NTY Nbty Inc.

NBTY Reports Fourth Quarter and Year-End Results BOHEMIA, N.Y., Nov. 10 /PRNewswire-FirstCall/ -- NBTY, Inc. (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, 2003. For the fiscal fourth quarter ended September 30, 2003, sales increased 49% to $365 million, compared to $245 million for the fiscal fourth quarter ended September 30, 2002. Net income for the fiscal fourth quarter 2003 was $14 million, or $0.20 per diluted share, compared to net income of $29 million, or $0.43 per diluted share, for the comparable period last year. Results for the fiscal fourth quarter 2003 included certain non-recurring charges totaling $10 million, pre-tax, that decreased net earnings by $0.11 per diluted share. Included in these one-time charges was a write-off of $7 million relating to the Company's investment in high yield bonds purchased in anticipation of an acquisition which NBTY determined not to pursue because of ephedra exposure, among other things. The balance of these charges were attributed to various items, including: the discontinuation of the Company's network marketing operations; fees and expenses associated with another acquisition which the Company chose not to consummate principally because of litigation exposure; and the closure of the Company's facilities in Murphysboro, Illinois and Thornton, Colorado that occurred in conjunction with integrating the operations of Rexall Sundown. NBTY acquired Rexall on July 25, 2003. Rexall's sales from that date until September 30, 2003 were $73 million. Without Rexall sales, NBTY sales would have increased 19% in the fiscal fourth quarter 2003. For fiscal 2003, sales increased 24% to $1.2 billion compared to $964 million for fiscal 2002. Net income for fiscal 2003 was $80 million, or $1.16 per diluted share, compared to net income of $96 million, or $1.41 per diluted share, for fiscal 2002. Results for fiscal year 2003 included the aforementioned non-recurring charges totaling $10 million, pre-tax, that decreased net earnings by $0.11 per diluted share. Without Rexall sales, NBTY sales would have increased 16% for fiscal 2003. At September 30, 2003, the Company's total assets were $1.2 billion and its working capital was $312 million, compared with total assets of $730 million and working capital of $186 million at September 30, 2002. OPERATIONS FOR THE FISCAL FOURTH QUARTER ENDED SEPTEMBER 30, 2003 For the fiscal fourth quarter 2003, sales for the wholesale division increased $90 million to $164 million, an increase of 122%, compared to $74 million for the fiscal fourth quarter 2002. The increase in 2003 includes $73 million of Rexall sales with EBITDA of $10 million. Without Rexall sales, the wholesale division's sales would have increased by 23% for the fiscal fourth quarter 2003. The Rexall acquisition added numerous well-known brands to the Company's wholesale operation. These brands include Rexall(R), Sundown(R), Osteo Bi-Flex(R), CarbSolutions(TM), MET-Rx(R) and WORLDWIDE Sports Nutrition(R). With this acquisition, NBTY reinforces its dominant position in the wholesale sector. The integration of the acquisition is on schedule. The Company continues to leverage valuable consumer sales information it receives from its Vitamin World and direct response/e-commerce operations. This information is monitored on a daily basis and used as a planning tool in the introduction of new products to our wholesale customers. The success of this strategy is demonstrated by the acceptance of our new products by the mass-market retailers and their customers. NBTY remains focused on increasing market share in the wholesale channel and expanding its presence in the nutritional supplement marketplace. Vitamin World sales for the fiscal fourth quarter 2003 were $54 million, compared to $52 million for the comparable prior period. Vitamin World's same store sales for the fiscal fourth quarter 2003 increased 4%. Although Vitamin World generated EBITDA of $2 million for the fiscal fourth quarter 2003, Vitamin World operations recorded a loss of $2 million. Included in this loss is an asset impairment charge, in the form of accelerated depreciation, for certain unprofitable stores. Vitamin World currently has 533 stores in operation nationwide. During fiscal 2003, the Company closed twenty Vitamin World stores and added nine new stores. Sales from NBTY's European retail operations for the fiscal fourth quarter 2003 increased 27% to $95 million from $74 million for the fiscal fourth quarter 2002. This 27% increase includes sales generated by 50 GNC stores in the UK and 65 DeTuinen stores in the Netherlands acquired earlier this fiscal year. GNC (UK) and DeTuinen each generated sales of $9 million in the fiscal fourth quarter 2003. Although GNC (UK) was marginally profitable, DeTuinen incurred a $500,000 loss for the fiscal fourth quarter 2003. Holland & Barrett's same store sales for the fiscal fourth quarter 2003 increased 2% with foreign exchange. Holland & Barrett continues to be a leader in the UK and Ireland. The Company's European division currently operates 589 stores in the UK, Ireland and the Netherlands. Revenues from Puritan's Pride direct response/e-commerce operations for the fiscal fourth quarter 2003 increased 16% to $52 million from $45 million for the fiscal fourth quarter 2002. Online sales, which increased more than 50% for the fiscal fourth quarter 2003, comprised 21% of sales for the fiscal fourth quarter 2003. The increase in sales reflects the continued success of investments in advertising, sales promotions and faster product delivery to customers. OPERATIONS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2003 Sales by segment for fiscal 2003 were as follows: wholesale sales were $417 million, an increase of 43%; Vitamin World sales were $212 million, an increase of 7%; European retail operation sales were $364 million, an increase of 25%; and Puritan's Pride sales were $200 million, an increase of 9%. Excluding $73 million of Rexall sales, wholesale sales would have increased by 18% for fiscal 2003. NBTY Chairman and CEO, Scott Rudolph, said: "The fourth quarter reflected a wide array of transitional issues which we anticipate will be resolved in fiscal 2004. The integration of Rexall is on schedule and has already contributed significantly to our revenue growth. The Rexall acquisition is indicative of our commitment to the wholesale segment, and we anticipate continued growth in revenue and market share for NBTY." 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 Sports Nutrition(R), American Health(R), GNC (UK)(R) and DeTuinen(R). 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, 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; and (xxx) 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 (Dollars and shares in thousands, except per share amounts) For the three months ended September 30, 2003 2002 Net sales $364,847 $245,461 Cost and expenses: Cost of sales 182,249 107,805 Discontinued product charge (1,500) Catalog printing, postage and promotion 20,439 13,561 Selling, general and administrative 132,281 90,568 Litigation recovery of raw material costs (836) 333,469 211,098 Income from operations 31,378 34,363 Other (expense): Interest (5,674) (3,912) Investment write down (6,659) Miscellaneous, net (112) (765) (12,445) (4,677) Income before income taxes 18,933 29,686 Provision for income taxes 4,951 338 Net income $ 13,982 $ 29,348 Net income per share: Basic $ 0.21 $ 0.44 Diluted $ 0.20 $ 0.43 Weighted average common shares outstanding: Basic 66,547 66,122 Diluted 68,796 67,986 NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars and shares in thousands, except per share amounts) For the fiscal years ended September 30, 2003 2002 Net sales $1,192,548 $964,083 Cost and expenses: Cost of sales 554,804 433,611 Discontinued product charge 4,500 Catalog printing, postage and promotion 66,455 47,846 Selling, general and administrative 435,748 348,334 Litigation recovery of raw material costs (21,354) 1,061,507 808,437 Income from operations 131,041 155,646 Other income (expense): Interest (17,384) (18,499) Investment write down (6,659) Miscellaneous, net 5,424 1,560 (18,619) (16,939) Income before income taxes 112,422 138,707 Provision for income taxes 32,738 42,916 Net income $79,684 $95,791 Net income per share: Basic $1.20 $1.45 Diluted $1.16 $1.41 Weighted average common shares outstanding: Basic 66,452 65,952 Diluted 68,538 67,829 SALES (Thousands) THREE MONTHS FISCAL YEARS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, % % 2003 2002 Increase 2003 2002 Increase Wholesale $163,721 $73,610 122% $416,627 $291,287 43% US Retail/ Vitamin World 54,138 52,255 4% 212,380 198,602 7% European Retail/ Holland & Barrett/ 94,694 74,397 27% 363,597 290,881 25% Direct Response/ Puritan's Pride 52,294 45,199 16% 199,944 183,313 9% Total $364,847 $245,461 49% $1,192,548 $964,083 24% GROSS PROFIT PERCENTAGES THREE MONTHS ENDED FISCAL YEARS ENDED SEPTEMBER 30, SEPTEMBER 30, % % 2003 2002 Increase 2003 2002 Increase Wholesale 39% 44% -5% 40% 41% -1% US Retail/Vitamin World 60% 59% 1% 60% 59% 1% European Retail/ Holland & Barrett/GNC 59% 64% -5% 61% 63% -2% Direct Response/ Puritan's Pride 60% 60% 0% 62% 61% 1% Total (without discontinued product charge) 50% 56% -6% 54% 55% -1% Discontinued product charge 1% 1% -1% -1% Total 51% 56% -5% 53% 55% -2% INCOME FROM OPERATIONS BY SEGMENT (Thousands) THREE MONTHS ENDED FISCAL YEARS ENDED SEPTEMBER 30, SEPTEMBER 30, 2003 2002 2003 2002 Wholesale $23,149 $15,986 $76,933 $60,197 US Retail/Vitamin World (1,983) 59 (1,643) (4,975) European Retail/ Holland & Barrett/GNC 18,802 20,380 83,345 79,421 Direct Response/Puritan's Pride 17,440 14,333 62,184 66,273 Segment Results 57,408 50,758 220,819 200,916 Corporate Expenses (27,530) (17,231) (85,278) (66,624) Discontinued Product Charge 1,500 (4,500) Litigation Recovery of Raw Material Costs 836 21,354 Income from Operations $31,378 $34,363 $131,041 $155,646 Non-recurring charges included in operations: Provision for plant closures 2,645 Unsuccessful acquisition costs 1,000 Total non-recurring charges included in operations 3,645 -- Income from operations excluding non-recurring charges $35,023 $34,363 NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS (Dollars and shares in thousands) September 30, September 30, 2003 2002 Current assets: Cash and cash equivalents $49,349 $26,229 Investments in bonds 1,583 8,194 Accounts receivable, less allowance for doubtful accounts of $10,463 at September 30, 2003 and $4,194 at September 30, 2002 89,430 36,825 Inventories 314,091 204,402 Deferred income taxes 37,021 11,206 Prepaid expenses and other current assets 44,736 24,691 Total current assets 536,210 311,547 Property, plant and equipment, net 298,344 216,245 Goodwill 213,362 144,999 Intangible assets, net 137,469 48,413 Other assets 16,423 8,936 Total assets $1,201,808 $730,140 NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (Dollars and shares in thousands) September 30, September 30, 2003 2002 Current liabilities: Current portion of long-term debt and capital lease obligations $12,841 $23,044 Accounts payable 87,039 48,616 Accrued expenses and other current liabilities 123,956 54,177 Total current liabilities 223,836 125,837 Long-term debt 413,989 163,874 Deferred income taxes 40,213 16,928 Other liabilities 10,872 4,244 Total liabilities 688,910 310,883 Commitments and contingencies Stockholders' equity: Common stock, $0.008 par; authorized 175,000 shares; issued and outstanding 66,620 shares at September 30, 2003 and 66,322 shares at September 30, 2002 533 529 Capital in excess of par 130,208 126,283 Retained earnings 367,552 287,868 498,293 414,680 Accumulated other comprehensive income 14,605 4,577 Total stockholders' equity 512,898 419,257 Total liabilities and stockholders' equity $1,201,808 $730,140 NBTY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) For the fiscal years ended September 30, 2003 2002 Cash flows from operating activities: Net income $79,684 $95,791 Adjustments to reconcile net income to net cash provided by operating activities: (Gain)/loss on disposal/sale of property, plant and equipment (711) 102 Depreciation and amortization 46,884 42,192 Foreign currency exchange rate (gain) loss (334) 1,556 Amortization of deferred financing costs 1,003 782 Amortization of bond discount 124 124 Investment write down 6,659 Allowance for doubtful accounts (2,906) 972 Deferred income taxes 6,033 (5,829) Compensation expense for ESOP 1,710 Tax benefit from exercise of stock options 1,072 1,815 Changes in assets and liabilities, net of acquisitions: Accounts receivable (1,466) (7,011) Inventories (23,879) (14,277) Prepaid expenses and other current assets (15,855) (3,432) Other assets 616 (586) Accounts payable (2,773) (3,442) Accrued expenses and other liabilities 15,671 (3,670) Net cash provided by operating activities 111,532 105,087 Cash flows from investing activities: Cash paid for acquisitions, net of cash acquired (289,676) (7,702) Purchase of property, plant and equipment (37,510) (21,489) Proceeds from sale of property, plant, and equipment 1,498 1,004 Proceeds from sale of intangibles 53 Purchase of short term investments (8,242) Release of cash held in escrow 2,403 4,600 Net cash used in investing activities (323,285) (31,776) Cash flows from financing activities: Principal payments under long-term debt agreements and capital leases (35,212) (85,353) Proceeds from borrowings under long term debt agreements 275,000 Payments for debt issuance costs (7,500) Proceeds from stock options exercised 1,147 1,899 Net cash provided by (used in) financing activities 233,435 (83,454) Effect of exchange rate changes on cash and cash equivalents 1,438 1,938 Net increase (decrease) in cash and cash equivalents 23,120 (8,205) Cash and cash equivalents at beginning of year 26,229 34,434 Cash and cash equivalents at end of year $49,349 $26,229 Supplemental disclosure of cash flow information: Cash paid during the period for interest $17,709 $18,513 Cash paid during the period for income taxes $34,698 $55,101 DATASOURCE: NBTY, Inc. CONTACT: Harvey Kamil, President and CFO 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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