NTY Nbty Inc.

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-Q

Commission File Number: 001-31788

NBTY, Inc.
(Exact name of registrant as specified in its charter)

2100 Smithtown Avenue,
Ronkonkoma, New York 11779
(Address of principal executive offices) (Zip Code)

(631) 567-9500
(Registrant's telephone number, including area code)

        Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES  ý     NO  o

        Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES  o     NO  o

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES  o     NO  ý

        The number of shares of Common Stock (par value $.008 per share) outstanding as of April 30, 2009 was 61,860,627.

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NBTY, INC.
INDEX

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

        

NBTY, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except per share amounts)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NBTY, Inc.

Condensed Consolidated Statements of Income

(Unaudited)

(in thousands, except per share amounts)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NBTY, Inc.

Condensed Consolidated Statements of Stockholders' Equity and Comprehensive (Loss) Income

Six Months Ended March 31, 2009 and 2008

(Unaudited)

(in thousands)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NBTY, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(in thousands, except per share amounts)

1. Basis of Presentation

        NBTY, Inc. (together with its subsidiaries, "we," "our," "us," "NBTY," or the "Company") is a leading global vertically integrated manufacturer, marketer, distributor and retailer of a broad line of high-quality, value-priced nutritional supplements in the United States and throughout the world. We market over 25,000 products under numerous owned and private-label brands, including Nature's Bounty®, Vitamin World®, Pure Protein®, Body Fortress®, Puritan's Pride®, Holland & Barrett®, Rexall®, Osteo-Bi-Flex®, Flex-A-Min®, Knox®, Sundown®, MET-Rx®, WORLDWIDE Sport Nutrition®, American Health®, DeTuinen®, Le Naturiste™, SISU®, Solgar®, Physiologics® and Ester-C®.

        We have prepared these financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") applicable to interim financial information and on a basis that is consistent with the accounting principles applied in our Annual Report on Form 10-K for the fiscal year ended September 30, 2008 ("2008 Form 10-K"). In our opinion, these financial statements reflect all adjustments (including normal recurring items) necessary for a fair presentation of our results for the interim periods presented. These financial statements do not include all information or notes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with GAAP. Accordingly, these financial statements should be read in conjunction with the financial statements and notes thereto contained in our 2008 Form 10-K. Results for interim periods are not necessarily indicative of results which may be achieved for a full year.

Estimates

        The preparation of financial statements in conformity with GAAP requires that we make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. These judgments can be subjective and complex, and consequently actual results could differ materially from those estimates and assumptions. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our most significant estimates include: sales returns and other allowances; inventory valuation and obsolescence; valuation and recoverability of long-lived assets, including goodwill; income taxes; and accruals for the outcome of current litigation.

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

1. Basis of Presentation (Continued)

Accounts Receivable Reserves

        Accounts receivable were net of the following reserves:

Recent Accounting Developments

        In March 2008, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133" ("SFAS 161"). SFAS 161 requires enhanced disclosures regarding an entity's derivative and hedging activities. These enhanced disclosures include information regarding how and why an entity uses derivative instruments; how derivative instruments and related hedge items are accounted for under SFAS 133, "Accounting for Derivative Instruments and Hedging Activities", and its related interpretations; and how derivative instruments and related hedge items affect an entity's financial position, financial performance and cash flows. We adopted SFAS 161 as of January 1, 2009. The adoption of SFAS 161 had no impact on our financial position or results of operations. The additional disclosures required by SFAS 161 are included in Note 11.

        In December 2007, the FASB issued SFAS No. 141 (revised 2007), ("SFAS 141R"), "Business Combinations", which replaces SFAS No. 141. The statement retains the purchase method of accounting for acquisitions, however, includes changes in the way assets and liabilities are recognized in purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. SFAS 141R will become effective for us beginning October 1, 2009 and will apply prospectively to business combinations completed on or after that date. The impact of the adoption of SFAS 141R will be dependent on the extent and nature of any future acquisitions.

        In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 permits companies to choose to measure certain financial instruments and other eligible items at fair value when the items are not otherwise currently required to be measured at fair value. Under SFAS 159, the decision to measure items at fair value is made at specified election dates on an irrevocable instrument-by-instrument basis. Companies electing the fair value option would be required to recognize changes in fair value in earnings and to expense upfront cost and fees associated with the item for which the fair value option is elected. Companies electing the fair value option are required to distinguish, on the face of the statement of financial position, the fair value of assets and liabilities for which the fair value option has been elected and similar assets and liabilities measured using another measurement attribute. SFAS 159 became effective

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

1. Basis of Presentation (Continued)

for us on October 1, 2008. The adoption of SFAS 159 did not have a significant impact on our consolidated financial position or results of operations as we did not elect the fair value option.

        In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and enhances disclosures about fair value measurements. SFAS 157 applies when other accounting pronouncements require fair value measurements; it does not require new fair value measurements. We adopted SFAS 157 on October 1, 2008 for financial assets and liabilities carried at fair value and non financial assets and liabilities that are recognized or disclosed on a recurring basis. The adoption did not have a material effect on the consolidated financial statements. In February 2008, the FASB issued FASB Staff Position 157-2, which provides for a one-year deferral of the provisions of SFAS 157 for non-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a non-recurring basis. FASB Staff Position 157-2 will become effective for us beginning October 1, 2009. We anticipate that the adoption of FASB Staff Position SFAS 157-2 will not have a significant impact on our consolidated financial position or results of operations.

2. Acquisitions

Leiner

        On July 14, 2008, we acquired substantially all the nutritional supplement assets of Leiner Health Products Inc. ("Leiner") plus the assumption of certain liabilities for $370,600 (subject to adjustment based upon finalization of working capital balances acquired at the date of closing). During December 2008, the working capital balances were finalized resulting in an additional payment by us of $2,366 which increased goodwill. The working capital payment was made from the $15,000 held in escrow and the remainder of the escrow was returned to NBTY. The purchase price was funded primarily by the use of our existing $325,000 revolving credit facility and cash on hand. The Company also incurred $3,470 of direct transaction costs for a total purchase price of $376,436. Substantially all the goodwill associated with this acquisition is deductible for tax purposes.

        At the closing of the Leiner acquisition, we anticipated workforce reductions and, as such, included an estimated accrual for such reductions of $5,508, comprised of severance and employee benefits, in the purchase price allocation. The rollforward of the workforce reduction accrual was as follows:

        During the six months ended March 31, 2009, we incurred $2,285 of severance costs, in the form of stay-bonuses for services incurred in the period. These costs are recorded over the service period and are paid to the Leiner transitional associates upon their termination. This amount was included in

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

2. Acquisitions (Continued)

selling, general and administrative expense in the consolidated statement of income for the six months ended March 31, 2009.

        The following unaudited pro forma financial information presents a summary of our consolidated net sales and net income for the three and six months ended March 31, 2008, assuming that the acquisition of Leiner had taken place on October 1, 2007:

        The above unaudited pro forma financial information has been prepared for comparative purposes only and includes certain adjustments to actual financial results, such as imputed interest costs, and estimated additional depreciation and amortization expense as a result of property, plant and equipment and intangible assets acquired. The pro forma financial information does not purport to be indicative of the results of operations that would have been achieved had the acquisition taken place on the date indicated or that may result in the future.

        The above unaudited pro forma information includes certain non-recurring charges related to Leiner's bankruptcy reorganization and impairments on its Fort Mill, South Carolina facility, which we did not acquire. These non-recurring charges do not relate to the acquisition and were not part of the activities that were acquired by NBTY. The amount of these non-recurring charges included in the above unaudited pro forma financial information for the three months and six months ended March 31, 2008 was $18,026 and $19,820, respectively.

Julian Graves

        On September 16, 2008, our subsidiary, NBTY Europe Limited, acquired Julian Graves, a UK independent retailer of nuts, seeds and confectionaries for approximately $25,000. Julian Graves has a network of 349 stores throughout the UK and Ireland. The preliminary allocation of net assets acquired primarily consisted of inventory, property, plant and equipment and goodwill. Since we acquired the outstanding share capital of Julian Graves, the goodwill associated with this acquisition is not deductible for tax purposes. The purchase agreement stipulates an adjustment to the purchase price between the buyer and seller for the excess or shortfall of the final working capital threshold as stated

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

2. Acquisitions (Continued)

in the agreement. During January 2009, the final working capital amount was agreed between the buyer and seller, which will result in a reduction of the purchase price and goodwill of approximately $2,750 upon settlement. The allocation of net assets acquired is based on preliminary estimates. Finalization of the valuation of the net assets acquired and working capital balance at the date of closing are subject to change during the purchase price allocation period (generally one year from the acquisition date).

        In September 2008, the UK Office of Fair Trading commenced an investigation under the merger control provisions of the Enterprise Act 2002 into the completed acquisition by NBTY Europe Limited of Julian Graves. In March 2009, this investigation was referred to the UK Competition Commission for potential anti-trust implications. In the event of an adverse finding by the Competition Commission, NBTY Europe Limited may be required to modify the purchase to resolve the competition concerns identified, which could include divestment of all or some of the acquired Julian Graves stores. Pending the outcome of the investigation, NBTY Europe Limited has not integrated the Julian Graves business with its existing UK operations.

        Proforma financial information related to Julian Graves is not provided as its impact was not material to our consolidated financial statements.

3. Inventories

        The components of inventories were as follows:

4. Goodwill and Intangible Assets

Goodwill

        The changes in the carrying amount of goodwill by segment for the six month period ended March 31, 2009, were as follows:

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

4. Goodwill and Intangible Assets (Continued)

        The purchase price adjustments included in the Wholesale/US Nutrition segment relate to Leiner acquisition adjustments of $2,366 for the finalization of working capital balances, $730 of additional transaction costs, an adjustment for inventory reserves of $1,189 and a $2,549 increase in the tax accrual. The purchase price adjustments included in the European Retail segment relate primarily to the acquisition of Julian Graves.

        In March 2009, due principally to a decline in the Company's stock price since the date of our annual goodwill impairment test, we performed an interim test as of February 28, 2009. The fair value of our reporting units exceeded their respective carrying values and therefore no impairment to goodwill was deemed necessary.

Other Intangible Assets

        The carrying amounts of intangible assets as of March 31, 2009 and September 30, 2008 were as follows:

        Aggregate amortization expense of other intangible assets included in the consolidated statements of income under the caption "selling, general and administrative" expenses for the three months ended March 31, 2009 and 2008 was approximately $3,989 and $3,374, respectively. Amortization expense for the six months ended March 31, 2009 and 2008 was approximately $8,024 and $6,755, respectively.

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

4. Goodwill and Intangible Assets (Continued)

        Assuming no changes in our definite lived intangible assets, estimated amortization expense for each of the five succeeding fiscal years is as follows:

5. IT Project Termination Costs

        During December 2008, management determined that certain information technology projects relating to the Direct Response/E-Commerce segment were ineffective and not economical and should be terminated. These newly purchased and partially installed Internet and computer programs were ineffective in generating new customers and were discontinued. As a result, $4,667 of previously capitalized software costs were written-off in December 2008. In addition, certain termination payments and future lease obligations of $3,415 were charged to operations during December 2008 relating to these terminated projects as they will not provide any future economic benefit. As a result of the termination of operating management in the Direct Response/E-Commerce segment, we also incurred severance costs of $565.

6. Accrued Expenses and Other Current Liabilities

        The components of accrued expenses and other current liabilities were as follows:

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

7. Long-Term Debt

        The components of long-term debt were as follows:

8. Litigation Summary

Prohormone products

        In March 2004, a putative class-action lawsuit was filed in New Jersey against MET-Rx USA, Inc. ("Met-Rx"), a subsidiary of the Company, claiming that the advertising and marketing of certain prohormone supplements were false and misleading and that plaintiff and the putative class of New Jersey purchasers of these products were entitled to damages and injunctive relief. Because these allegations were virtually identical to allegations made in a putative nationwide class-action previously filed against Met-Rx in California, we moved in 2004 to dismiss or stay the New Jersey action pending the outcome of the California action. The motion was granted, and the New Jersey action is stayed at this time. The California action against Met-Rx had been dismissed in 2008.

Nutrition Bars

        Our subsidiary, Rexall Sundown, Inc. ("Rexall"), and certain of its subsidiaries are defendants in a class-action lawsuit brought in 2002 on behalf of all California consumers who bought various nutrition bars. Plaintiffs allege misbranding of nutrition bars and violations of California unfair competition statutes, misleading advertising and other similar causes of action. Plaintiffs seek restitution, legal fees and injunctive relief. We have defended this action vigorously. In December 2007, while Rexall's and the other defendants' renewed motion for judgment on the pleadings was pending, the Court again stayed the case for all purposes, pending rulings on other relevant cases before the California Supreme Court. The California Supreme Court issued a ruling in those other cases on February 11, 2008. The parties to those other cases filed a petition for certiorari with the United States Supreme Court. That petition was denied on January 12, 2009. The case remains stayed. Based upon the information currently available, no determination can be made at this time as to the final outcome of this case, nor can its materiality be accurately ascertained.

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

8. Litigation Summary (Continued)

        In addition to the foregoing, other regulatory inquiries, claims, suits and complaints (including product liability and intellectual property claims) arise in the ordinary course of our business. We believe that such other inquiries, claims, suits and complaints would not have a material adverse effect on our consolidated financial condition or results of operations, if adversely determined against us.

9. Income Taxes

        Our provision for income taxes is impacted by a number of factors, including federal taxes, our international tax structure, state tax rates in the jurisdictions where we conduct business, and our ability to utilize state tax credits that expire between 2013 and 2016. Therefore, our overall effective income tax rate could vary as a result of these factors.

        The effective income tax rate for the three months ended March 31, 2009 and 2008 was 35.2% and 32.9%, respectively. The effective income tax rate for the six months ended March 31, 2009 and 2008 was 35.5% and 33.4%, respectively. The effective income tax rate was higher for the six months ended March 31, 2009 as compared to the prior comparable period due to a higher effective state rate as a result of increased operations in California from the Leiner acquisition and a lower domestic production deduction in the current year due to lower domestic income.

        We accrue interest and penalties related to unrecognized tax benefits in income tax expense. This methodology is consistent with previous periods. At March 31, 2009, we had $1,640 and $889 accrued for the potential payment of interest and penalties, respectively. As of March 31, 2009, we were subject to U.S. Federal Income Tax examinations for the tax years 2005 - 2008, and to non-US examinations for the tax years of 2003 - 2008. In addition, we are generally subject to state and local examinations for fiscal years 2005 - 2008.

10. Net Income Per Share

        Basic net income per share is based on the weighted average number of common shares outstanding during the three and six month period ended March 31, 2009 and 2008. Diluted net income per share includes the dilutive effect of outstanding stock options, which resulted in a dilutive effect of approximately 1,348 and 1,715 shares for the three months ended March 31, 2009 and 2008, respectively, and 1,443 and 1,803 shares for the six months ended March 31, 2009 and 2008, respectively. There were 852 outstanding stock options at March 31, 2009 that were not included in the calculation of diluted net income per share since they would have been anti-dilutive.

11. Fair Value of Financial Instruments

        On October 1, 2008, we adopted the provisions of SFAS 157, which establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

11. Fair Value of Financial Instruments (Continued)

unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

•

Level 1—Quoted prices in active markets for identical assets or liabilities.



•

Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.



•

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Interest Rate Swaps

        To manage the potential risk arising from changing interest rates and their impact on long-term debt, our policy is to maintain a combination of available fixed and variable rate financial instruments. In Fiscal 2008, we entered into two interest rate swap contracts to hedge the variability of future interest relating to a portion of the interest payments on our Term Loan. Each swap contract has a notional amount of $100 million. One swap contract has a fixed interest rate, before bank margin of 3.88% for a two year term and the other swap contract has a fixed interest rate, before bank margin of 4.195% for a three year term. Under the terms of the swap contracts, variable interest payments for a portion of our Term Loan are swapped for fixed interest payments.

        In accordance with SFAS 133, as amended by SFAS 138, we have formally documented the relationship between the interest rate swap contracts and the Term Loan, as well as our risk management objective and strategy for undertaking the hedge transactions. This process includes linking the derivative which was designated as a cash flow hedge to the specific liability on the balance sheet. We record the change in the fair value of the swap contracts through Other Comprehensive Income ("OCI"), net of income tax. Since we expect these hedging relationships to be highly effective, both at inception of the hedges and on an ongoing basis, they are expected to be highly effective in achieving offsetting changes in fair value attributable to the hedged risk during the period that the hedges are designated. We have determined that there will be no ineffectiveness in the hedging relationships since the hedged forecasted interest payments are based on the same notional amount, have the same reset dates, and are based on the same benchmark interest rate designated under the variable rate Term Loan. We assess, at the inception of the hedges and on an ongoing basis, whether the derivatives used in the hedging transaction are highly effective in offsetting changes in the cash flows of the hedged item. The change in the fair value of the swap contracts for the six months ended March 31, 2009 recorded through OCI, net of income tax was $5,807. At March 31, 2009, the swap contracts liability, included in other liabilities, was $11,676. The fair value of the swap contracts were valued using observable current market information such as the prevailing LIBOR interest rate and LIBOR yield curve rates (Level 2).

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

11. Fair Value of Financial Instruments (Continued)

7 ¹ / 8 % Senior Subordinated Notes

        The face value and the fair value of the 7 ¹ / 8 % Senior Subordinated Notes at March 31, 2009, was $190,000 and $152,000, respectively. The fair value of the 7 ¹ / 8 % Senior Subordinated Notes was determined based on then quoted market prices (Level 1).

12. Business and Credit Concentration

Financial Instruments

        Financial instruments which potentially subject us to credit risk consist primarily of cash and cash equivalents (the amounts of which may, at times, exceed Federal Deposit Insurance Corporation limits on insurable amounts), investments and trade accounts receivable. We mitigate our risk by investing in or through major financial institutions. At March 31, 2009, we had $3,075 of municipal auction rate securities, which were classified in non-current assets as available-for-sale investments.

Customers

        We perform on-going credit evaluations of our customers and adjust credit limits based upon payment history and the customers' current credit worthiness, as determined by review of their current credit information. Customers account activity is continuously monitored. As a result of this review process, we record bad debt expense, which is based upon historical experience as well as specific customer collection issues that have been identified, to adjust the carrying amount of the related receivable to its estimated realizable value. While such bad debt expenses have historically been within expectations and allowances established, if the financial condition of one or more of our customers were to deteriorate, additional bad debt provisions may be required.

        The following individual customers accounted for the following percentages of net sales for the three and six months ended March 31, 2009 and 2008, respectively:

 

        The loss of any one of these customers, or any other major customer, would have a material adverse effect on our consolidated results of operations if we were unable to replace such customer(s).

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

12. Business and Credit Concentration (Continued)

        The following individual customers accounted for 10% or more of the Wholesale/US Nutrition segment's gross accounts receivable as of March 31, 2009 and September 30, 2008, respectively:

13. Supplemental Disclosure of Cash Flow Information

14. Segment Information

        We are organized by sales segments on a worldwide basis. We evaluate performance based on a number of factors; however, the primary measures of performance are the net sales, gross profit and income or loss from operations (prior to corporate allocations) of each segment, as these are the key performance indicators that we review. Operating income or loss for each segment does not include corporate general and administrative expenses, interest expense and other miscellaneous income/expense items. Corporate general and administrative expenses include, but are not limited to: human resources, legal, finance, IT, and various other corporate level activity related expenses. Such unallocated expenses remain within corporate. Corporate also includes our manufacturing assets and, accordingly, certain items associated with these activities, remain unallocated in the corporate segment. Operations are evaluated excluding the impact of any intercompany transfer pricing mark-up.

        All our products fall into one or more of these four segments:

•

Wholesale/US Nutrition—This segment is comprised of several divisions, each targeting specific market groups which include wholesalers, distributors, food, drug and mass merchandisers, pharmacies, health food stores, bulk and international customers.

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

14. Segment Information (Continued)

•

North American Retail—This segment generates revenue through its 444 owned and operated Vitamin World and Nutrition Warehouse stores selling proprietary brand and third-party products, and through its Canadian operation of 87 owned and operated Le Naturiste stores.



•

European Retail—This segment generates revenue through its 531 Holland & Barrett stores, 345 Julian Graves stores and 31 GNC stores in the UK, 71 DeTuinen stores in the Netherlands and 22 Nature's Way and 4 Julian Graves stores in Ireland. Such revenue consists of sales of proprietary brand and third-party products, as well as franchise fees from 7 Holland & Barrett locations in South Africa.



•

Direct Response/E-Commerce—This segment generates revenue through the sale of proprietary brand and third-party products primarily through mail order catalog and the internet. Catalogs are strategically mailed to customers who order by mail, internet, or by phone.

        The following table represents key financial information of our business segments:

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

14. Segment Information (Continued)

Net sales by location of customer

        Total assets by segment were as follows:

        Approximately 29% and 36% of our net sales during the six months ended March 31, 2009 and 2008, respectively, were denominated in currencies other than U.S. dollars, principally British Pounds, Euros and Canadian dollars. A significant weakening of such currencies versus the U.S. dollar could have a material adverse effect on our results of operations.

        Foreign subsidiaries accounted for the following percentages of total assets and total liabilities:

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

15. Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes

        The 7 ¹ / 8 % Senior Subordinated Notes due 2015 are guaranteed by all of our domestic subsidiaries, which are wholly-owned by the Company. These guarantees are full, unconditional and joint and several. The following condensed consolidating financial information presents:

1.

Condensed consolidating financial statements as of March 31, 2009 and September 30, 2008 and for the three and six months ended March 31, 2009 and 2008 of (a) NBTY, Inc., the parent and issuer, (b) the guarantor subsidiaries, (c) the non-guarantor subsidiaries and (d) the Company on a consolidated basis, and



2.

Elimination entries necessary to consolidate NBTY, Inc., the parent, with guarantor and non-guarantor subsidiaries.

        The condensed consolidating financial statements are presented using the equity method of accounting for investments in wholly-owned subsidiaries. Under this method, the investments in subsidiaries are recorded at cost and adjusted for our share of the subsidiaries' cumulative results of operations, capital contributions, distributions and other equity changes. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. This financial information should be read in conjunction with the financial statements and other notes related thereto.

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

15. Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes (Continued)

Condensed Consolidating Balance Sheet
As of March 31, 2009

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

15. Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes (Continued)

Condensed Consolidating Balance Sheet
As of September 30, 2008

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

15. Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes (Continued)

Condensed Consolidating Statement of Income
Three Months Ended March 31, 2009

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

15. Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes (Continued)

 

Condensed Consolidating Statement of Income
Three Months Ended March 31, 2008

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

15. Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes (Continued)

Condensed Consolidating Statement of Income
Six Months Ended March 31, 2009

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

15. Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes (Continued)

Condensed Consolidating Statement of Income
Six Months Ended March 31, 2008

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

15. Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes (Continued)

Condensed Consolidating Statement of Cash Flows
Six Months Ended March 31, 2009

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NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

15. Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes (Continued)

Condensed Consolidating Statement of Cash Flows
Six Months Ended March 31, 2008

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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations

(in thousands, except per share amounts)

Forward-Looking Statements

         This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this report, the words "subject to," "believe," "expect," "plan," "project," "estimate," "intend," "may," "should," "can," or "anticipate," or the negative thereof, or variations thereon, or similar expressions are intended to identify forward-looking statements, which are inherently uncertain. Similarly, discussions of strategy although believed to be reasonable, are also forward-looking statements and are inherently uncertain.

         All forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from projected results. Factors which may materially affect such forward-looking statements include:

•

slow or negative growth in the nutritional supplement industry;



•

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;



•

our inability to retain customers of companies (or mailing lists) recently acquired;



•

increased competition;



•

increased costs;



•

loss or retirement of key members of our management;



•

increases in the cost of borrowings or unavailability of additional debt or equity capital, or both;



•

unavailability of, or inability to consummate, advantageous acquisitions in the future, including those that may be subject to bankruptcy court approval or our inability to integrate acquisitions into the mainstream of our business;



•

changes in general economic and political conditions in the markets in which we may compete from time to time or worldwide;



•

our inability to gain or hold market share of our wholesale or retail customers anywhere in the world;



•

our inability to obtain or renew insurance or to manage insurance costs;



•

our exposure to and expense of defending and resolving product liability claims, intellectual property claims and other litigation;



•

our ability to implement our business strategy successfully;



•

our inability to manage our retail, wholesale, manufacturing and other operations efficiently;



•

consumer acceptance of our products due to adverse publicity regarding nutritional supplements;



•

our inability to renew leases for our retail locations;



•

the inability of our retail stores to attain or maintain profitability;



•

the absence of clinical trials for many of our products;



•

sales and earnings volatility or trends for us and our market segments;

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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

(in thousands, except per share amounts)

•

the efficacy of our internet and on-line sales and marketing strategies;



•

fluctuations in foreign currencies, including the British pound, the euro, the Canadian dollar and the Chinese yuan;



•

import-export controls on sales to foreign countries;



•

our inability to secure favorable new sites for, and delays in opening, new retail and manufacturing locations;



•

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 and the Food Supplements Directive and Traditional Herbal Medicinal Products Directive in Europe;



•

the mix of our products and the profit margins thereon;



•

the availability and pricing of raw materials;



•

risk factors discussed elsewhere in this report and in our Form 10-K for the fiscal year ended September 30, 2008;



•

adverse effects on us of increased energy prices and potentially reduced traffic flow to our retail locations;



•

adverse tax determinations;



•

the loss of a significant customer;



•

potential investment losses as a result of liquidity conditions; and



•

other factors beyond our control.

         Consequently, such forward-looking statements should be regarded solely as our current plans, estimates and beliefs. Readers are cautioned not to place undue reliance on forward-looking statements. We cannot guarantee future results, events, levels of activity, performance or achievements. We do not undertake and specifically decline 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.

         Industry data used throughout this report was obtained from industry publications and internal Company estimates. While we believe such information to be reliable, its accuracy has not been independently verified and cannot be guaranteed.

         The following discussion should also be read in conjunction with our condensed consolidated financial statements and notes thereto included elsewhere herein and our 2008 Form 10-K.

Overview

        NBTY, Inc. (together with its subsidiaries, the "Company," "NBTY," "we," or "us") is a leading global vertically integrated manufacturer, marketer and retailer of a broad line of high quality, value-priced nutritional supplements in the United States and throughout the world. We market approximately 25,000 products under numerous brands, including Nature's Bounty®, Vitamin World®, Pure Protein®, Body Fortress®, Puritan's Pride®, Holland & Barrett®, Rexall®, Osteo Bi-Flex®,

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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

(in thousands, except per share amounts)

Flex-A-Min®, Knox®, Sundown®, MET-Rx®, WORLDWIDE Sport Nutrition®, American Health®, DeTuinen®, Le Naturiste™, SISU®, Solgar®, Physiologics® and Ester-C®. Our vertical integration includes the purchase of raw materials, formulation and manufacture of products, which we then market through the following four channels of distribution:

•

Wholesale/US Nutrition operations—distribute products under various US Nutrition brand names and third party private labels, each targeting specific market groups that include mass market retailers, supermarkets, drugstore chains, pharmacies, health and natural food stores, bulk healthcare practitioners, wholesalers, distributors and international customers;



•

North American Retail operations—include 444 Vitamin World and Nutrition Warehouse stores selling proprietary brand and third-party products in the United States and our Canadian operation of 87 Le Naturiste stores;



•

European Retail operations—include 531 Holland & Barrett stores, 345 Julian Graves stores, and 31 GNC stores in the UK; 71 DeTuinen stores in the Netherlands; and 22 Nature's Way and 4 Julian Graves stores in Ireland, as well as 7 Holland & Barrett franchised locations in South Africa, each selling proprietary brand and third-party products; and



•

Direct Response/E-Commerce operations—include the sale of proprietary brand and third-party products primarily through mail order catalogs and the internet.

Critical Accounting Policies

        Our significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2008. A discussion of our critical accounting policies and estimates are included in Management's Discussion and Analysis of Results of Operations and Financial Condition in our Annual Report on Form 10-K for the fiscal year ended September 30, 2008. Management has discussed the development and selection of these policies with the Audit Committee of the Company's Board of Directors, and the Audit Committee of the Board of Directors has reviewed the Company's disclosures of these policies. There have been no material changes to the critical accounting policies or estimates reported in the Management's Discussion and Analysis section of the audited financial statements for the fiscal year ended September 30, 2008 as filed with the Securities and Exchange Commission.

Results of Operations

        Operating results in all periods presented include the results of acquisitions. The timing of acquisitions and the changing mix of our businesses may affect the comparability of results from one period to another.

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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

(in thousands, except per share amounts)

Three Months Ended March 31, 2009 Compared to the Three Months Ended March 31, 2008:

Net Sales

        Net sales by segment for the three months ended March 31, 2009 as compared with the prior comparable period were as follows:

Wholesale / US Nutrition

        Net sales for the Wholesale / US Nutrition segment increased $90,438 or 34.9% to $349,801 for the three months ended March 31, 2009. This increase was due to net sales from private label brands, which increased $102,904 primarily resulting from our acquisition of Leiner and net sales from Vita Health, Inc., the Leiner Canadian subsidiary. Some of the major brands in this segment include Nature's Bounty, Solgar, Osteo Bi-Flex, Ester C and Sundown. Collectively, net sales of these brands decreased $15,134 and net sales of all other company brands decreased $2,708. In addition, net sales from international customers decreased primarily caused by foreign currency translation. We continue to adjust shelf space allocation among the US Nutrition brands to provide the best overall product mix and to respond to changing market conditions. These efforts have helped to strengthen US Nutrition's position in the mass market. US Nutrition continues to leverage valuable consumer sales information obtained from our Vitamin World retail stores and Puritan's Pride Direct Response/E-Commerce operations in order to provide its mass-market customers with data and analyses to drive mass market sales.

        We continue to use targeted promotions to grow overall net sales. Promotional programs and rebates as a percentage of sales were 10.7% for the three months ended March 31, 2009 as compared to 10.4% for the prior comparable period.

        Product returns were $10,809 or 2.7% of sales for the three months ended March 31, 2009 as compared to $6,786 or 2.3% of sales for the prior comparable period. Product returns for the three months ended March 31, 2009 were higher than normal due to the reallocation of shelf space by customers of our US Nutrition brands and approximately $2,000 for returns related to the recall of our Met-Rx bars containing peanut butter. We expect sales returns relating to normal operations to trend at approximately 2% of Wholesale / US Nutrition sales in future quarters.

        One customer represented 31% and 19% of the Wholesale / US Nutrition segment's net sales for the three months ended March 31, 2009 and 2008, respectively. This customer also represented 18% and 9% of consolidated net sales for the three months ended March 31, 2009 and 2008, respectively.

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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

(in thousands, except per share amounts)

The loss of this customer, or any one of our major customers, would have a material adverse effect on our results of operations if we were unable to replace such customers.

North American Retail

        Net sales for this segment were consistent with the prior comparable period. Sales for stores open more than one year (same store sales) increased 1.5%.

        The following is a summary of North American Retail store activity for the three months ended March 31, 2009 and 2008:

        We anticipate opening an additional 3 Vitamin World stores and closing up to 5 under-performing Vitamin World stores during the remainder of this fiscal year.

European Retail

        The decrease in net sales for this segment is primarily the result of unfavorable foreign currency translation and the difficult retail environment. The decline in net sales was partially offset by an increase in net sales from the recent acquisition of Julian Graves. Same store sales in U.S. dollars decreased 31.3% or $49,063 as compared to the prior comparable period. Same store sales in local currency declined 5.4% from the prior like period. This decrease was partially offset by the acquisition of Julian Graves, which contributed net sales of $22,980 for the three months ended March 31, 2009.

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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

(in thousands, except per share amounts)

        The following is a summary of European Retail store activity for the three months ended March 31, 2009 and 2008:

        We anticipate opening an additional 5 stores during the remainder of this fiscal year.

Direct Response / E-Commerce

        Direct Response/E-Commerce net sales decreased $3,783 or 6.0% for the three months ended March 31, 2009 as compared to the prior comparable period. The average order size increased approximately 12% for the three months ended March 31, 2009 as compared to the prior comparable period. On-line net sales comprised 42.7% of this segment's net sales for the three months ended March 31, 2009 as compared to 44.8% for the prior comparable period. We remain the vitamin and nutritional supplements leader in the direct response and e-commerce sectors and continue to increase the number of products available via our catalog and websites.

        This division continues to vary its promotional strategy throughout the fiscal year, utilizing highly promotional catalogs which are not offered in every quarter. Historical results reflect this pattern and therefore this division should be viewed on an annual, and not quarterly, basis.

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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

(in thousands, except per share amounts)

Gross Profit

        Gross Profit by segment for the three months ended March 31, 2009 as compared with the prior comparable period was as follows:

        The Wholesale/US Nutrition segment's gross profit percentage decreased to 27.3% for the three months ended March 31, 2009 as compared to 40.7% for the prior comparable period. The decline in gross margin was mainly due to higher raw material and other manufacturing costs which were not offset by higher prices charged to customers, increased promotional activity and a larger concentration of sales of lower margin private label products.

        The increase in the North American Retail segment's gross profit percentage to 66.2% for the three months ended March 31, 2009 as compared to 61.6% for the comparable prior period reflects a shift in promotional strategy as well as a focus on rationalizing SKU's and enhanced visual merchandising. The decrease in the European Retail segment's gross profit dollars is the result of unfavorable foreign currency translation partially offset by the acquisition of Julian Graves. The increase in the Direct Response/E-Commerce segment's gross profit percentage to 63.8% for the three months ended March 31, 2009 as compared to 58.5% for the prior comparable period reflects a decrease in promotional activity.

Advertising, Promotion and Catalog Expenses

        Total advertising, promotion and catalog expenses by segment for the three months ended March 31, 2009 as compared with the prior comparable period were as follows:

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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

(in thousands, except per share amounts)

        The decrease in the Wholesale/US Nutrition segment's advertising, promotions and catalogs is due to a $2,481 decrease in magazine and newspaper advertising and a decrease in other advertising of $1,204 as compared to the prior comparable period. The increase in North American Retail advertising relates to new promotions through free standing inserts in newspapers and magazines of $1,493. The decrease in the European Retail segment relates to the effect of foreign currency translation as well as discretionary expense reduction efforts. The decrease in the Direct Response/E-commerce segment relates to discretionary expense reduction efforts.

        We create our own advertising materials through our in-house staff of advertising associates. In the U.K. and Ireland, both Holland & Barrett and Nature's Way advertise on television and in national newspapers. GNC (UK) and De Tuinen also advertise in newspapers. SISU advertises in trade journals and magazines.

Selling, General and Administrative Expenses

        Selling, general and administrative expenses by segment for the three months ended March 31, 2009 as compared with the prior comparable period were as follows:

        The Wholesale/US Nutrition's selling, general and administrative expense ("SG&A") increased $5,776 for the three months ended March 31, 2009 as compared to the prior comparable period. Payroll and payroll related costs increased $2,095 primarily related to severance costs of $1,693. Freight costs increased $2,121 but remained consistent as a percentage of sales.

        The European Retail's SG&A increased $3,101 for the three months ended March 31, 2009 as compared to the prior comparable period due to the acquisition of Julian Graves, which added $14,487 to total SG&A costs offset by a decrease in costs due to foreign currency translation. In local currency, and excluding the impact of the Julian Graves acquisition, SG&A costs increased approximately 10% due to increased occupancy expenses related to rent increases and new stores.

        The Direct Response/E-Commerce SG&A decreased $2,801 due to a decrease in freight costs of $897, a decrease in outside services and temporary labor of $696 and decreases across most expense categories due to the staff reorganization of this segment during the first quarter of fiscal 2009.

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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

(in thousands, except per share amounts)

        The Corporate segment's SG&A increased $2,058 primarily due to an increase in payroll and payroll related costs of $1,115 due to increased headcount partially offset by a reduction in executive bonus accruals.

Interest Expense

        Interest expense increased $5,231 due to interest on the Term Loan and outstanding borrowings under the Revolving Credit Facility which were not outstanding during the prior comparable period.

Miscellaneous, net

        The components of miscellaneous, net were as follows:

        Miscellaneous, net decreased primarily due to lower investment income earned on lower cash and investment balances as well as unrealized foreign exchange losses on intercompany balances for the three months ended March 31, 2009 associated with the strengthening of the U.S. dollar against the British Pound and Canadian dollar as compared to unrealized foreign exchange gains in the prior comparable period.

Provision for Income Taxes

        Our provision for income taxes is impacted by a number of factors, including federal income taxes, our international tax structure, state income tax rates in the jurisdictions where we conduct business, and our ability to utilize state tax credits that expire between 2013 and 2016. Therefore, our overall effective income tax rate could vary as a result of these factors. The effective income tax rate for the three months ended March 31, 2009 and March 31, 2008 was 35.2% and 32.9%, respectively. The effective income tax rate was higher for the three months ended March 31, 2009 as compared to the prior comparable period due to a higher effective state rate as a result of increased operations in California from the Leiner acquisition and a lower domestic production deduction in the current year due to lower domestic income.

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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

(in thousands, except per share amounts)

Six months Ended March 31, 2009 Compared to the Six months Ended March 31, 2008:

Net Sales

        Net sales by segment for the six months ended March 31, 2009 as compared with the prior comparable period were as follows:

Wholesale / US Nutrition

        Net sales for the Wholesale / US Nutrition segment increased $238,470 or 46.0% to $756,768 for the six months ended March 31, 2009. This increase was due to net sales from private label brands, which increased $220,957 primarily resulting from our acquisition of Leiner. Some of the major brands in this segment include Nature's Bounty, Solgar, Osteo Bi-Flex, Ester C and Sundown. Collectively, sales of these brands decreased $13,545. Net sales from our sports nutrition brands increased $10,361 over the prior comparable quarter. Net sales from all other brands increased $4,184. We continue to adjust shelf space allocation among the US Nutrition brands to provide the best overall product mix and to respond to changing market conditions. These efforts have helped to strengthen US Nutrition's position in the mass market. US Nutrition continues to leverage valuable consumer sales information obtained from our Vitamin World retail stores and Puritan's Pride Direct Response/E-Commerce operations in order to provide its mass-market customers with data and analyses to drive mass market sales. In addition, international wholesale net sales increased $25,256 due to net sales from Vita Health Inc., the Leiner Canadian subsidiary, offset by a decrease in net sales to other international customers caused by foreign currency translation.

        We continue to use targeted promotions to grow overall net sales. Promotional programs and rebates as a percentage of net sales were 9.5% for the six months ended March 31, 2009 as compared to 10.3% for the prior comparable period.

        Product returns were $18,317 or 2.1% of sales for the six months ended March 31, 2009 as compared to $13,424 or 2.3% of sales for the prior comparable period. We expect sales returns relating to normal operations to trend at approximately 2% of Wholesale / US Nutrition sales in future quarters.

        One customer represented 30% and 20% of the Wholesale / US Nutrition segment's net sales for the six months ended March 31, 2009 and 2008, respectively. It also represented 18% and 10% of consolidated net sales for the six months ended March 31, 2009 and 2008, respectively. Another customer represented 10% of the Wholesale / US Nutrition segment's net sales and 6% of consolidated net sales for the six months ended March 31, 2009. The loss of either one of these customers, or any

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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

(in thousands, except per share amounts)

one of our major customers, would have a material adverse effect on our results of operations if we were unable to replace such customers.

North American Retail

        Net sales for this segment decreased $7,732 or 7.2% to $100,354 for the six months ended March 31, 2009. Sales for stores open more than one year (same store sales) decreased 5.1%. This decline in net sales is partially attributable to a shift in our Vitamin World stores strategy from reliance on promotional discounting to drive sales to an everyday low price for its customers.

        The following is a summary of North American Retail store activity for the six months ended March 31, 2009 and 2008:

        We anticipate opening an additional 3 Vitamin World stores and closing up to 5 under-performing Vitamin World stores during the remainder of this fiscal year.

European Retail

        The decrease in net sales for this segment is primarily the result of unfavorable foreign currency translation and the difficult retail environment. The decline in net sales was partially offset by an increase in net sales from the recent acquisition of Julian Graves. Same store sales in U.S. dollars decreased 28.6% or $89,435 as compared to the prior comparable period. Same store sales in local currency declined 4.5% from the prior like period. This decrease was partially offset by the acquisition of Julian Graves, which contributed net sales of $58,315 for the six months ended March 31, 2009.

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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

(in thousands, except per share amounts)

        The following is a summary of European Retail store activity for the six months ended March 31, 2009 and 2008:

        We anticipate opening an additional 5 stores during the remainder of this fiscal year.

Direct Response / E-Commerce

        Direct Response/E-Commerce net sales increased $8,193 or 8.2% for the six months ended March 31, 2009 as compared to the prior comparable period. These results reflect a lowering of prices to garner greater market share in a highly competitive environment and an increase in marketing and advertising as compared to the prior comparable period.

        The average order size increased approximately 18% for the six months ended March 31, 2009 as compared to the prior comparable period. On-line net sales comprised 44.4% of this segment's net sales for the six months ended March 31, 2009 as compared to 43.0% for the prior comparable period. We remain the vitamin and nutritional supplements leader in the direct response and e-commerce sectors and continue to increase the number of products available via our catalog and websites.

        This division continues to vary its promotional strategy throughout the fiscal year, utilizing highly promotional catalogs which are not offered in every quarter. Historical results reflect this pattern and therefore this division should be viewed on an annual, and not quarterly, basis.

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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

(in thousands, except per share amounts)

Gross Profit

        Gross Profit by segment for the six months ended March 31, 2009 as compared with the prior comparable period was as follows:

        The Wholesale/US Nutrition segment's gross profit percentage decreased to 27.4% for the six months ended March 31, 2009 as compared to 42.3% for the prior comparable period. The decline in gross margin was mainly due to higher raw material and other manufacturing costs which were not offset by higher prices charged to customers, increased promotional activity and lower margins on private label products.

        The increase in the North American Retail segment's gross profit percentage to 66.5% for the six months ended March 31, 2009 as compared to 60.4% for the comparable prior period reflects a shift in promotional strategy as well as a focus on rationalizing SKU's and enhanced visual merchandising. The decrease in the European Retail segment's gross profit dollars is the result of unfavorable foreign currency translation partially offset by the acquisition of Julian Graves. The increase in the Direct Response/E-Commerce segment's gross profit percentage to 61.5% for the six months ended March 31, 2009 as compared to 60.3% for the prior comparable period reflects a decrease in promotional activity.

Advertising, Promotion and Catalog Expenses

        Total advertising, promotion and catalog expenses by segment for the six months ended March 31, 2009 as compared with the prior comparable period were as follows:

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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

(in thousands, except per share amounts)

        The decrease in the Wholesale/US Nutrition segment's advertising, promotions and catalogs is due to a $5,020 decrease in magazine and newspaper advertising and a decrease in other advertising of $1,712 as compared to the prior comparable period. The increase in North American Retail advertising relates to new promotions through free standing inserts in newspapers and magazines of $1,536. The decrease in the European Retail segment relates to the effect of foreign currency translation as well as discretionary expense reduction efforts. The decrease in the Direct Response/E-commerce segment relates to discretionary expense reduction efforts.

        We create our own advertising materials through our in-house staff of advertising associates. In the U.K. and Ireland, both Holland & Barrett and Nature's Way advertise on television and in national newspapers. GNC (UK) and De Tuinen also advertise in newspapers. SISU advertises in trade journals and magazines.

Selling, General and Administrative Expenses

        Selling, general and administrative expenses by segment for the six months ended March 31, 2009 as compared with the prior comparable period were as follows:

        The Wholesale/US Nutrition's selling, general and administrative expense ("SG&A") increased $18,933 for the six months ended March 31, 2009 as compared to the prior comparable period. Freight costs increased $8,383, a portion of which relates to higher private label sales, as well as additional shipments and higher fuel surcharges. Payroll and payroll related costs increased $5,133 primarily related to the Leiner operation and $1,717 related to severance costs. In addition, outside services increased $1,311 and amortization increased $2,028 due to the Leiner acquisition.

        The decrease in SG&A in the North American Retail segment is the result of lower payroll and payroll related costs due to a change in the commission structure as well as lower costs incurred across most categories. In addition, the prior period included a charge of approximately $350 for asset impairments, which did not recur in the six months ended March 31, 2009.

        The European Retail's SG&A increased $10,795 for the six months ended March 31, 2009 as compared to the prior comparable period due to the acquisition of Julian Graves, which added $32,188 to total SG&A costs partially offset by a decrease in US dollar reported costs due to foreign currency translation. In local currency, and excluding the impact of the Julian Graves acquisition, SG&A costs increased approximately 10% due to increased occupancy expenses related to rent increases and new stores.

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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

(in thousands, except per share amounts)

        The Direct Response/E-Commerce SG&A decreased $877 due primarily to a reduction in consulting related expenses.

        The Corporate segment's SG&A increased $9,392 primarily due to an increase in payroll and payroll related costs of $6,128 which includes approximately $1,692 for severance costs.

IT Project Termination Costs

        During December 2008, management determined that certain information technology projects relating to the Direct Response segment would be terminated. As a result, $4,667 previously capitalized costs were written-off during the six months ended March 31, 2009. In addition, certain termination payments and future lease obligations of $3,415 were charged to operations during the same period as they will not provide any future economic benefit. In connection with these terminated IT projects certain employees were also terminated resulting in a severance charge of $565.

Interest Expense

        Interest expense increased $10,858 due to interest on the Term Loan and outstanding borrowings under the Revolving Credit Facility which were not outstanding during the prior comparable period.

Miscellaneous, net

        The components of miscellaneous, net were as follows:

        Miscellaneous, net decreased primarily due to unrealized foreign exchange losses on intercompany balances for the six months ended March 31, 2009 associated with the strengthening of the U.S. dollar against the British Pound and Canadian dollar as compared to unrealized foreign exchange gains in the prior comparable period as well as lower investment income earned on lower cash and investment balances.

Provision for Income Taxes

        Our provision for income taxes is impacted by a number of factors, including federal taxes, our international tax structure, state tax rates in the jurisdictions where we conduct business, and our ability to utilize state tax credits that expire between 2013 and 2016. Therefore, our overall effective income tax rate could vary as a result of these factors. The effective income tax rate for the six months ended March 31, 2009 and March 31, 2008 was 35.5% and 33.4%, respectively. The effective income tax rate was higher for the six months ended March 31, 2009 as compared to the prior comparable period due to a higher effective state rate as a result of increased operations in California from the Leiner

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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

(in thousands, except per share amounts)

acquisition and a lower domestic production deduction in the current year due to lower domestic income.

Seasonality

        Although we believe that our business is not seasonal in nature, historically, we have experienced, and expect to continue to experience, a substantial variation in our net sales and operating results from quarter to quarter. We believe that the factors that influence this variability of quarterly results include general economic and industry conditions affecting consumer spending, changing consumer demands and current news on nutritional supplements, the timing of our introduction of new products, promotional program incentives offered to customers, the timing of catalog promotions, the level of consumer acceptance of new products and actions of competitors. Accordingly, a comparison of our results of operations from consecutive periods is not necessarily meaningful, and our results of operations for any period are not necessarily indicative of future performance. Additionally, we may experience higher net sales in a quarter depending upon when we have engaged in significant promotional activities.

Liquidity and Capital Resources

        Our primary sources of liquidity and capital resources are cash generated from operations and our revolving credit facility. The facility provides for revolving credit loans in the aggregate principal amount of up to $325,000 to be used for working capital and other general corporate purposes, and acquisitions. At March 31, 2009, $320,000 remained undrawn on the revolving credit facility. We have used cash from operations and our revolving credit facility to finance working capital, facility expansions, acquisitions, capital expenditures and debt service requirements. We anticipate these uses will continue to be our principal uses of cash in future quarters.

        The following table sets forth, for the periods indicated, cash balances, cash held by foreign subsidiaries and working capital:

        The following table sets forth, for the period indicated, net cash flows provided by (used in) operating, investing and financing activities and other operating measures:

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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

(in thousands, except per share amounts)

        We monitor current and anticipated future levels of cash and cash equivalents in relation to anticipated operating, financing and investing requirements. Cash and cash equivalents held by our foreign subsidiaries are subject to U.S. income taxes upon repatriation to the U.S. We generally repatriate all earnings from our foreign subsidiaries where permitted under local law.

        The decrease in working capital of $43,352 as compared to September 30, 2008 was primarily due to required principal payments under our Term Loan, as well as paydowns under our revolving credit facility. The annualized total inventory turnover rate was approximately 2.43 times during the current period ended March 31, 2009 compared to 2.59 during the prior like period. The annualized finished goods inventory turnover (excluding bulk inventory) was approximately 5.22 times during the current period ended March 31, 2009 compared to 4.45 during the prior like period. At the time of the Leiner acquisition in July 2008, Leiner inventory levels were not adequate to maintain customer fulfillment levels. The increase in inventory reflects our ongoing efforts to maintain a sufficient supply of product to respond to our increased sales levels.

        Cash provided by operating activities during the six month period ended March 31, 2009 was mainly attributable to net income and non-cash charges, offset by changes in operating assets and liabilities.

        During the six month period ended March 31, 2009, cash flows used in investing activities consisted primarily of purchases of property, plant and equipment, offset by an escrow refund in connection with the Leiner acquisition.

        For the six month period ended March 31, 2009 cash flows used in financing activities related to the net principal payments under long-term debt agreements and principal payments under capital lease obligations.

        We believe our cash generated from operations, as well as our undrawn borrowings under our $325,000 revolving credit facility, will be sufficient to fund our operations and meet our cash requirements to satisfy our working capital needs, capital expenditure needs, outstanding commitments, and other liquidity requirements associated with our existing operations over the next 18 to 24 months. Our ability to fund these requirements and comply with financial covenants under our debt agreements will depend on our cash flow from future operations and is subject to prevailing economic conditions and financial, business and other factors, some of which are beyond our control. In addition, as part of our strategy, we may pursue acquisitions and investments that are complementary to our business. Any material future acquisitions or investments will likely require additional capital and, therefore, we cannot predict or assure that additional funds from existing sources will be sufficient for such future events.

Off-Balance Sheet Arrangements

        We have no off-balance sheet arrangements. For additional information relating to certain contractual cash obligations see below.

Contractual Cash Obligations and Other Commercial Commitments

        We conduct retail operations under operating leases, which expire at various dates through 2033. Some of the leases contain escalation clauses, as well as renewal options, and provide for contingent rent based upon sales plus certain tax and maintenance costs. At March 31, 2009, we had $568,860 in

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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

(in thousands, except per share amounts)

future minimum rental payments (excluding real estate tax and maintenance costs) for retail locations and other leases that have initial or noncancelable lease terms in excess of one year.

        We were committed to make future purchases for inventory related items, such as raw materials and finished goods, under various purchase arrangements with fixed price provisions aggregating $175,487 at March 31, 2009. Such purchase commitments are generally cancelable at our discretion until the order has been shipped, but require repayment of all expenses incurred through the date of cancellation. During the six months ended March 31, 2009 no one supplier individually represented greater than 10% of our raw material purchases. We do not believe that the loss of any single supplier would have a material adverse effect on our consolidated financial condition or results of operations.

        We had $4,884 in open capital commitments at March 31, 2009, primarily related to furniture and fixtures related to store renovations, as well as other manufacturing equipment and computer hardware and software.

        We are currently evaluating our point of sales systems for retail operations. At March 31, 2009, we had capitalized costs of approximately $11,000 in these systems. If we determine that the systems do not fulfill our needs or we will not get a return on our investment, we will take action to correct the situation.

        At March 31, 2009, we had $9,542 in unrecognized tax benefits, the recognition of which would have an effect of $6,364 on income tax expense and the effective income tax rate. We do not believe that the amount will change significantly in the next 12 months. At this time, we are unable to make a reasonably reliable estimate of the timing of payments in individual years beyond 12 months due to uncertainties in the timing of tax audit outcomes.

        We have employment agreements with two of our executive officers. The agreements, entered into on March 1, 2008, each have a term of three years and are automatically renewed each year thereafter unless either party notifies the other to the contrary. These agreements provide for minimum salary levels and contain provisions regarding severance and change in control of the Company. The remaining commitment for salaries to these two officers as of March 31, 2009 was approximately $2,923. In addition, five members of Holland & Barrett's senior executive staff have service contracts terminable by us upon twelve months notice. The annual aggregate commitment for such senior executive staff as of March 31, 2009 was approximately $1,317.

        We maintain a consulting agreement with Rudolph Management Associates, Inc. for the services of Arthur Rudolph, one of our directors and the father of Scott Rudolph, our Chief Executive Officer. The agreement requires Mr. Rudolph to provide consulting services to us through December 31, 2009, in exchange for a consulting fee of $450 per year, payable monthly. In addition, Mr. Rudolph receives certain fringe benefits accorded to our other executives.

        We have grown our business through acquisitions, and under proper conditions, may continue to seek to acquire entities in similar or complementary businesses. Such acquisitions are likely to require the incurrence and/or assumption of indebtedness and/or obligations, the issuance of equity securities or some combination thereof. In addition, we may from time to time determine to sell or otherwise dispose of certain of our existing assets or businesses; we cannot predict if any such transactions will be consummated, nor the terms or forms of consideration which might be required in any such transactions.

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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

(in thousands, except per share amounts)

Inflation

        Inflation affects the cost of raw materials, goods and services we use. High energy costs and fluctuations in commodity prices can affect the cost of all raw materials and components. The competitive environment somewhat limits our ability to recover higher costs resulting from inflation by raising prices. However, we anticipate passing these costs to our customers, to the extent possible. We seek to mitigate the adverse effects of inflation primarily through improved productivity and strategic buying initiatives.

Financial Covenants and Credit Rating

        Our credit arrangements impose certain restrictions regarding capital expenditures and limit our ability to: incur additional indebtedness, dispose of assets, make repayments of indebtedness or amendments of debt instruments, pay distributions, create liens on assets and enter into sale and leaseback transactions, investments, loans or advances and acquisitions. Such restrictions could limit our ability to respond to market conditions, to provide for unanticipated capital investments or to take advantage of business or acquisition opportunities. We were in compliance with all covenants under our credit arrangements at March 31, 2009.

        At March 31, 2009, credit ratings were as follows:

Recent Accounting Developments

        In March 2008, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133" ("SFAS 161"). SFAS 161 requires enhanced disclosures regarding an entity's derivative and hedging activities. These enhanced disclosures include information regarding how and why an entity uses derivative instruments; how derivative instruments and related hedge items are accounted for under SFAS 133, "Accounting for Derivative Instruments and Hedging Activities", and its related interpretations; and how derivative instruments and related hedge items affect an entity's financial position, financial performance and cash flows. We adopted SFAS 161 as of January 1, 2009. The adoption of SFAS 161 had no impact on our financial position or results of operations.

        In December 2007, the FASB issued SFAS No. 141 (revised 2007), ("SFAS 141R"), "Business Combinations", which replaces SFAS No. 141. The statement retains the purchase method of accounting for acquisitions, however, includes changes in the way assets and liabilities are recognized in purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. SFAS 141R will become effective for us beginning October 1, 2009 and will apply prospectively to business combinations completed on or after that date. The impact of the adoption of SFAS 141R will be dependent on the extent and nature of any future acquisitions.

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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

(in thousands, except per share amounts)

        In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 permits companies to choose to measure certain financial instruments and other eligible items at fair value when the items are not otherwise currently required to be measured at fair value. Under SFAS 159, the decision to measure items at fair value is made at specified election dates on an irrevocable instrument-by-instrument basis. Companies electing the fair value option would be required to recognize changes in fair value in earnings and to expense upfront cost and fees associated with the item for which the fair value option is elected. Companies electing the fair value option are required to distinguish, on the face of the statement of financial position, the fair value of assets and liabilities for which the fair value option has been elected and similar assets and liabilities measured using another measurement attribute. SFAS 159 became effective for us on October 1, 2008. The adoption of SFAS 159 did not have a significant impact on our consolidated financial position or results of operations as we did not elect the fair value option.

        In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and enhances disclosures about fair value measurements. SFAS 157 applies when other accounting pronouncements require fair value measurements; it does not require new fair value measurements. We adopted SFAS 157 on October 1, 2008 for financial assets and liabilities carried at fair value and non financial assets and liabilities that are recognized or disclosed on a recurring basis. The adoption did not have a material effect on the consolidated financial statements. In February 2008, the FASB issued FASB Staff Position 157-2, which provides for a one-year deferral of the provisions of SFAS 157 for non-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a non-recurring basis. FASB Staff Position 157-2 will become effective for us beginning October 1, 2009. We anticipate that the adoption of FASB Staff Position SFAS 157-2 will not have a significant impact on our consolidated financial position or results of operations.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

(in thousands)

Quantitative and Qualitative Disclosures About Market Risk

        We are subject to currency fluctuations and interest rate risks that arise from normal business operations. We regularly assess these risks.

        We have subsidiaries whose operations are denominated in foreign currencies (primarily the British pound sterling, the euro, the Canadian dollar and the Chinese yuan). We consolidate the earnings of our international subsidiaries by translating them into U.S. dollars in accordance with Statement of Financial Accounting Standards No. 52 "Foreign Currency Translation." The statements of income of our international operations are translated into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar weakens against foreign currencies, the remeasurement of these foreign currencies denominated transactions results in increased net sales, operating expenses and net income. Similarly, our net sales, operating expenses and net income will decrease when the U.S. dollar strengthens against foreign currencies.

        The U.S. dollar volume of net sales denominated in foreign currencies was approximately $363,723, or 29.0% of total net sales, for the six months ended March 31, 2009. A majority of our foreign currency exposure is denominated in the British pound sterling and Canadian dollars. For the six months ended March 31, 2009, as compared to the prior comparable period, the change in currency rates between British pound sterling and Canadian dollar as compared to the U.S. dollar was a decline of 25% and 19%, respectively, resulting in a decrease of $89,739 and $15,396 in net sales and operating income, respectively. The total impact of all currency fluctuations on net income was a reduction of approximately $0.23 per diluted share for the six months ended March 31, 2009.

        To manage the potential risk arising from changing interest rates and their impact on long-term debt, our policy is to maintain a combination of available fixed and variable rate financial instruments. We are exposed to changes in interest rates on our floating rate $325,000 revolving credit facility, our multicurrency term facility, and our Term Loan. With respect to the interest on the Term Loan, in August 2008, we entered into two interest rate swap contracts, each with a notional amount of $100 million. Under the terms of the swap contracts, variable interest payments will be swapped for fixed interest payments. The interest rate exposure on the multicurrency term facility is mitigated by the interest earned on the cash collateral securing the loan. Therefore, a hypothetical 10% change in interest rates would not have a material effect on our consolidated pretax income or cash flow. At March 31, 2009, we had borrowings outstanding under our revolving credit facility of $5,000. A hypothetical 10% change in interest rates would not have a material effect on our consolidated pretax income or cash flow.

        The 7 ¹ / 8 % Senior Subordinated Notes had a fair value at March 31, 2009, based on then quoted market prices, of $152,000. At March 31, 2009, based solely on a hypothetical 10% change in interest rates related to our fixed rate Notes, we estimate that the hypothetical fair value of our fixed rate debt would have changed approximately $5,000. We believe that the carrying value of all of our other financial instruments approximates fair value due to their short maturities and variable interest rates.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

        Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Our disclosure controls and procedures are also designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, have concluded, based on their respective evaluations as of the end of the period covered by this Report, that our disclosure controls and procedures are effective as of March 31, 2009.

Changes in Internal Control Over Financial Reporting

        There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Prohormone products

        In March 2004, a putative class-action lawsuit was filed in New Jersey against MET-Rx USA, Inc. ("Met-Rx"), a subsidiary of the Company, claiming that the advertising and marketing of certain prohormone supplements were false and misleading and that plaintiff and the putative class of New Jersey purchasers of these products were entitled to damages and injunctive relief. Because these allegations were virtually identical to allegations made in a putative nationwide class-action previously filed against Met-Rx in California, we moved in 2004 to dismiss or stay the New Jersey action pending the outcome of the California action. The motion was granted, and the New Jersey action is stayed at this time. The California action against Met-Rx had been dismissed in 2008.

Nutrition Bars

        Our subsidiary, Rexall Sundown, Inc. ("Rexall"), and certain of its subsidiaries are defendants in a class-action lawsuit brought in 2002 on behalf of all California consumers who bought various nutrition bars. Plaintiffs allege misbranding of nutrition bars and violations of California unfair competition statutes, misleading advertising and other similar causes of action. Plaintiffs seek restitution, legal fees and injunctive relief. We have defended this action vigorously. In December 2007, while Rexall's and the other defendants' renewed motion for judgment on the pleadings was pending, the Court again stayed the case for all purposes, pending rulings on other relevant cases before the California Supreme Court. The California Supreme Court issued a ruling in those other cases on February 11, 2008. The parties to those other cases filed a petition for certiorari with the United States Supreme Court. That petition was denied on January 12, 2009. The case remains stayed. Based upon the information currently available, no determination can be made at this time as to the final outcome of this case, nor can its materiality be accurately ascertained.

        In addition to the foregoing, other regulatory inquiries, claims, suits and complaints (including product liability and intellectual property claims) arise in the ordinary course of our business. We believe that such other inquiries, claims, suits and complaints would not have a material adverse effect on our consolidated financial condition or results of operations, if adversely determined against us.

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Item 1A. Risk Factors

Risk Factors

        In addition to the other information set forth in this Report, you should carefully consider the risk factors disclosed under part 1—"Item 1A. Risk Factors" in our annual report on Form 10-K for the year ended September 30, 2008, which could materially adversely affect our business, financial condition, operating results and cash flows. The risks and uncertainties described in our Form 10-K for the year ended September 30, 2008 are not the only ones we face. Risks and uncertainties not currently known to us or that we currently deem immaterial also may materially adversely affect our business, financial condition operating results or cash flows. Since September 30, 2008, there have been no significant changes relating to risk factors.

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Item 4. Submission of Matters to a Vote of Security Holders

        At the 2009 Annual Meeting of Shareholders of NBTY, Inc. held on February 27, 2009, the following matters were voted upon:

        Proposition 1:     Re-elected Directors to serve until the 2012 Annual Meeting.

        Proposition 2:     Approved the NBTY, Inc. 2009 Equity Awards Plan.

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Votes against include 6,259,390 Broker Non-Votes.

        Proposition 3:     Ratified the appointment of PricewaterhouseCoopers LLP as independent registered public accountants to audit the consolidated financial statements of the Company for the 2009 fiscal year.

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Item 6. Exhibits

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Filed herewith

(1)

Incorporated by reference to NBTY, Inc.'s Form 10-Q filed February 9, 2009 (File #001-31788).

(2)

Incorporated by reference to NBTY, Inc.'s Proxy Statement, filed January 14, 2009, for the Annual Meeting of Stockholders held on February 27, 2009 (File #001-31788).

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SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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