NTY Nbty Inc.

NBTY Reports Record Second Quarter Results BOHEMIA, N.Y., April 22 /PRNewswire-FirstCall/ -- NBTY, Inc. (http://www.nbty.com/), a leading manufacturer and marketer of nutritional supplements, today announced record results for the fiscal second quarter ended March 31, 2004. For the fiscal second quarter ended March 31, 2004, sales increased 58% to $440 million, compared to sales of $278 million for the fiscal second quarter ended March 31, 2003. Net income for the fiscal second quarter was $41 million, or $0.60 per diluted share, compared to net income of $20 million, or $0.29 per diluted share for the fiscal second quarter last year. (Without a one-time $6 million discontinued product charge, net income and earnings per diluted share for the fiscal second quarter of 2003 would have been $24 million and $0.34, respectively.) Results for the fiscal second quarter of 2004 reflect increased sales across all the Company's businesses and include the results of Rexall businesses acquired in July 2003. Rexall product lines recorded sales of $82 million for the fiscal second quarter. Without such product lines, sales would have increased 29% for the fiscal second quarter. For the first six months of fiscal 2004, sales increased 59% to $825 million, compared to $519 million for the first six months of fiscal 2003. Net income for the first six months of fiscal 2004 was $65 million, or $0.94 per diluted share, compared with $36 million, or $0.53 per diluted share for the first six months of fiscal 2003. (Without the aforementioned one-time $6 million charge, net income and earnings per diluted share for the first six months of fiscal 2003 would have been $40 million and $0.59, respectively.) NBTY continues to enhance its financial strength. During the first six months of fiscal 2004, the Company repaid a total of $98 million of principal outstanding under its term loans; $24 million in the first fiscal quarter ended December 31, 2003 and $74 million in the second fiscal quarter ended March 31, 2004. These payments reduced the principal amount of outstanding term loans to $174 million from the principal balance of $272 million at September 30, 2003. OPERATIONS FOR THE FISCAL SECOND QUARTER ENDED MARCH 31, 2004 The US Nutrition wholesale division, which operates Nature's Bounty and Rexall, increased its sales 123% to $189 million from $85 million for the comparable prior period of fiscal 2003. These results include $82 million from Rexall product lines, such as Osteo Bi-Flex(R), MET-Rx(R), Sundown(R) and Carb Solutions(R), and include a charge of approximately $3 million for returns associated with Rexall's pre-acquisition sales. These returns have decreased steadily since the Rexall acquisition in July 2003, as the Company maximizes Rexall retail space and replaces pre-acquisition slower-moving Rexall products with reformulated Rexall products as well as Nature's Bounty premium products. US Nutrition's results reflect the continued success of the integration of Rexall and additional growth in mass-market sales. The Company now employs 575 former Rexall associates, approximately 350 fewer than at the time of the acquisition. NBTY continues to increase its dominant presence in the wholesale nutritional supplement marketplace. The Company's utilization of consumer sales information, received on a daily basis from its Vitamin World retail stores and Puritan's Pride direct-response/e-commerce operations, continues to provide mass-market customers with timely and vital data to drive sales. Vitamin World fiscal second quarter sales were $56 million compared to $54 million a year ago, an increase of 5%. Vitamin World operations generated continued profitability in the fiscal second quarter and EBITDA (as defined in non-GAAP financial measures below) was $4 million. Same store sales increased 4%. During the fiscal second quarter Vitamin World opened 5 new stores, closed 3 stores and at the end of the quarter operated 545 stores nationwide. NBTY's European retail sales for the fiscal second quarter increased 42% to $123 million from $87 million for the fiscal second quarter a year ago. This increase includes sales generated by the 50 GNC stores in the UK and 67 DeTuinen stores in the Netherlands that NBTY acquired in fiscal 2003. GNC (UK) and DeTuinen each generated sales of approximately $10 million for the fiscal second quarter. While results for the DeTuinen chain, acquired in May 2003, were not profitable, a turn-around is anticipated within the next 12 months based upon the chain's progress to date. During the fiscal second quarter, the Company's European retail division opened 6 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 with same store sales increasing 21% for the fiscal second quarter, reflecting in part, the positive effect of the strong British pound. Without the effect of foreign exchange, Holland & Barrett same store sales increased 6%. Revenues from Puritan's Pride direct response/e-commerce operations for the fiscal second quarter increased 35% to $71 million from $52 million for the comparable prior period. Puritan's Pride on-line sales increased 58% for the fiscal second quarter and comprised 20% of all direct response sales for this fiscal second quarter. The increase in sales reflects the Company's ability to more effectively target market its customer base. During this fiscal quarter, the Company shipped 63,000 more orders than in the prior like quarter, and average order size increased $14 to $79 from $65. 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. NBTY Chairman and CEO, Scott Rudolph, said: "We are very pleased to report a second consecutive quarter of record results and sales increases across all divisions. The successful integration of Rexall continues to contribute to our overall revenue growth and lends further credence to our strategic plan to enhance wholesale operations and further our position as the dominant force in the worldwide nutritional supplement market. We anticipate continued growth in revenue and market share and remain confident in the long-term outlook 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 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; 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 (UNAUDITED) (Dollars and shares in thousands, except per share amounts) For the three months ended March 31, 2004 2003 Net sales $ 439,594 $277,824 Costs and expenses: Cost of sales 213,248 124,679 Discontinued product charge - 6,000 Catalog printing, postage and promotion 19,322 16,782 Selling, general and administrative 138,294 99,170 370,864 246,631 Income from operations 68,730 31,193 Other income (expense): Interest (6,759) (3,774) Miscellaneous, net 540 2,274 (6,219) (1,500) Income before income taxes 62,511 29,693 Provision for income taxes 21,254 10,082 Net income $41,257 $ 19,611 Net income per share: Basic $0.62 $0.30 Diluted $0.60 $0.29 Weighted average common shares outstanding: Basic 66,730 66,261 Diluted 69,098 68,323 NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Dollars and shares in thousands, except per share amounts) For the six months ended March 31, 2004 2003 Net sales $824,647 $ 519,228 Costs and expenses: Cost of sales 406,134 231,359 Discontinued product charge -- 6,000 Catalog printing, postage and promotion 39,459 30,637 Selling, general and administrative 268,665 192,546 714,258 460,542 Income from operations 110,389 58,686 Other income (expense): Interest (13,564) (7,820) Miscellaneous, net 2,047 3,513 (11,517) (4,307) Income before income taxes 98,872 54,379 Provision for income taxes 33,970 18,145 Net income $64,902 $36,234 Net income per share: Basic $0.97 $0.55 Diluted $0.94 $0.53 Weighted average common shares outstanding: Basic 66,686 66,216 Diluted 68,997 68,205 SALES (Thousands) (Unaudited) THREE MONTHS ENDED SIX MONTHS ENDED MARCH 31, MARCH 31, 2004 2003 % Increase 2004 2003 % Increase Wholesale $189,425 $84,850 123% $368,620 $158,967 132% US Retail / Vitamin World 56,100 53,556 5% 109,511 103,819 5% UK Retail / Holland & Barrett / GNC 123,416 87,089 42% 240,466 169,702 42% Direct Response / Puritan's Pride 70,653 52,329 35% 106,050 86,740 22% Total $439,594 $277,824 58% $824,647 $519,228 59% GROSS PROFIT PERCENTAGES (Unaudited) THREE MONTHS ENDED SIX MONTHS ENDED MARCH 31, MARCH 31, % Increase % Increase 2004 2003 (% Decrease) 2004 2003 (% Decrease) Wholesale 39% 41% -2% 38% 42% -4% US Retail / Vitamin World 60% 59% 1% 60% 59% 1% European Retail / Holland & Barrett / GNC 62% 63% -1% 61% 63% -2% Direct Response / Puritan's Pride 61% 61% 0% 61% 62% -1% Total (without discontinued product charge) 52% 55% -3% 51% 55% -4% Discontinued product charge 0% -2% 2% 0% -1% 1% Total 52% 53% -1% 51% 54% -3% Reconciliation of GAAP Measures to Non-GAAP Measures (Thousands) (Unaudited) THREE MONTHS ENDED MARCH 31, 2004 Pretax Income Depreciation Interest EBITDA (Loss) and amortization Wholesale $40,999 $2,764 $-- $43,763 US Retail / Vitamin World 1,193 3,027 4,220 European Retail / Holland & Barrett / GNC 29,683 3,394 33,077 Direct Response / Puritan's Pride 23,418 1,393 24,811 Segment Results 95,293 10,578 105,871 Corporate (32,782) 5,501 6,759 (20,522) Total $62,511 $16,079 $6,759 $85,349 THREE MONTHS ENDED MARCH 31, 2003 Pretax Income Depreciation Interest EBITDA (Loss) and amortization Wholesale $17,950 $242 $-- $18,192 US Retail / Vitamin World 1,093 3,000 4,093 European Retail / Holland & Barrett / GNC 23,069 2,373 25,442 Direct Response / Puritan's Pride 13,958 1,601 15,559 Segment Results 56,070 7,216 63,286 Corporate (26,377) 3,981 3,774 (18,622) Total $29,693 $11,197 $3,774 $44,664 Reconciliation of GAAP Measures to Non-GAAP Measures (Thousands) (Unaudited) SIX MONTHS ENDED MARCH 31, 2004 Pretax Income Depreciation Interest EBITDA (Loss) and amortization Wholesale $71,007 $5,442 $-- $76,449 US Retail / Vitamin World 1,389 6,186 7,575 European Retail / Holland & Barrett / GNC 55,982 5,900 61,882 Direct Response / Puritan's Pride 32,686 2,808 35,494 Segment Results 161,064 20,336 181,400 Corporate (62,192) 10,922 13,564 (37,706) Total $98,872 $31,258 $13,564 $143,694 SIX MONTHS ENDED MARCH 31, 2003 Pretax Income Depreciation Interest EBITDA (Loss) and amortization Wholesale $32,154 $452 $-- $32,606 US Retail / Vitamin World (562) 5,936 5,374 European Retail / Holland & Barrett / GNC 45,361 4,538 49,899 Direct Response / Puritan's Pride 24,972 2,938 27,910 Segment Results 101,925 13,864 115,789 Corporate (47,546) 7,888 7,820 (31,838) Total $54,379 $21,752 $7,820 $83,951 NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) ASSETS (Dollars and shares in thousands) March 31, September 30, 2004 2003 Current assets: Cash and cash equivalents $ 54,709 $ 49,349 Investments in bonds -- 4,158 Accounts receivable, less allowance for doubtful accounts of $8,077 at March 31, 2004 and $7,100 at September 30, 2003 93,128 80,829 Inventories 308,610 314,091 Deferred income taxes 37,021 37,021 Prepaid expenses and other current assets 31,902 44,736 Total current assets 525,370 530,184 Property, plant and equipment, net 298,806 298, 344 Goodwill 212,722 213,362 Intangible assets, net 141,489 137,469 Other assets 17,631 16,423 Total assets $1,196,018 $1,195,782 NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY (Dollars and shares in thousands) March 31, September 30, 2004 2003 Current liabilities: Current portion of long-term debt and capital lease obligations $ 2,834 $ 12,841 Accounts payable 87,412 87,039 Accrued expenses and other current liabilities 124,994 116,029 Total current liabilities 215,240 215,909 Long-term debt 326,030 413,989 Deferred income taxes 40,005 40,213 Other liabilities 5,391 10,872 Total liabilities 586,666 680,983 Commitments and contingencies Stockholders' equity: Common stock, $0.008 par; authorized 175,000 shares; issued and outstanding 66,735 shares at March 31, 2004 and 66,620 shares at September 30, 2003 534 533 Capital in excess of par 132,900 130,208 Retained earnings 434,355 369,453 567,789 500,194 Accumulated other comprehensive income 41,563 14,605 Total stockholders' equity 609,352 514,799 Total liabilities and stockholders' equity $1,196,018 $1,195,782 NBTY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands) For the six months ended March 31, 2004 2003 Cash flows from operating activities: Net income 64,902 36,234 Adjustments to reconcile net income to net cash provided by operating activities: Loss/(Gain) on sale/disposal of property, plant and equipment 492 (962) Depreciation and amortization 31,258 21,752 Foreign currency exchange rate gain (240) (906) Amortization of deferred financing costs 1,812 394 Amortization of bond discount 62 62 Allowance for doubtful accounts 977 98 Compensation expense for ESOP 2,473 855 Tax benefit from exercise of stock options 132 113 Changes in assets and liabilities: Accounts receivable (12,417) (4,436) Inventories 9,905 (6,877) Prepaid expenses and other current assets 16,444 (7,251) Other assets 367 59 Accounts payable (3,597) 7,426 Accrued expenses and other liabilities 1,286 120 Net cash provided by operating activities 113,856 46,681 Cash flows from investing activities: Purchase of property, plant -and equipment (21,916) (17,686) Proceeds from sale of property, plant, and equipment 83 1,293 Proceeds from sale of investment in bonds 4,158 -- Cash paid for acquisitions, net of cash acquired -- (14,786) Release of cash held in escrow -- 2,403 Net cash used in investing activities (17,675) (28,776) Cash flows from financing activities: Principal payments under long-term debt agreements and capital leases (98,027) (11,616) Payments for debt issuance costs (500) -- Proceeds from stock options exercised 88 176 Net cash used in financing activities (98,439) (11,440) Effect of exchange rate changes on cash and cash equivalents 7,618 1,080 Net increase in cash and cash equivalents 5,360 7,545 Cash and cash equivalents at beginning of period 49,349 26,229 Cash and cash equivalents at end of period 54,709 33,774 Supplemental disclosure of cash flow information: Cash paid during the period for interest $11,798 $8,218 Cash paid during the period for income taxes $16,780 $15,480 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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