NTY Nbty Inc.

BOHEMIA, N.Y., Jan. 28 /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 first quarter ended December 31, 2007. For the fiscal first quarter ended December 31, 2007, net sales were $511 million compared to $506 million for the fiscal first quarter ended December 31, 2006, an increase of $5 million or 1%. Net income for the fiscal first quarter ended December 31, 2007 was $46 million, or $0.67 per diluted share, compared to $51 million, or $0.73 per diluted share, for the fiscal first quarter ended December 31, 2006. This reflects the decrease in earnings in the Direct Response/E-Commerce division. Adjusted EBITDA for the fiscal first quarter of 2008 was $87 million. At December 31, 2007, NBTY had total assets of $1.6 billion and working capital of $603 million, of which $236 million consisted of cash and short-term investments. The Company is committed to using its cash and leverage to increase shareholder value through opportunistic acquisitions and stock repurchases. In October 2007, NBTY purchased in open market transactions 296 thousand shares of its common stock for approximately $11 million dollars. These shares were purchased under an existing publicly announced authorization. NBTY anticipates continuing such purchases on an opportunistic basis. Based on market conditions, these repurchases may be greater than historical repurchases. OPERATIONS FOR THE FISCAL FIRST QUARTER ENDED DECEMBER 31, 2007 Net sales for the Wholesale/US Nutrition division, which markets Nature's Bounty, Solgar, Osteo Bi-Flex, Rexall, Ester-C and other brands, increased $12 million or 5% to $259 million from $247 million for the prior like quarter. Gross profit for the Wholesale operation increased to 44%, compared with 40% for the prior like quarter, reflecting greater efficiencies in supply chain management. The Company is currently experiencing higher purchase prices of certain raw materials. It is anticipated that a portion of these cost increases will be reflected in the prices of the Company's products. The Wholesale/US Nutrition division utilizes 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 data. The Vitamin World stores are used as a laboratory for new ideas and are an effective tool in determining and monitoring consumer preferences. This information, as well as scanned sales data from the Vitamin World stores, is shared on a real time basis with our wholesale customers to give them a competitive advantage. Net sales for the North American Retail division increased $1 million, or 2% to $56 million for the fiscal first quarter ended December 31, 2007 compared with $55 million for the prior like quarter. While Adjusted EBITDA was positive, this division operated at an approximate $1 million loss. Same store sales for North American Retail increased 6% for the fiscal first quarter of 2008. The North American Retail division continues to focus on rationalizing SKU's, enhancing visual merchandising and increasing customer traffic. During the fiscal first quarter of 2008, the North American Retail division closed 5 under-performing stores and added 2 new stores. At the end of the fiscal first quarter, the North American Retail division operated a total of 534 stores consisting of 454 Vitamin World stores in the United States and 80 LeNaturiste stores in Canada. During the remainder of fiscal 2008, Vitamin World anticipates closing approximately 18 under-performing stores and opening approximately 10 stores. European Retail net sales for the fiscal first quarter of 2008 increased $6 million, or 4% to $159 million from $153 million for the prior like period. European Retail division same store sales in local currency decreased 4%. The European Retail division continues to leverage its premier status, high street locations and brand awareness in a difficult retail environment. The European Retail division consists of 514 Holland & Barrett and 31 GNC stores in the UK, 19 Nature's Way stores in Ireland, and 70 DeTuinen stores in the Netherlands for a total of 634 stores. During the fiscal first quarter of 2008 the European Retail division opened 8 stores. Net sales from Direct Response/E-Commerce operations for the fiscal first quarter of 2008 decreased $14 million, or 28% to $37 million from $52 million for the fiscal first quarter of 2007. This division varies its promotional strategy throughout the fiscal year. In the fiscal first quarter 2007, Direct Response utilized a highly promotional priced catalog which was not offered in the currently reported quarter. Therefore, in this less promotional quarter, Direct Response realized lower results. Direct Response's historical results reflect this pattern and should therefore be viewed on an annual and not quarterly basis. The Direct Response operations include catalog and online internet sales. This Division's strategic plan is to increase internet sales by continuing to incorporate new technologies. For this fiscal first quarter online sales increased to 40% of total Direct Response/E-Commerce sales compared to 36% for the fiscal first quarter of 2007. 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: "NBTY maintained its leadership position. We are confident that the initiatives we instituted in our direct response business will be the cornerstone for generating positive results. We continue to enhance our position as the global leader in the nutritional supplement industry and take steps to best respond to cyclical changes in industry segments and garner greater market share." ABOUT NBTY NBTY is a leading global 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) (http://www.naturesbounty.com/), Vitamin World(R) (http://www.vitaminworld.com/), Puritan's Pride(R) (http://www.puritan.com/), Holland & Barrett(R) (http://www.hollandandbarrett.com/), Rexall(R) (http://www.rexallsundown.com/), Sundown(R) (http://www.rexallsundown.com/), MET-Rx(R) (http://www.metrx.com/), WORLDWIDE Sport Nutrition(R) (http://www.sportnutrition.com/), American Health(R) (http://www.americanhealthus.com/), GNC (UK)(R) (http://www.gnc.co.uk/), DeTuinen(R) (http://www.detuinen.nl/), LeNaturiste(TM) (http://www.lenaturiste.com/), SISU(R) (http://www.sisu.com/), Solgar(R) (http://www.solgar.com/) and Ester-C(R) (http://www.ester-c.com/) 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 and manufacturing 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 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 energy 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; (xxxiii) potential investment losses as a result of liquidity conditions; and (xxxiv) 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, 2007 2006 Net sales $510,858 $ 506,237 Costs and expenses: Cost of sales 240,331 247,047 Advertising, promotion and catalog 34,169 26,763 Selling, general and administrative 168,123 151,939 442,623 425,749 Income from operations 68,235 80,488 Other income (expense): Interest (3,862) (5,063) Miscellaneous, net 4,887 1,339 1,025 (3,724) Income before provision for income taxes 69,260 76,764 Provision for income taxes 23,438 25,908 Net income $45,822 $50,856 Net income per share: Basic $0.68 $0.76 Diluted $0.67 $0.73 Weighted average common shares outstanding: Basic 66,903 67,213 Diluted 68,786 69,331 SALES (Unaudited) THREE MONTHS ENDED DECEMBER 31, Percentage (In thousands) 2007 2006 Change Wholesale / US Nutrition $258,935 $246,728 5% North American Retail 56,182 54,973 2% European Retail 158,597 152,966 4% Direct Response / E-Commerce 37,144 51,570 -28% Total $510,858 $506,237 1% GROSS PROFIT PERCENTAGES (Unaudited) THREE MONTHS ENDED DECEMBER 31, Increase 2007 2006 - Decrease Wholesale / US Nutrition 44% 40% 4% North American Retail 59% 60% -1% European Retail 63% 63% 0% Direct Response / E-Commerce 63% 62% 1% Total 53% 51% 2% ADJUSTED EBITDA** Reconciliation of GAAP Measures to Non-GAAP Measures (Unaudited) (In thousands) THREE MONTHS ENDED DECEMBER 31, 2007 Pretax Depreciation Income and Non-cash Adjusted (Loss) amortization Interest charges EBITDA** Wholesale / US Nutrition $53,981 $2,694 $- $- $56,675 North American Retail (864) 850 350 336 European Retail 35,067 3,063 38,130 Direct Response / E-Commerce 7,123 1,366 8,489 Segment Results 95,307 7,973 - 350 103,630 Corporate / Manufacturing (26,047) 5,959 3,862 - (16,226) Total $69,260 $13,932 $3,862 $350 $87,404 THREE MONTHS ENDED 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 1,087 1,137 - 353 2,577 European Retail 38,824 2,828 - - 41,652 Direct Response / E-Commerce 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 ** 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) (Dollars and shares in thousands, except per share amounts) December 31, September 30, 2007 2007 Current assets: Cash and cash equivalents $98,941 $92,902 Investments 137,301 121,382 Accounts receivable, net 111,226 98,454 Inventories 390,321 384,990 Deferred income taxes 21,856 21,441 Prepaid expenses and other current assets 52,825 54,460 Total current assets 812,470 773,629 Property, plant and equipment, net 323,193 323,154 Goodwill 248,614 251,753 Intangible assets, net 159,045 157,548 Other assets 29,386 28,851 Total assets $1,572,708 $1,534,935 Current liabilities: Current portion of long-term debt $1,008 $989 Accounts payable 72,931 71,852 Accrued expenses and other current liabilities 135,658 125,533 Total current liabilities 209,597 198,374 Long-term debt, net of current portion 209,400 210,106 Deferred income taxes 58,272 61,788 Other liabilities 11,586 8,697 Total liabilities 488,855 478,965 Commitments and contingencies Stockholders' equity: Common stock, $0.008 par; authorized 175,000 shares; issued and outstanding 66,822 shares at December 31, 2007 and 67,118 shares at September 30, 2007 535 537 Capital in excess of par 142,864 143,244 Retained earnings 897,516 864,852 Accumulated other comprehensive income 42,938 47,337 Total stockholders' equity 1,083,853 1,055,970 Total liabilities and stockholders' equity $1,572,708 $1,534,935 NBTY, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) For the three months ended December 31, 2007 2006 Cash flows from operating activities: Net income $45,822 $50,856 Adjustments to reconcile net income to cash and cash equivalents provided by operating activities: Impairments and disposals of property, plant and equipment 462 392 Depreciation and amortization 13,932 14,231 Foreign currency transaction (gain) loss (1,299) 318 Amortization and write-off of deferred charges 152 1,303 Amortization of bond discount 34 31 Allowance for doubtful accounts (229) (135) Inventory reserves 1,061 2,292 Deferred income taxes 449 3,886 Excess income tax benefit from exercise of stock options (88) (20) Changes in operating assets and liabilities, net of acquisitions: Accounts receivable (11,789) (2,516) Inventories (7,784) (5,087) Prepaid expenses and other current assets 1,275 4,443 Other assets (490) (163) Accounts payable 687 2,834 Accrued expenses and other liabilities 7,842 10,241 Net cash provided by operating activities 50,037 82,906 Cash flows from investing activities: Purchase of property, plant and equipment (9,814) (6,212) Purchase of available-for-sale investments (55,148) (214,718) Proceeds from sale of available-for-sale investments 39,272 154,844 Cash paid for acquisitions, net of cash acquired (5,072) (38,219) Cash collateral securing loan - (18,360) Net cash used in investing activities (30,762) (122,665) Cash flows from financing activities: Principal payments under long-term debt agreements and capital leases (239) (196) Payments for financing fees - (1,649) Excess income tax benefit from exercise of stock options 88 20 Proceeds from stock options exercised - 12 Purchase of treasury stock (subsequently retired) (10,603) - Net cash used in financing activities (10,754) (1,813) Effect of exchange rate changes on cash and cash equivalents (2,482) 1,763 Net increase (decrease) in cash and cash equivalents 6,039 (39,809) Cash and cash equivalents at beginning of the period 92,902 89,805 Cash and cash equivalents at end of the period $98,941 $49,996 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, or , for NBTY, Inc. Web site: http://www.nbty.com/

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