NTY Nbty Inc.

NBTY Reports Third Quarter Results BOHEMIA, N.Y., July 22 /PRNewswire-FirstCall/ -- NBTY, Inc. (NYSE:NTY) (http://www.nbty.com/), a leading manufacturer and marketer of nutritional supplements, today announced results for the fiscal third quarter ended June 30, 2004. For the fiscal third quarter ended June 30, 2004, sales increased 30% to $400 million, compared to sales of $308 million for the fiscal third quarter ended June 30, 2003. Net income for the fiscal third quarter was $26 million, or $0.37 per diluted share, compared to net income of $29 million, or $0.43 per diluted share for the fiscal third quarter last year. Net income results for the fiscal third quarter of 2003 reflect a $4 million after-tax benefit to record available foreign tax credits (representing $0.06 per diluted share.) The product lines purchased in the July 2003 Rexall acquisition recorded sales of $68 million for the fiscal third quarter of 2004. Without such product lines, sales would have increased 8% for this three-month period. For the first nine months of fiscal 2004, sales increased 48% to $1.2 billion compared to $828 million for the first nine months of fiscal 2003. Net income for the first nine months of 2004 was $91 million, or $1.31 per diluted share, compared with net income of $66 million, or $0.96 per diluted share, for the first nine months of fiscal 2003. Net income results for the first nine months of fiscal 2003 reflect the aforementioned $4 million after- tax benefit to record available foreign tax credits (representing $0.06 per diluted share.) The product lines purchased in the Rexall acquisition recorded sales of $224 million for the first nine months of fiscal 2004. Without such product lines, sales would have increased 21% for this nine-month period. During the fiscal third quarter and first nine months of fiscal 2004, the Company repaid $18 million and $116 million, respectively, of principal outstanding under the term loans originally used to acquire Rexall. These payments reduced the principal outstanding under the Company's term loans to $156 million. OPERATIONS FOR THE FISCAL THIRD QUARTER ENDED JUNE 30, 2004 The US Nutrition wholesale division, which operates Nature's Bounty and Rexall, increased its sales 83% to $172 million from $94 million for the comparable prior period of fiscal 2003. NBTY has established a dominant presence in the wholesale nutritional supplement marketplace. The Company's utilization of consumer sales information from its Vitamin World retail stores and Puritan's Pride direct- response/e-commerce operations provides mass-market customers with timely and vital data to drive their sales. The Company continues to adjust shelf space allocation between the Nature's Bounty brand and Rexall brands to provide the best overall product mix. These efforts have strengthened US Nutrition's position in the mass market. The Company is introducing reformulated, repackaged MET-Rx(R) brand products with improved flavors. In addition, the Company re-launched Spider- Man vitamins under the Sundown Kids(TM) brand. Spider-Man is a trademark of Marvel Characters, Inc. Vitamin World fiscal third quarter sales were $53 million compared to $54 million a year ago, a decrease of 2%. For the fiscal third quarter, Vitamin World operations reported a pre-tax loss of $1 million. However, EBITDA (as defined in non-GAAP financial measures below) was $1 million. During the fiscal third quarter Vitamin World opened 10 new stores, closed 3 stores and at the end of the quarter operated 552 stores nationwide. For the fiscal third quarter, same store sales decreased 4%, reflecting vulnerability in this specialty retail market. Same store sales increased 2% for the first nine months of fiscal 2004. As NBTY introduces more new products directly to the mass market, the specialty retail market's ability to capitalize on market trends and new products is restricted. We expect this trend to continue in the near future. NBTY's European retail sales for the fiscal third quarter increased 23% to $122 million from $99 million for the fiscal third quarter a year ago. Sales generated by GNC (UK) and DeTuinen were approximately $21 million for the fiscal third quarter. Both retail chains were profitable in the fiscal third quarter. The Company's European retail division opened 3 new stores, closed 3 stores and at the end of the quarter operated 599 stores in the UK, Ireland and the Netherlands. Holland & Barrett continues to be a leader in the United Kingdom. Same store sales in the UK increased 14% for the fiscal third quarter, reflecting in part the positive effect of the strong British pound. Without the effect of foreign exchange, Holland & Barrett same store sales increased 3%. Revenues from Puritan's Pride direct response/e-commerce operations for the fiscal third quarter decreased 14% to $53 million from $61 million for the comparable prior period. The decrease in sales for the fiscal third quarter reflects in part a change in the timing of promotional catalog mailings. However, Puritan's Pride revenues for the first nine months of fiscal 2004 increased 7% to $159 million, reflecting more effective target marketing to its customer base. The on-line portion of Puritan's Pride sales increased 8% for the fiscal third quarter and 35% for the first nine months of fiscal 2004. NBTY remains the leader in the direct response and e-commerce sector and continues to increase the number of products available via its catalog and websites. The Company settled a previously announced civil complaint arising out of the Company's sales of pseudoephedrine products (now discontinued) for a payment of $950,000, without an admission of any liability. This payment was reserved for in a prior period and did not affect current quarter results. NBTY Chairman and CEO, Scott Rudolph, said: "We are pleased with NBTY's overall performance, although we are disappointed in the continued decline in Vitamin World sales. We are confident in our ability to quickly adapt to cyclical changes in industry segments which are likely to impact near-term results and remain optimistic for the long-term." ABOUT NBTY NBTY is a leading vertically integrated manufacturer and distributor of a broad line of high-quality, value-priced nutritional supplements in the United States and throughout the world. The Company markets approximately 1,500 products under several brands, including Nature's Bounty(R), Vitamin World(R), Puritan's Pride(R), Holland & Barrett(R), Rexall(R), Sundown(R), MET-Rx(R), WORLDWIDE Sport Nutrition(R), American Health(R), GNC (UK)(R) and DeTuinen(R). This release refers to non-GAAP financial measures, such as EBITDA. "EBITDA" is defined as earnings before interest, taxes, depreciation and amortization. This non-GAAP financial measure is not prepared in accordance with generally accepted accounting principles and may be different from non- GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation of the non-GAAP measure to the comparable GAAP measure is included in the attached financial tables. Management believes the presentation of EBITDA is relevant and useful because EBITDA is a measurement industry analysts utilize when evaluating NBTY's operating performance. Management also believes EBITDA enhances an investor's understanding of NBTY's results of operations because it measures NBTY's operating performance exclusive of interest and non-cash charges for depreciation and amortization. Management also provides this non- GAAP measurement as a way to help investors better understand its core operating performance, enhance comparisons of NBTY's core operating performance from period to period and to allow better comparisons of NBTY's operating performance to that of its competitors. This release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations and business. All of these forward-looking statements, which can be identified by the use of terminology such as "subject to," "believe," "expects," "may," "will," "should," "can," or "anticipates," or the negative thereof, or variations thereon, or comparable terminology, or by discussions of strategy which, although believed to be reasonable, are inherently uncertain. Factors which may materially affect such forward-looking statements include: (i) slow or negative growth in the nutritional supplement industry; (ii) interruption of business or negative impact on sales and earnings due to acts of war, terrorism, bio-terrorism, civil unrest or disruption of mail service; (iii) adverse publicity regarding nutritional supplements; (iv) inability to retain customers of companies (or mailing lists) recently acquired; (v) increased competition; (vi) increased costs; (vii) loss or retirement of key members of management; (viii) increases in the cost of borrowings and unavailability of additional debt or equity capital; (ix) unavailability of, or inability to consummate, advantageous acquisitions in the future, including those that may be subject to bankruptcy approval or the inability of NBTY to integrate acquisitions into the mainstream of its business; (x) changes in general worldwide economic and political conditions in the markets in which NBTY may compete from time to time; (xi) the inability of NBTY to gain and/or hold market share of its wholesale and/or retail customers anywhere in the world; (xii) unavailability of electricity in certain geographical areas; (xiii) the inability of NBTY to obtain and/or renew insurance; (xiv) exposure to and expense of defending and resolving, product liability claims and other litigation; (xv) the ability of NBTY to successfully implement its business strategy; (xvi) the inability of NBTY to manage its retail, wholesale, manufacturing and other operations efficiently; (xvii) consumer acceptance of NBTY's products; (xviii) the inability of NBTY to renew leases on its retail locations; (xix) inability of NBTY's retail stores to attain or maintain profitability; (xx) the absence of clinical trials for many of NBTY's products; (xxi) sales and earnings volatility and/or trends; (xxii) the efficacy of NBTY's Internet and on-line sales and marketing; (xxiii) fluctuations in foreign currencies, including the British Pound; (xxiv) import-export controls on sales to foreign countries; (xxv) the inability of NBTY to secure favorable new sites for, and delays in opening, new retail locations; (xxvi) introduction of 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 the Food Supplements Directive and the Traditional Herbal Medicinal Products Directive in Europe; (xxvii) the mix of NBTY's products and the profit margins thereon; (xxviii) the availability and pricing of raw materials; (xxix) risk factors discussed in NBTY's filings with the U.S. Securities and Exchange Commission; (xxx) adverse effects on NBTY as a result of increased gasoline prices and potentially reduced traffic flow to NBTY's retail locations; and (xxxi) other factors beyond NBTY's control. Readers are cautioned not to place undue reliance on forward-looking statements. NBTY cannot guarantee future results, trends, events, levels of activity, performance or achievements. NBTY does not undertake and specifically declines any obligation to update, republish or revise forward- looking statements to reflect events or circumstances after the date hereof or to reflect the occurrences of unanticipated events. NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Dollars and shares in thousands, except per share amounts) For the three months ended June 30, 2004 2003 Net sales $399,913 $308,474 Costs and expenses: Cost of sales 197,228 141,196 Catalog printing, postage and promotion 21,651 15,378 Selling, general and administrative 139,905 110,924 358,784 267,498 Income from operations 41,129 40,976 Other income (expense): Interest (5,569) (3,890) Miscellaneous, net 1,096 2,023 (4,473) (1,867) Income before income taxes 36,656 39,109 Provision for income taxes 10,754 9,641 Net income $25,902 $29,468 Net income per share: Basic $0.39 $0.44 Diluted $0.37 $0.43 Weighted average common shares outstanding: Basic 66,803 66,263 Diluted 69,207 68,287 NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Dollars and shares in thousands, except per share amounts) For the nine months ended June 30, 2004 2003 Net sales $1,224,559 $827,701 Costs and expenses: Cost of sales 603,362 372,555 Discontinued product charge -- 6,000 Catalog printing, postage and promotion 61,109 46,015 Selling, general and administrative 408,569 303,470 1,073,040 728,040 Income from operations 151,519 99,661 Other income (expense): Interest (19,132) (11,709) Miscellaneous, net 3,142 5,536 (15,990) (6,173) Income before income taxes 135,529 93,488 Provision for income taxes 44,725 27,786 Net income $90,804 $65,702 Net income per share: Basic $1.36 $0.99 Diluted $1.31 $0.96 Weighted average common shares outstanding: Basic 66,724 66,232 Diluted 69,107 68,233 SALES (Thousands) (Unaudited) THREE MONTHS ENDED NINE MONTHS ENDED JUNE 30, JUNE 30, % Increase % 2004 2003 (% Decrease) 2004 2003 Increase Wholesale $171,598 $93,939 83% $540,217 $252,906 114% US Retail / Vitamin World 53,452 54,423 -2% 162,963 158,242 3% European Retail / Holland & Barrett / GNC 122,320 99,202 23% 362,787 268,903 35% Direct Response / Puritan's Pride 52,543 60,910 -14% 158,592 147,650 7% Total $399,913 $308,474 30% $1,224,559 $827,701 48% GROSS PROFIT PERCENTAGES (Unaudited) THREE MONTHS ENDED NINE MONTHS ENDED JUNE 30, JUNE 30, % Increase % Increase 2004 2003 (% Decrease) 2004 2003 (% Decrease) Wholesale 36% 41% -5% 38% 41% -3% US Retail / Vitamin World 58% 59% -1% 60% 59% 1% European Retail / Holland & Barrett / GNC 63% 60% 3% 62% 61% 1% Direct Response / Puritan's Pride 61% 62% -1% 61% 62% -1% Total (without discontinued product charge) 51% 54% -3% 51% 55% -4% Discontinued product charge 0% 0% 0% 0% -1% 1% Total 51% 54% -3% 51% 54% -3% Reconciliation of GAAP Measures to Non-GAAP Measures (Thousands) (Unaudited) THREE MONTHS ENDED JUNE 30, 2004 Pretax Depreciation Income and (Loss) amortization Interest EBITDA Wholesale $26,920 $2,493 $ -- $29,413 US Retail / Vitamin World (1,147) 2,323 1,176 European Retail / Holland & Barrett / GNC 28,247 3,983 32,230 Direct Response / Puritan's Pride 16,294 1,294 17,588 Segment Results 70,314 10,093 80,407 Corporate (33,658) 5,497 5,569 (22,592) Total $36,656 $15,590 $5,569 $57,815 THREE MONTHS ENDED JUNE 30, 2003 Pretax Depreciation Income and (Loss) amortization Interest EBITDA Wholesale $21,630 $290 $ -- $21,920 US Retail / Vitamin World 902 2,639 3,541 European Retail / Holland & Barrett / GNC 19,182 2,708 21,890 Direct Response / Puritan's Pride 19,771 1,413 21,184 Segment Results 61,485 7,050 68,535 Corporate (22,376) 3,737 3,890 (14,749) Total $39,109 $10,787 $3,890 $53,786 Reconciliation of GAAP Measures to Non-GAAP Measures (Thousands) (Unaudited) NINE MONTHS ENDED JUNE 30, 2004 Pretax Depreciation Income and (Loss) amortization Interest EBITDA Wholesale $97,927 $7,935 $ -- $105,862 US Retail / Vitamin World 243 8,509 8,752 European Retail / Holland & Barrett / GNC 84,229 9,881 94,110 Direct Response / Puritan's Pride 48,980 4,102 53,082 Segment Results 231,379 30,427 261,806 Corporate (95,850) 16,421 19,132 (60,297) Total $135,529 $46,848 $19,132 $201,509 NINE MONTHS ENDED JUNE 30, 2003 Pretax Depreciation Income and (Loss) amortization Interest EBITDA Wholesale $53,784 $741 $ -- $54,525 US Retail / Vitamin World 340 8,576 8,916 European Retail / Holland & Barrett / GNC 64,542 7,247 71,789 Direct Response / Puritan's Pride 44,744 4,350 49,094 Segment Results 163,410 20,914 184,324 Corporate (69,922) 11,625 11,709 (46,588) Total $93,488 $32,539 $11,709 $137,736 NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) ASSETS (Dollars and shares in thousands) June 30, September 30, 2004 2003 Current assets: Cash and cash equivalents $50,185 $49,349 Investments in bonds -- 4,158 Accounts receivable, less allowance for doubtful accounts of $7,560 at June 30, 2004 and $7,100 at September 30, 2003 87,367 80,829 Inventories 353,381 314,091 Deferred income taxes 37,021 37,021 Prepaid expenses and other current assets 51,715 44,736 Total current assets 579,669 530,184 Property, plant and equipment, net 283,612 298,344 Goodwill 217,287 213,362 Intangible assets, net 138,968 137,469 Other assets 15,816 16,423 Total assets $1,235,352 $1,195,782 NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY (Dollars and shares in thousands) June 30, September 30, 2004 2003 Current liabilities: Current portion of long-term debt and capital lease obligations $3,247 $12,841 Accounts payable 96,965 87,039 Accrued expenses and other current liabilities 149,768 116,029 Total current liabilities 249,980 215,909 Long-term debt 307,112 413,989 Deferred income taxes 53,609 40,213 Other liabilities 6,188 10,872 Total liabilities 616,889 680,983 Commitments and contingencies Stockholders' equity: Common stock, $0.008 par; authorized 175,000 shares; issued and outstanding 66,870 shares at June 30, 2004 and 66,620 shares at September 30, 2003 535 533 Capital in excess of par 134,023 130,208 Retained earnings 460,257 369,453 594,815 500,194 Accumulated other comprehensive income 23,648 14,605 Total stockholders' equity 618,463 514,799 Total liabilities and stockholders' equity $1,235,352 $1,195,782 NBTY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands) For the nine months ended June 30, Cash flows from operating activities: 2004 2003 Net income $90,804 $65,702 Adjustments to reconcile net income to net cash provided by operating activities: Loss/(gain) on disposal/sale of property, plant and equipment 496 (843) Depreciation and amortization 46,848 32,539 Foreign currency transaction gain (679) (970) Amortization of deferred financing costs 2,337 591 Amortization of bond discount 93 93 Allowance for doubtful accounts 460 43 Compensation expense for ESOP 4,176 1,283 Tax benefit from exercise of stock options 537 113 Deferred income taxes -- (1,000) Discontinued product charge -- 6,000 Changes in assets and liabilities, net of acquisitions: Accounts receivable (6,651) (12,998) Inventories (35,536) (13,323) Prepaid expenses and other current assets 7,135 (17,201) Other assets 1,377 (1,209) Accounts payable 6,372 5,743 Accrued expenses and other liabilities 19,638 15,013 Net cash provided by operating activities 137,407 79,576 Cash flows from investing activities: Purchase of property, plant and equipment (32,087) (24,852) Proceeds from sale of property, plant, and equipment 1,092 1,454 Proceeds from sale of investment in bonds 4,158 -- Cash paid for acquisitions, net of cash acquired -- (32,049) Release of cash held in escrow -- 2,403 Net cash used in investing activities (26,837) (53,044) Cash flows from financing activities: Principal payments under long-term debt agreements and capital leases (116,563) (17,510) Payments for debt issuance costs (500) -- Proceeds from stock options exercised 807 176 Net cash used in financing activities (116,256) (17,334) Effect of exchange rate changes on cash and cash equivalents 6,522 3,032 Net increase in cash and cash equivalents 836 12,230 Cash and cash equivalents at beginning of period 49,349 26,229 Cash and cash equivalents at end of period $50,185 $38,459 Supplemental disclosure of cash flow information: Cash paid during the period for interest $13,592 $8,656 Cash paid during the period for income taxes $22,356 $21,035 DATASOURCE: NBTY, Inc. CONTACT: Harvey Kamil, President and Chief Financial Officer of NBTY, Inc., +1-631-244-2020; or Carl Hymans of G.S. Schwartz & Co., +1-212-725-4500, , for NBTY, Inc. Web site: http://www.nbty.com/

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