NBTY Reports Record First Quarter Results

Jan 28, 2010, 07:00 ET from NBTY, Inc.

RONKONKOMA, N.Y., Jan. 28 /PRNewswire-FirstCall/ -- NBTY, Inc. (NYSE: NTY) (www.NBTY.com), a leading global manufacturer and marketer of nutritional supplements, today announced record results for the fiscal first quarter ended December 31, 2009.

For the fiscal first quarter ended December 31, 2009, net sales were a record $751 million compared to $661 million for the fiscal first quarter ended December 31, 2008, an increase of $91 million or 14%.

Net income for the fiscal first quarter ended December 31, 2009 was $76 million, or $1.18 per diluted share, compared to net income of $13 million, or $0.21 per diluted share, for the prior comparable quarter.  Included in the fiscal first quarter ended December 31, 2008 was a pre-tax charge of $8.6 million, or $0.09 per diluted share, for information technology project termination costs.

Net income for this fiscal first quarter of 2010 reflects greater sales and improved supply chain management, both of which contributed to higher gross profits in all divisions.  The overall gross profit percentage increased 4% to 45%.  Selling, general & administrative costs decreased to 25% of sales for the fiscal first quarter of 2010 as a result of cost containment initiatives, and advertising costs decreased to 4% of sales for this period.  These improvements in efficiency resulted in a $10 million decrease in SG&A and advertising costs compared with the prior like quarter.  With a $91 million increase in sales, income from operations increased $86 million.  The Company also benefited in part from the strengthening of the British Pound Sterling, which resulted in the reduction of foreign exchange losses reported in the caption Miscellaneous net in the prior like quarter.

Adjusted EBITDA for the fiscal first quarter of 2010 was a record $148 million, compared to $53 million for the fiscal first quarter of 2009.  The Company's balance sheet continues to be strong and well capitalized.  At December 31, 2009, working capital was $756 million, total assets were $2 billion, and $325 million remained undrawn under the Company's Revolving Credit Facility.

OPERATIONS FOR THE FISCAL FIRST QUARTER ENDED DECEMBER 31, 2009

Net sales for the Wholesale/US Nutrition division, which markets various brands including Nature's Bounty, Osteo Bi-Flex, Rexall, Sundown,  Ester-C, Solgar, and private label products, increased $64 million, or 16%, to $471 million.  Private label sales were $198 million, or 42% of total wholesale sales.

The Nielsen Company tracks industry-wide sales of vitamins, minerals, herbs and other supplements in the food, drug and mass market sectors.  For the thirteen week period ended January 2, 2010, Nielsen reported an increase in the entire category of 14%.  According to Nielsen, for that same period, the Company's Wholesale brands reported a 16% increase.

The Wholesale/US Nutrition division utilizes valuable consumer preference sales data generated by the Company's Vitamin World retail stores and Puritan's Pride Direct Response/E-Commerce operations to empower its wholesale customers with this latest data.  The Vitamin World stores are used as a laboratory for new ideas and are an effective tool in determining and monitoring consumer preferences.  This information, as well as scanned sales data from the Vitamin World stores, is shared on a real time basis with our wholesale customers to give them a competitive advantage.

Net sales for the North American Retail division, comprised of Vitamin World Stores in the United States and LeNaturiste stores in Canada, were $51 million, a 6% increase from the prior like quarter.   The division's same store sales were up 5% for the fiscal first quarter of 2010 as the modernization of the Vitamin World stores had a favorable impact on its operations.  

During the fiscal first quarter of 2010, the North American Retail division opened six new stores.  At the end of the fiscal first quarter of 2010, the North American Retail division operated a total of 534 stores, consisting of 448 Vitamin World stores in the United States and 86 LeNaturiste stores in Canada.

European Retail net sales for the fiscal first quarter ended December 31, 2009 were $176 million, a 13% increase compared to $156 million for the prior like quarter.  In local currency, (British Pound Sterling), European Retail net sales increased 8% and same store sales increased 6%.

The Company is integrating the Julian Graves operations into our European Retail Division.  This process will include converting a number of Julian Graves stores into Holland & Barrett stores and eliminating redundant activities.  The Company should begin to see the benefits from this integration by the fiscal fourth quarter 2010.

The European Retail division continues to leverage its premier status, high street locations and brand awareness to maintain market share in a difficult retail environment. The European Retail division consists of 543 Holland & Barrett stores, 351 Julian Graves stores and 32 GNC stores in the UK, 25 Nature's Way stores in Ireland, and 82 DeTuinen stores in the Netherlands, for a total of 1,033 stores in Europe and 14 Holland & Barrett franchised stores in South Africa, Singapore and Malta.  As part of Holland & Barrett's global expansion, additional franchise locations are expected during fiscal 2010.

Net sales from Direct Response/E-Commerce operations for the fiscal first quarter of 2010 increased $3 million, or 7% to $53 million from $49 million for the fiscal first quarter of 2009.  As this division varies its promotional strategy throughout the fiscal year, its results should be viewed on an annual and not quarterly basis.  Puritan's Pride is the leader in the Direct Response and E-Commerce sectors and continues to increase the number of products available via its catalog and web sites.  Average order size increased to $79 compared with $75 for the prior like quarter.

NBTY Chairman and CEO, Scott Rudolph, said: "We are pleased to report record results for the quarter.  Our significant increase in revenue and profitability reflect NBTY's on-going initiatives to improve operations, control costs and expand our premiere position as the leading nutritional supplement company.  Our growing financial strength continues to play a vital role in generating future growth and shareholder value."

ABOUT NBTY

NBTY is a leading global vertically integrated manufacturer, marketer and distributor of a broad line of high-quality, value-priced nutritional supplements in the United States and throughout the world. Under a number of NBTY and third party brands, the Company offers over 25,000 products, including products marketed by the Company's Nature's Bounty® (www.NaturesBounty.com), Vitamin World® (www.VitaminWorld.com), Puritan's Pride® (www.Puritan.com), Holland & Barrett® (www.HollandAndBarrett.com), Rexall® (www.Rexall.com), Sundown® (www.SundownNutrition.com), MET-Rx® (www.MetRX.com), Worldwide Sport Nutrition® (www.SportNutrition.com), American Health® (www.AmericanHealthUS.com), GNC (UK)® (www.GNC.co.uk), DeTuinen® (www.DeTuinen.nl), LeNaturiste™ (www.LeNaturiste.com), SISU® (www.SISU.com), Solgar® (www.Solgar.com), Good 'n' Natural® (www.goodnnatural.com), Home Health™ (www.homehealthus.com), Julian Graves, and Ester-C® (www.Ester-C.com) brands.  NBTY routinely posts information that may be important to investors on its web site.

This release refers to non-GAAP financial measures, such as Adjusted EBITDA.  "Adjusted EBITDA" is defined as net income, excluding the aggregate amount of all non-cash losses reducing net income, plus 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 Adjusted EBITDA is relevant and useful because Adjusted EBITDA is a measurement industry analysts utilize when evaluating NBTY's operating performance.  Management also believes Adjusted 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.  These forward-looking statements can be identified by the use of terminology such as "subject to," "believe," "expects," "plan," "project," "estimate," "intend," "may," "will," "should," "can," or "anticipates," or the negative thereof, or variations thereon, or comparable terminology, or by discussions of strategy.   Although all of these forward looking statements are believed to be reasonable, they 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 God, 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 and intellectual property 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) the 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 strategies; (xxiii) fluctuations in foreign currencies, including the British pound, the Euro and the Canadian dollar; (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 and manufacturing locations; (xxvi) introduction of and compliance with 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 Good Manufacturing Practices in the United States, the Food Supplements Directive and Traditional Herbal Medicinal Products Directive in Europe and Section 404 requirements of the Sarbanes-Oxley Act of 2002; (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 energy prices and potentially reduced traffic flow to NBTY's retail locations; (xxxi) adverse tax determinations; (xxxii) the loss of a significant customer of the Company; (xxxiii) potential investment losses as a result of liquidity conditions; and (xxxiv) other factors beyond the Company'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.

Consequently, such forward-looking statements should be regarded solely as NBTY's current plans, estimates and beliefs.

NBTY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(In thousands, except per share amounts)

Three months

ended December 31,

2009

2008

Net sales

$         751,151 

$      660,552 

Costs and expenses:

  Cost of sales

411,448 

388,503 

  Advertising, promotion and catalog

28,742 

31,291 

  Selling, general and administrative

188,731 

195,901 

  IT project termination costs

8,647 

628,921 

624,342 

Income from operations

122,230 

36,210 

Other income (expense):

    Interest

(8,056)

(9,489)

    Miscellaneous, net

1,755 

(5,633)

(6,301)

(15,122)

Income before provision for income taxes

115,929 

21,088 

Provision for income taxes

40,343 

7,613 

Net income

$          75,586 

$        13,475 

Net income per share:

  Basic

$1.21 

$0.22 

  Diluted

$1.18 

$0.21 

Weighted average common shares outstanding:

  Basic

62,408 

61,600 

  Diluted

63,885 

63,114 

NET SALES

(Unaudited)

THREE MONTHS ENDED

DECEMBER 31,

Percentage

(In thousands)

2009

2008

Change

Wholesale / US Nutrition

$       471,114

$         406,966

16%

North American Retail

           51,458

             48,438

6%

European Retail

         175,995

           156,026

13%

Direct Response / E-Commerce

           52,584

             49,122

7%

Total

$       751,151

$         660,552

14%

GROSS PROFIT

PERCENTAGES

(Unaudited)

THREE MONTHS ENDED

DECEMBER 31,

Increase

2009

2008

- Decrease

Wholesale / US Nutrition

34%

28%

6%

North American Retail

68%

67%

1%

European Retail

62%

63%

-1%

Direct Response / E-Commerce

63%

59%

4%

Total

45%

41%

4%

ADJUSTED EBITDA**

Reconciliation of GAAP Measures to Non-GAAP Measures

(Unaudited)

(In thousands)

THREE MONTHS ENDED

DECEMBER 31, 2009

Pretax Income

(Loss)

Depreciation and

amortization

Interest

Non-cash

charges

Adjusted

EBITDA**

Wholesale / US Nutrition

$     86,238 

$          3,672 

$             - 

$     5,578 

$     95,488 

North American Retail

2,072 

709 

49 

2,830 

European Retail

34,644 

3,626 

119 

38,389 

Direct Response / E-Commerce

16,388 

1,206 

15 

17,609 

Segment Results

139,342 

9,213 

5,761 

154,316 

Corporate / Manufacturing

(23,413)

7,734 

8,056 

1,183 

(6,440)

Total

$  115,929 

$        16,947 

$     8,056 

$     6,944 

$   147,876 

THREE MONTHS ENDED

DECEMBER 31, 2008

Pretax Income

(Loss)

Depreciation and

amortization

Interest

Non-cash

charges

Adjusted

EBITDA**

Wholesale / US Nutrition

$      30,017 

$         3,724 

$            - 

$        47 

$     33,788 

North American Retail

(1,155)

752 

24 

(379)

European Retail

26,171 

3,561 

52 

29,784 

Direct Response / E-Commerce

709 

1,265 

4,685 

6,659 

Segment Results

55,742

9,302 

4,808 

       69,852

Corporate / Manufacturing

(34,654)

8,219 

9,489 

562 

(16,384)

Total

$      21,088 

$       17,521 

$    9,489 

$   5,370 

$     53,468 

**   SINCE ADJUSTED EBITDA IS NOT A MEASURE OF PERFORMANCE CALCULATED IN ACCORDANCE WITH U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP"), IT SHOULD NOT BE CONSIDERED IN ISOLATION OF, OR AS A SUBSTITUTE FOR OR SUPERIOR TO, OTHER MEASURES OF FINANCIAL PERFORMANCE PREPARED IN ACCORDANCE WITH GAAP, SUCH AS OPERATING INCOME, NET INCOME AND CASH FLOWS FROM OPERATING ACTIVITIES.  IN ADDITION, ADJUSTED EBITDA IS AS DEFINED BY THE COMPANY'S CREDIT AGREEMENT AND IS NOT NECESSARILY COMPARABLE TO SIMILARLY TITLED MEASURES REPORTED BY OTHER COMPANIES.  

NBTY, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except per share amounts)

December 31,

September 30,

         2009

         2009

Assets

Current assets:

  Cash and cash equivalents

$         158,706 

$         106,001 

  Accounts receivable, net

187,593 

155,863 

  Inventories

655,448 

658,534 

  Deferred income taxes

28,221 

28,154 

  Other current assets

62,978 

49,999 

         Total current assets

1,092,946 

998,551 

Property, plant and equipment, net

367,365 

373,817 

Goodwill

339,937 

339,099 

Other intangible assets, net

210,285 

214,139 

Other assets

20,852 

34,615 

    Total assets

$     2,031,385 

$     1,960,221 

Liabilities and stockholders' Equity

Current liabilities:

  Current portion of long-term debt

$          61,227 

$          38,893 

  Accounts payable

96,206 

128,485 

  Accrued expenses and other current liabilities

179,165 

156,734 

     Total current liabilities

336,598 

324,112 

Long-term debt, net of current portion

404,479 

437,629 

Deferred income taxes

40,676 

36,422 

Other liabilities

30,753 

34,233 

     Total liabilities

812,506 

832,396 

Commitments and contingencies

Stockholders' equity:

Common stock, $0.008 par; authorized 175,000

  shares issued and outstanding 63,209 and

  61,874 shares at December 31, 2009  and September 30, 2009, respectively

506 

495 

  Capital in excess of par

159,378 

145,885 

  Retained earnings

1,060,383 

984,797 

  Accumulated other comprehensive income

(1,388)

(3,352)

       Total stockholders' equity

1,218,879 

1,127,825 

 Total liabilities and stockholders' equity

$     2,031,385 

$     1,960,221 

NBTY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

Three months

ended December 31,

2009

2008

Cash flows from operating activities:

Net income

$     75,586 

$    13,475 

Adjustments to reconcile net income to cash provided by

 operating activities:

   Impairments and disposals of assets

5,591 

5,154 

   Depreciation and amortization

16,947 

17,521 

   Foreign currency transaction loss

115 

5,886 

   Stock-based compensation

1,420 

702 

   Amortization of deferred charges

392 

316 

   Allowance for doubtful accounts

(115)

1,361 

   Inventory reserves

2,174 

1,737 

   Deferred income taxes

773 

152 

   Excess income tax benefit from exercise of stock options

(4,240)

   Changes in operating assets and liabilities:

     Accounts receivable

(31,989)

(27,740)

     Inventories

2,036 

(44,047)

     Other assets

1,523 

4,698 

     Accounts payable

(32,864)

24,613 

     Accrued expenses and other liabilities

22,666 

2,884 

       Net cash provided by operating activities

60,015 

6,712 

Cash flows from investing activities:

 Purchase of property, plant and equipment

(9,883)

(22,639)

 Cash paid for acquisitions

(87)

(264)

 Proceeds from sale of investments

1,650 

 Escrow refund, net of purchase price adjustments

12,219 

       Net cash used in investing activities

(8,320)

(10,684)

Cash flows from financing activities:

 Principal payments under long-term debt agreements and capital leases

(10,968)

(8,497)

 Proceeds from borrowings under the Revolving Credit Facility

35,000 

 Principal payments under the Revolving Credit Facility

(60,000)

 Excess income tax benefit from exercise of stock options

4,240 

 Proceeds from stock options exercised

7,843 

      Net cash provided by (used in) financing activities

1,115 

(33,491)

Effect of exchange rate changes on cash and cash equivalents

(105)

(19)

Net increase (decrease) in cash and cash equivalents

52,705 

(37,482)

Cash and cash equivalents at beginning of period

106,001 

90,180 

Cash and cash equivalents at end of period

$   158,706 

$    52,698 

Contact: Harvey Kamil

Carl Hymans

NBTY, Inc.

G.S. Schwartz & Co.

President and Chief Financial Officer

212-725-4500

631-200-2020

carlh@schwartz.com

SOURCE NBTY, Inc.



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