NTY Nbty Inc.

BOHEMIA, N.Y., April 27 /PRNewswire-FirstCall/ -- NBTY, Inc. (NYSE:NTY) (http://www.nbty.com/), a leading global manufacturer and marketer of nutritional supplements, today announced results for the fiscal second quarter ended March 31, 2006. For the fiscal second quarter ended March 31, 2006, net sales increased $39 million, or 9%, to $482 million compared to net sales of $443 million for the fiscal second quarter ended March 31, 2005. This $39 million increase includes $32 million in net sales from NBTY's recent acquisitions: $26 million from Solgar, $3 million from LeNaturiste and $3 million from SISU. Net income for the fiscal second quarter ended March 31, 2006 was $21 million, or $0.31 per diluted share, including non-cash charges of $0.12 per diluted share, compared to $21 million, or $0.30 per diluted share, for the fiscal second quarter ended March 31, 2005. The effective tax rate for this fiscal second quarter was 29%, compared to 34% in the prior like period. Without these non-cash charges, earnings per diluted share for the second fiscal quarter of 2006 would have been $0.43. The non-cash charges consist primarily of a pre-tax $10 million Carb Solutions trademark impairment charge and other charges relating to closing certain Solgar international operations. The Company discontinued the majority of Carb Solutions' low carb business acquired as part of the acquisition of Rexall Sundown in 2003. Accordingly, the Company wrote off the carrying value of the Carb Solutions trademark. In addition, Solgar's operations in Australia, Canada and Mexico were unprofitable and were therefore closed. For the six months ended March 31, 2006, net sales increased 9% to $937 million, compared to net sales of $863 million for the prior like period. Net income for the six months ended March 31, 2006 was $44 million, or $0.64 per diluted share, including non-cash charges of $0.15 per diluted share, compared to $51 million, or $0.73 per diluted share, in the comparable prior period. Net income results for the six months ended March 31, 2006 included pre-tax non-cash charges of $14 million, representing the trademark impairment charge, charges for closing certain Solgar International entities and certain North American Retail impairment charges. Without these non-cash charges, earnings for the six months ended March 31, 2006 would have been $0.79 per diluted share. At March 31, 2006, NBTY's total assets were $1.3 billion, including $396 million in inventory. Inventory decreased $38 million for the fiscal second quarter of 2006 and $96 million for the six months ended March 31, 2006. These decreases reflect the Company's successful initiatives to lower inventories while continuing to assure uninterrupted product supply to its customers. NBTY's strong financial position allowed the Company to accelerate repayment of $130 million of term loan debt in the first six months of fiscal 2006 and an additional $18 million in April 2006. The Company continues to deleverage, with long term debt of $269 million in April 2006. The Company anticipates additional accelerated reduction of debt. OPERATIONS FOR THE FISCAL SECOND QUARTER ENDED MARCH 31, 2006 Sales for the Wholesale/US Nutrition division, which markets Nature's Bounty, Sundown, Solgar and SISU brands, increased approximately $33 million, or 18%, to $216 million from $183 million for the prior like quarter. NBTY's recent acquisitions accounted for $29 million of this increase in sales. Product returns for the fiscal second quarter were $3 million, significantly lower than the return levels experienced in the previous eight quarters. The Company expects normalized return rates of approximately $20 million per year for the Wholesale/US Nutrition division. Gross margins for the wholesale operation were affected by promotional incentives offered to customers and competitive pricing in the joint care category. US Nutrition continues to utilize 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 information. The Vitamin World stores are used as a laboratory for new ideas and have become an effective tool in determining and monitoring consumer preferences. This information, as well as scanned sales data from the Vitamin World stores, is shared with wholesale customers. The North American Retail division's sales increased $6 million, or 10%, to $62 million from $56 million. Same store sales for Vitamin World increased 10% from the prior like quarter. Vitamin World's adjusted EBITDA was $3 million compared to a negative $3 million for the fiscal second quarter of 2005. During the fiscal second quarter of 2006, Vitamin World closed 17 under-performing stores. Vitamin World has closed a total of 40 stores in the six months ended March 31, 2006 and anticipates closing an additional 30 stores by the end of fiscal 2006 as these stores come up for lease renewal. The Company does not anticipate any significant charges with respect to these store closures. At the end of the fiscal second quarter, the North American Retail division operated a total of 607 stores, with 507 in the US and 100 in Canada. European Retail sales for the fiscal second quarter ended March 31, 2006 decreased 3% to $143 million from $147 million for the fiscal second quarter ended March 31, 2005 because the British Pound Sterling decreased in value. In local currency, same store sales for this segment increased 7% from the prior like period. The European Retail business continues to leverage its premier status, high street locations and brand awareness to achieve these results. The European Retail business is comprised of 495 Holland & Barrett and 33 GNC stores in the UK, 16 Nature's Way stores in Ireland, and 68 DeTuinen stores in the Netherlands. GNC and DeTuinen stores continued to be profitable in this fiscal second quarter. During the fiscal second quarter ended March 31, 2006, the European Retail division opened 2 stores and operated a total of 612 stores. Revenues from Direct Response/Puritan's Pride operations for the fiscal second quarter of 2006 increased 7% to $61 million from $57 million for the comparable prior period. The average order size increased to $88 from $76. Online sales now constitute 33% of total Direct Response/E-Commerce sales. NBTY remains the leader in the direct response and e-commerce sectors. NBTY Chairman and CEO, Scott Rudolph, said: "We are pleased to witness a positive turn in consumer attitudes as a result of some favorable media coverage the industry has received. We anticipate continued revenue growth and enhanced financial strength and remain confident in the long-term outlook for the Company." ABOUT NBTY NBTY is a leading 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 22,000 products, including products marketed by the Company's 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), DeTuinen(R), LeNaturiste(TM), SISU(R) and Solgar(R) brands. 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 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 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 proposed 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 gasoline 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; and (xxxiii) 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. Contact: Harvey Kamil NBTY, Inc. President and Chief Financial Officer 631-200-2020 Carl Hymans G.S. Schwartz & Co. 212-725-4500 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, 2006 2005 Net sales $481,743 $442,714 Costs and expenses: Cost of sales 251,131 226,081 Advertising, promotion and catalog 27,066 34,515 Selling, general and administrative 157,222 144,634 Trademark impairment 10,450 - 445,869 405,230 Income from operations 35,874 37,484 Other income (expense): Interest (6,958) (5,881) Miscellaneous, net 997 110 (5,961) (5,771) Income before provision for income taxes 29,913 31,713 Provision for income taxes 8,613 10,846 Net income $21,300 $20,867 Net income per share: Basic $0.32 $0.31 Diluted $0.31 $0.30 Weighted average common shares outstanding: Basic 67,195 67,290 Diluted 69,043 69,291 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, 2006 2005 Net sales $937,013 $862,983 Costs and expenses: Cost of sales 497,080 438,034 Advertising, promotion and catalog 52,226 55,298 Selling, general and administrative 302,877 283,036 Trademark impairment 10,450 - 862,633 776,368 Income from operations 74,380 86,615 Other income (expense): Interest (15,950) (11,573) Miscellaneous, net 2,146 2,101 (13,804) (9,472) Income before provision for income taxes 60,576 77,143 Provision for income taxes 16,356 26,383 Net income $44,220 $50,760 Net income per share: Basic $0.66 $0.76 Diluted $0.64 $0.73 Weighted average common shares outstanding: Basic 67,194 67,130 Diluted 69,038 69,137 SALES (Thousands) (Unaudited) THREE MONTHS ENDED SIX MONTHS ENDED MARCH 31, MARCH 31, Percentage Percentage 2006 2005 Change 2006 2005 Change Wholesale/US Nutrition $216,062 $182,556 18% $440,301 $362,174 22% North American Retail/ Vitamin World 61,681 55,975 10% 120,123 109,359 10% European Retail/ Holland & Barrett/ GNC (UK) 143,026 146,963 -3% 282,592 288,870 -2% Direct Response/ Puritan's Pride 60,974 57,220 7% 93,997 102,580 -8% Total $481,743 $442,714 9% $937,013 $862,983 9% GROSS PROFIT PERCENTAGES (Unaudited) THREE MONTHS ENDED SIX MONTHS ENDED MARCH 31, MARCH 31, - %Decrease - %Decrease 2006 2005 %Increase 2006 2005 % Increase Wholesale/US Nutrition 30% 34% -4% 31% 34% -3% North American Retail/ Vitamin World 59% 53% 6% 58% 54% 4% European Retail/ Holland & Barrett/ GNC (UK) 64% 62% 2% 62% 63% -1% Direct Response/ Puritan's Pride 63% 59% 4% 61% 59% 2% Total 48% 49% -1% 47% 49% -2% Reconciliation of GAAP Measures to Non-GAAP Measures ** (Thousands) (Unaudited) THREE MONTHS ENDED MARCH 31, 2006 Pretax Depreciation Interest Non-cash Adjusted Income and charges EBITDA (Loss) amortization Wholesale/US Nutrition $1,004 $2,576 $- $11,885 $15,465 North American Retail/ Vitamin World 1,410 1,125 - 146 2,681 European Retail/ Holland & Barrett/ GNC (UK) 40,616 2,636 - - 43,252 Direct Response/ Puritan's Pride 19,806 1,281 - - 21,087 Segment Results 62,836 7,618 - 12,031 82,485 Corporate/ Manufacturing (32,923) 6,282 6,958 - (19,683) Total $29,913 $13,900 $6,958 $12,031 $62,802 THREE MONTHS ENDED MARCH 31, 2005 Pretax Depreciation Interest Non-cash Adjusted Income and charges EBITDA (Loss) amortization Wholesale/US Nutrition $12,376 $2,461 $- $- $14,837 North American Retail/ Vitamin World (4,549) 1,838 - - (2,711) European Retail/ Holland & Barrett/ GNC (UK) 40,080 3,094 - - 43,174 Direct Response/ Puritan's Pride 15,269 1,293 - - 16,562 Segment Results 63,176 8,686 - - 71,862 Corporate/ Manufacturing (31,463) 5,826 5,881 - (19,756) Total $31,713 $14,512 $5,881 $- $52,106 Reconciliation of GAAP Measures to Non-GAAP Measures ** (Thousands) (Unaudited) SIX MONTHS ENDED MARCH 31, 2006 Pretax Depreciation Interest Non-cash Adjusted Income and charges EBITDA (Loss) amortization Wholesale/US Nutrition $24,985 $5,130 $- $11,885 $42,000 North American Retail/ Vitamin World (1,982) 2,598 - 2,271 2,887 European Retail/ Holland & Barrett/ GNC (UK) 76,404 5,294 - - 81,698 Direct Response/ Puritan's Pride 26,434 2,536 - - 28,970 Segment Results 125,841 15,558 - 14,156 155,555 Corporate/ Manufacturing (65,265) 12,486 15,950 - (36,829) Total $ 60,576 $28,044 $15,950 $14,156 $118,726 SIX MONTHS ENDED MARCH 31, 2005 Pretax Depreciation Interest Non-cash Adjusted Income and charges EBITDA (Loss) amortization Wholesale/US Nutrition $36,098 $4,955 $- $- $41,053 North American Retail/ Vitamin World (7,683) 3,610 - - (4,073) European Retail/ Holland & Barrett/ GNC (UK) 80,348 6,428 - - 86,776 Direct Response/ Puritan's Pride 29,146 2,582 - - 31,728 Segment Results 137,909 17,575 - - 155,484 Corporate/ Manufacturing (60,766) 11,552 11,573 - (37,641) Total $ 77,143 $29,127 $11,573 $- $117,843 ** 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, THE COMPANY'S DEFINITION OF ADJUSTED EBITDA IS NOT NECESSARILY COMPARABLE TO SIMILARLY TITLED MEASURES REPORTED BY OTHER COMPANIES. NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) ASSETS (Dollars and shares in thousands) March 31, September 30, 2006 2005 Current assets: Cash and cash equivalents $ 62,879 $67,282 Investments - 39,900 Accounts receivable, less allowance for doubtful accounts of $10,345 and $9,155, respectively 80,064 73,226 Inventories 395,562 491,335 Deferred income taxes 23,649 23,645 Prepaid expenses and other current assets 31,454 54,469 Total current assets 593,608 749,857 Property, plant and equipment, net of accumulated depreciation of $290,308 and $279,883, respectively 314,845 320,528 Goodwill 224,077 228,747 Other intangible assets, net 150,084 166,325 Other assets 13,602 16,845 Total assets $1,296,216 $1,482,302 NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY (Dollars and shares in thousands) March 31, September 30, 2006 2005 Current liabilities: Current portion of long-term debt $ 9,897 $ 80,922 Accounts payable 67,148 72,720 Accrued expenses and other current liabilities 119,479 120,487 Total current liabilities 196,524 274,129 Long-term debt 277,052 428,204 Deferred income taxes 57,789 57,092 Other liabilities 7,245 6,822 Total liabilities 538,610 766,247 Commitments and contingencies Stockholders' equity: Common stock, $0.008 par; authorized 175,000 shares; issued and outstanding 67,204 shares at March 31, 2006 and 67,191 shares at September 30, 2005 537 537 Capital in excess of par 138,737 138,657 Retained earnings 603,495 559,275 Accumulated other comprehensive income 14,837 17,586 Total stockholders' equity 757,606 716,055 Total liabilities and stockholders' equity $1,296,216 $1,482,302 NBTY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands) For the six months ended March 31, 2006 2005 Cash flows from operating activities: Net income $44,220 $ 50,760 Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities: Provision relating to impairments and disposals of property, plant and equipment 3,933 25 Depreciation and amortization 28,044 29,127 Foreign currency transaction loss/(gain) 19 (451) Amortization and write-off of deferred financing costs 2,976 1,216 Amortization and write-off of bond discount 318 80 Gain on extinguishment of debt (425) - Compensation expense for ESOP - 1,135 Impairment on trademark 10,450 - Impairment on asset held for sale - 1,908 Gain on sale of business assets - (1,999) Provision for (recovery of) allowance for doubtful accounts 1,372 (672) Inventory reserves 3,151 1,828 Deferred income taxes 2,453 3,957 Changes in operating assets and liabilities: Accounts receivable (7,741) 19,900 Inventories 91,047 (85,296) Prepaid expenses and other current assets 19,106 16,400 Other assets 1,171 335 Accounts payable (2,782) (1,154) Accrued expenses and other liabilities 676 16,784 Net cash provided by operating activities 197,988 53,883 Cash flows from investing activities: Purchase of property, plant and equipment (21,166) (21,605) Proceeds from sale of property, plant, and equipment 77 70 Proceeds from sale of trademark - 30 Proceeds from sale of business assets - 5,766 Proceeds from sale of available-for-sale marketable securities 39,900 - Cash paid for acquisitions, net of cash acquired - (5,327) Purchase price settlements, net 1,846 - Purchase of intangible assets (228) - Net cash provided by (used in) investing activities 20,429 (21,066) NBTY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont'd.) (UNAUDITED) Cash flows from financing activities: Principal payments under long-term debt agreements (216,071) (17,977) Principal payments under the Revolving Credit Facility (6,000) - Tax benefit from exercise of stock options 15 194 Proceeds from stock options exercised 65 191 Purchase of treasury stock - (176) Net cash used in financing activities (221,991) (17,768) Effect of exchange rate changes on cash and cash equivalents (829) 1,468 Net (decrease) increase in cash and cash equivalents (4,403) 16,517 Cash and cash equivalents at beginning of period 67,282 21,751 Cash and cash equivalents at end of period $62,879 $ 38,268 DATASOURCE: NBTY, Inc. CONTACT: Harvey Kamil, President and Chief Financial Officer of NBTY, Inc., +1-631-200-2020; or Carl Hymans of G.S. Schwartz & Co., +1-212-725-4500, , for NBTY, Inc. Web site: http://www.nbty.com/

Copyright