not quarterly basis. Online sales increased to 36% of total Direct Response/E-Commerce sales. Puritan's Pride views the Internet as the future driver of growth and is incorporating new technologies to expand this business. NBTY remains the leader in the direct response and e-commerce sectors and continues to increase the number of products available via its catalog and web sites. NBTY Chairman and CEO, Scott Rudolph, said: "We are pleased by the record revenue and profitability attained in this quarter. These increases reflect the success of our ongoing initiatives to further drive sales, increase market share, enhance profitability and expand our premier leadership position within the industry. We continue to strive to grow the business while controlling costs and increasing long-term shareholder value and remain confident in the long-term outlook for NBTY." 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) (In thousands, except per share amounts) For the three months ended December 31, 2006 2005 Net sales $506,237 $455,270 Costs and expenses: Cost of sales 247,047 245,949 Advertising, promotion and catalog 26,763 25,160 Selling, general and administrative 151,939 145,655 425,749 416,764 Income from operations 80,488 38,506 Other income (expense): Interest (5,063) (8,992) Miscellaneous, net 1,339 1,149 (3,724) (7,843) Income before provision for income taxes 76,764 30,663 Provision for income taxes 25,908 7,743 Net income $50,856 $22,920 Net income per share: Basic $0.76 $0.34 Diluted $0.73 $0.33 Weighted average common shares outstanding: Basic 67,213 67,193 Diluted 69,331 69,034 SALES (Unaudited) THREE MONTHS ENDED (In thousands) DECEMBER 31, Percentage 2006 2005 Change Wholesale / US Nutrition $246,728 $224,239 10% North American Retail / Vitamin World 54,973 58,442 -6% European Retail / Holland & Barrett / GNC (UK) 152,966 139,566 10% Direct Response / Puritan's Pride 51,570 33,023 56% Total $506,237 $455,270 11% GROSS PROFIT PERCENTAGES (Unaudited) THREE MONTHS ENDED DECEMBER 31, % 2006 2005 Increase Wholesale / US Nutrition 40% 32% 8% North American Retail / Vitamin World 60% 57% 3% European Retail / Holland & Barrett / GNC (UK) 63% 61% 2% Direct Response / Puritan's Pride 62% 58% 4% Total 51% 46% 5% Reconciliation of GAAP Measures to Non-GAAP Measures (Unaudited) THREE MONTHS ENDED (In thousands) DECEMBER 31, 2006 Pretax Depreciation Income and Non-cash Adjusted (Loss) amortization Interest charges EBITDA Wholesale / US Nutrition $49,589 $ 2,789 $ - $ - $52,378 North American Retail / Vitamin World 1,087 1,137 - 353 2,577 European Retail / Holland & Barrett / GNC (UK) 38,824 2,828 - - 41,652 Direct Response / Puritan's Pride 15,593 1,265 - - 16,858 Segment Results 105,093 8,019 - 353 113,465 Corporate / Manufacturing (28,329) 6,212 5,063 - (17,054) Total $76,764 $14,231 $5,063 $353 $96,411 THREE MONTHS ENDED DECEMBER 31, 2006 Pretax Depreciation Income and Non-cash Adjusted (Loss) amortization Interest charges EBITDA Wholesale / US Nutrition $23,981 $ 2,554 $ - $ - $26,535 North American Retail / Vitamin World (3,392) 1,473 - 2,125 206 European Retail / Holland & Barrett / GNC (UK) 35,788 2,658 - - 38,446 Direct Response / Puritan's Pride 6,628 1,255 - - 7,883 Segment Results 63,005 7,940 - 2,125 73,070 Corporate / Manufacturing (32,342) 6,204 8,992 - (17,146) Total $30,663 $14,144 $8,992 $2,125 $55,924 ** SINCE ADJUSTED EBITDA IS NOT A MEASURE OF PERFORMANCE CALCULATED IN ACCORDANCE WITH U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP"), IT SHOULD NOT BE CONSIDERED IN ISOLATION OF, OR AS A SUBSTITUTE FOR OR SUPERIOR TO, OTHER MEASURES OF FINANCIAL PERFORMANCE PREPARED IN ACCORDANCE WITH GAAP, SUCH AS OPERATING INCOME, NET INCOME AND CASH FLOWS FROM OPERATING ACTIVITIES. IN ADDITION, THE COMPANY'S DEFINITION OF ADJUSTED EBITDA IS NOT NECESSARILY COMPARABLE TO SIMILARLY TITLED MEASURES REPORTED BY OTHER COMPANIES. NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) ASSETS (In thousands, except per share amounts) December 31, September 30, 2006 2006 Current assets: Cash and cash equivalents $49,996 $89,805 Investments 59,874 - Accounts receivable, less allowance for doubtful accounts of $10,080 and $10,361, respectively 94,102 89,154 Inventories 366,735 354,496 Deferred income taxes 26,670 26,636 Prepaid expenses and other current assets 39,000 42,261 Total current assets 636,377 602,352 Property, plant and equipment, net of accumulated depreciation of $305,241 and $296,069, respectively 319,634 309,437 Goodwill 248,064 235,959 Other intangible assets, net 164,470 146,169 Other assets 29,107 10,393 Total assets $1,397,652 $1,304,310 NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY (In thousands, except per share amounts) December 31, September 30, 2006 2006 Current liabilities: Current portion of long-term debt $ 797 $ 18,660 Accounts payable 71,040 64,211 Accrued expenses and other current liabilities 142,495 127,768 Total current liabilities 214,332 210,639 Long-term debt, net of current portion 209,671 191,045 Deferred income taxes 64,431 55,276 Other liabilities 10,920 7,918 Total liabilities 499,354 464,878 Commitments and contingencies Stockholders' equity: Common stock, $0.008 par; authorized 175,000 shares; issued and outstanding 67,214 shares and 67,212 shares at December 31, 2006 and September 30, 2006, respectively 538 538 Capital in excess of par 138,809 138,777 Retained earnings 721,916 671,060 Accumulated other comprehensive income 37,035 29,057 Total stockholders' equity 898,298 839,432 Total liabilities and stockholders' equity $1,397,652 $1,304,310 NBTY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) For the three months ended December 31, 2006 2005 Cash flows from operating activities: Net income $50,856 $22,920 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 392 2,281 Depreciation and amortization 14,231 14,144 Foreign currency transaction loss 318 276 Amortization and write-off of deferred financing costs 1,303 1,554 Amortization and write-off of bond discount 31 204 (Recovery of) provision for allowance for doubtful accounts (135) 255 Inventory reserves 2,292 2,783 Deferred income taxes 3,886 1,161 Excess income tax benefit from exercise of stock options (20) (15) Changes in operating assets and liabilities, net of acquisitions: Accounts receivable (2,516) (11,882) Inventories (5,087) 52,750 Prepaid expenses and other current assets 4,443 10,056 Other assets (163) 2 Accounts payable 2,834 2,883 Accrued expenses and other liabilities 10,241 240 Net cash provided by operating activities 82,906 99,612 Cash flows from investing activities: Purchase of property, plant and equipment (6,212) (9,488) Proceeds from sale of property, plant, and equipment - 41 Purchase of available-for-sale marketable securities (214,718) - Proceeds from available-for-sale marketable securities 154,844 39,900 Cash paid for acquisitions, net of cash acquired (38,219) - Increase in restricted cash (18,360) - Purchase price settlements, net - 1,586 Purchase of intangible assets - (228) Net cash (used in) provided by investing activities (122,665) 31,811 Cash flows from financing activities: Principal payments under long-term debt agreements and capital leases (196) (121,220) Principal payments under the Revolving Credit Facility - (6,000) Payments for financing fees (1,649) - Excess income tax benefit from exercise of stock options 20 15 Proceeds from stock options exercised 12 18 Net cash used in financing activities (1,813) (127,187) Effect of exchange rate changes on cash and cash equivalents 1,763 (1,660) Net (decrease) increase in cash and cash equivalents (39,809) 2,576 Cash and cash equivalents at beginning of period 89,805 67,282 Cash and cash equivalents at end of period $49,996 $69,858 DATASOURCE: NBTY, Inc. CONTACT: Harvey Kamil, President and Chief Financial Officer, NBTY, Inc., +1-631-200-2020; Carl Hymans, G.S. Schwartz & Co., +1-212-725-4500, Web site: http://www.nbty.com/

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