NTY Nbty Inc.

NBTY Reports Fourth Quarter and Year-End Results BOHEMIA, N.Y., Dec. 14 /PRNewswire-FirstCall/ -- NBTY, Inc. (NYSE:NTY) (http://www.nbty.com/), a leading manufacturer and marketer of nutritional supplements, today announced results for the fiscal fourth quarter and fiscal year ended September 30, 2004. For the fiscal fourth quarter ended September 30, 2004, net sales increased 17% to $427 million, compared to net sales of $365 million for the fiscal fourth quarter ended September 30, 2003. Net income for the fiscal fourth quarter of 2004 was $21 million, or $0.30 per diluted share, compared to net income of $16 million, or $0.23 per diluted share for the fiscal fourth quarter of 2003. Results for the fiscal fourth quarter of 2003 included certain net non- recurring charges and foreign tax credits which resulted in a net decrease of $0.02 per diluted share. For fiscal 2004, net sales increased 39% to $1.65 billion compared to $1.19 billion for fiscal 2003. Net income for fiscal 2004 was $112 million, or $1.62 per diluted share, compared with net income of $82 million, or $1.19 per diluted share, for fiscal 2003. Net income results for fiscal 2003 reflect the aforementioned items, which resulted in a net decrease of $0.02 per diluted share. At September 30, 2004, the Company's total assets were $1.2 billion and its working capital was $360 million. OPERATIONS FOR THE FISCAL FOURTH QUARTER ENDED SEPTEMBER 30, 2004 The US Nutrition wholesale division, which operates Nature's Bounty and Rexall brands, increased net sales 19% to $194 million from $164 million for the comparable prior period of fiscal 2003. NBTY continues to expand its dominant presence in the wholesale nutritional supplement marketplace and has increased its product distribution to current accounts, as well as new customers. 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 and Rexall brands to provide the best overall product mix and to respond to changing market conditions. While these efforts have further strengthened US Nutrition's position in the mass market, the returns associated with this reallocation are a contributing factor to an overall decrease in gross margins in this channel. Gross margins were also affected by the slowdown in the low carb category. In the fiscal fourth quarter, US Nutrition launched a bonus program for its Sundown brand products as part of on-going efforts to deliver greater value to consumers and increase sales and gain market share in this highly competitive channel. The Company expects this on-going initiative will continue to effect wholesale gross margins. NBTY recently launched a new $6.5 million national print advertising campaign featuring television talk show host and media personality Regis Philbin. Beginning in January 2005, Regis Philbin will be featured in a national campaign for NBTY's Osteo Bi-Flex, the number one Doctor Recommended Brand for joint care. The ads will appear in leading adult lifestyle publications including O, The Oprah Magazine; Better Homes and Gardens; Family Circle; and Prevention and have already appeared in AARP's Modern Maturity magazine. US Retail-Vitamin World fiscal fourth quarter net sales were $53 million compared to $54 million a year ago, a decrease of 1%. For the fiscal fourth quarter, Vitamin World operations reported a pre-tax loss of less than $400,000. However, Vitamin World's EBITDA (as defined in non-GAAP financial measures below) for the same period was a positive $2 million. During the fiscal fourth quarter Vitamin World opened 8 new stores, closed 3 stores and at the end of the quarter operated 557 stores nationwide. For the fiscal fourth quarter, same store sales decreased 4%, reflecting continued vulnerability in this specialty retail market. For fiscal 2004, same store sales increased 1%. 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 remains hampered. The Company expects this trend to continue in the near future. NBTY's European retail net sales for the fiscal fourth quarter increased 41% to $133 million from $95 million for the fiscal fourth quarter a year ago. Net sales generated by GNC (UK) and DeTuinen totaled $15 million for the fiscal fourth quarter. GNC (UK) remained profitable, while DeTuinen incurred a pre-tax loss of $1 million in the fiscal fourth quarter. The Company's European retail division opened 3 new stores, and at the end of the quarter operated 602 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 36% in US dollars for the fiscal fourth quarter, reflecting in part the positive effect of the strong British pound. Without the effect of foreign exchange, Holland & Barrett same store sales increased 21%. Net sales from Puritan's Pride direct response/e-commerce operations for the fiscal fourth quarter decreased 10% to $47 million from $52 million for the comparable prior period, reflecting the continued change in the timing of the promotional catalogues as well as the cyclical nature of this business. 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. Puritan's Pride continues to make investments in advertising and sales promotions and focus on a high level of customer service. OPERATIONS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2004 Net sales by segment for fiscal 2004 as compared to fiscal 2003 were as follows: Wholesale net sales were $734 million, an increase of 76%; US Retail net sales were $216 million, an increase of 2%; European Retail net sales were $496 million, an increase of 36%; and Direct Response net sales were $205 million, an increase of 3%. SALES FOR THE TWO MONTHS ENDED NOVEMBER 2004 Preliminary unaudited net sales by segment for the two months ended November 2004 compared to the prior like period were as follows: Wholesale net sales were $124 million, a decrease of 2%; US Retail net sales were $34 million, a decrease of 2%; European Retail net sales were $92 million, an increase of 19%; and Direct Response net sales were $37 million, an increase of 49%. NBTY Chairman and CEO, Scott Rudolph, said: "We are encouraged by NBTY's overall performance for fiscal 2004 which was achieved despite a general industry weakness and highly competitive market environment. While we expect industry weakness to continue in the near-term, we are confident in our ability to quickly adapt to cyclical changes in industry segments 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/or unavailability of additional debt or equity capital; (ix) unavailability of, or inability to consummate, advantageous acquisitions in the future, including those that may be subject to bankruptcy approval or the inability of NBTY to integrate acquisitions into the mainstream of its business; (x) changes in general worldwide economic and political conditions in the markets in which NBTY may compete from time to time; (xi) the inability of NBTY to gain and/or hold market share of its wholesale and/or retail customers anywhere in the world; (xii) unavailability of electricity in certain geographical areas; (xiii) the inability of NBTY to obtain and/or renew insurance and/or the costs of the same; (xiv) exposure to and expense of defending and resolving, product liability claims and other litigation; (xv) the ability of NBTY to successfully implement its business strategy; (xvi) the inability of NBTY to manage its retail, wholesale, manufacturing and other operations efficiently; (xvii) consumer acceptance of NBTY's products; (xviii) the inability of NBTY to renew leases for its retail locations; (xix) inability of NBTY's retail stores to attain or maintain profitability; (xx) the absence of clinical trials for many of NBTY's products; (xxi) sales and earnings volatility and/or trends for the Company and its market segments; (xxii) the efficacy of NBTY's Internet and on-line sales and marketing; (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 proposed Good Manufacturing Practices in the United States and the Food Supplements Directive and 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. -Tables Follow- NBTY, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars and shares in thousands, except per share amounts) For the three months ended September 30, 2004 2003 Net sales $427,471 $364,847 Costs and expenses: Cost of sales 219,051 182,249 Discontinued product charge (credit) - (1,500) Catalog printing, postage and promotion 24,129 20,439 Selling, general and administrative 146,267 132,281 389,447 333,469 Income from operations 38,024 31,378 Other income (expense): Interest (5,530) (5,674) Bond investment write down - (4,084) Miscellaneous, net 982 (112) (4,548) (9,870) Income before provision for income taxes 33,476 21,508 Provision for income taxes 12,431 5,626 Net income $ 21,045 $ 15,882 Net income per share: Basic $0.31 $0.24 Diluted $0.30 $0.23 Weighted average common shares outstanding: Basic 66,999 66,547 Diluted 69,011 68,796 NBTY, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars and shares in thousands, except per share amounts) For the fiscal years ended September 30, 2004 2003 Net sales $1,652,031 $1,192,548 Costs and expenses: Cost of sales 822,412 554,804 Discontinued product charge - 4,500 Catalog printing, postage and promotion 85,238 66,455 Selling, general and administrative 554,838 435,748 1,462,488 1,061,507 Income from operations 189,543 131,041 Other income (expense): Interest (24,663) (17,384) Bond investment write down - (4,084) Miscellaneous, net 4,125 5,424 (20,538) (16,044) Income before provision for income taxes 169,005 114,997 Provision for income taxes 57,156 33,412 Net income $111,849 $81,585 Net income per share: Basic $1.67 $1.23 Diluted $1.62 $1.19 Weighted average common shares outstanding: Basic 66,793 66,452 Diluted 69,069 68,538 SALES (Thousands) THREE MONTHS ENDED FISCAL YEARS ENDED SEPTEMBER 30, SEPTEMBER 30, % Increase 2004 2003 (% Decrease) 2004 2003 % Increase Wholesale $194,075 $163,721 19% $734,293 $416,627 76% US Retail/ Vitamin World 53,469 54,138 -1% 216,431 212,380 2% European Retail / Holland & Barrett / GNC (UK) 133,021 94,694 41% 495,808 363,597 36% Direct Response / Puritan's Pride 46,906 52,294 -10% 205,499 199,944 3% Total $427,471 $364,847 17% $ 1,652,031 $ 1,192,548 39% GROSS PROFIT PERCENTAGES THREE MONTHS ENDED FISCAL YEARS ENDED SEPTEMBER 30, SEPTEMBER 30, % Increase % Increase 2004 2003 (% Decrease) 2004 2003 (% Decrease) Wholesale 32% 39% -7% 36% 40% -4% US Retail / Vitamin World 58% 60% -2% 59% 60% -1% European Retail / Holland & Barrett / GNC (UK) 63% 59% 4% 62% 61% 1% Direct Response / Puritan's Pride 65% 60% 5% 62% 62% 0% Total (without discontinued product charge) (credit) 49% 50% -1% 50% 54% -4% Discontinued product charge (credit) 0% 1% -1% 0% -1% 1% Total 49% 51% -2% 50% 53% -3% Reconciliation of GAAP Measures to Non-GAAP Measures (Thousands) THREE MONTHS ENDED SEPTEMBER 30, 2004 Pretax Depreciation Income and (Loss) amortization Interest EBITDA Wholesale $ 14,298 $ 2,538 $ - $ 16,836 US Retail / Vitamin World (364) 2,339 1,975 European Retail / Holland & Barrett / GNC (UK) 36,094 2,489 38,583 Direct Response / Puritan's Pride 16,285 1,301 17,586 Segment Results 66,313 8,667 74,980 Corporate (32,837) 6,165 5,530 (21,142) Total $ 33,476 $ 14,832 $ 5,530 $ 53,838 THREE MONTHS ENDED SEPTEMBER 30, 2004 Pretax Depreciation Income and (Loss) amortization Interest EBITDA Wholesale $ 23,149 $ 1,443 $ - $ 24,592 US Retail / Vitamin World (1,983) 4,157 2,174 European Retail / Holland & Barrett / GNC (UK) 18,802 2,624 21,426 Direct Response / Puritan's Pride 17,440 1,429 18,869 Segment Results 57,408 9,653 67,061 Corporate (35,900) 4,692 5,674 (25,534) Total $ 21,508 $ 14,345 $ 5,674 $ 41,527 Reconciliation of GAAP Measures to Non-GAAP Measures (Thousands) FISCAL YEAR ENDED SEPTEMBER 30, 2004 Pretax Depreciation Income and (Loss) amortization Interest EBITDA Wholesale $ 112,224 $ 10,474 $ - $ 122,698 US Retail / Vitamin World (120) 10,848 10,728 European Retail / Holland & Barrett / GNC (UK) 120,323 12,370 132,693 Direct Response / Puritan's Pride 65,265 5,403 70,668 Segment Results 297,692 39,095 336,787 Corporate (128,687) 22,585 24,663 (81,439) Total $ 169,005 $ 61,680 $ 24,663 $ 255,348 FISCAL YEAR ENDED SEPTEMBER 30, 2003 Pretax Depreciation Income and (Loss) mortization Interest EBITDA Wholesale $ 76,933 $ 2,184 $ - $ 79,117 US Retail / Vitamin World (1,643) 12,733 11,090 European Retail / Holland & Barrett / GNC (UK) 83,345 9,872 93,217 Direct Response / Puritan's Pride 62,184 5,779 67,963 Segment Results 220,819 30,568 251,387 Corporate (105,822) 16,316 17,384 (72,122) Total $ 114,997 $ 46,884 $ 17,384 $ 179,265 NBTY, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS (Dollars and shares in thousands) September 30, September 30, 2004 2003 Current assets: Cash and cash equivalents $21,751 $49,349 Investment in bonds - 4,158 Accounts receivable, less allowance for doubtful accounts of $9,389 at September 30, 2004 and $7,100 at September 30, 2003 86,113 80,829 Inventories 374,559 314,091 Deferred income taxes 32,062 37,021 Prepaid expenses and other current assets 62,835 44,736 Total current assets 577,320 530,184 Property, plant and equipment, net 280,075 298,344 Goodwill 221,429 213,362 Intangible assets, net 136,541 137,469 Other assets 17,288 16,423 Total assets $ 1,232,653 $ 1,195,782 NBTY, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (Dollars and shares in thousands) September 30, September 30, 2004 2003 Current liabilities: Current portion of long-term debt $3,205 $12,841 Accounts payable 97,635 87,039 Accrued expenses and other current liabilities 116,633 118,439 Total current liabilities 217,473 218,319 Long-term debt 306,531 413,989 Deferred income taxes 64,675 40,213 Other liabilities 4,176 8,462 Total liabilities 592,855 680,983 Commitments and contingencies Stockholders' equity: Common stock, $.008 par; authorized 175,000 shares; issued and outstanding 67,060 shares at September 30, 2004 and 66,620 shares at September 30, 2003 536 533 Capital in excess of par 135,787 130,208 Retained earnings 481,302 369,453 617,625 500,194 Accumulated other comprehensive income 22,173 14,605 Total stockholders' equity 639,798 514,799 Total liabilities and stockholders' equity $ 1,232,653 $ 1,195,782 NBTY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) For the fiscal years ended Sept. 30, 2004 2003 Cash flows from operating activities: Net income $111,849 $81,585 Adjustments to reconcile net income to net cash provided by operating activities: Loss/(gain) on disposal/sale of property, plant and equipment 1,556 (711) Depreciation and amortization 61,680 46,884 Foreign currency transaction gain (1,253) (334) Amortization of deferred financing costs 3,955 1,003 Amortization of bond discount 7 124 Allowance for doubtful accounts 3,074 2,970 Inventory reserve 16,070 2,108 Compensation expense for ESOP 4,090 1,711 Tax benefit from exercise of stock options 1,228 1,072 Deferred income taxes 8,767 5,227 Bond investment write down - 4,084 Discontinued product charge - 4,500 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable (8,151) (222) Inventories (72,888) (30,487) Prepaid expenses and other current assets (4,095) (15,855) Other assets (1,937) 616 Accounts payable 7,193 (2,773) Accrued expenses and other liabilities (11,209) 10,030 Net cash provided by operating activities 119,936 111,532 Cash flows from investing activities: Purchase of property, plant and equipment (42,700) (37,510) Proceeds from sale of property, plant, and equipment 1,065 1,498 Proceeds from sale of bond investment 4,158 - Cash paid for acquisitions, net of cash acquired - (289,676) Release of cash held in escrow - 2,403 Net cash used in investing activities (37,477) (323,285) Cash flows from financing activities: Principal payments under long-term debt agreements (117,100) (35,211) Proceeds from borrowings under long term debt agreements - 275,000 Payments for financing fees (500) (7,500) Proceeds from stock options exercised 1,881 1,146 Net cash (used in) provided by financing activities (115,719) 233,435 Effect of exchange rate changes on cash and cash equivalents 5,662 1,438 Net (decrease) increase in cash and cash equivalents (27,598) 23,120 Cash and cash equivalents at beginning of year 49,349 26,229 Cash and cash equivalents at end of year $ 21,751 $ 49,349 Supplemental disclosure of cash flow information: Cash paid during the year for interest $ 21,156 $ 17,709 Cash paid during the year for income taxes $ 39,490 $ 34,698 NBTY, INC. & SUBSIDIARIES NET SALES BY MARKET SEGMENT PRELIMINARY/UNAUDITED (Thousands) OCTOBER % 2004 2003 Increase Wholesale 71,553 65,751 8.8% US Retail / Vitamin World 18,375 17,640 4.2% European Retail / Holland & Barrett / GNC (UK) 46,537 38,432 21.1% Direct Response / Puritan's Pride 16,600 12,751 30.2% Total 153,065 134,574 13.7% NOVEMBER % 2004 2003 Inc/(Dec) Wholesale 52,872 61,313 -13.8% US Retail / Vitamin World 15,855 17,426 -9.0% European Retail / Holland & Barrett / GNC (UK) 45,886 39,239 16.9% Direct Response / Puritan's Pride 20,376 12,002 69.8% Total 134,989 129,980 3.9% 2 MONTHS ENDED NOVEMBER % 2004 2003 Inc/(Dec) Wholesale 124,425 127,064 -2.1% US Retail / Vitamin World 34,230 35,066 -2.4% European Retail / Holland & Barrett / GNC (UK) 92,423 77,671 19.0% Direct Response / Puritan's Pride 36,976 24,753 49.4% Total 288,054 264,554 8.9% 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, or , for NBTY, Inc. Web site: http://www.nbty.com/

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