RONKONKOMA, N.Y., Jan. 28 /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 first quarter ended December 31, 2008. For the
fiscal first quarter ended December 31, 2008, net sales were $661
million compared to $511 million for the fiscal first quarter ended
December 31, 2007, an increase of $150 million or 29%. Included in
this total are net sales from Leiner Health Products of $131
million and $35 million in net sales from Julian Graves, two
acquisitions completed in the fiscal fourth quarter of 2008. Net
income for the fiscal first quarter ended December 31, 2008 was
$13.5 million, or $0.21 per diluted share, compared to $46 million,
or $0.67 per diluted share, for the fiscal first quarter ended
December 31, 2007. The decline in net income reflects lower gross
profit margins due to higher raw material costs which were not
offset by higher prices charged to customers, weakness in foreign
exchange rates and the costs associated with the write off and
termination of Direct Response information technology programs
which were ineffective and uneconomical. Overall gross profit
margins for the fiscal first quarter of 2009 decreased to 41% from
53% for the fiscal first quarter of 2008. As previously discussed,
a portion of this decrease was anticipated due to lower gross
margins on Leiner private label business. Additional cost pressures
occurred at the time of the Leiner acquisition in July 2008, when
Leiner inventory levels were not adequate to maintain customer
fulfillment levels. At the same time, certain raw material costs
were increasing due to tight supply and inflationary pressures. In
order to maintain customer fulfillment levels, the Company was
forced to purchase products at these higher costs. The Company made
a conscious decision not to pass along these costs to customers
until acceptable fulfillment levels were reached. The Company has
attained acceptable fulfillment levels. The decline in both the
British pound sterling and the Canadian dollar also negatively
impacted this fiscal first quarter net income. The British pound
sterling declined 23% and the Canadian dollar declined 19% compared
to the prior like quarter. Without these fluctuations in exchange
rates, earnings per diluted share would have been $0.15 higher for
this fiscal first quarter of 2009. As a result of the replacement
of operating management in the Direct Response/E-Commerce division,
it was determined that newly purchased and partially installed
Internet and computer programs were ineffective in generating new
customers and were discontinued. Accordingly, the Company recorded
an $8.6 million pre-tax charge, or $0.09 per diluted share. The
Company's balance sheet continues to be strong and well
capitalized. At December 31, 2008, working capital was $539
million, total assets were $1.9 billion and $290 million remained
undrawn under the Company's $325 million Revolving Credit Facility.
Adjusted EBITDA for the fiscal first quarter of 2009 was $53
million, compared to $87 million for the fiscal first quarter of
2008. OPERATIONS FOR THE FISCAL FIRST QUARTER ENDED DECEMBER 31,
2008 Net sales for the Wholesale/US Nutrition division, which
markets various brands including Nature's Bounty, Osteo Bi-Flex,
Rexall, Ester-C and Leiner products, increased $148 million, or
57%, to $407 million from $259 million for the prior like quarter.
Leiner contributed $131 million in net sales for the fiscal first
quarter, without which, net sales for this division would have
increased 7%. In the fiscal first quarter, the Company incurred
approximately $5 million of Leiner non-manufacturing payroll costs,
in addition to certain other integration costs. The Company expects
these payroll costs as well as other integration costs to be
eliminated by July 2009. Gross profit for the Wholesale operation
decreased to 28% from 44% for the prior like quarter. Operating
results were adversely affected by higher raw material costs which
were not offset by higher prices charged to customers. While the
gross profit percentage decreased during this period, the Company
continued to increase its market share. 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 December 27, 2008, Nielsen reported an
increase in the entire category of 8%. According to Nielsen, for
that same period, the Company's Wholesale brands reported a 13%
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, decreased $8 million, or 14% to $48 million for the fiscal
first quarter ended December 31, 2008 compared with $56 million for
the prior like quarter. These results reflect the difficult retail
environment in the US and Canada. Same store sales for North
American Retail decreased 11% for the fiscal first quarter of 2009.
Vitamin World was profitable for the fiscal first quarter of 2009
while LeNaturiste operated at a loss. During fiscal 2009
LeNaturiste will focus on increasing gross margins by utilizing
more in-house manufactured products and more targeted promotions.
During the fiscal first quarter of 2009, the North American Retail
division closed 1 Vitamin World store and added 10 new stores. At
the end of the fiscal first quarter of 2009, the North American
Retail division operated a total of 531 stores, consisting of 447
Vitamin World stores in the United States and 84 LeNaturiste stores
in Canada. European Retail net sales for the fiscal first quarter
ended December 31, 2008 decreased $3 million, or 2% to $156 million
compared to $159 million for the prior like quarter. Julian Graves
contributed sales of $35 million, without which, net sales would
have decreased 24%. As previously announced, the Julian Graves
acquisition continues to be the subject of an inquiry from the UK
Office of Fair Trading for potential anti-trust implications. In
conjunction with this inquiry, Julian Graves has not been
integrated with the Company's European operations. European Retail
division same store sales in local currency decreased 3% from the
prior like period. The European Retail division continues to
leverage its premier status, high street locations and brand
awareness in a difficult retail environment. The European Retail
division consists of 529 Holland & Barrett stores, 346 Julian
Graves stores and 31 GNC stores in the UK, 21 Nature's Way stores
in Ireland, and 71 DeTuinen stores in the Netherlands for a total
of 998 stores in Europe. During the fiscal first quarter of 2009
the European Retail division opened 3 Holland & Barrett stores
and 2 Nature's Way stores. In addition, 4 Holland & Barrett
franchise stores were opened in South Africa during this period.
Net sales from Direct Response/E-Commerce operations for the fiscal
first quarter of 2009 increased $12 million, or 32% to $49 million
from $37 million for the fiscal first quarter of 2008. As this
division varies its promotional strategy throughout the fiscal
year, its results should be viewed on an annual and not quarterly
basis. Online sales represented 47% of total Direct
Response/E-Commerce sales for this fiscal first quarter of 2009
compared to 40% in the prior like quarter. This increase reflects
on-going efforts to garner greater online consumer sales and to
capitalize on the continuing surge in shopping via the web.
Puritan's Pride views the Internet as the driver of future growth.
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. NBTY Chairman and CEO, Scott
Rudolph, said: "We experienced an exceptionally difficult quarter
in which profitability was impacted by inflationary pressures,
foreign exchange declines and the IT write off. We are committed to
expanding our position as the global leader in the nutritional
supplement industry, garnering greater market share and generating
long-term growth, while remaining committed to putting our
customers first." 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(R)
(http://www.naturesbounty.com/), Vitamin World(R)
(http://www.vitaminworld.com/), Puritan's Pride(R)
(http://www.puritan.com/), Holland & Barrett(R)
(http://www.hollandandbarrett.com/), Rexall(R)
(http://www.rexall.com/), Sundown(R)
(http://www.sundownnutrition.com/), MET-Rx(R)
(http://www.metrx.com/), Worldwide Sport Nutrition(R)
(http://www.sportnutrition.com/), American Health(R)
(http://www.americanhealthus.com/), GNC (UK)(R)
(http://www.gnc.co.uk/), DeTuinen(R) (http://www.detuinen.nl/),
LeNaturiste(TM) (http://www.lenaturiste.com/), SISU(R)
(http://www.sisu.com/), Solgar(R) (http://www.solgar.com/), Good
'n' Natural(R) (http://www.goodnnatural.com/), Home Health(TM)
(http://www.homehealthus.com/), Julian Graves, and Ester-C(R)
(http://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.
Contact: Harvey Kamil Carl Hymans NBTY, Inc. G.S. Schwartz &
Co. President and Chief Financial Officer 212-725-4500 631-200-2020
(TABLES FOLLOW) NBTY, INC. CONDENSED CONSOLIDATED STATEMENTS OF
INCOME (UNAUDITED) (In thousands, except per share amounts) Three
months ended December 31, 2008 2007 Net sales $660,552 $510,858
Costs and expenses: Cost of sales 388,503 240,331 Advertising,
promotion and catalog 31,291 34,169 Selling, general and
administrative 195,901 168,123 IT project termination costs 8,647 -
624,342 442,623 Income from operations 36,210 68,235 Other income
(expense): Interest (9,489) (3,862) Miscellaneous, net (5,633)
4,887 (15,122) 1,025 Income before provision for income taxes
21,088 69,260 Provision for income taxes 7,613 23,438 Net income
$13,475 $45,822 Net income per share: Basic $0.22 $0.68 Diluted
$0.21 $0.67 Weighted average common shares outstanding: Basic
61,600 66,903 Diluted 63,114 68,786 NET SALES (Unaudited) THREE
MONTHS ENDED DECEMBER 31, Percentage (In thousands) 2008 2007
Change Wholesale / US Nutrition $406,966 $258,935 57% North
American Retail 48,438 56,182 -14% European Retail 156,026 158,597
-2% Direct Response / E-Commerce 49,122 37,144 32% Total $660,552
$510,858 29% GROSS PROFIT PERCENTAGES (Unaudited) THREE MONTHS
ENDED DECEMBER 31, Increase 2008 2007 - Decrease Wholesale / US
Nutrition 28% 44% -16% North American Retail 67% 59% 8% European
Retail 63% 63% 0% Direct Response / E-Commerce 59% 63% -4% Total
41% 53% -12% ADJUSTED EBITDA** Reconciliation of GAAP Measures to
Non-GAAP Measures (Unaudited) (In thousands) THREE MONTHS ENDED
DECEMBER 31, 2008 Depreciation Pretax and Non-cash Adjusted Income
(Loss) amortization Interest charges EBITDA** Wholesale / US
Nutrition $42,014 $3,724 $- $47 $45,785 North American Retail 247
752 - 24 1,023 European Retail 26,171 3,561 - 52 29,784 Direct
Response / E-Commerce 2,204 1,265 - 4,685 8,154 Segment Results
70,636 9,302 - 4,808 84,746 Corporate / Manufacturing (49,548)
8,219 9,489 562 (31,278) Total $21,088 $17,521 $9,489 $5,370
$53,468 THREE MONTHS ENDED DECEMBER 31, 2007 Depreciation Pretax
and Non-cash Adjusted Income (Loss) amortization Interest charges
EBITDA** Wholesale / US Nutrition $53,981 $2,694 $- $- $56,675
North American Retail (864) 850 - 350 336 European Retail 35,067
3,063 - - 38,130 Direct Response / E-Commerce 7,123 1,366 - - 8,489
Segment Results 95,307 7,973 - 350 103,630 Corporate /
Manufacturing (26,047) 5,959 3,862 - (16,226) Total $69,260 $13,932
$3,862 $350 $87,404 ** 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. Condensed Consolidated
Balance Sheets (Unaudited) (In thousands, except per share amounts)
December 31, September 30, 2008 2008 Current assets: Cash and cash
equivalents $ 52,698 $90,180 Accounts receivable, net 139,856
122,878 Inventories 608,354 585,239 Deferred income taxes 25,355
25,098 Other current assets 49,692 75,971 Total current assets
875,955 899,366 Property, plant and equipment, net 399,428 419,066
Goodwill 324,064 342,379 Intangible assets, net 222,502 230,424
Other assets 38,390 45,123 Total assets $1,860,339 $1,936,358
Current liabilities: Current portion of long-term debt $32,575
$33,309 Accounts payable 134,981 120,620 Accrued expenses and other
current liabilities 169,085 172,035 Total current liabilities
336,641 325,964 Long-term debt, net of current portion 501,960
538,402 Deferred income taxes 32,631 49,139 Other liabilities
32,632 24,657 Total liabilities 903,864 938,162 Commitments and
contingencies Stockholders' equity: Common stock, $0.008 par;
authorized 175,000 shares; issued and outstanding 61,600 shares at
December 31, 2008 and 61,599 at September 30, 2008, respectively
493 493 Capital in excess of par 141,698 140,990 Retained earnings
852,543 839,068 Accumulated other comprehensive (loss) Income
(38,259) 17,645 Total stockholders' equity 956,475 998,196 Total
liabilities and stockholders' equity $1,860,339 $1,936,358 NBTY,
INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands) For the Three Months ended December 31, 2008 2007
Cash flows from operating activities: Net income $13,475 $45,822
Adjustments to reconcile net income to cash provided by operating
activities: Impairments and disposals of property, plant and
equipment 487 462 Depreciation and amortization 17,521 13,932 IT
write-off costs 4,667 - Foreign currency transaction loss (gain)
5,886 (1,299) Stock-based compensation 702 - Amortization and
write-off of deferred charges 316 186 Allowance for doubtful
accounts 1,361 (229) Inventory reserves 1,737 1,061 Deferred income
taxes 152 449 Excess income tax benefit from exercise of stock
options - (88) Changes in operating assets and liabilities, net of
acquisitions: Accounts receivable (27,740) (11,789) Inventories
(44,047) (7,784) Other assets 4,698 785 Accounts payable 24,613 687
Accrued expenses and other liabilities 2,884 7,842 Net cash
provided by operating activities 6,712 50,037 Cash flows from
investing activities: Purchase of property, plant and equipment
(22,639) (9,814) Purchase of available-for-sale investments -
(55,148) Proceeds from sale of available-for-sale investments -
39,272 Cash paid for acquisitions, net of cash acquired (264)
(5,072) Escrow refund, net of purchase price adjustments 12,219 -
Net cash used in investing activities (10,684) (30,762) Cash flows
from financing activities: Principal payments under long-term debt
agreements and capital leases (8,497) (239) 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 - 88 Proceeds
from stock options exercised 6 - Purchase of treasury stock
(subsequently retired) - (10,603) Net cash used in financing
activities (33,491) (10,754) Effect of exchange rate changes on
cash and cash equivalents (19) (2,482) Net (decrease) increase in
cash and cash equivalents (37,482) 6,039 Cash and cash equivalents
at beginning of period 90,180 92,902 Cash and cash equivalents at
end of period $52,698 $98,941 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., for
NBTY, Inc., +1-212-725-4500, Web Site: http://www.nbty.com/
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