- Quarterly Report (10-Q)

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

FORM 10-Q


(Mark One)
ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 2010
Or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to

Commission File Number: 001-31788

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


Delaware (State or other jurisdiction of incorporation or organization)		11-2228617 (I.R.S. Employer Identification No.)

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 ý 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.


Large accelerated filer ý		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

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 August 2, 2010 was 63,418,619.

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NBTY, INC.
INDEX



PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income	4
	Condensed Consolidated Statements of Stockholders' Equity and Comprehensive Income	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	44
Item 4.	Controls and Procedures	45
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	48
Item 6.	Exhibits	50
Signatures		51
Exhibits

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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)

			June 30, 2010			September 30, 2009

Assets
Current assets:
	Cash and cash equivalents		$	293,632		$	106,001
	Accounts receivable, net			146,233			155,863
	Inventories			642,305			658,534
	Deferred income taxes			27,912			28,154
	Other current assets			51,369			49,999

		Total current assets		1,161,451			998,551
Property, plant and equipment, net				367,661			373,817
Goodwill				332,805			339,099
Intangible assets, net				198,569			214,139
Other assets				19,304			34,615

		Total assets	$	2,079,790		$	1,960,221

Liabilities and Stockholders' Equity
Current liabilities:
	Current portion of long-term debt		$	70,791		$	38,893
	Accounts payable			105,737			128,485
	Accrued expenses and other current liabilities			154,120			156,734

		Total current liabilities		330,648			324,112
Long-term debt, net of current portion				361,830			437,629
Deferred income taxes				40,198			36,422
Other liabilities				33,906			34,233

		Total liabilities		766,582			832,396

Commitments and contingencies
Stockholders' equity:
	Common stock, $.008 par; authorized 175,000 shares; issued and outstanding 63,411 shares and 61,874 shares at June 30, 2010 and September 30, 2009, respectively			507			495
	Capital in excess of par			167,602			145,885
	Retained earnings			1,173,222			984,797
	Accumulated other comprehensive income			(28,123	)		(3,352	)

		Total stockholders' equity		1,313,208			1,127,825

		Total liabilities and stockholders' equity	$	2,079,790		$	1,960,221

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)

			Three months ended June 30,						Nine months ended June 30,

			2010			2009			2010			2009
Net sales			$	695,856		$	651,707		$	2,152,167		$	1,907,813

Costs and expenses:
	Cost of sales			363,355			359,240			1,155,470			1,091,386
	Advertising, promotion and catalog			37,003			23,570			116,682			87,889
	Selling, general and administrative			192,118			182,618			575,443			553,177
	IT project termination costs			—			10,127			—			18,774

				592,476			575,555			1,847,595			1,751,226

Income from operations				103,380			76,152			304,572			156,587

Other income (expense):
	Interest			(7,312	)		(8,402	)		(22,984	)		(26,780	)
	Miscellaneous, net			68			3,396			2,613			(1,959	)

				(7,244	)		(5,006	)		(20,371	)		(28,739	)

Income before provision for income taxes				96,136			71,146			284,201			127,848
Provision for income taxes				29,953			25,229			95,776			45,386

		Net income	$	66,183		$	45,917		$	188,425		$	82,462

Net income per share:
	Basic		$	1.04		$	0.74		$	2.99		$	1.34
	Diluted		$	1.03		$	0.73		$	2.94		$	1.31
Weighted average common shares outstanding:
	Basic			63,378			61,796			63,014			61,665
	Diluted			64,139			63,264			64,087			63,124

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 Income
Nine Months Ended June 30, 2010 and 2009
(Unaudited)
(in thousands)

		Common Stock

		Common Stock								Accumulated Other Comprehensive (Loss) Income
		Number of Shares		Amount		Capital in Excess of Par		Retained Earnings		Accumulated Other Comprehensive (Loss) Income			Total Stockholders' Equity
Balance, September 30, 2009			61,874	$	495	$	145,885	$	984,797	$	(3,352	)	$	1,127,825
Components of comprehensive income:
	Net income								188,425					188,425
	Foreign currency translation adjustment, net of taxes										(26,866	)		(26,866	)
	Change in fair value of interest rate swaps, net of taxes										2,095			2,095

Comprehensive income:													$	163,654

Exercise of stock options			1,537		12		10,312							10,324
Excess tax benefit from exercise of stock options							6,097							6,097
Stock-based compensation							5,308							5,308

Balance, June 30, 2010			63,411	$	507	$	167,602	$	1,173,222	$	(28,123	)	$	1,313,208

Balance, September 30, 2008			61,599	$	493	$	140,990	$	839,068	$	17,645		$	998,196
Components of comprehensive income:
	Net income								82,462					82,462
	Foreign currency translation adjustment, net of taxes										(12,733	)		(12,733	)
	Change in fair value of interest rate swaps, net of taxes										(4,797	)		(4,797	)

Comprehensive income:													$	64,932

Exercise of stock options			273		2		1,435							1,437
Excess tax benefit from exercise of stock options							55							55
Stock-based compensation							2,013							2,013

Balance, June 30, 2009			61,872	$	495	$	144,493	$	921,530	$	115		$	1,066,633

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)

					Nine months ended June 30,

					2010			2009
Cash flows from operating activities:
	Net income				$	188,425		$	82,462
	Adjustments to reconcile net income to cash provided by operating activities:
		Impairments and disposals of assets				10,033			4,520
		Depreciation and amortization				50,071			51,604
		IT project termination costs				—			16,521
		Foreign currency transaction loss				1,312			5,113
		Stock-based compensation				5,308			2,013
		Amortization of deferred charges				1,093			951
		Allowance for doubtful accounts				1,977			(366	)
		Inventory reserves				3,317			5,666
		Deferred income taxes				2,048			888
		Excess income tax benefit from exercise of stock options				(6,097	)		(55	)
		Changes in operating assets and liabilities, net of acquisitions:
			Accounts receivable			8,770			(11,129	)
			Inventories			6,445			(63,228	)
			Other assets			12,036			9,162
			Accounts payable			(21,358	)		(7,061	)
			Accrued expenses and other liabilities			7,335			(8,915	)

				Net cash provided by operating activities		270,715			88,146

Cash flows from investing activities:
	Purchase of property, plant and equipment					(40,358	)		(38,584	)
	Proceeds from sale of available-for-sale investments					2,000			—
	Cash paid for acquisitions, net of cash acquired					(11,875	)		(264	)
	Escrow refund, net of purchase price adjustments					—			14,460

				Net cash used in investing activities		(50,233	)		(24,388	)

Cash flows from financing activities:
	Principal payments under long-term debt agreements and capital leases					(42,992	)		(25,176	)
	Proceeds from borrowings under the Revolving Credit Facility					—			95,000
	Principal payments under the Revolving Credit Facility					—			(155,000	)
	Excess income tax benefit from exercise of stock options					6,097			55
	Proceeds from stock options exercised					10,324			1,437

				Net cash used in financing activities		(26,571	)		(83,684	)

Effect of exchange rate changes on cash and cash equivalents						(6,280	)		(437	)

Net increase (decrease) in cash and cash equivalents						187,631			(20,363	)
Cash and cash equivalents at beginning of period						106,001			90,180

Cash and cash equivalents at end of period					$	293,632		$	69,817

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 and number of stores)

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®, Ester-C®, Solgar®, MET-Rx®, American Health®, Osteo Bi-Flex®, Flex-A-Min®, SISU®, Knox®, Sundown®, Rexall®, Pure Protein®, Body Fortress®, WORLDWIDE Sport Nutrition®, Natural Wealth®, Puritan's Pride®, Holland & Barrett®, GNC (UK)®, Physiologics®, Le Naturiste®, De Tuinen®, Julian Graves® and Vitamin World®.

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, 2009 ("2009 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 disclosures 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 2009 Form 10-K. Results for interim periods are not necessarily indicative of results that 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.

Accounts Receivable Reserves

Accounts receivable were net of the following reserves:

	June 30, 2010		September 30, 2009

Allowance for sales returns	$	9,043	$	11,707
Promotional program incentive allowance		63,269		49,071
Allowance for doubtful accounts		5,709		3,723

	$	78,021	$	64,501

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NBTY, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)
(in thousands, except per share amounts and number of stores)

1. Basis of Presentation (Continued)

Basic net income per share is based on the weighted average number of common shares outstanding during the three and nine month periods ended June 30, 2010 and 2009. For the three and nine months ended June 30, 2010, diluted net income per share includes the dilutive effect of outstanding stock options and restricted stock units which resulted in a dilutive effect of 761 and 1,073 shares, respectively. For the three and nine months ended June 30, 2009, diluted net income per share includes the dilutive effect of outstanding stock options which resulted in a dilutive effect of 1,468 and 1,459 shares, respectively. There were 291 and 198 outstanding stock options for the three and nine months ended June 30, 2010, respectively, that were not included in the calculation of diluted net income per share since they would have been anti-dilutive. There were 910 and 871 outstanding stock options for the three and nine months ended June 30, 2009, respectively, that were not included in the calculation of diluted net income per share since they would have been anti-dilutive.

In June 2009, the Financial Accounting Standards Board ("FASB") issued authoritative guidance requiring an enterprise to perform an analysis to determine whether the enterprise's variable interests give it a controlling financial interest in a variable interest entity. This analysis identifies the primary beneficiary of a variable interest entity as one with the power to direct the activities of a variable interest entity that most significantly impacts the entity's economic performance and the obligation to absorb losses of the entity that could potentially be significant to the variable interest. This guidance will become effective for us October 1, 2010. We anticipate that the adoption of this guidance will not have any impact on our consolidated financial position or results of operations because we currently do not have any variable interest entities.

On July 15, 2010, we announced the execution of a definitive merger agreement under which an affiliate of The Carlyle Group ("Carlyle") will acquire all of the outstanding common shares of NBTY for $55.00 per share in cash. We filed a preliminary proxy statement with the Securities and Exchange Commission on August 3, 2010, in connection with the proposed transaction.

The board of directors of NBTY has unanimously approved the merger agreement and recommended that NBTY's stockholders adopt the agreement with Carlyle. A special meeting of NBTY's stockholders will be held as soon as practicable after the preparation and filing of a proxy statement with the Securities and Exchange Commission and subsequent mailing to shareholders. The mailing of the proxy statement is expected to take place following the expiration of the 35 calendar day period following the date of the merger agreement, during the course of which NBTY is permitted to solicit alternative proposals from third parties. The transaction is expected to close by December 31, 2010.

Completion of the transaction is subject to customary conditions to closing, including approval of NBTY's stockholders and regulatory approvals, but is not subject to any condition with regard to the financing of the transaction. The transaction has fully committed financing, consisting of a combination of equity contributed by Carlyle and external debt financing.

On May 14, 2010, our subsidiary, NBTY Global Hong Kong Limited, acquired Ultimate Biopharma (Zhongsham) Corporation ("Ultimate"), a Chinese-foreign joint venture limited company which manufactures softgel capsules for approximately $8,800 plus an adjustment for collected accounts receivable and other working capital components for a total purchase price of approximately $14,465. The preliminary allocation of net assets acquired consisted of accounts receivable, inventory, property, plant and equipment and goodwill. Since we acquired the equity of Ultimate, the goodwill associated with this acquisition is not deductible for tax purposes. The allocation of net assets acquired is based on preliminary estimates which we expect will be finalized by September 2010.

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

The changes in the carrying amount of goodwill by segment for the nine-month period ended June 30, 2010, were as follows:

The carrying amounts of intangible assets as of June 30, 2010 and September 30, 2009 were as follows:

In June 2010, we recorded an impairment charge of $3,533 ($2,429, net of taxes) related to a private label customer contract, renewal of which is no longer probable.

The increase in intangible assets for the land use right relates to our acquisition in China and is based on a preliminary allocation of the purchase price.

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 June 30, 2010 and 2009 was $3,975 and $4,018, respectively. Amortization expense for the nine months ended June 30, 2010 and 2009 was $11,962 and $12,042, respectively.

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

During fiscal 2009, management terminated certain information technology projects relating to the Direct Response/E-Commerce, North American and European Retail segments that were determined

to be ineffective and uneconomical. Previously capitalized software configuration, coding and other related costs of $10,127 and $18,774 were written off for the three and nine months ended June 30, 2009, respectively.

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

Principal payments on the Term Loan during the first nine months of the year included $20,000 in voluntary prepayments.

On May 11, 2010, a putative class-action, captioned John F. Hutchins v. NBTY, Inc., et al, was filed in the United States District Court, Eastern District of New York, against the Company and certain officers, claiming that the defendants made allegedly false material statements, or concealed allegedly adverse material facts, for the purpose of causing members of the class to purchase NBTY stock at allegedly artificially inflated prices. To date, there has been no activity since the filing of the complaint. The Company believes the claims to be without merit and intends to vigorously defend this action. At this time, however, no determination can be made as to the ultimate outcome of the litigation or the amount of liability, if any, on the part of any of the defendants.

On July 22, 2010, a putative class-action, captioned Philip Gottlieb v. NBTY, Inc., et al, was filed in the Supreme Court of the State of New York, County of Nassau, against the Company, the members of its board of directors, The Carlyle Group and certain Carlyle-related entities (The Carlyle Group and the Carlyle-related entities, collectively "Carlyle"), challenging the Board of Directors' decision to sell the Company to Carlyle for the price of $55.00 per share. The complaint alleges that this price per share does not represent fair value for the Company and seeks to enjoin the anticipated sale and to invalidate certain related transactions. The Company believes the claims to be without merit and intends to vigorously defend this action. The Company cannot presently predict the ultimate outcome of the litigation or the amount of liability, if any, on the part of any of the defendants.

In March 2004, a putative class-action lawsuit, captioned Jerry Beidler v. MET-Rx U.S.A, Inc, was filed in New Jersey Superior Court, Mercer County, against MET-Rx U.S.A, 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 (in an action styled Eric Ayala v. MET-Rx U.S.A, Inc. et. al .), 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 was dismissed in 2009.

Our subsidiary, Rexall Sundown, Inc. ("Rexall"), and certain of its subsidiaries, are defendants in a class-action lawsuit, captioned Jamie Pesek, et al. v. Rexall Sundown, Inc., et al. , brought in California Superior Court, County of San Francisco 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. Since December 2007, with Rexall's and the other defendants' renewed motion for judgment on the pleadings pending, the Court has stayed the case for all purposes, pending rulings on relevant cases before the California Supreme Court. Although the California Supreme Court has resolved some of those cases, others remain pending as of this date. Accordingly, the case remains stayed. The Court held a case-management conference ("CMC") on August 5, 2009. At that time, the parties requested, and the Court agreed, to keep the stay in place for at least another nine months. The Court scheduled a subsequent CMC for February 25, 2010, but canceled that conference upon being informed by the parties that the California Supreme Court had not yet acted. The Court set another CMC for May 21, 2010, and instructed the parties to report back before that date as to the status of the cases before the California Supreme Court. By agreement of the parties, the May 21, 2010 CMC has been continued for nine months. The California Supreme Court still has not resolved the outstanding issues pending before it. 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, intellectual property and California Proposition 65 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.

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 June 30, 2010 and 2009 was 31.2% and 35.5%, respectively. The effective income tax rate for the nine months ended June 30, 2010 and 2009 was 33.7% and 35.5%, respectively. The effective income tax rate was lower for the three and nine month periods ended June 30, 2010 as compared to the prior comparable period primarily due to the impact of a UK restructuring completed during June 2010 which allows us to utilize certain tax benefits that were previously reserved and the partial release of a valuation allowance on state tax credits in the current year.

We accrue interest and penalties related to unrecognized tax benefits in income tax expense. This methodology is consistent with previous periods. At June 30, 2010, we had $1,372 and $439 accrued for the potential payment of interest and penalties, respectively. As of June 30, 2010, we were subject to U.S. Federal Income Tax examinations for the tax years 2007-2009, and to non-U.S. examinations for the tax years of 2004-2009. In addition, we are generally subject to state and local examinations for fiscal years 2006-2009.

At June 30, 2010, we had a liability of $8,711 for unrecognized tax benefits, the recognition of which would have an effect of $5,931 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.

On December 23, 2009, the Company granted 287 stock options to directors and certain employees under the 2008 and 2000 Stock Option Plans. These stock options were granted with an exercise price of $43.88, the closing price of the Company's common stock on the date of grant. The vesting period for these options is over four years, in three equal increments on each of the second, third and fourth anniversary of the date of grant, except those granted to Harvey Kamil, President and Chief Financial Officer, the vesting of which will accelerate if he retires after the second anniversary of the date of grant. All stock options granted expire ten years from the date of grant.

The weighted average fair value per share of the options granted was $22.13. The fair value of each option award is estimated on the date of grant using a Black-Scholes-Merton option pricing model. The following weighted average assumptions were used for the options granted in December 2009:

On December 23, 2009, the Company also granted 21 restricted stock units to directors and certain executives under the 2009 Equity Awards Plan. The closing price of the Company's common stock on the date of grant was $43.88. These restricted stock units vest over four years, in three equal increments on each of the second, third and fourth anniversary of the date of grant, except those granted to Harvey Kamil, President and Chief Financial Officer, the vesting of which will accelerate if he retires after the second anniversary of the date of grant.

GAAP establishes a framework for measuring fair value and expands disclosures about fair value measurements. Fair value is defined 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. GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

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.

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 that 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 nine months ended June 30, 2010 recorded through OCI, net of income tax was $2,095. At June 30, 2010, the swap contracts liability was $6,769. Of this amount, $1,664 is included in other current liabilities and $5,105 is included in other liabilities. At September 30, 2009, the swap contracts liability, included in other liabilities, was $10,181. 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).

The face value of the 7 ¹ / 8 % Senior Subordinated Notes at June 30, 2010, was $190,000. The fair value of the 7 ¹ / 8 % Senior Subordinated Notes, based on then quoted market prices (Level 1), approximated its carrying value at June 30, 2010.

Financial instruments that potentially subject us to credit risk consist primarily of cash and cash equivalents (the amounts of which, at times, may 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.

We perform on-going credit evaluations of our customers and adjust credit limits based upon payment history and the customers' current creditworthiness, 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 historically have been within expectations and the 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 customers accounted for the following percentages of net sales for the three and nine months ended June 30, 2010 and 2009, respectively:

The loss 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 that customer.

The following individual customers accounted for 10% or more of the Wholesale/US Nutrition segment's gross accounts receivable as of June 30, 2010 and September 30, 2009, respectively:

	June 30, 2010			September 30, 2009

Raw materials	$	150,986		$	166,447
Work-in-process		21,112			26,447
Finished goods		497,621			489,737
Valuation and obsolescence reserves		(27,414	)		(24,097	)

	$	642,305		$	658,534

	Wholesale/ US Nutrition		North American Retail			European Retail			Direct Response/ E-Commerce		Consolidated

Balance at October 1, 2009:
Goodwill	$	180,276	$	7,686		$	142,718		$	16,105	$	346,785
Accumulated impairment losses		—		(7,686	)		—			—		(7,686	)

		180,276		—			142,718			16,105		339,099
Foreign currency translation		114		—			(9,918	)		—		(9,804	)
Acquisitions		2,957		—			553			—		3,510

Balance at June 30, 2010:
Goodwill		183,347		7,686			133,353			16,105		340,491
Accumulated impairment losses		—		(7,686	)		—			—		(7,686	)

	$	183,347	$	—		$	133,353		$	16,105	$	332,805

		June 30, 2010				September 30, 2009

		Gross carrying amount		Accumulated amortization		Gross carrying amount		Accumulated amortization		Amortization period (years)
Definite lived intangible assets:
Brands		$	97,798	$	29,808	$	98,093	$	26,201	20
Customer lists			64,918		46,475		64,948		43,667	2 - 15
Private label and customer relationships			118,516		18,710		122,822		14,374	10 - 20
Trademarks and licenses			16,276		7,370		17,844		7,417	2 - 20
Covenants not to compete			3,544		3,388		3,540		3,249	3 - 5
Land use right			1,468		—		—		—	40

			302,520		105,751		307,247		94,908
Indefinite lived intangible asset:
Trademark			1,800		—		1,800		—

	Total intangible assets	$	304,320	$	105,751	$	309,047	$	94,908


For the fiscal year ending September 30,
	2010	$	15,823
	2011	$	15,781
	2012	$	15,650
	2013	$	15,552
	2014	$	15,040

	June 30, 2010		September 30, 2009

Accrued compensation and related taxes	$	37,143	$	38,945
Accrued purchases		20,072		17,664
Income taxes payable		5,668		16,700
Other		91,237		83,425

	$	154,120	$	156,734

NTY Nbty Inc.

Notizie - NTY

La tua Cronologia

			June 30, 2010		September 30, 2009

Credit Agreement:
	$300 million, five-year Term Loan		$	228,171	$	270,000
Senior Subordinated Notes				188,974		188,856
Multi-currency Term Loan				14,362		15,336
Mortgage and Capital Leases				1,114		2,330

				432,621		476,522
		Less: current portion		70,791		38,893

		Total	$	361,830	$	437,629


Risk-free rate(1)	2.9	%
Expected term(2)	6.4
Expected volatility(3)	48.0	%
Expected dividend yield	0.0	%

		Nine months ended June 30,

		2010			2009
Non-cash investing and financing information:
Property, plant and equipment additions included in accounts payable		$	1,349		$	4,275
Acquisitions accounted for under the purchase method:
	Fair value of assets acquired	$	15,228		$	264
	Liabilities assumed		(211	)		—
	Less: Payable to seller		(2,456	)		—
	Less: Cash acquired		(686	)		—

	Net cash paid	$	11,875		$	264

		Wholesale / US Nutrition		North American Retail			European Retail		Direct Response/ E-Commerce		Corporate/ Manufacturing			Consolidated

*Three months ended June 30, 2010:*
	Net sales	$	434,592	$	52,543		$	152,051	$	56,670	$	—		$	695,856
	Income (loss) from operations		82,537		3,955			20,401		15,440		(18,953	)		103,380
	Depreciation and amortization		3,642		613			3,316		1,143		7,598			16,312
	Capital expenditures		236		1,046			11,454		—		3,185			15,921
*Three months ended June 30, 2009:*
	Net sales	$	396,162	$	51,223		$	151,293	$	53,029	$	—		$	651,707
	Income (loss) from operations		61,905		(2,274	)		14,070		18,166		(15,715	)		76,152
	Depreciation and amortization		3,681		758			3,634		1,245		7,486			16,804
	Capital expenditures		94		268			819		—		4,819			6,000
*Nine months ended June 30, 2010:*
	Net sales	$	1,332,280	$	158,770		$	487,059	$	174,058	$	—		$	2,152,167
	Income (loss) from operations		224,229		6,479			80,924		49,841		(56,901	)		304,572
	Depreciation and amortization		10,973		1,944			10,400		3,555		23,199			50,071
	Capital expenditures		1,322		2,140			24,835		36		12,025			40,358
*Nine months ended June 30, 2009:*
	Net sales	$	1,152,930	$	151,577		$	441,757	$	161,549	$	—		$	1,907,813
	Income (loss) from operations		110,968		(4,160	)		60,559		38,119		(48,899	)		156,587
	Depreciation and amortization		10,991		2,255			10,598		3,777		23,983			51,604
	Capital expenditures		725		2,786			9,844		4,162		21,067			38,584

	June 30, 2010		September 30, 2009

Wholesale/US Nutrition	$	906,389	$	915,783
North American Retail		31,311		28,334
European Retail		410,352		403,657
Direct Response/E-Commerce		54,354		54,348
Corporate/Manufacturing		677,384		558,099

	$	2,079,790	$	1,960,221

				Parent Company			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated

Assets
Current assets:
	Cash and cash equivalents			$	202,446		$	—	$	91,186		$	—		$	293,632
	Accounts receivable, net				—			124,553		21,680			—			146,233
	Intercompany				—			364,453		741,242			(1,105,695	)		—
	Inventories				—			520,779		121,526			—			642,305
	Deferred income taxes				—			24,140		3,772			—			27,912
	Other current assets				—			7,957		43,412			—			51,369

			Total current assets		202,446			1,041,882		1,022,818			(1,105,695	)		1,161,451
Property, plant and equipment, net					35,068			231,246		101,347			—			367,661
Goodwill					—			197,701		135,104			—			332,805
Other intangible assets, net					—			174,735		23,834			—			198,569
Other assets					—			19,251		53			—			19,304
Intercompany loan receivable					320,348			40,735		—			(361,083	)		—
Investments in subsidiaries					2,309,863					—			(2,309,863	)		—

		Total assets		$	2,867,725		$	1,705,550	$	1,283,156		$	(3,776,641	)	$	2,079,790

Liabilities and Stockholders' Equity
Current liabilities:
	Current portion of long-term debt			$	55,899		$	—	$	14,892		$	—		$	70,791
	Accounts payable				—			64,997		40,740			—			105,737
	Intercompany				1,105,695			—		—			(1,105,695	)		—
	Accrued expenses and other current liabilities				—			118,515		35,605			—			154,120

			Total current liabilities		1,161,594			183,512		91,237			(1,105,695	)		330,648
Intercompany loan payable					—					361,083			(361,083	)		—
Long-term debt, net of current portion					338,776			—		23,054			—			361,830
Deferred income taxes					37,561			—		2,637			—			40,198
Other liabilities					16,586			2,757		14,563			—			33,906

			Total liabilities		1,554,517			186,269		492,574			(1,466,778	)		766,582
Commitments and contingencies
Stockholders' Equity:
	Common stock				507			—		—			—			507
	Capital in excess of par				167,602			352,019		301,270			(653,289	)		167,602
	Retained earnings				1,173,222			1,167,262		501,846			(1,669,108	)		1,173,222
	Accumulated other comprehensive loss				(28,123	)		—		(12,534	)		12,534			(28,123	)

			Total stockholders' equity		1,313,208			1,519,281		790,582			(2,309,863	)		1,313,208

			Total liabilities and stockholders' equity	$	2,867,725		$	1,705,550	$	1,283,156		$	(3,776,641	)	$	2,079,790

			Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated

Net sales			$	—		$	518,175		$	194,966		$	(17,285	)	$	695,856
Costs and expenses:
	Cost of sales			—			294,826			85,814			(17,285	)		363,355
	Advertising, promotion and catalog			—			30,195			6,808						37,003
	Selling, general and administrative			18,954			90,634			82,530						192,118

				18,954			415,655			175,152			(17,285	)		592,476

Income from operations				(18,954	)		102,520			19,814			—			103,380

Other income (expense):
		Equity in income of subsidiaries		78,872			—			—			(78,872	)		—
		Intercompany interest		2,143			—			(2,143	)		—			—
		Interest		(7,096	)		—			(216	)		—			(7,312	)
		Miscellaneous, net		77			(464	)		455			—			68

				73,996			(464	)		(1,904	)		(78,872	)		(7,244	)

Income before provision for income taxes				55,042			102,056			17,910			(78,872	)		96,136
(Benefit)/ provision for income taxes				(11,140	)		35,720			5,373			—			29,953

Net income			$	66,182		$	66,336		$	12,537		$	(78,872	)	$	66,183

			Parent Company			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated

Net sales			$	—		$	483,797	$	189,498		$	(21,588	)	$	651,707
Costs and expenses:
	Cost of sales			—			292,517		88,311			(21,588	)		359,240
	Advertising, promotion and catalog			—			17,804		5,766			—			23,570
	Selling, general and administrative			15,382			86,880		80,356			—			182,618
	IT project termination costs			—			4,299		5,828			—			10,127

				15,382			401,500		180,261			(21,588	)		575,555

Income from operations				(15,382	)		82,297		9,237			—			76,152

Other income (expense):
		Equity in income of subsidiaries		59,809			—		—			(59,809	)		—
		Intercompany interest		2,993			—		(2,993	)		—			—
		Interest		(8,078	)		—		(324	)		—			(8,402	)
		Miscellaneous, net		217			1,064		2,115			—			3,396

				54,941			1,064		(1,202	)		(59,809	)		(5,006	)

Income before provision for income taxes				39,559			83,361		8,035			(59,809	)		71,146
(Benefit)/ provision for income taxes				(6,358	)		29,176		2,411			—			25,229

Net income			$	45,917		$	54,185	$	5,624		$	(59,809	)	$	45,917

			Parent Company			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated

Net sales			$	—		$	1,577,866	$	625,939		$	(51,638	)	$	2,152,167
Costs and expenses:
	Cost of sales			—			931,575		275,533			(51,638	)		1,155,470
	Advertising, promotion and catalog			—			97,784		18,898			—			116,682
	Selling, general and administrative			56,904			267,389		251,150			—			575,443

				56,904			1,296,748		545,581			(51,638	)		1,847,595

Income from operations				(56,904	)		281,118		80,358			—			304,572

Other income (expense):
		Equity in income of subsidiaries		235,585			—		—			(235,585	)		—
		Intercompany interest		6,502			—		(6,502	)		—			—
		Interest		(22,411	)		—		(573	)		—			(22,984	)
		Miscellaneous, net		254			1,816		543			—			2,613

				219,930			1,816		(6,532	)		(235,585	)		(20,371	)

Income before provision for income taxes				163,026			282,934		73,826			(235,585	)		284,201
(Benefit)/ provision for income taxes				(25,399	)		99,027		22,148			—			95,776

Net income			$	188,425		$	183,907	$	51,678		$	(235,585	)	$	188,425

			Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated

Net sales			$	—		$	1,414,913		$	553,222		$	(60,322	)	$	1,907,813
Costs and expenses:
	Cost of sales			—			906,352			245,356			(60,322	)		1,091,386
	Advertising, promotion and catalog			—			72,444			15,445			—			87,889
	Selling, general and administrative			47,790			271,455			233,932			—			553,177
	IT project termination costs			—			12,946			5,828			—			18,774

				47,790			1,263,197			500,561			(60,322	)		1,751,226

Income from operations				(47,790	)		151,716			52,661			—			156,587

Other income (expense):
		Equity in income of subsidiaries		122,441			—			—			(122,441	)		—
		Intercompany interest		15,603			—			(15,603	)		—			—
		Interest		(25,279	)		(2	)		(1,499	)		—			(26,780	)
		Miscellaneous, net		(255	)		(2,553	)		849			—			(1,959	)

				112,510			(2,555	)		(16,253	)		(122,441	)		(28,739	)

Income before provision for income taxes				64,720			149,161			36,408			(122,441	)		127,848
(Benefit)/ provision for income taxes				(17,742	)		52,206			10,922			—			45,386

Net income			$	82,462		$	96,955		$	25,486		$	(122,441	)	$	82,462

	Three months ended June 30,				Nine months ended June 30,

	2010		2009		2010		2009
United States	$	474,814	$	436,059	$	1,434,952	$	1,292,914
United Kingdom		146,952		147,510		465,474		422,495
Canada		20,796		20,624		75,280		62,548
Holland		14,817		13,537		49,678		40,923
Ireland		5,938		5,333		18,241		15,211
Other foreign countries		32,539		28,644		108,542		73,722

	$	695,856	$	651,707	$	2,152,167	$	1,907,813

		Net Sales by Segment Three months ended June 30,

		2010					2009					Comparison 2010 vs. 2009
Segment		Net Sales		% of total			Net Sales		% of total			$ change		% change
Wholesale/US Nutrition		$	434,592		62.4	%	$	396,162		60.8	%	$	38,430		9.7	%
North American Retail			52,543		7.6	%		51,223		7.9	%		1,320		2.6	%
European Retail			152,051		21.9	%		151,293		23.2	%		758		0.5	%
Direct Response/E-Commerce			56,670		8.1	%		53,029		8.1	%		3,641		6.9	%

	Net sales	$	695,856		100.0	%	$	651,707		100.0	%	$	44,149		6.8	%

		Gross Profit by Segment Three months ended June 30,

		2010					2009					Comparison 2010 vs. 2009
				% of sales					% of sales			Comparison 2010 vs. 2009
Segment		Gross Profit		% of sales			Gross Profit		% of sales			$ change		% change
Wholesale/US Nutrition		$	167,998		38.7	%	$	131,587		33.2	%	$	36,411		27.7	%
North American Retail			35,216		67.0	%		34,493		67.3	%		723		2.1	%
European Retail			93,796		61.7	%		92,698		61.3	%		1,098		1.2	%
Direct Response/E-Commerce			35,491		62.6	%		33,689		63.5	%		1,802		5.3	%

	Gross Profit	$	332,501		47.8	%	$	292,467		44.9	%	$	40,034		13.7	%

		Three months ended June 30,

North American Retail stores:		2010			2009
Vitamin World
	Open at beginning of the period		446			444
	Opened during the period		5			1
	Closed during the period		—			(3	)
	Open at end of the period		451			442
Le Naturiste
	Open at beginning of the period		85			87
	Opened during the period		—			—
	Closed during the period		(2	)		(1	)
	Open at end of the period		83			86
Total North American Retail
	Open at beginning of the period		531			531
	Opened during the period		5			1
	Closed during the period		(2	)		(4	)
	Open at end of the period		534			528

	Three months ended June 30,

European Retail stores:	2010			2009
Company-owned stores
Open at beginning of the period		1,020			984
Opened during the period		10			9
Acquired during the period		—			—
Closed during the period		(4	)		(1	)
Open at end of the period		1,026			992
Franchised stores
Open at beginning of the period		32			27
Opened during the period		—			2
Closed/sold during the period		(8	)		—
Open at end of the period		24			29
Total company-owned and franchised stores
Open at beginning of the period		1,052			1,011
Opened during the period		10			11
Acquired during the period		—			—
Closed/sold during the period		(12	)		(1	)
Open at end of the period		1,050			1,021

								Dollar Change			Percentage Change

		Three months ended June 30,						Dollar Change			Percentage Change
		Three months ended June 30,						2010 vs. 2009			2010 vs. 2009
		2010			2009			2010 vs. 2009			2010 vs. 2009
Wholesale / US Nutrition		$	26,916		$	15,054		$	11,862			79	%
North American Retail			985			869			116			13	%
European Retail			3,814			3,644			170			5	%
Direct Response / E-Commerce			5,252			3,919			1,333			34	%
Corporate			36			84			(48	)		(57	)%

	Total	$	37,003		$	23,570		$	13,433			57	%

	Percentage of net sales		5.3	%		3.6	%

						Dollar Change

	Three months ended June 30,					Dollar Change
	Three months ended June 30,					2010 vs. 2009
	2010			2009		2010 vs. 2009
Foreign exchange (losses) gains	$	(589	)	$	2,672	$	(3,261	)
Rental income		141			308		(167	)
Investment income		243			118		125
Other		273			298		(25	)

Total	$	68		$	3,396	$	(3,328	)

								Dollar Change			Percentage Change

		Nine months ended June 30,						Dollar Change			Percentage Change
		Nine months ended June 30,						2010 vs. 2009			2010 vs. 2009
		2010			2009			2010 vs. 2009			2010 vs. 2009
Wholesale / US Nutrition		$	85,471		$	58,176		$	27,295			47	%
North American Retail			6,971			6,925			46			1	%
European Retail			10,090			9,128			962			11	%
Direct Response / E-Commerce			13,911			13,343			568			4	%
Corporate			239			317			(78	)		(25	)%

	Total	$	116,682		$	87,889		$	28,793			33	%

	Percentage of net sales		5.4	%		4.6	%

	As of June 30, 2010		As of September 30, 2009

Cash and cash equivalents at end of the period	$	293,632	$	106,001
Working capital	$	830,803	$	674,439

	Nine months ended June 30,

	2010			2009
Cash flow provided by operating activities	$	270,715		$	88,146
Cash flow used in investing activities	$	(50,233	)	$	(24,388	)
Cash flow used in financing activities	$	(26,571	)	$	(83,684	)
Total inventory turnover		2.38			2.38
Finished goods inventory turnover (excluding bulk)		5.03			5.06
Days sales outstanding in accounts receivable		31			33

Credit Rating Agency	Secured Debt	7 ¹ / 8 % Notes	Overall

Standard and Poors	BBB-	BB	BB/Positive
Moody's	Ba1/LGD2	B1/LGD6	Ba2/Positive

Exhibit No.			Description

	3.1		Restated Certificate of Incorporation of NBTY, Inc. (incorporated by reference to exhibit 3.1 to the Form 10-K of NBTY, Inc. for the fiscal year ended September 30, 2005, filed on December 22, 2005).
	3.2		Amended and Restated By-Laws of NBTY, Inc. (incorporated by reference to exhibit 3.2 to the Form 8-K of NBTY, Inc. filed on March 4, 2010).
	4.1		Indenture, dated as of September 23, 2005, among NBTY, Inc., the Guarantors (as defined therein), and The Bank of New York, as Trustee (incorporated by reference to exhibit 4.2 to NBTY, Inc.'s Form 8-K filed on September 27, 2005).
	4.2		Registration Rights Agreement, dated as of September 23, 2005, among NBTY, Inc., the Guarantors (as defined therein) and J.P. Morgan Securities, Inc., Adams Harkness, Inc., BNP Paribas Securities Corp., HSBC Securities (USA), Inc., and RBC Capital Markets Corporation (incorporated by reference to exhibit 4.3 to NBTY, Inc.'s Form 8-K filed on September 27, 2005).
	31.1		Rule 13a-14(a) Certification of Principal Executive Officer.*
	31.2		Rule 13a-14(a) Certification of Principal Financial Officer.*
	32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
	32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
	101		The following materials from NBTY, Inc.'s Quarterly Report on Form 10-Q for the period ended June 30, 2010, formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statement of Stockholders' Equity and Comprehensive Income (Loss), (iv) Condensed Consolidated Statement of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.**


	NBTY, INC. (Registrant)
Date: August 9, 2010	By:	/s/ SCOTT RUDOLPH Scott Rudolph Chairman and Chief Executive Officer (Principal Executive Officer)
Date: August 9, 2010	By:	/s/ HARVEY KAMIL Harvey Kamil President and Chief Financial Officer (Principal Financial and Accounting Officer)

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