NTY Nbty Inc.

RONKONKOMA, N.Y., April 24 /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 and first six months ended March 31, 2008. For the fiscal second quarter ended March 31, 2008, net sales were $533 million compared to $508 million for the fiscal second quarter ended March 31, 2007, an increase of $24 million or 5%. Net income for the fiscal second quarter ended March 31, 2008 was $44 million, or $0.67 per diluted share, compared to $57 million, or $0.83 per diluted share, for the fiscal second quarter ended March 31, 2007. The decrease in net income reflects the decrease in overall gross profit from 53% to 51% and higher advertising and selling, general and administrative costs incurred in the fiscal second quarter. Adjusted EBITDA for the fiscal second quarter ended March 31, 2008 was $84 million compared to $100 million for the prior like quarter. At March 31, 2008, NBTY had total assets of $1.5 billion and working capital of $494 million. The Company is committed to using its cash and leverage to increase shareholder value through investments in infrastructure, opportunistic acquisitions and stock repurchases. During the quarter, $8 million in short term municipal auction rate securities were reclassified into Other Assets to reflect the lack of liquidity. Net sales for the six months ended March 31, 2008 increased 3% to $1.043 billion. Net income for the six months ended March 31, 2008 was $90 million, or $1.34 per diluted share, compared to $108 million, or $1.56 per diluted share, for the six months ended March 31, 2007. The decrease in net income reflects higher advertising and SG&A costs. Adjusted EBITDA for the six months ended March 31, 2008 was $171 million compared to $196 million for the six months ended March 31, 2007. In fiscal year 2008, NBTY repurchased a total of 6.1 million shares of its common stock under an existing publicly announced share repurchase program. The Company repurchased 296 thousand shares in October 2007 for approximately $11 million and 5.8 million shares were repurchased in February 2008 for $160 million. Accordingly, the number of weighted average diluted shares for the quarter ended March 31, 2008 was 66 million and is expected to decline in future quarters to approximately 63 million when reflecting the full impact of the stock repurchase. OPERATIONS FOR THE FISCAL SECOND QUARTER ENDED MARCH 31, 2008 Net sales for the Wholesale/US Nutrition division, which markets Nature's Bounty, Solgar, Osteo Bi-Flex, Rexall, Ester-C and other brands, increased $14 million or 6% to $259 million from $245 million for the prior like quarter. Gross profit for the Wholesale operation was 41%, compared to 43% for the prior like quarter. The decrease in gross profit reflects changes in product mix and more promotional programs offered to customers. This division continues to gain market share. Information Resources Inc. (IRI) tracks industry-wide sales in the food, drug and mass market sectors. For the thirteen week period ended March 30, 2008, IRI reported an increase in the category of 7%. According to IRI, for the same period, the Company's Wholesale division reported a 23% increase. The Company is encouraged by this increase. 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 were $52 million for the fiscal second quarter ended March 31, 2008 compared with $56 million for the prior like quarter. The North American Retail division and Vitamin World were profitable, although LeNaturiste, the Company's Canadian retail chain, operated at a loss. Same store sales for North American Retail decreased 4% for the fiscal second quarter of 2008. The North American Retail division continues to focus on rationalizing SKUs, enhancing visual merchandising and increasing customer traffic. During the fiscal second quarter of 2008, the North American Retail division closed 7 under-performing stores and added 3 new stores. At the end of the fiscal second quarter, the North American Retail division operated a total of 530 stores consisting of 450 Vitamin World stores in the United States and 80 LeNaturiste stores in Canada. During the remainder of fiscal 2008, North American Retail anticipates opening 7 stores and closing 7 under- performing stores. European Retail net sales for the fiscal second quarter of 2008 were $158 million compared to $160 million for the prior like period. European Retail division same store sales in local currency decreased 4% reflecting the continued difficult retail environment. The European Retail division consists of 516 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 636 stores. During the fiscal second quarter of 2008 the European Retail division opened 2 stores. During the remainder of fiscal 2008, the European Retail division anticipates opening 19 additional stores. The European Retail division continues to leverage its premier status, high street locations and brand awareness in a difficult retail environment. Net sales from Direct Response/E-Commerce operations for the fiscal second quarter of 2008 increased $15 million, or 31% to $63 million from $48 million for the fiscal second quarter of 2007. This division varies its promotional strategy throughout the fiscal year, utilizing highly promotional priced catalogs which are not offered in every quarter. 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 second quarter online sales increased to 45% of total Direct Response/E-Commerce sales compared to 36% for the fiscal second quarter of 2007. For the six months ended March 31, 2008, this division processed 1.4 million orders, an increase of over 250 thousand orders compared to the prior like period. 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: "Our continued sales momentum is indicative of NBTY's ability to develop and implement strategic initiatives to enhance our dominant position as the worldwide leader in the nutritional supplement industry. We continue to make investments in our infrastructure and remain well positioned to quickly adapt to meet the challenges of industry segment changes and remain committed to increasing long-term profitability and shareholder value." 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.rexall.com/), Sundown(R) (http://www.sundownnutrition.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/), Good 'n' Natural(R) (http://www.goodnnatural.com/), Home Health(TM) (http://www.homehealthus.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 (TABLES FOLLOW) NBTY, Inc. Condensed Consolidated Statements of Income (Unaudited) (In thousands, except per share amounts) For the three months ended March 31, 2008 2007 Net sales $532,518 $508,459 Costs and expenses: Cost of sales 261,284 239,530 Advertising, promotion and catalog 39,007 34,441 Selling, general and administrative 166,409 151,963 466,700 425,934 Income from operations 65,818 82,525 Other income (expense): Interest (3,657) (4,154) Miscellaneous, net 3,786 2,307 129 (1,847) Income before provision for income taxes 65,947 80,678 Provision for income taxes 21,721 23,324 Net income $44,226 $57,354 Net income per share: Basic $0.69 $0.85 Diluted $0.67 $0.83 Weighted average common shares outstanding: Basic 64,102 67,273 Diluted 65,817 69,490 NBTY, Inc. Condensed Consolidated Statements of Income (Unaudited) (In thousands, except per share amounts) For the six months ended March 31, 2008 2007 Net sales $1,043,376 $1,014,697 Costs and expenses: Cost of sales 501,615 486,578 Advertising, promotion and catalog 73,176 61,204 Selling, general and administrative 334,531 303,902 909,322 851,684 Income from operations 134,054 163,013 Other income (expense): Interest (7,519) (9,217) Miscellaneous, net 8,673 3,646 1,154 (5,571) Income before provision for income taxes 135,208 157,442 Provision for income taxes 45,160 49,232 Net income $90,048 $108,210 Net income per share: Basic $1.37 $1.61 Diluted $1.34 $1.56 Weighted average common shares outstanding: Basic 65,510 67,242 Diluted 67,313 69,423 SALES (Unaudited) THREE MONTHS ENDED MARCH 31, Percentage (In thousands) 2008 2007 Change Wholesale / US Nutrition $259,363 $244,968 6% North American Retail 51,904 55,764 -7% European Retail 158,070 159,554 -1% Direct Response / E-Commerce 63,181 48,173 31% Total $532,518 $508,459 5% GROSS PROFIT PERCENTAGES (Unaudited) THREE MONTHS ENDED MARCH 31, Increase 2008 2007 - Decrease Wholesale / US Nutrition 41% 43% -2% North American Retail 62% 60% 2% European Retail 61% 64% -3% Direct Response / E-Commerce 59% 61% -2% Total 51% 53% -2% SALES (Unaudited) SIX MONTHS ENDED MARCH 31, Percentage (In thousands) 2008 2007 Change Wholesale / US Nutrition $518,298 $491,697 5% North American Retail 108,086 110,737 -2% European Retail 316,666 312,520 1% Direct Response / E-Commerce 100,326 99,743 1% Total $1,043,376 $1,014,697 3% GROSS PROFIT PERCENTAGES (Unaudited) SIX MONTHS ENDED MARCH 31, Increase 2008 2007 - Decrease Wholesale / US Nutrition 42% 41% 1% North American Retail 60% 60% 0% European Retail 62% 64% -2% Direct Response / E-Commerce 60% 61% -1% Total 52% 52% 0% ADJUSTED EBITDA** Reconciliation of GAAP Measures to Non-GAAP Measures (Unaudited) (In thousands) THREE MONTHS ENDED MARCH 31, 2008 Pretax Depreciation Income and Non-cash Adjusted (Loss) amortization Interest charges EBITDA** Wholesale / US Nutrition $41,507 $2,578 $- $48 $44,133 North American Retail 522 804 - 16 1,342 European Retail 34,266 2,970 - 41 37,277 Direct Response / E-Commerce 15,750 1,374 - 20 17,144 Segment Results 92,045 7,726 - 125 99,896 Corporate / Manufacturing (26,098) 5,998 3,657 393 (16,050) Total $65,947 $13,724 $3,657 $518 $83,846 THREE MONTHS ENDED MARCH 31, 2007 Pretax Depreciation Income and Non-cash Adjusted (Loss) amortization Interest charges EBITDA** Wholesale / US Nutrition $48,748 $2,770 $- $- $51,518 North American Retail 984 997 - 231 2,212 European Retail 43,705 2,737 - - 46,442 Direct Response / E-Commerce 12,498 1,263 - - 13,761 Segment Results 105,935 7,767 - 231 113,933 Corporate / Manufacturing (25,257) 6,747 4,154 - (14,356) Total $80,678 $14,514 $4,154 $231 $99,577 ** 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. ADJUSTED EBITDA** Reconciliation of GAAP Measures to Non-GAAP Measures (Unaudited) (In thousands) SIX MONTHS ENDED MARCH 31, 2008 Pretax Depreciation Income and Non-cash Adjusted (Loss) amortization Interest charges EBITDA** Wholesale / US Nutrition $95,488 $5,272 $- $48 $100,808 North American Retail (342) 1,654 - 366 1,678 European Retail 69,333 6,032 - 41 75,406 Direct Response / E-Commerce 22,872 2,740 - 20 25,632 Segment Results 187,351 15,698 - 475 203,524 Corporate / Manufacturing (52,143) 11,957 7,519 393 (32,274) Total $135,208 $27,655 $7,519 $868 $171,250 SIX MONTHS ENDED MARCH 31, 2007 Pretax Depreciation Income and Non-cash Adjusted (Loss) amortization Interest charges EBITDA** Wholesale / US Nutrition $98,337 $5,559 $- $- $103,896 North American Retail 2,071 2,134 - 584 4,789 European Retail 82,529 5,565 - - 88,094 Direct Response / E-Commerce 28,091 2,528 - - 30,619 Segment Results 211,028 15,786 - 584 227,398 Corporate / Manufacturing (53,586) 12,960 9,217 - (31,409) Total $157,442 $28,746 $9,217 $584 $195,989 ** 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. Condensed Consolidated Balance Sheets (Unaudited) (Dollars and shares in thousands, except per share amounts) March 31, September 30, 2008 2007 Current assets: Cash and cash equivalents $104,908 $92,902 Investments 24,991 121,382 Accounts receivable, net 99,725 98,454 Inventories 389,474 384,990 Deferred income taxes 21,855 21,441 Prepaid expenses and other current assets 49,291 54,460 Total current assets 690,244 773,629 Property, plant and equipment, net 321,555 323,154 Goodwill 249,811 251,753 Intangible assets, net 154,763 157,548 Other assets 36,674 28,851 Total assets $1,453,047 $1,534,935 Current liabilities: Current portion of long-term debt $972 $989 Accounts payable 86,363 71,852 Accrued expenses and other current liabilities 109,121 125,533 Total current liabilities 196,456 198,374 Long-term debt, net of current portion 209,164 210,106 Deferred income taxes 58,613 61,788 Other liabilities 11,802 8,697 Total liabilities 476,035 478,965 Commitments and contingencies Stockholders' equity: Common stock, $0.008 par; authorized 175,000 shares; issued and outstanding 61,637 shares at March 31, 2008 and 67,118 shares at September 30, 2007 493 537 Capital in excess of par 141,283 143,244 Retained earnings 792,226 864,852 Accumulated other comprehensive income 43,010 47,337 Total stockholders' equity 977,012 1,055,970 Total liabilities and stockholders' equity $1,453,047 $1,534,935 NBTY, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) For the six months ended March 31, 2008 2007 Cash flows from operating activities: Net income $90,048 $108,210 Adjustments to reconcile net income to cash provided by operating activities: Impairments and disposals of property, plant and equipment 482 1,112 Depreciation and amortization 27,655 28,746 Foreign currency transaction (gain) loss (1,385) 212 Stock-based compensation 518 - Amortization and write-off of deferred charges 372 1,515 Allowance for doubtful accounts (174) (384) Inventory reserves 2,465 4,265 Deferred income taxes 903 7,385 Excess income tax benefit from exercise of stock options (4,984) (1,884) Changes in operating assets and liabilities, net of acquisitions: Accounts receivable (153) (203) Inventories (8,156) (19,623) Prepaid expenses and other current assets 4,849 10,967 Other assets (608) (150) Accounts payable 13,927 6,807 Accrued expenses and other liabilities (10,946) 5,058 Net cash provided by operating activities 114,813 152,033 Cash flows from investing activities: Purchase of property, plant and equipment (21,693) (20,880) Purchase of available-for-sale investments (159,884) (317,050) Proceeds from sale of available-for-sale investments 248,728 191,472 Cash paid for acquisitions, net of cash acquired (5,072) (37,005) Cash collateral securing loan - (18,539) Net cash provided by (used in) investing activities 62,079 (202,002) Cash flows from financing activities: Principal payments under long-term debt agreements and capital leases (481) (425) Payments for financing fees - (1,649) Excess income tax benefit from exercise of stock options 4,984 1,884 Proceeds from stock options exercised 3,852 634 Purchase of treasury stock (subsequently retired) (171,008) - Net cash (used in) provided by financing activities (162,653) 444 Effect of exchange rate changes on cash and cash equivalents (2,233) 1,957 Net increase (decrease) in cash and cash equivalents 12,006 (47,568) Cash and cash equivalents at beginning of the period 92,902 89,805 Cash and cash equivalents at end of the period $104,908 $42,237 DATASOURCE: NBTY, Inc. CONTACT: Harvey Kamil, President and Chief Financial Officer of NBTY, Inc., +1-631-200-2020; Carl Hymans of G.S. Schwartz & Co., +1-212-725-4500, Web site: http://www.nbty.com/

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