NBTY (NTY) 10-Q 2010 Q2 Quarterly report

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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 2010
Or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from                             to

Commission File Number: 001-31788

NBTY, Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization) 11-2228617
(I.R.S. Employer
Identification No.)

2100 Smithtown Avenue,
Ronkonkoma, New York 11779
(Address of principal executive offices) (Zip Code)

(631) 567-9500
(Registrant's telephone number, including area code)

        Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ý    NO o

        Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES o    NO o

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý Accelerated filer o Non-accelerated filer o
(Do not check if a
smaller reporting company) Smaller reporting company o

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o    NO ý

        The number of shares of Common Stock (par value $.008 per share) outstanding as of April 30, 2010 was 63,409,288.

NBTY, INC.
INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)		3
	Condensed Consolidated Balance Sheets		3
	Condensed Consolidated Statements of Income		4
	Condensed Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss)		5
	Condensed Consolidated Statements of Cash Flows		6
	Notes to Condensed Consolidated Financial Statements		7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		45
Item 4.	Controls and Procedures		46
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		47
Item 1A.	Risk Factors		48
Item 5.	Other Information		49
Item 6.	Exhibits		50
Signatures			51
Exhibits

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

NBTY, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except per share amounts)

			March 31, 2010			September 30, 2009
Assets
Current assets:
	Cash and cash equivalents		$	213,905		$	106,001
	Accounts receivable, net			167,976			155,863
	Inventories			636,978			658,534
	Deferred income taxes			27,952			28,154
	Other current assets			58,709			49,999
		Total current assets		1,105,520			998,551
Property, plant and equipment, net				363,276			373,817
Goodwill				332,327			339,099
Intangible assets, net				205,367			214,139
Other assets				19,777			34,615
		Total assets	$	2,026,267		$	1,960,221
Liabilities and Stockholders' Equity
Current liabilities:
	Current portion of long-term debt		$	64,108		$	38,893
	Accounts payable			109,168			128,485
	Accrued expenses and other current liabilities			154,684			156,734
		Total current liabilities		327,960			324,112
Long-term debt, net of current portion				375,839			437,629
Deferred income taxes				39,151			36,422
Other liabilities				31,814			34,233
		Total liabilities		774,764			832,396
Commitments and contingencies
Stockholders' equity:
	Common stock, $.008 par; authorized 175,000 shares; issued and outstanding 63,302 shares and 61,874 shares at March 31, 2010 and September 30, 2009, respectively			506			495
	Capital in excess of par			163,997			145,885
	Retained earnings			1,107,039			984,797
	Accumulated other comprehensive loss			(20,039	)		(3,352	)
		Total stockholders' equity		1,251,503			1,127,825
		Total liabilities and stockholders' equity	$	2,026,267		$	1,960,221

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

NBTY, Inc.

Condensed Consolidated Statements of Income

(Unaudited)

(in thousands, except per share amounts)

			Three months ended March 31,						Six months ended March 31,
			2010			2009			2010			2009
Net sales			$	705,160		$	595,553		$	1,456,311		$	1,256,105
Costs and expenses:
	Cost of sales			380,668			343,644			792,116			732,147
	Advertising, promotion and catalog			50,937			33,028			79,679			64,319
	Selling, general and administrative			194,593			174,657			383,324			370,557
	IT project termination costs			—			—			—			8,647
				626,198			551,329			1,255,119			1,175,670
Income from operations				78,962			44,224			201,192			80,435
Other income (expense):
	Interest			(7,616	)		(8,888	)		(15,672	)		(18,377	)
	Miscellaneous, net			790			279			2,545			(5,356	)
				(6,826	)		(8,609	)		(13,127	)		(23,733	)
Income before provision for income taxes				72,136			35,615			188,065			56,702
Provision for income taxes				25,480			12,545			65,823			20,157
		Net income	$	46,656		$	23,070		$	122,242		$	36,545
Net income per share:
	Basic		$	0.74		$	0.37		$	1.95		$	0.59
	Diluted		$	0.73		$	0.37		$	1.91		$	0.58
Weighted average common shares outstanding:
	Basic			63,266			61,600			62,833			61,600
	Diluted			64,267			62,948			64,061			63,043

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

NBTY, Inc.

Condensed Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss)

Six Months Ended March 31, 2010 and 2009

(Unaudited)

(in thousands)

		Common Stock
										Accumulated Other Comprehensive (Loss) Income
		Number of Shares		Amount		Capital in Excess of Par		Retained Earnings					Total Stockholders' Equity
Balance, September 30, 2009			61,874	$	495	$	145,885	$	984,797	$	(3,352	)	$	1,127,825
Components of comprehensive income:
	Net income								122,242					122,242
	Foreign currency translation adjustment, net of taxes										(17,848	)		(17,848	)
	Change in fair value of interest rate swaps, net of taxes										1,161			1,161
Comprehensive income:													$	105,555
Exercise of stock options			1,428		11		9,714							9,725
Excess tax benefit from exercise of stock options							4,787							4,787
Stock-based compensation							3,611							3,611
Balance, March 31, 2010			63,302	$	506	$	163,997	$	1,107,039	$	(20,039	)	$	1,251,503
Balance, September 30, 2008			61,599	$	493	$	140,990	$	839,068	$	17,645		$	998,196
Components of comprehensive loss:
	Net income								36,545					36,545
	Foreign currency translation adjustment, net of taxes										(56,249	)		(56,249	)
	Change in fair value of interest rate swaps, net of taxes										(5,807	)		(5,807	)
Comprehensive loss:													$	(25,511	)
Exercise of stock options			1				6							6
Stock-based compensation							1,069							1,069
Balance, March 31, 2009			61,600	$	493	$	142,065	$	875,613	$	(44,411	)	$	973,760

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

NBTY, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

					Six months ended March 31,
					2010			2009
Cash flows from operating activities:
	Net income				$	122,242		$	36,545
	Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
		Impairments and disposals of assets				6,196			688
		Depreciation and amortization				33,758			34,800
		IT project termination costs				—			4,667
		Foreign currency transaction loss				130			6,669
		Amortization of deferred charges				774			631
		Stock-based compensation				3,611			1,069
		Allowance for doubtful accounts				1,866			850
		Inventory reserves				1,699			7,177
		Deferred income taxes				1,447			383
		Excess income tax benefit from exercise of stock options				(4,787	)		—
		Changes in operating assets and liabilities:
			Accounts receivable			(15,717	)		(16,256	)
			Inventories			16,286			(57,941	)
			Other assets			4,173			10,568
			Accounts payable			(18,341	)		47,219
			Accrued expenses and other liabilities			4,099			(20,843	)
				Net cash provided by operating activities		157,436			56,226
Cash flows from investing activities:
	Purchase of property, plant and equipment					(24,437	)		(35,639	)
	Proceeds from sale of investments					2,000			—
	Cash paid for acquisitions					(573	)		(264	)
	Escrow refund, net of purchase price adjustments					—			11,989
				Net cash used in investing activities		(23,010	)		(23,914	)
Cash flows from financing activities:
	Principal payments under long-term debt agreements and capital leases					(35,777	)		(16,785	)
	Proceeds from borrowings under the Revolving Credit Facility					—			60,000
	Principal payments under the Revolving Credit Facility					—			(115,000	)
	Excess income tax benefit from exercise of stock options					4,787			—
	Proceeds from stock options exercised					9,725			6
				Net cash used in financing activities		(21,265	)		(71,779	)
Effect of exchange rate changes on cash and cash equivalents						(5,257	)		(6,912	)
Net increase (decrease) in cash and cash equivalents						107,904			(46,379	)
Cash and cash equivalents at beginning of period						106,001			90,180
Cash and cash equivalents at end of period					$	213,905		$	43,801

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

NBTY, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(in thousands, except per share amounts)

1. Basis of Presentation

        NBTY, Inc. (together with its subsidiaries, "we," "our," "us," "NBTY," or the "Company") is a leading global vertically integrated manufacturer, marketer, distributor and retailer of a broad line of high-quality, value-priced nutritional supplements in the United States and throughout the world. We market over 25,000 products under numerous owned and private-label brands, including Nature's Bounty®, Ester-C®, Solgar®, MET-Rx®, American Health®, Osteo Bi-Flex®, Flex-A-Min®, SISU®, Knox®, Sundown®, Rexall®, Pure Protein®, Body Fortress®, WORLDWIDE Sport Nutrition®, Natural Wealth®, Puritan's Pride®, Holland & Barrett®, GNC (UK)®, Physiologics®, Le Naturiste®, De Tuinen®, Julian Graves® and Vitamin World®.

        We have prepared these financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") applicable to interim financial information and on a basis that is consistent with the accounting principles applied in our Annual Report on Form 10-K for the fiscal year ended September 30, 2009 ("2009 Form 10-K"). In our opinion, these financial statements reflect all adjustments (including normal recurring items) necessary for a fair presentation of our results for the interim periods presented. These financial statements do not include all information or disclosures necessary for a complete presentation of financial position, results of operations and cash flows in conformity with GAAP. Accordingly, these financial statements should be read in conjunction with the financial statements and notes thereto contained in our 2009 Form 10-K. Results for interim periods are not necessarily indicative of results that may be achieved for a full year.

Estimates

        The preparation of financial statements in conformity with GAAP requires that we make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. These judgments can be subjective and complex, and consequently actual results could differ materially from those estimates and assumptions. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our most significant estimates include: sales returns and other allowances; inventory valuation and obsolescence; valuation and recoverability of long-lived assets, including goodwill; income taxes; and accruals for the outcome of current litigation.

7

NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

1. Basis of Presentation (Continued)

Accounts Receivable Reserves

        Accounts receivable were net of the following reserves:

	March 31, 2010		September 30, 2009
Allowance for sales returns	$	9,039	$	11,707
Promotional programs incentive allowance		54,434		49,071
Allowance for doubtful accounts		5,735		3,723
	$	69,208	$	64,501

Net Income Per Share

        Basic net income per share is based on the weighted average number of common shares outstanding during the three and six month periods ended March 31, 2010 and 2009. For the three and six months ended March 31, 2010, diluted net income per share includes the dilutive effect of outstanding stock options and restricted stock units, which resulted in a dilutive effect of 1,001 and 1,228 shares, respectively. For the three and six months ended March 31, 2009, diluted net income per share includes the dilutive effect of outstanding stock options, which resulted in a dilutive effect of 1,348 and 1,443 shares, respectively. There were 287 and 852 outstanding stock options at March 31, 2010 and 2009, respectively, that were not included in the calculation of diluted net income per share since they would have been anti-dilutive.

Recent Accounting Developments

        In June 2009, the Financial Accounting Standards Board ("FASB") issued authoritative guidance requiring an enterprise to perform an analysis to determine whether the enterprise's variable interests give it a controlling financial interest in a variable interest entity. This analysis identifies the primary beneficiary of a variable interest entity as one with the power to direct the activities of a variable interest entity that most significantly impacts the entity's economic performance and the obligation to absorb losses of the entity that could potentially be significant to the variable interest. This guidance will become effective for us October 1, 2010. We anticipate that the adoption of this guidance will not have any impact on our consolidated financial position or results of operations because we currently do not have any variable interest entities.

        The FASB issued authoritative guidance that retains the purchase method of accounting for acquisitions; however, it includes changes in the way assets and liabilities are recognized in purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. This guidance became effective for us October 1, 2009 and will apply prospectively to business combinations completed on or after that date. The adoption of this guidance will impact future acquisitions.

8

NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

2. Inventories

        The components of inventories were as follows:

		March 31, 2010			September 30, 2009
Raw materials		$	161,394		$	166,447
Work-in-process			23,636			26,447
Finished goods			477,743			489,737
Valuation and obsolescence reserves			(25,795	)		(24,097	)
	Total	$	636,978		$	658,534

3. Goodwill and Intangible Assets

Goodwill

        The changes in the carrying amount of goodwill by segment for the six-month period ended March 31, 2010, were as follows:

	Wholesale/ US Nutrition		North American Retail			European Retail			Direct Response/ E-Commerce		Consolidated
Balance at October 1, 2009:
Goodwill	$	180,276	$	7,686		$	142,718		$	16,105	$	346,785
Accumulated impairment losses		—		(7,686	)		—			—		(7,686	)
		180,276		—			142,718			16,105		339,099
Foreign currency translation		346		—			(7,691	)		—		(7,345	)
Acquisitions		—		—			573			—		573
Balance at March 31, 2010:
Goodwill		180,622		7,686			135,600			16,105		340,013
Accumulated impairment losses		—		(7,686	)		—			—		(7,686	)
	$	180,622	$	—		$	135,600		$	16,105	$	332,327

9

NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

3. Goodwill and Intangible Assets (Continued)

Intangible Assets

        The carrying amounts of intangible assets as of March 31, 2010 and September 30, 2009 were as follows:

		March 31, 2010				September 30, 2009
		Gross carrying amount		Accumulated amortization		Gross carrying amount		Accumulated amortization		Amortization period (years)
Definite lived intangible assets
Brands		$	98,011	$	28,636	$	98,093	$	26,201		20
Customer lists			64,922		45,533		64,948		43,667		2 - 15
Private label and customer relationships			122,669		17,545		122,822		14,374		10 - 20
Trademarks and licenses			16,912		7,431		17,844		7,417		2 - 20
Covenants not to compete			3,551		3,353		3,540		3,249		3 - 5
			306,065		102,498		307,247		94,908
Indefinite lived intangible asset
Trademark			1,800		—		1,800		—
	Total intangible assets	$	307,865	$	102,498	$	309,047	$	94,908

        Aggregate amortization expense of other intangible assets included in the consolidated statements of income under the caption "selling, general and administrative" expenses for the three months ended March 31, 2010 and 2009 was $3,987 and $3,989, respectively. Amortization expense for the six months ended March 31, 2010 and 2009 was $7,987 and $8,024, respectively.

        Assuming no changes in our definite lived intangible assets, estimated amortization expense for each of the five succeeding fiscal years is as follows:

For the fiscal year ending September 30,
2010	$	15,946
2011	$	15,835
2012	$	15,704
2013	$	15,605
2014	$	15,094

4. IT Project Termination Costs

        During December 2008, management determined that certain information technology projects relating to the Direct Response/E-Commerce segment that were ineffective and not economical would be terminated. As a result, previously capitalized software configuration and other related costs of $8,647 were written-off during the six months ended March 31, 2009.

10

NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

5. Accrued Expenses and Other Current Liabilities

        The components of accrued expenses and other current liabilities were as follows:

	March 31, 2010		September 30, 2009
Accrued compensation and related taxes	$	33,294	$	38,945
Accrued purchases		24,441		17,664
Litigation		10,477		9,646
Income taxes payable		—		16,700
Other		86,472		73,779
	$	154,684	$	156,734

6. Long-Term Debt

        The components of long-term debt were as follows:

			March 31, 2010		September 30, 2009
Credit Agreement:
	$300 million, five-year Term Loan		$	235,086	$	270,000
Senior Subordinated Notes				188,934		188,856
Multi-currency Term Loan				14,503		15,336
Mortgage and Capital Leases				1,424		2,330
				439,947		476,522
		Less: current portion		64,108		38,893
		Total	$	375,839	$	437,629

        During March 2010, we made an additional principal payment of $17,000 on the Term Loan. Total additional principal payments on the Term Loan during the first six months of this fiscal year were $20,000.

7. Litigation Summary

Prohormone Products

        In March 2004, a putative class-action lawsuit, captionedJerry Beidler v. MET-Rx U.S.A, Inc, was filed in New Jersey Superior Court, Mercer County, against MET-Rx U.S.A, Inc. ("Met-Rx"), a subsidiary of the Company, claiming that the advertising and marketing of certain prohormone supplements were false and misleading and that plaintiff and the putative class of New Jersey purchasers of these products were entitled to damages and injunctive relief. Because these allegations were virtually identical to allegations made in a putative nationwide class-action previously filed against Met-Rx in California (in an action styledEric Ayala v. MET-Rx U.S.A, Inc. et. al.), we moved in 2004 to dismiss or stay the New Jersey action pending the outcome of the California action. The motion was granted, and the New Jersey action is stayed at this time. The California action against Met-Rx was dismissed in 2009.

11

NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

7. Litigation Summary (Continued)

Nutrition Bars

        Our subsidiary, Rexall Sundown, Inc. ("Rexall"), and certain of its subsidiaries, are defendants in a class-action lawsuit, captionedJamie Pesek, et al. v. Rexall Sundown, Inc., et al., brought in California Superior Court, County of San Francisco in 2002 on behalf of all California consumers who bought various nutrition bars. Plaintiffs allege misbranding of nutrition bars and violations of California unfair competition statutes, misleading advertising and other similar causes of action. Plaintiffs seek restitution, legal fees and injunctive relief. We have defended this action vigorously. Since December 2007, with Rexall's and the other defendants' renewed motion for judgment on the pleadings pending, the Court has stayed the case for all purposes, pending rulings on relevant cases before the California Supreme Court. Although the California Supreme Court has resolved some of those cases, others remain pending as of this date. Accordingly, the case remains stayed. The Court held a case-management conference ("CMC") on August 5, 2009. At that time, the parties requested, and the Court agreed, to keep the stay in place for at least another six months. The Court scheduled a subsequent CMC for February 25, 2010, but canceled that conference upon being informed by the parties that the California Supreme Court had not yet acted. The Court has set another CMC for May 21, 2010, and instructed the parties to report back before that date as to the status of the cases before the California Supreme Court. By agreement of the parties, the May 21, 2010 CMC has been continued for six months. The California Supreme Court still has not resolved the outstanding issues pending before it. Based upon the information currently available, no determination can be made at this time as to the final outcome of this case, nor can its materiality be accurately ascertained.

Claims in the Ordinary Course

        In addition to the foregoing, other regulatory inquiries, claims, suits and complaints (including product liability, intellectual property and California Proposition 65 claims) arise in the ordinary course of our business. We believe that such other inquiries, claims, suits and complaints would not have a material adverse effect on our consolidated financial condition or results of operations, if adversely determined against us.

8. Income Taxes

        Our provision for income taxes is impacted by a number of factors, including federal taxes, our international tax structure, state tax rates in the jurisdictions where we conduct business, and our ability to utilize state tax credits that expire between 2013 and 2016. Therefore, our overall effective income tax rate could vary as a result of these factors.

        The effective income tax rate for the three months ended March 31, 2010 and 2009 was 35.3% and 35.2%, respectively. The effective income tax rate for the six months ended March 31, 2010 and 2009 was 35.0% and 35.5%, respectively. The effective income tax rate was lower for the six months ended March 31, 2010 as compared to the prior comparable period primarily due to the partial release of a valuation allowance on state tax credits in the current year.

        We accrue interest and penalties related to unrecognized tax benefits in income tax expense. This methodology is consistent with previous periods. At March 31, 2010, we had $1,257 and $439 accrued

12

NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

8. Income Taxes (Continued)

for the potential payment of interest and penalties, respectively. As of March 31, 2010, we were subject to U.S. Federal Income Tax examinations for the tax years 2006-2009, and to non-U.S. examinations for the tax years of 2004-2009. In addition, we are generally subject to state and local examinations for fiscal years 2006-2009.

        At March 31, 2010, we had a liability of $8,711 for unrecognized tax benefits, the recognition of which would have an effect of $5,931 on income tax expense and the effective income tax rate. We do not believe that the amount will change significantly in the next 12 months. At this time, we are unable to make a reasonably reliable estimate of the timing of payments in individual years beyond 12 months due to uncertainties in the timing of tax audit outcomes.

9. Stock-based Compensation

        On December 23, 2009, the Company granted 287 stock options to directors and certain employees under the 2008 and 2000 Stock Option Plans. These stock options were granted with an exercise price of $43.88, the closing price of the Company's common stock on the date of grant. The vesting period for these options is over four years, in three equal increments on each of the second, third and fourth anniversary of the date of grant, except those granted to Harvey Kamil, President and Chief Financial Officer, the vesting of which will accelerate if he retires after the second anniversary of the date of grant. All stock options granted expire ten years from the date of grant.

        The weighted average fair value per share of the options granted was $22.13. The fair value of each option award is estimated on the date of grant using a Black-Scholes-Merton option pricing model. The following weighted average assumptions were used for the options granted in December 2009:

Risk-free rate(1)	2.9	%
Expected term(2)	6.4
Expected volatility(3)	48.0	%
Expected dividend yield	0.0	%

(1)

The risk-free rate is based upon the rate on a zero coupon U.S. Treasury bill, for the expected term of the option, in effect at the time of grant.

(2)

The expected term of the option is based on historical employee exercise behavior, the vesting terms of the respective option and a contractual life of ten years.

(3)

Expected volatility is primarily based on the daily historical volatility of our stock price, over a period similar to the expected term of the option.

        On December 23, 2009, the Company also granted 21 restricted stock units to directors and certain executives under the 2009 Equity Awards Plan. The closing price of the Company's common stock on the date of grant was $43.88. These restricted stock units vest over four years, in three equal increments on each of the second, third and fourth anniversary of the date of grant, except those

13

NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

9. Stock-based Compensation (Continued)

granted to Harvey Kamil, President and Chief Financial Officer, the vesting of which will accelerate if he retires after the second anniversary of the date of grant.

10. Fair Value of Financial Instruments

        GAAP establishes a framework for measuring fair value and expands disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

•

Level 1—Quoted prices in active markets for identical assets or liabilities.

•

Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Interest Rate Swaps

        To manage the potential risk arising from changing interest rates and their impact on long-term debt, our policy is to maintain a combination of available fixed and variable rate financial instruments. In fiscal 2008, we entered into two interest rate swap contracts to hedge the variability of future interest relating to a portion of the interest payments on our Term Loan. Each swap contract has a notional amount of $100 million. One swap contract has a fixed interest rate, before bank margin, of 3.88% for a two-year term and the other swap contract has a fixed interest rate, before bank margin, of 4.195% for a three-year term. Under the terms of the swap contracts, variable interest payments for a portion of our Term Loan are swapped for fixed interest payments.

        We have formally documented the relationship between the interest rate swap contracts and the Term Loan, as well as our risk management objective and strategy for undertaking the hedge transactions. This process includes linking the derivative that was designated as a cash flow hedge to the specific liability on the balance sheet. We record the change in the fair value of the swap contracts through Other Comprehensive Income ("OCI"), net of income tax. Since we expect these hedging relationships to be highly effective, both at inception of the hedges and on an ongoing basis, they are expected to be highly effective in achieving offsetting changes in fair value attributable to the hedged risk during the period that the hedges are designated. We have determined that there will be no ineffectiveness in the hedging relationships since the hedged forecasted interest payments are based on the same notional amount, have the same reset dates, and are based on the same benchmark interest rate designated under the variable rate Term Loan. We assess, at the inception of the hedges and on an

14

NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

10. Fair Value of Financial Instruments (Continued)

ongoing basis, whether the derivatives used in the hedging transaction are highly effective in offsetting changes in the cash flows of the hedged item. The change in the fair value of the swap contracts for the six months ended March 31, 2010 recorded through OCI, net of income tax was $1,161. At March 31, 2010, the swap contracts liability was $8,290. Of this amount, $2,634 is included in other current liabilities and $5,656 is included in other liabilities. At September 30, 2009, the swap contracts liability, included in other liabilities, was $10,181. The fair value of the swap contracts were valued using observable current market information such as the prevailing LIBOR interest rate and LIBOR yield curve rates (Level 2).

7¹/8% Senior Subordinated Notes

        The face value and the fair value of the 7¹/8% Senior Subordinated Notes at March 31, 2010, was $190,000 and $191,425, respectively. The fair value of the 7¹/8% Senior Subordinated Notes was based on then quoted market prices (Level 1).

11. Business and Credit Concentration

Financial Instruments

        Financial instruments that potentially subject us to credit risk consist primarily of cash and cash equivalents (the amounts of which may, at times, exceed Federal Deposit Insurance Corporation limits on insurable amounts), investments and trade accounts receivable. We mitigate our risk by investing in or through major financial institutions.

Customers

        We perform on-going credit evaluations of our customers and adjust credit limits based upon payment history and the customers' current creditworthiness, as determined by review of their current credit information. Customers' account activity is continuously monitored. As a result of this review process, we record bad debt expense, which is based upon historical experience as well as specific customer collection issues that have been identified, to adjust the carrying amount of the related receivable to its estimated realizable value. While such bad debt expenses historically have been within expectations and the allowances established, if the financial condition of one or more of our customers were to deteriorate, additional bad debt provisions may be required.

        The following individual customer accounted for the following percentages of net sales for the three and six months ended March 31, 2010 and 2009, respectively:

	Wholesale/ US Nutrition Segment Net Sales Three months ended March 31,						Total Consolidated Net Sales Three months ended March 31,
	2010			2009			2010			2009
Customer A		30	%		31	%		18	%		18	%

15

NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

11. Business and Credit Concentration (Continued)

	Wholesale/ US Nutrition Segment Net Sales Six months ended March 31,						Total Consolidated Net Sales Six months ended March 31,
	2010			2009			2010			2009
Customer A		28	%		30	%		17	%		18	%

        The loss of this customer, or any other major customer, would have a material adverse effect on our consolidated results of operations if we were unable to replace that customer.

        The following individual customers accounted for 10% or more of the Wholesale/US Nutrition segment's gross accounts receivable as of March 31, 2010 and September 30, 2009, respectively:

	March 31, 2010			September 30, 2009
Customer A		23	%		25	%
Customer B		9	%		11	%

12. Supplemental Disclosure of Cash Flow Information

	Six months ended March 31,
	2010		2009
Non-cash investing and financing information:
Property, plant and equipment additions included in accounts payable	$	1,717	$	797

13. Segment Information

        We are organized by sales segments on a worldwide basis. We evaluate performance based on a number of factors; however, the primary measures of performance are the net sales, gross profit and income or loss from operations (prior to corporate allocations) of each segment, as these are the key performance indicators that we review. Operating income or loss for each segment does not include the impact of any intercompany transfer pricing mark-up, corporate general and administrative expenses, interest expense and other miscellaneous income/expense items. Corporate general and administrative expenses include, but are not limited to: human resources, legal, finance, and various other corporate level activity related expenses. Such unallocated expenses remain within the Corporate segment. During fiscal 2009, we changed the way certain expenses are allocated to the segments. Specifically, certain shipping and warehouse costs, information technology and advertising costs previously included in the Corporate segment are now allocated to the Wholesale/US Nutrition, North American Retail and Direct Response/E-Commerce segments on a percentage of sales basis. All prior period segment information has been adjusted to conform with the current period presentation.

16

NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

13. Segment Information (Continued)

        All our products fall into one or more of these four segments:

•

Wholesale/US Nutrition—This segment is comprised of several divisions, each targeting specific market groups, which include wholesalers, distributors, food, drug and mass merchandisers, pharmacies, health food stores, bulk and international customers.

•

North American Retail—This segment generates revenue through its 446 owned and operated Vitamin World and Nutrition Warehouse stores selling proprietary brand and third-party products, and through its Canadian operation of 85 owned and operated Le Naturiste stores.

•

European Retail—This segment generates revenue through its 565 Holland & Barrett stores, 324 Julian Graves stores and 35 GNC stores in the UK, 85 DeTuinen stores in the Netherlands and 27 Nature's Way stores in Ireland. In addition, Holland & Barrett has 16 franchise locations in South Africa, Singapore and Malta. This revenue consists of sales of proprietary brand and third-party products, as well as franchise fees.

•

Direct Response/E-Commerce—This segment generates revenue through the sale of proprietary brand and third-party products primarily through mail order catalog and the internet. Catalogs are strategically mailed to customers who order by mail, internet, or by phone.

17

NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

13. Segment Information (Continued)

        The following table represents key financial information of our business segments:

		Wholesale/ US Nutrition		North American Retail			European Retail		Direct Response/ E-Commerce		Corporate/ Manufacturing			Consolidated
Three months ended March 31, 2010:
	Net sales	$	426,575	$	54,769		$	159,013	$	64,803	$	—		$	705,160
	Income (loss) from operations		55,454		451			25,880		18,013		(20,836	)		78,962
	Depreciation and amortization		3,659		622			3,458		1,206		7,866			16,811
	Capital expenditures		947		659			9,276		11		3,661			14,554
Three months ended March 31, 2009:
	Net sales	$	349,801	$	51,916		$	134,438	$	59,398	$	—		$	595,553
	Income (loss) from operations		19,046		(731	)		20,318		19,244		(13,653	)		44,224
	Depreciation and amortization		3,586		745			3,403		1,267		8,278			17,279
	Capital expenditures		455		2,607			6,367		253		3,318			13,000
Six months ended March 31, 2010:
	Net sales	$	897,688	$	106,227		$	335,008	$	117,388	$	—		$	1,456,311
	Income (loss) from operations		141,692		2,523			60,524		34,401		(37,948	)		201,192
	Depreciation and amortization		7,331		1,331			7,084		2,412		15,600			33,758
	Capital expenditures		1,086		1,094			13,380		41		8,836			24,437
Six months ended March 31, 2009:
	Net sales	$	756,768	$	100,354		$	290,464	$	108,519	$	—		$	1,256,105
	Income (loss) from operations		49,063		(1,886	)		46,489		19,953		(33,184	)		80,435
	Depreciation and amortization		7,310		1,497			6,964		2,532		16,497			34,800
	Capital expenditures		631		4,108			10,490		4,370		16,040			35,639

Net sales by location of customer:

		Three months ended March 31,				Six months ended March 31,
		2010		2009		2010		2009
United States		$	463,883	$	407,664	$	960,138	$	856,855
United Kingdom			152,809		127,781		318,522		274,985
Canada			25,909		19,704		54,484		41,923
Netherlands			16,577		12,789		34,861		27,386
Ireland			6,301		4,926		12,142		9,879
Other foreign countries			39,681		22,689		76,164		45,077
	Consolidated net sales	$	705,160	$	595,553	$	1,456,311	$	1,256,105

18

NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

13. Segment Information (Continued)

Total assets by segment:

		March 31, 2010		September 30, 2009
Wholesale/US Nutrition		$	912,173	$	915,783
North American Retail			29,737		28,334
European Retail			410,184		403,657
Direct Response/E-Commerce			53,388		54,348
Corporate/Manufacturing			620,785		558,099
	Consolidated assets	$	2,026,267	$	1,960,221

        Approximately 30% and 29% of our net sales during the six months ended March 31, 2010 and 2009, respectively, were denominated in currencies other than U.S. dollars, principally the British pound sterling, the euro and the Canadian dollar. A significant weakening of such currencies versus the U.S. dollar could have a material adverse effect on our results of operations.

        Foreign subsidiaries accounted for the following percentages of total assets and total liabilities:

	March 31, 2010			September 30, 2009
Total Assets		26	%		26	%
Total Liabilities		14	%		13	%

14. Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes

        The 7¹/8% Senior Subordinated Notes due 2015 are guaranteed by our domestic wholly-owned subsidiaries. These guarantees are full, unconditional and joint and several. The following condensed consolidating financial information presents:

1.

Condensed consolidating financial statements as of March 31, 2010 and September 30, 2009 and for the three and six months ended March 31, 2010 and 2009 of (a) NBTY, Inc., the parent and issuer, (b) the guarantor subsidiaries, (c) the non-guarantor subsidiaries and (d) the Company on a consolidated basis; and



2.

Elimination entries necessary to consolidate NBTY, Inc., the parent, with guarantor and non-guarantor subsidiaries.

        The condensed consolidating financial statements are presented using the equity method of accounting for investments in wholly-owned subsidiaries. Under this method, the investments in subsidiaries are recorded at cost and adjusted for our share of the subsidiaries' cumulative results of operations, capital contributions, distributions and other equity changes. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. This financial information should be read in conjunction with the financial statements and other notes related thereto.

19

NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

14. Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes (Continued)

Condensed Consolidating Balance Sheet
As of March 31, 2010

					Parent Company			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
	Cash and cash equivalents				$	130,927		$	—	$	82,978		$	—		$	213,905
	Accounts receivable, net					—			143,939		24,037			—			167,976
	Intercompany					—			269,056		751,397			(1,020,453	)		—
	Inventories					—			512,023		124,955			—			636,978
	Deferred income taxes					—			24,141		3,811			—			27,952
	Other current assets					—			15,190		43,519			—			58,709
				Total current assets		130,927			964,349		1,030,697			(1,020,453	)		1,105,520
Property, plant and equipment, net						35,902			235,153		92,221			—			363,276
Goodwill						—			197,701		134,626			—			332,327
Other intangible assets, net						—			181,849		23,518			—			205,367
Other assets						—			19,720		57			—			19,777
Intercompany loan receivable						323,308			40,735		—			(364,043	)		—
Investments in subsidiaries						2,236,402			—		—			(2,236,402	)		—
		Total assets			$	2,726,539		$	1,639,507	$	1,281,119		$	(3,620,898	)	$	2,026,267
Liabilities and Stockholders' Equity
Current liabilities:
	Current portion of long-term debt				$	49,028		$	4	$	15,076		$	—		$	64,108
	Accounts payable					—			67,898		41,270			—			109,168
	Intercompany					1,020,453			—		—			(1,020,453	)		—
	Accrued expenses and other current liabilities					—			115,982		38,702			—			154,684
				Total current liabilities		1,069,481			183,884		95,048			(1,020,453	)		327,960
Intercompany loan payable						—			—		364,043			(364,043	)		—
Long-term debt, net of current portion						352,031			—		23,808			—			375,839
Deferred income taxes						36,378			—		2,773			—			39,151
Other liabilities						17,146			2,678		11,990			—			31,814
				Total liabilities		1,475,036			186,562		497,662			(1,384,496	)		774,764
Commitments and contingencies
Stockholders' Equity:
	Common stock					506			—		—			—			506
	Capital in excess of par					163,997			352,019		301,268			(653,287	)		163,997
	Retained earnings					1,107,039			1,100,926		489,310			(1,590,236	)		1,107,039
	Accumulated other comprehensive loss					(20,039	)		—		(7,121	)		7,121			(20,039	)
				Total stockholders' equity		1,251,503			1,452,945		783,457			(2,236,402	)		1,251,503
			Total liabilities and stockholders' equity		$	2,726,539		$	1,639,507	$	1,281,119		$	(3,620,898	)	$	2,026,267

20

NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

14. Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes (Continued)

Condensed Consolidating Balance Sheet
As of September 30, 2009

					Parent Company			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
	Cash and cash equivalents				$	46,169		$	—	$	59,832		$	—		$	106,001
	Accounts receivable, net					—			132,762		23,101			—			155,863
	Intercompany					—			141,489		744,496			(885,985	)		—
	Inventories					—			530,218		128,316			—			658,534
	Deferred income taxes					—			24,124		4,030			—			28,154
	Other current assets					—			20,910		29,089			—			49,999
				Total current assets		46,169			849,503		988,864			(885,985	)		998,551
Property, plant and equipment, net						39,246			245,415		89,156			—			373,817
Goodwill						—			197,701		141,398			—			339,099
Other intangible assets, net						—			189,022		25,117			—			214,139
Other assets						—			21,403		13,212			—			34,615
Intercompany loan receivable						340,710			40,733		—			(381,443	)		—
Investments in subsidiaries						2,082,257			—		—			(2,082,257	)		—
		Total assets			$	2,508,382		$	1,543,777	$	1,257,747		$	(3,349,685	)	$	1,960,221
Liabilities and Stockholders' Equity
Current liabilities:
	Current portion of long-term debt				$	38,138		$	115	$	640		$	—		$	38,893
	Accounts payable					—			90,835		37,650			—			128,485
	Intercompany					885,985			—		—			(885,985	)		—
	Accrued expenses and other current liabilities					—			114,851		41,883			—			156,734
				Total current liabilities		924,123			205,801		80,173			(885,985	)		324,112
Intercompany loan payable						—			—		381,443			(381,443	)		—
Long-term debt, net of current portion						398,411			—		39,218			—			437,629
Deferred income taxes						35,959			—		463			—			36,422
Other liabilities						22,064			2,602		9,567			—			34,233
				Total liabilities		1,380,557			208,403		510,864			(1,267,428	)		832,396
Commitments and contingencies
Stockholders' Equity:
	Common stock					495			—		—			—			495
	Capital in excess of par					145,885			352,019		301,269			(653,288	)		145,885
	Retained earnings					984,797			983,355		450,168			(1,433,523	)		984,797
	Accumulated other comprehensive loss					(3,352	)		—		(4,554	)		4,554			(3,352	)
				Total stockholders' equity		1,127,825			1,335,374		746,883			(2,082,257	)		1,127,825
			Total liabilities and stockholders' equity		$	2,508,382		$	1,543,777	$	1,257,747		$	(3,349,685	)	$	1,960,221

21

NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

14. Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes (Continued)

Condensed Consolidating Statement of Income
Three Months Ended March 31, 2010

			Parent Company			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales			$	—		$	516,392	$	206,568		$	(17,800	)	$	705,160
Costs and expenses:
	Cost of sales			—			307,432		91,036			(17,800	)		380,668
	Advertising, promotion and catalog			—			44,345		6,592			—			50,937
	Selling, general and administrative			20,836			90,843		82,914			—			194,593
				20,836			442,620		180,542			(17,800	)		626,198
Income from operations				(20,836	)		73,772		26,026			—			78,962
Other income (expense):
		Equity in income of subsidiaries		64,966			—		—			(64,966	)		—
		Intercompany interest		2,106			—		(2,106	)		—			—
		Interest		(7,488	)		—		(128	)		—			(7,616	)
		Miscellaneous, net		198			1,098		(506	)		—			790
				59,782			1,098		(2,740	)		(64,966	)		(6,826	)
Income before provision for income taxes				38,946			74,870		23,286			(64,966	)		72,136
(Benefit)/provision for income taxes				(7,710	)		26,204		6,986			—			25,480
Net income			$	46,656		$	48,666	$	16,300		$	(64,966	)	$	46,656

22

NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

14. Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes (Continued)

Condensed Consolidating Statement of Income
Three Months Ended March 31, 2009

			Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales			$	—		$	446,269		$	171,000		$	(21,716	)	$	595,553
Costs and expenses:
	Cost of sales			—			289,559			75,801			(21,716	)		343,644
	Advertising, promotion and catalog			—			28,519			4,509			—			33,028
	Selling, general and administrative			11,443			90,475			72,739			—			174,657
				11,443			408,553			153,049			(21,716	)		551,329
Income from operations				(11,443	)		37,716			17,951			—			44,224
Other income (expense):
		Equity in income of subsidiaries		32,671			—			—			(32,671	)		—
		Intercompany interest		5,955			—			(5,955	)		—			—
		Interest		(8,162	)		—			(726	)		—			(8,888	)
		Miscellaneous, net		(92	)		(133	)		504			—			279
				30,372			(133	)		(6,177	)		(32,671	)		(8,609	)
Income before provision for income taxes				18,929			37,583			11,774			(32,671	)		35,615
(Benefit)/provision for income taxes				(4,141	)		13,153			3,533			—			12,545
Net income			$	23,070		$	24,430		$	8,241		$	(32,671	)	$	23,070

23

NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

14. Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes (Continued)

Condensed Consolidating Statement of Income
Six Months Ended March 31, 2010

			Parent Company			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales			$	—		$	1,059,690	$	430,974		$	(34,353	)	$	1,456,311
Costs and expenses:
	Cost of sales			—			636,749		189,720			(34,353	)		792,116
	Advertising, promotion and catalog			—			67,589		12,090			—			79,679
	Selling, general and administrative			37,950			176,754		168,620			—			383,324
				37,950			881,092		370,430			(34,353	)		1,255,119
Income from operations				(37,950	)		178,598		60,544			—			201,192
Other income (expense):
		Equity in income of subsidiaries		156,713			—		—			(156,713	)		—
		Intercompany interest		4,359			—		(4,359	)		—			—
		Interest		(15,315	)		—		(357	)		—			(15,672	)
		Miscellaneous, net		176			2,281		88			—			2,545
				145,933			2,281		(4,628	)		(156,713	)		(13,127	)
Income before provision for income taxes				107,983			180,879		55,916			(156,713	)		188,065
(Benefit)/provision for income taxes				(14,259	)		63,308		16,774			—			65,823
Net income			$	122,242		$	117,571	$	39,142		$	(156,713	)	$	122,242

24

NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

14. Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes (Continued)

Condensed Consolidating Statement of Income
Six Months Ended March 31, 2009

			Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales			$	—		$	931,115		$	363,724		$	(38,734	)	$	1,256,105
Costs and expenses:
	Cost of sales			—			613,835			157,046			(38,734	)		732,147
	Advertising, promotion and catalog			—			54,640			9,679			—			64,319
	Selling, general and administrative			28,380			188,601			153,576			—			370,557
	IT project termination costs			—			8,647			—			—			8,647
				28,380			865,723			320,301			(38,734	)		1,175,670
Income from operations				(28,380	)		65,392			43,423			—			80,435
Other income (expense):
		Equity in income of subsidiaries		60,014			—			—			(60,014	)		—
		Intercompany interest		12,609			—			(12,609	)		—			—
		Interest		(17,201	)		(1	)		(1,175	)		—			(18,377	)
		Miscellaneous, net		(472	)		(3,617	)		(1,267	)		—			(5,356	)
				54,950			(3,618	)		(15,051	)		(60,014	)		(23,733	)
Income before provision for income taxes				26,570			61,774			28,372			(60,014	)		56,702
(Benefit)/provision for income taxes				(9,975	)		21,620			8,512			—			20,157
Net income			$	36,545		$	40,154		$	19,860		$	(60,014	)	$	36,545

25

NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

14. Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes (Continued)

Condensed Consolidating Statement of Cash Flows
Six Months Ended March 31, 2010

					Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
	Net income				$	122,242		$	117,571		$	39,142		$	(156,713	)	$	122,242
	Adjustments to reconcile net income to net cash & cash equivalents provided by operating activities:
		Equity in earnings of subsidiaries				(156,713	)		—			—			156,713			—
		Impairments and disposals of assets				—			5,756			440			—			6,196
		Depreciation and amortization				2,585			22,492			8,681			—			33,758
		Foreign currency transaction (gain) loss				(142	)		—			272			—			130
		Amortization of deferred charges				774			—			—			—			774
		Stock-based compensation				2,970			317			324			—			3,611
		Allowance for doubtful accounts				—			1,866			—			—			1,866
		Inventory reserves				—			1,699			—			—			1,699
		Deferred income taxes				—			1,483			(36	)		—			1,447
		Excess income tax benefit from exercise of stock options				(4,787	)		—			—			—			(4,787	)
		Changes in operating assets and liabilities:
			Accounts receivable			—			(14,508	)		(1,209	)		—			(15,717	)
			Inventories			—			15,827			459			—			16,286
			Other assets			—			5,704			(1,531	)		—			4,173
			Accounts payable			—			(23,936	)		5,595			—			(18,341	)
			Accrued expenses and other liabilities			—			2,364			1,735			—			4,099
				Net cash (used in) provided by operating activities		(33,071	)		136,635			53,872			—			157,436
Cash flows from investing activities:
	Intercompany accounts					137,174			(127,246	)		(9,928	)		—			—
	Purchase of property, plant and equipment					(503	)		(8,966	)		(14,968	)		—			(24,437	)
	Proceeds from sale of investments					2,000			—			—			—			2,000
	Cash paid for acquisitions					—			—			(573	)		—			(573	)
				Net cash provided by (used in) investing activities		138,671			(136,212	)		(25,469	)		—			(23,010	)
Cash flows from financing activities:
	Principal payments under long-term debt agreements and capital leases					(35,354	)		(423	)		—			—			(35,777	)
	Excess income tax benefit from exercise of stock options					4,787			—			—			—			4,787
	Proceeds from stock options exercised					9,725			—			—			—			9,725
				Net cash used in financing activities		(20,842	)		(423	)		—			—			(21,265	)
Effect of exchange rate changes on cash and cash equivalents						—			—			(5,257	)		—			(5,257	)
Net increase in cash and cash equivalents						84,758			—			23,146			—			107,904
Cash and cash equivalents at beginning of period						46,169			—			59,832			—			106,001
Cash and cash equivalents at end of period					$	130,927		$	—		$	82,978		$	—		$	213,905

26

NBTY, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

(in thousands, except per share amounts)

14. Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes (Continued)

Condensed Consolidating Statement of Cash Flows
Six Months Ended March 31, 2009

					Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
	Net income				$	36,545		$	40,154		$	19,860		$	(60,014	)	$	36,545
	Adjustments to reconcile net income to net cash & cash equivalents provided by operating activities:
		Equity in earnings of subsidiaries				(60,014	)		—			—			60,014			—
		Impairments and disposals of property, plant and equipment				33			—			655			—			688
		Depreciation and amortization				2,502			24,030			8,268			—			34,800
		IT project termination costs				—			4,667			—			—			4,667
		Foreign currency transaction loss				4,287			639			1,743			—			6,669
		Stock-based compensation				1,004			(25	)		90			—			1,069
		Amortization of deferred charges				631			—			—			—			631
		Allowance for doubtful accounts				—			765			85			—			850
		Inventory reserves				—			6,382			795			—			7,177
		Deferred income taxes				—			371			12			—			383
		Changes in operating assets and liabilities, net of acquisitions:
			Accounts receivable			—			(15,069	)		(1,187	)		—			(16,256	)
			Inventories			—			(39,059	)		(18,882	)		—			(57,941	)
			Other assets			—			9,421			1,147			—			10,568
			Accounts payable			—			41,846			5,373			—			47,219
			Accrued expenses and other liabilities			—			(8,535	)		(12,308	)		—			(20,843	)
				Net cash (used in) provided by operating activities		(15,012	)		65,587			5,651			—			56,226
Cash flows from investing activities:
	Intercompany accounts					33,113			(40,542	)		7,429			—			—
	Purchase of property, plant and equipment					(5,190	)		(23,933	)		(6,516	)		—			(35,639	)
	Cash paid for acquisitions, net of cash acquired					—			—			(264	)		—			(264	)
	Escrow refund, net of purchase price adjustments					11,904			—			85			—			11,989
				Net cash provided by (used in) investing activities		39,827			(64,475	)		734			—			(23,914	)
Cash flows from financing activities:
	Principal payments under long-term debt agreements and capital leases					(15,421	)		(1,112	)		(252	)		—			(16,785	)
	Proceeds from borrowings under the Revolving Credit Facility					60,000			—			—			—			60,000
	Principal payments under the Revolving Credit Facility					(115,000	)		—			—			—			(115,000	)
	Proceeds from stock options exercised					6			—			—			—			6
				Net cash used in financing activities		(70,415	)		(1,112	)		(252	)		—			(71,779	)
Effect of exchange rate changes on cash and cash equivalents						—			—			(6,912	)		—			(6,912	)
Net decrease in cash and cash equivalents						(45,600	)		—			(779	)		—			(46,379	)
Cash and cash equivalents at beginning of period						49,662			—			40,518			—			90,180
Cash and cash equivalents at end of period					$	4,062		$	—		$	39,739		$	—		$	43,801

27

NBTY, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(in thousands, except per share amounts and number of stores)

Forward-Looking Statements

This quarterly report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this report, the words "subject to," "believe," "expect," "plan," "project," "estimate," "intend," "may," "should," "can," and "anticipate," and the negatives thereof, or variations thereof, or similar expressions, are intended to identify forward-looking statements, which are inherently uncertain. Similarly, discussions of strategy, although believed to be reasonable, are also forward-looking statements and are inherently uncertain.

All forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from projected results. Factors that may materially affect forward-looking statements include:

•

slow or negative growth in the nutritional supplement industry;

•

changes in worldwide general economic and political conditions, and in economic and political conditions in the markets in which we compete from time to time;

•

application of anti-trust or similar merger control laws in any jurisdiction, which may limit our expansion plans;

•

our inability to retain customers of companies (or mailing lists) recently acquired;

•

increased competition;

•

increased costs;

•

loss or retirement of key members of our management;

•

increases in the cost of borrowings or unavailability of additional debt or equity capital, or both;

•

unavailability of, or inability to consummate, advantageous acquisitions in the future, including those that may be subject to bankruptcy court approval, or our inability to integrate acquisitions into the mainstream of our business;

•

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;

•

our inability to gain or hold market share of our wholesale or retail customers anywhere in the world;

•

our inability to obtain or renew insurance or to manage insurance costs;

•

our exposure to, and the expense of defending and resolving, product liability claims, intellectual property claims and other litigation;

•

our inability to implement our business strategy successfully;

•

our inability to manage our retail, wholesale, manufacturing or other operations efficiently;

•

consumer acceptance of our products due to adverse publicity regarding nutritional supplements;

•

our inability to renew leases for our retail locations;

•

the inability of our retail stores to attain or maintain profitability;

•

the absence of clinical trials for many of our products;

28

•

sales and earnings volatility or trends for us and our market segments;

•

the efficacy of our internet and on-line sales and marketing strategies;

•

fluctuations in foreign currencies, including the British pound sterling, the euro, the Canadian dollar and the Chinese yuan;

•

controls on sales to, or purchases from, foreign countries or certain persons;

•

our inability to secure favorable new sites for, and delays in opening, new retail and manufacturing locations;

•

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 and the Food Supplements Directive and Traditional Herbal Medicinal Products Directive in Europe;

•

the mix of our products and the profit margins thereon;

•

the availability and pricing of raw materials;

•

adverse effects on us of increased energy prices and potentially reduced traffic flow to our retail locations;

•

adverse tax determinations;

•

our inability to comply with, or adverse consequences stemming from, new government regulation or enforcement policies;

•

the loss of a significant customer;

•

risk factors discussed elsewhere in this report; and

•

other factors beyond our control.

Consequently, readers should regard these forward-looking statements solely as our current plans, estimates and beliefs. We caution readers not to place undue reliance on forward-looking statements. We cannot guarantee future results, events, levels of activity, performance or achievements. Except as required by law, we do not undertake and specifically decline 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.

We obtained industry data used throughout this report from industry publications and internal company estimates. While we believe this information to be reliable, we have not independently verified, and cannot guarantee, its accuracy.

The following discussion should also be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included elsewhere herein and with our 2009 Form 10-K.

Overview

        NBTY, Inc. (together with its subsidiaries, the "Company," "NBTY," "we," or "us") is a leading global vertically integrated manufacturer, marketer and retailer of a broad line of high-quality, value-priced nutritional supplements in the United States and throughout the world. We market approximately 25,000 products under numerous owned and private-label brands, including Nature's Bounty®, Ester-C®, Solgar®, MET-Rx®, American Health®, Osteo Bi-Flex®, Flex-A-Min®, SISU®, Knox®, Sundown®, Rexall®, Pure Protein®, Body Fortress®, WORLDWIDE Sport Nutrition®, Natural Wealth®, Puritan's Pride®, Holland & Barrett®, GNC (UK)®, Physiologics®, Le Naturiste®, De Tuinen®,

29

Julian Graves® and Vitamin World®. Our vertical integration includes purchasing raw materials and formulating and manufacturing products, which we then market through the following four channels of distribution:

•

Wholesale/US Nutrition operations—distributes products under various US Nutrition brand names and third party private labels, each targeting specific market groups that include mass market retailers, supermarkets, club stores, drugstore chains, pharmacies, health and natural food stores, healthcare practitioners, wholesalers, distributors and international customers;

•

North American Retail operations—includes 446 Vitamin World stores in the United States and 85 Le Naturiste stores operating in Canada, each selling branded and third-party products;

•

European Retail operations—includes 565 Holland & Barrett stores in Europe and 16 franchise Holland & Barrett stores in South Africa, Singapore and Malta (which we include in this segment); 324 Julian Graves stores and 35 GNC (UK) stores in the United Kingdom ("UK"); 85 De Tuinen stores (including 16 franchise locations) in the Netherlands; and 27 Nature's Way stores in Ireland, each selling branded and third-party products; and

•

Direct Response/E-Commerce operations—includes the sale of branded and third-party products primarily through mail order catalogs and the internet.

Results of Operations

        The timing of acquisitions and the changing mix of our businesses may affect the comparability of results from one period to another.

Three Months Ended March 31, 2010 Compared to the Three Months Ended March 31, 2009:

Net Sales

        Net sales by segment for the three months ended March 31, 2010 as compared with the prior comparable period were as follows:

		Net Sales by Segment Three months ended March 31,
		2010					2009					Comparison 2010 vs 2009
Segment		Net Sales		% of total			Net Sales		% of total			$ change		% change
Wholesale/US Nutrition		$	426,575		60.5	%	$	349,801		58.7	%	$	76,774		21.9	%
North American Retail			54,769		7.8	%		51,916		8.7	%		2,853		5.5	%
European Retail			159,013		22.5	%		134,438		22.6	%		24,575		18.3	%
Direct Response/E-Commerce			64,803		9.2	%		59,398		10.0	%		5,405		9.1	%
	Net sales	$	705,160		100.0	%	$	595,553		100.0	%	$	109,607		18.4	%

Wholesale/US Nutrition

        Net sales for the Wholesale/US Nutrition segment increased $76,774 or 21.9% to $426,575 for the three months ended March 31, 2010. This increase was attributable to the following:

•

Higher net sales of domestic private label products, which increased $16,282. This increase is attributable to higher sales volume as well as a re-allocation of shelf space at a major customer.

•

Net sales from our major brands increased $32,017. Some of the major brands in this segment include Nature's Bounty®, Solgar®, Osteo Bi-Flex®, Sundown® and Ester-C®.

30

•

Net sales from our sports nutrition brands (such as WORLDWIDE Sport Nutrition®, Pure Protein® and Met-Rx®) increased $15,333.

•

Wholesale net sales to international customers increased $12,262.

        We continue to adjust shelf space allocation among our numerous wholesale brands to provide the best overall product mix and to respond to changing market conditions. These efforts have helped to strengthen US Nutrition's position in the mass marketplace. Wholesale/US Nutrition continues to leverage valuable consumer sales information obtained from our Vitamin World retail stores and Puritan's Pride Direct Response/E-Commerce operations in order to provide its mass-market customers with data and analyses to drive mass market sales.

        We use targeted promotions to grow overall net sales. Promotional programs and rebates as a percentage of sales were 12.6% for the three months ended March 31, 2010 as compared to 10.0% for the prior comparable period. We expect promotional programs and rebates as a percentage of sales to fluctuate on a quarterly basis.

        Product returns were $5,437 or 1.1% of sales for the three months ended March 31, 2010 as compared to $10,809 or 2.7% of sales for the prior comparable period. The product returns for the three months ended March 31, 2010 are mainly attributable to returns in the ordinary course of business. Product returns for the prior comparable period were higher than normal due to the reallocation of shelf space by customers of our US Nutrition brands and approximately $2,000 for bars primarily related to the recall of our Met-Rx® bars containing peanut butter. We expect returns relating to normal operations to trend between 1% to 2% of Wholesale/US Nutrition sales in future quarters.

        One customer represented 30% and 31% of the Wholesale/US Nutrition segment's net sales for the three months ended March 31, 2010 and 2009, respectively. It also represented 18% of consolidated net sales for both the three months ended March 31, 2010 and 2009. The loss of this customer, or any other major customer, would have a material adverse effect on our results of operations if we were unable to replace that customer.

North American Retail

        Net sales for this segment increased $2,853 or 5.5% to $54,769 for the three months ended March 31, 2010. Sales for stores open more than one year (same store sales) increased 4.6%, representing $2,385 of the overall increase.

31

        The following is a summary of North American Retail store activity for the three months ended March 31, 2010 and 2009:

		Three months ended March 31,
North American Retail stores:		2010			2009
Vitamin World
	Open at beginning of the period		448			447
	Opened during the period		1			—
	Closed during the period		(3	)		(3	)
	Open at end of the period		446			444
Le Naturiste
	Open at beginning of the period		86			84
	Opened during the period		—			3
	Closed during the period		(1	)		—
	Open at end of the period		85			87
Total North American Retail
	Open at beginning of the period		534			531
	Opened during the period		1			3
	Closed during the period		(4	)		(3	)
	Open at end of the period		531			531

        We anticipate opening up to 14 additional Vitamin World stores during the remainder of this fiscal year. We also continually evaluate when and whether to close underperforming retail stores in this segment.

European Retail

        Net sales for this segment increased $24,575 or 18.3% to $159,013 for the three months ended March 31, 2010. Same store sales increased 14.7%, representing $19,144 of the overall increase. In local currency, same store sales increased 5.7% from the prior like period.

32

        The following is a summary of European Retail store activity for the three months ended March 31, 2010 and 2009:

	Three months ended March 31,
European Retail stores:	2010			2009
Company-owned stores
Open at beginning of the period		1,014			980
Opened during the period		9			3
Acquired during the period		3			2
Closed during the period		(6	)		(1	)
Open at end of the period		1,020			984
Franchised stores
Open at beginning of the period		33			26
Opened during the period		2			3
Closed during the period		(3	)		(2	)
Open at end of the period		32			27
Total company-owned and franchised stores
Open at beginning of the period		1,047			1,006
Opened during the period		11			6
Acquired during the period		3			2
Closed during the period		(9	)		(3	)
Open at end of the period		1,052			1,011

        We anticipate opening approximately 28 additional stores during the remainder of this fiscal year. We also continually evaluate when and whether to close underperforming retail stores in this segment.

Direct Response/E-Commerce

        Direct Response/E-Commerce net sales increased $5,405 or 9.1% for the three months ended March 31, 2010 as compared to the prior comparable period. The total number of orders increased approximately 15.1% and the average order size decreased approximately 3.6% for the three months ended March 31, 2010 as compared to 2009. We are a leader in the U.S. direct response nutritional supplement industry and continue to increase the number of products available through our catalogs and websites.

        This segment continues to vary its promotional strategy throughout the fiscal year. Historical results reflect this pattern and therefore this segment should be viewed on an annual, and not quarterly, basis.

33

Gross Profit

        Gross Profit by segment for the three months ended March 31, 2010 as compared with the prior comparable period was as follows:

		Gross Profit by Segment Three months ended March 31,
		2010					2009					Comparison 2010 vs 2009
				% of sales					% of sales
Segment		Gross Profit					Gross Profit					$ change		% change
Wholesale/US Nutrition		$	149,231		35.0	%	$	95,457		27.3	%	$	53,774		56.3	%
North American Retail			36,351		66.4	%		34,354		66.2	%		1,997		5.8	%
European Retail			98,722		62.1	%		84,218		62.6	%		14,504		17.2	%
Direct Response/E-Commerce			40,188		62.0	%		37,880		63.8	%		2,308		6.1	%
	Gross Profit	$	324,492		46.0	%	$	251,909		42.3	%	$	72,583		28.8	%

        The Wholesale/US Nutrition segment's gross profit percentage increased to 35.0% for the three months ended March 31, 2010 as compared to 27.3% for the prior comparable period. The prior comparable period was affected by higher raw material and other manufacturing costs which were not offset by higher prices charged to customers and lower margins on domestic private label products. During the three months ended March 31, 2010, the improved gross profit percentage reflects a more stable raw materials environment as well as efficiencies generated in manufacturing and supply chain management brought about by economies of scale. Because of the increasing competitive nature of the private label business, we anticipate gross profit margins for our private label business to decrease for the remainder of fiscal 2010. This should adversely affect gross profits for our Wholesale/US Nutrition segment during this period. To address this issue, we have begun the process of initiating additional improvements in supply chain management. We are also increasing our focus on our branded product sales, which traditionally have higher gross profit margins.

        The increase in gross profit dollars across the other three segments is mainly attributable to sales increases, as the gross profit percentages remained relatively consistent with the prior comparable period.

Advertising, Promotion and Catalog Expenses

        Total advertising, promotion and catalog expenses by segment for the three months ended March 31, 2010 as compared with the prior comparable period were as follows:

								Dollar Change			Percentage Change
		Three months ended March 31,
								2010 vs. 2009			2010 vs. 2009
		2010			2009
Wholesale/US Nutrition		$	38,105		$	22,439		$	15,666			70	%
North American Retail			4,148			3,662			486			13	%
European Retail			3,299			2,114			1,185			56	%
Direct Response/E-Commerce			5,289			4,712			577			12	%
Corporate			96			101			(5	)		(5	)%
	Total	$	50,937		$	33,028		$	17,909			54	%
	Percentage of net sales		7.2	%		5.5	%

        The increase in the Wholesale/US Nutrition segment's advertising, promotion and catalog expense is the result of an increase in television advertising campaigns for some of our major brands. The increase in the European Retail advertising also relates to television advertising. We do not expect this level of advertising to continue for the remainder of this fiscal year.

34

Selling, General and Administrative Expenses

        Selling, general and administrative expenses ("SG&A") by segment for the three months ended March 31, 2010 as compared with the prior comparable period were as follows:

								Dollar Change		Percentage Change
		Three months ended March 31,
								2010 vs. 2009		2010 vs. 2009
		2010			2009
Wholesale/US Nutrition		$	55,673		$	53,972		$	1,701		3	%
North American Retail			31,751			31,424			327		1	%
European Retail			69,543			61,786			7,757		13	%
Direct Response/E-Commerce			16,886			13,924			2,962		21	%
Corporate			20,740			13,551			7,189		53	%
	Total	$	194,593		$	174,657		$	19,936		11	%
	Percentage of net sales		27.6	%		29.3	%

        Certain expenses historically included in the Corporate segment have been re-allocated to other operating segments. Specifically, certain shipping, advertising and information technology costs have been re-allocated in fiscal 2009 to the Wholesale/US Nutrition, North American Retail and Direct Response/E-Commerce segments on a percentage of sales basis. The prior year amounts have been reclassified to conform to the current year presentation.

        The increase in the Wholesale/US Nutrition segment's SG&A for the three months ended March 31, 2010 as compared to the prior comparable period is due to an increase in bad debt expense, which was partially offset by lower payroll costs.

        The increase in the European Retail SG&A is mainly due to the effect of foreign currency exchange rates. In local currency, SG&A increased 4% principally due to payroll related charges.

        The Direct Response/E-Commerce SG&A increased $2,363 due to additional freight costs, including fuel surcharges.

        The Corporate segment's SG&A increased $3,942 for payroll and payroll related costs. In addition, professional and legal expenses increased $1,711 primarily due to higher litigation costs.

Interest Expense

        Interest expense decreased $1,272 due to lower principal balances outstanding on our Term Loan. The Term Loan balance was reduced by $49,914 to $235,086 at March 31, 2010 as compared to $285,000 at March 31, 2009.

Miscellaneous, net

        The components of miscellaneous, net were as follows:

						Dollar Change
	Three months ended March 31,
						2010 vs. 2009
	2010		2009
Foreign exchange transaction gain (loss)	$	316	$	(669	)	$	985
Rental income		129		559			(430	)
Investment income		133		168			(35	)
Other		212		221			(9	)
Total	$	790	$	279		$	511

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        Miscellaneous, net increased primarily due to the strengthening of the British pound sterling, which resulted in the reduction of foreign exchange losses in the prior comparable quarter. The average exchange rate for the conversion of the British pound sterling to U.S. dollars for the three months ended March 31, 2010 and 2009 was $1.56 and $1.44, respectively.

Provision for Income Taxes

        Our provision for income taxes is impacted by a number of factors, including federal taxes, our international tax structure, state tax rates in the jurisdictions where we conduct business, and our ability to utilize state tax credits that expire between 2013 and 2016. Therefore, our overall effective income tax rate could vary as a result of these factors. The effective income tax rate for the three months ended March 31, 2010 and March 31, 2009 was 35.3% and 35.2%, respectively.

Six Months Ended March 31, 2010 Compared to the Six Months Ended March 31, 2009:

Net Sales

        Net sales by segment for the six months ended March 31, 2010 as compared with the prior comparable period were as follows:

		Net Sales by Segment Six months ended March 31,
		2010					2009					Comparison 2010 vs 2009
Segment		Net Sales		% of total			Net Sales		% of total			$ change		% change
Wholesale/US Nutrition		$	897,688		61.6	%	$	756,768		60.3	%	$	140,920		18.6	%
North American Retail			106,227		7.3	%		100,354		8.0	%		5,873		5.9	%
European Retail			335,008		23.0	%		290,464		23.1	%		44,544		15.3	%
Direct Response/E-Commerce			117,388		8.1	%		108,519		8.6	%		8,869		8.2	%
	Net sales	$	1,456,311		100.0	%	$	1,256,105		100.0	%	$	200,206		15.9	%

Wholesale/US Nutrition

        Net sales for the Wholesale/US Nutrition segment increased $140,920 or 18.6% to $897,688 for the six months ended March 31, 2010. This increase was attributable to the following:

•

Higher net sales of domestic private label products, which increased $53,252. This increase is attributable to higher sales volume as well as a re-allocation of shelf space at a major customer.

•

Net sales from our major brands increased $65,227. Some of the major brands in this segment include Nature's Bounty®, Solgar®, Osteo Bi-Flex®, Sundown® and Ester-C®.

•

Net sales from our sports nutrition brands (such as WORLDWIDE Sport Nutrition®, Pure Protein® and Met-Rx®) increased $16,502.

•

Wholesale net sales to international customers increased $27,171.

•

Net sales from all other brands decreased $21,232 due primarily to a re-allocation of shelf space at a major customer.

        We continue to adjust shelf space allocation among our numerous wholesale brands to provide the best overall product mix and to respond to changing market conditions. These efforts have helped to strengthen US Nutrition's position in the mass marketplace. Wholesale/US Nutrition continues to leverage valuable consumer sales information obtained from our Vitamin World retail stores and Puritan's Pride Direct Response/E-Commerce operations in order to provide its mass-market customers with data and analyses to drive mass market sales.

36

        We use targeted promotions to grow overall net sales. Promotional programs and rebates as a percentage of sales were 11.6% for the six months ended March 31, 2010 as compared to 9.5% for the prior comparable period. We expect promotional programs and rebates as a percentage of sales to fluctuate on a quarterly basis.

        Product returns were $10,687 or 1.0% of sales for the six months ended March 31, 2010 as compared to $18,317 or 2.1% of sales for the prior comparable period. The product returns for the six months ended March 31, 2010 are mainly attributable to returns in the ordinary course of business. Product returns for the prior comparable period were higher than normal due to the reallocation of shelf space by customers of our US Nutrition brands and approximately $2,000 for bars primarily related to the recall of our Met-Rx® bars containing peanut butter. We expect returns relating to normal operations to trend between 1% to 2% of Wholesale/US Nutrition sales in future quarters.

        One customer represented 28% and 30% of the Wholesale/US Nutrition segment's net sales for the six months ended March 31, 2010 and 2009, respectively. It also represented 17% and 18% of consolidated net sales for the six months ended March 31, 2010 and 2009, respectively. The loss of this customer, or any other major customer, would have a material adverse effect on our results of operations if we were unable to replace that customer.

North American Retail

        Net sales for this segment increased $5,873 or 5.9% to $106,227 for the six months ended March 31, 2010. Sales for stores open more than one year (same store sales) increased 4.9%, representing $4,869 of the overall increase.

        The following is a summary of North American Retail store activity for the six months ended March 31, 2010 and 2009:

		Six months ended March 31,
North American Retail stores:		2010			2009
Vitamin World
	Open at beginning of the period		442			441
	Opened during the period		7			7
	Closed during the period		(3	)		(4	)
	Open at end of the period		446			444
Le Naturiste
	Open at beginning of the period		86			81
	Opened during the period		—			6
	Closed during the period		(1	)		—
	Open at end of the period		85			87
Total North American Retail
	Open at beginning of the period		528			522
	Opened during the period		7			13
	Closed during the period		(4	)		(4	)
	Open at end of the period		531			531

        We anticipate opening up to 14 additional Vitamin World stores during the remainder of this fiscal year. We also continually evaluate when and whether to close underperforming retail stores in this segment.

37

European Retail

        Net sales for this segment increased $44,544 or 15.3% to $335,008 for the six months ended March 31, 2010. Same store sales increased 12.3%, representing $34,612 of the overall increase. In local currency, same store sales increased 5.9% from the prior like period.

        The following is a summary of European Retail store activity for the six months ended March 31, 2010 and 2009:

	Six months ended March 31,
European Retail stores:	2010			2009
Company-owned stores
Open at beginning of the period		1,004			975
Opened during the period		19			8
Acquired during the period		3			2
Closed during the period		(6	)		(1	)
Open at end of the period		1,020			984
Franchised stores
Open at beginning of the period		28			22
Opened during the period		7			7
Closed during the period		(3	)		(2	)
Open at end of the period		32			27
Total company-owned and franchised stores
Open at beginning of the period		1,032			997
Opened during the period		26			15
Acquired during the period		3			2
Closed during the period		(9	)		(3	)
Open at end of the period		1,052			1,011

        We anticipate opening approximately 28 additional stores during the remainder of this fiscal year. We also continually evaluate when and whether to close underperforming retail stores.

Direct Response/E-Commerce

        Direct Response/E-Commerce net sales increased $8,869 or 8.2% for the six months ended March 31, 2010 as compared to the prior comparable period. The total number of orders increased approximately 12% and the average order size remained consistent as compared to the prior comparable period. We are a leader in the U.S. direct response nutritional supplement industry and continue to increase the number of products available through our catalogs and websites.

        This segment continues to vary its promotional strategy throughout the fiscal year. Historical results reflect this pattern and therefore this segment should be viewed on an annual, and not quarterly, basis.

38

Gross Profit

        Gross Profit by segment for the six months ended March 31, 2010 as compared with the prior comparable period was as follows:

		Gross Profit by Segment Six months ended March 31,
		2010					2009					Comparison 2010 vs 2009
				% of sales					% of sales
Segment		Gross Profit					Gross Profit					$ change		% change
Wholesale/US Nutrition		$	311,133		34.7	%	$	207,473		27.4	%	$	103,660		50.0	%
North American Retail			71,162		67.0	%		66,773		66.5	%		4,389		6.6	%
European Retail			208,630		62.3	%		182,968		63.0	%		25,662		14.0	%
Direct Response/E-Commerce			73,270		62.4	%		66,744		61.5	%		6,526		9.8	%
	Gross Profit	$	664,195		45.6	%	$	523,958		41.7	%	$	140,237		26.8	%

        The Wholesale/US Nutrition segment's gross profit percentage increased to 34.7% for the six months ended March 31, 2010 as compared to 27.4% for the prior comparable period. The prior comparable period was affected by higher raw material and other manufacturing costs that were not offset by higher prices charged to customers and lower margins on domestic private label products. During the six months ended March 31, 2010, the improved gross profit percentage reflects a more stable raw materials environment as well as efficiencies generated in manufacturing and supply chain management brought about by economies of scale. Because of the increasing competitive nature of the private label business, we anticipate gross profit margins for our private label business to decrease for the remainder of fiscal 2010. This should adversely affect gross profits for our Wholesale/US Nutrition segment during this period. To address this issue, we have begun the process of initiating additional improvements in supply chain management. We are also increasing our focus on our branded product sales, which traditionally have higher gross profit margins.

        The increase in gross profit dollars for the other three segment's relates primarily to higher sales volume for the six months ended March 31, 2010 as compared to the comparable prior period.

Advertising, Promotion and Catalog Expenses

        Total advertising, promotion and catalog expenses by segment for the six months ended March 31, 2010 as compared with the prior comparable period were as follows:

								Dollar Change			Percentage Change
		Six months ended March 31,
								2010 vs. 2009			2010 vs. 2009
		2010			2009
Wholesale/US Nutrition		$	58,555		$	43,122		$	15,433			36	%
North American Retail			5,985			6,056			(71	)		(1	)%
European Retail			6,276			5,484			792			14	%
Direct Response/E-Commerce			8,659			9,424			(765	)		(8	)%
Corporate			204			233			(29	)		(12	)%
	Total	$	79,679		$	64,319		$	15,360			24	%
	Percentage of net sales		5.5	%		5.1	%

        The increase in the Wholesale/US Nutrition segment's advertising, promotion and catalog expense is the result of an increase in television advertising campaigns for some of our major brands. The increase in the European Retail advertising also relates to television advertising. We do not expect this level of advertising to continue for the remainder of this fiscal year.

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Selling, General and Administrative Expenses

        SG&A by segment for the six months ended March 31, 2010 as compared with the prior comparable period were as follows:

								Dollar Change			Percentage Change
		Six months ended March 31,
								2010 vs. 2009			2010 vs. 2009
		2010			2009
Wholesale/US Nutrition		$	110,887		$	115,288		$	(4,401	)		(4	)%
North American Retail			62,653			62,604			49			0	%
European Retail			141,830			130,995			10,835			8	%
Direct Response/E-Commerce			30,210			28,718			1,492			5	%
Corporate			37,744			32,952			4,792			15	%
	Total	$	383,324		$	370,557		$	12,767			3	%
	Percentage of net sales		26.3	%		29.5	%

        Certain expenses historically included in the Corporate segment have been re-allocated to other operating segments. Specifically, certain shipping, advertising and information technology costs have been re-allocated in fiscal 2009 to the Wholesale/US Nutrition, North American Retail and Direct Response/E-Commerce segments on a percentage of sales basis. The prior year amounts have been reclassified to conform to the current year presentation.

        The Wholesale/US Nutrition's SG&A decreased $4,401 for the six months ended March 31, 2010 as compared to the prior comparable period. This decrease is attributable to payroll costs, which decreased $2,206 primarily related to severance costs incurred in the prior comparable period that did not recur, a decrease in insurance costs of $2,156 due to lower negotiated rates and a decrease in freight costs of $1,085, which declined to 2.1% as a percentage of net sales as compared to 2.6% in the prior comparable period which is partially attributable to better utilization of freight carriers. These decreases were partially offset by increases in other expense categories.

        The increase in the European Retail SG&A is mainly due to the effect of foreign currency exchange rates. In local currency, SG&A increased 2% principally due to payroll related charges.

        The Direct Response/E-Commerce SG&A increased $1,492 primarily due to additional freight costs. The Corporate segment's SG&A increased $4,792 primarily due to payroll and payroll related costs of $2,691.

IT Project Termination Costs

        During December 2008, management determined that certain information technology projects relating to the Direct Response/E-Commerce segment would be terminated because they were determined to be ineffective and uneconomical. As a result, we recorded a charge of $8,647 for previously capitalized software configuration and other related costs for the six months ended March 31, 2009.

Interest Expense

        Interest expense decreased $2,705 due to lower principal balances outstanding on the Term Loan. The Term Loan balance was reduced by $49,914 to $235,086 at March 31, 2010 as compared to $285,000 at March 31, 2009.

40

Miscellaneous, net

        The components of miscellaneous, net were as follows:

						Dollar Change
	Six months ended March 31,
						2010 vs. 2009
	2010		2009
Foreign exchange transaction gain (loss)	$	934	$	(7,740	)	$	8,674
Rental income		276		1,137			(861	)
Investment income		256		858			(602	)
Other		1,079		389			690
Total	$	2,545	$	(5,356	)	$	7,901

        Miscellaneous, net increased primarily due to the strengthening of the British pound sterling, which resulted in the reduction of foreign exchange losses in the prior comparable period. The average exchange rate for the conversion of the British pound sterling to U.S. dollars for the six months ended March 31, 2010 and 2009 was $1.60 and $1.50, respectively.

Provision for Income Taxes

        Our provision for income taxes is impacted by a number of factors, including federal taxes, our international tax structure, state tax rates in the jurisdictions where we conduct business, and our ability to utilize state tax credits that expire between 2013 and 2016. Therefore, our overall effective income tax rate could vary as a result of these factors. The effective income tax rate for the six months ended March 31, 2010 and March 31, 2009 was 35.0% and 35.5%, respectively. The effective income tax rate was lower for the six months ended March 31, 2010 as compared to the prior comparable period primarily due to the partial release of a valuation allowance on state tax credits in the current year.

Seasonality

        Although we believe that our business is not seasonal in nature, historically, we have experienced, and expect to continue to experience, a substantial variation in our net sales and operating results from quarter to quarter. The factors that influence this variability of quarterly results include general economic and industry conditions affecting consumer spending, changing consumer demands and current news on nutritional supplements, the timing of our introduction of new products, promotional program incentives offered to customers, the timing of catalog promotions, the level of consumer acceptance of new products and actions of competitors. Accordingly, a comparison of our results of operations from consecutive periods is not necessarily meaningful, and our results of operations for any period are not necessarily indicative of future performance. Additionally, we may experience higher net sales in a quarter depending upon when we have engaged in significant advertising or other promotional activities.

Liquidity and Capital Resources

        Our primary sources of liquidity and capital resources are cash generated from operations and our revolving credit facility. The facility provides for revolving credit loans in the aggregate principal amount of up to $325,000 to be used for working capital and other general corporate purposes, and acquisitions. At March 31, 2010, the entire facility remained undrawn and available under the revolving credit facility. We have used cash generated from operations to finance working capital, facility expansions, acquisitions, capital expenditures and debt service requirements. We anticipate these uses will continue to be our principal uses of cash in the future.

41

        The following table sets forth, for the periods indicated, cash balances and working capital:

	As of March 31, 2010		As of September 30, 2009
Cash and cash equivalents at end of the period	$	213,905	$	106,001
Working capital	$	777,560	$	674,439

        The following table sets forth, for the period indicated, net cash flows provided by (used in) operating, investing and financing activities and other operating measures:

	Six months ended March 31,
	2010			2009
Cash flow provided by operating activities	$	157,436		$	56,226
Cash flow used in investing activities	$	(23,010	)	$	(23,914	)
Cash flow used in financing activities	$	(21,265	)	$	(71,779	)
Total inventory turnover		2.44			2.43
Finished goods inventory turnover (excluding bulk)		5.25			5.22
Days sales outstanding in accounts receivable		35			34

        We monitor current and anticipated future levels of cash and cash equivalents in relation to anticipated operating, financing and investing requirements. Cash and cash equivalents held by our foreign subsidiaries are subject to U.S. income taxes upon repatriation to the United States. We generally repatriate all earnings from our foreign subsidiaries where permitted under local law. However, during fiscal 2009, we permanently reinvested a portion of our foreign earnings outside of the United States. We also plan to permanently reinvest a portion of our foreign earnings outside of the United States during fiscal 2010.

        The increase in working capital of $103,121 as compared to September 30, 2009 was primarily due to increased cash and accounts receivable balances.

        Cash provided by operating activities during the six-month period ended March 31, 2010 was mainly attributable to net income.

        During the six-month period ended March 31, 2010, cash flows used in investing activities consisted primarily of purchases of property, plant and equipment, offset by proceeds received from the sale of municipal bond investments.

        For the six-month period ended March 31, 2010, cash flows used in financing activities related to the principal payments under long-term debt agreements and capital lease obligations, offset by proceeds from the exercise of stock options, including the excess income tax benefit.

        We believe our cash generated from operations, as well as our undrawn borrowings under our $325,000 revolving credit facility, will be sufficient to fund our operations and meet our cash requirements to satisfy our working capital needs, capital expenditure needs, outstanding commitments, and other liquidity requirements associated with our existing operations over the next 18 to 24 months. Our ability to fund these requirements and comply with financial covenants under our debt agreements will depend on our future operations, performance and cash flow and is subject to prevailing economic conditions and financial, business and other factors, some of which are beyond our control. In addition, as part of our strategy, we may pursue acquisitions and investments that are complementary to our business. Any material future acquisitions or investments will likely require additional capital and, therefore, we cannot predict or assure that additional funds from existing sources will be sufficient for such future events.

42

Off-Balance Sheet Arrangements

        We have no off-balance sheet arrangements. For additional information relating to certain contractual cash obligations see below.

Contractual Cash Obligations and Other Commercial Commitments

        We conduct retail operations under operating leases, which generally have lease terms between 5-15 years, with the longest lease term expiring in 2039. Some of the leases contain escalation clauses, as well as renewal options, and provide for contingent rent based upon sales plus certain tax and maintenance costs. At March 31, 2010, we had $604,218 in future minimum rental payments (excluding real estate tax and maintenance costs) for retail locations and other leases that have initial or noncancelable lease terms in excess of one year.

        During the six months ended March 31, 2010, no one supplier individually represented greater than 10% of our raw material purchases. We do not believe that the loss of any single supplier would have a material adverse effect on our consolidated financial condition or results of operations. We were committed to make future purchases for inventory related items, such as raw materials and finished goods, under various purchase arrangements, some of which extend beyond one year, with fixed price provisions aggregating $121,168 at March 31, 2010. Generally, most of our purchase commitments are cancelable at our discretion until the order has been shipped, but require repayment of all expenses incurred through the date of cancellation.

        We had $24,272 in open capital commitments at March 31, 2010, primarily related to new stores, building improvements and manufacturing equipment.

        At March 31, 2010, we had a liability of $8,711 for unrecognized tax benefits, the recognition of which would have an effect of $5,931 on income tax expense and the effective income tax rate. We do not believe that the amount will change significantly in the next 12 months. At this time, we are unable to make a reasonably reliable estimate of the timing of payments in individual years beyond 12 months due to uncertainties in the timing of tax audit outcomes.

        We have employment agreements with two of our executive officers. The agreements, entered into on March 1, 2008, each have a term of three years and are automatically renewed each year thereafter unless either party notifies the other to the contrary. These agreements provide for minimum salary levels and contain provisions regarding severance and change in control of the Company. The remaining commitment for salaries to these two officers as of March 31, 2010 was approximately $1,444. In addition, five members of Holland & Barrett's senior executive staff have service contracts terminable by us upon twelve months notice. The annual aggregate commitment for such senior executive staff as of March 31, 2010 was approximately $1,349.

        We maintain a consulting agreement with Rudolph Management Associates, Inc. for the services of Arthur Rudolph, one of our directors and the father of Scott Rudolph, our Chief Executive Officer. The agreement requires Mr. Rudolph to provide consulting services to us through December 31, 2010, in exchange for a consulting fee of $450 per year, payable monthly. In addition, Mr. Rudolph receives certain fringe benefits accorded to our executives.

        We have grown our business through acquisitions, and under proper conditions, may continue to seek to acquire entities in similar or complementary businesses. Such acquisitions are likely to require the incurrence or assumption of indebtedness or obligations, the issuance of equity securities or some combination thereof. In addition, from time to time we may determine to sell or otherwise dispose of certain of our existing assets or businesses; we cannot predict if any such transactions will be consummated, nor the terms or forms of consideration that might be required in any such transactions.

43

Financial Covenants and Credit Rating

        We were in compliance with all covenants under our credit arrangements at March 31, 2010. Our credit arrangements impose certain restrictions regarding capital expenditures and limit our ability to: incur additional indebtedness, dispose of assets, make repayments of indebtedness or amendments of debt instruments, pay distributions, create liens on assets and enter into sale and leaseback transactions, investments, loans or advances and acquisitions. Such restrictions could limit our ability to respond to market conditions, to provide for unanticipated capital investments or to take advantage of business or acquisition opportunities.

        At March 31, 2010, credit ratings were as follows:

Credit Rating Agency	Secured Debt	71/8% Notes	Overall
Standard and Poors	BBB-	BB	BB/Positive
Moody's	Ba1/LGD2	B1/LGD6	Ba2/Positive

Recent Accounting Developments

        In June 2009, the Financial Accounting Standards Board ("FASB") issued authoritative guidance requiring an enterprise to perform an analysis to determine whether the enterprise's variable interests give it a controlling financial interest in a variable interest entity. This analysis identifies the primary beneficiary of a variable interest entity as one with the power to direct the activities of a variable interest entity that most significantly impacts the entity's economic performance and the obligation to absorb losses of the entity that could potentially be significant to the variable interest. This guidance will become effective for us October 1, 2010. We anticipate that the adoption of this guidance will not have any impact on our consolidated financial position or results of operations because we currently do not have any variable interest entities.

        The FASB issued authoritative guidance that retains the purchase method of accounting for acquisitions; however, it includes changes in the way assets and liabilities are recognized in purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. This guidance became effective for us October 1, 2009 and will apply prospectively to business combinations completed on or after that date. The adoption of this guidance will impact future acquisitions.

Critical Accounting Policies and Estimates

        We describe our significant accounting policies in Note 1 of the Notes to Consolidated Financial Statements included in our 2009 Form 10-K. We discuss our critical accounting estimates in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our 2009 Form 10-K. There have been no significant changes in our significant accounting policies or critical accounting estimates since the end of fiscal 2009. The following disclosure regarding our promotional program incentive allowances is provided for additional clarification:

        We estimate our allowance for promotional program incentives based on specific outstanding marketing programs and historical experience. The allowance for sales incentives offered to customers is based on various contractual terms or other arrangements agreed to in advance with certain customers. Generally, customers earn such incentives based on sales. We accrue these incentives as a reduction to sales either at the time of sale or over the period of time in which they are earned, depending on the nature of the program. Historically, we have not experienced material adjustments to the estimate of our promotional program incentive allowance and we do not expect that there will be a material change in the future estimates and assumptions we use.

44

NBTY, Inc.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
(in thousands)

Quantitative and Qualitative Disclosures About Market Risk

        We are subject to currency fluctuations, primarily with respect to the British pound sterling, the euro, the Canadian dollar and the Chinese yuan, and interest rate risks that arise from normal business operations. We regularly assess these risks.

        We have subsidiaries whose operations are denominated in foreign currencies (primarily the British pound sterling, the euro, the Canadian dollar and the Chinese yuan). We consolidate the earnings of our international subsidiaries by translating them into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar weakens against foreign currencies, the remeasurement of these foreign currency denominated transactions results in increased net sales, operating expenses and net income. Similarly, our net sales, operating expenses and net income will decrease when the U.S. dollar strengthens against foreign currencies.

        The U.S. dollar volume of net sales denominated in foreign currencies was approximately $430,974, or 29.6% of total net sales, for the six months ended March 31, 2010. A majority of our foreign currency exposure is denominated in the British pound sterling and Canadian dollars. For the six months ended March 31, 2010, as compared to the prior comparable period, the change in currency rates between the British pound sterling and Canadian dollar as compared to the U.S. dollar was 6% and 17%, respectively, resulting in an increase of $25,895 and $2,959 in net sales and operating income, respectively. The related impact on net income was an increase of approximately $0.04 per diluted share for the six months ended March 31, 2010.

        To manage the potential risk arising from changing interest rates and their impact on long-term debt, our policy is to maintain a combination of available fixed and variable rate financial instruments. We are exposed to changes in interest rates on our floating rate revolving credit facility, our multicurrency term facility, and our Term Loan. With respect to the interest on the Term Loan, in August 2009, we entered into two interest rate swap contracts, each with a notional amount of $100 million. Under the terms of the swap contracts, variable interest payments are swapped for fixed interest payments. The interest rate exposure on the multicurrency term facility is mitigated by the interest earned on the cash collateral securing the loan. With respect to interest on our revolving credit facility, there were no borrowings outstanding during the six months ended March 31, 2010. Therefore, a hypothetical 10% change in interest rates would not have a material effect on our consolidated pretax income or cash flow.

        The 7¹/8% Senior Subordinated Notes had a fair value at March 31, 2010, based on then quoted market prices, of $191,425. At March 31, 2010, based solely on a hypothetical 10% change in interest rates related to our fixed rate Notes, we estimate that the hypothetical fair value of our fixed rate debt would have changed approximately $5,000. We believe that the carrying value of all our other financial instruments approximates fair value due to their short maturities and variable interest rates.

45

NBTY, Inc.
Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

        Our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We designed our disclosure controls and procedures to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, to allow timely decisions regarding required disclosure. Our chief executive officer and chief financial officer, with assistance from other members of our management, have reviewed the effectiveness of our disclosure controls and procedures as of March 31, 2010, and, based on their evaluation, have concluded that our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

        There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the three months ended March 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

46

NBTY, Inc.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings

Prohormone Products

        In March 2004, a putative class-action lawsuit, captionedJerry Beidler v. MET-Rx U.S.A, Inc, was filed in New Jersey Superior Court, Mercer County, against MET-Rx U.S.A, Inc. ("Met-Rx"), a subsidiary of the Company, claiming that the advertising and marketing of certain prohormone supplements were false and misleading and that plaintiff and the putative class of New Jersey purchasers of these products were entitled to damages and injunctive relief. Because these allegations were virtually identical to allegations made in a putative nationwide class-action previously filed against Met-Rx in California (in an action styledEric Ayala v. MET-Rx U.S.A, Inc. et. al.), we moved in 2004 to dismiss or stay the New Jersey action pending the outcome of the California action. The motion was granted, and the New Jersey action is stayed at this time. The California action against Met-Rx was dismissed in 2009.

Nutrition Bars

        Our subsidiary, Rexall Sundown, Inc. ("Rexall"), and certain of its subsidiaries, are defendants in a class-action lawsuit, captionedJamie Pesek, et al. v. Rexall Sundown, Inc., et al., brought in California Superior Court, County of San Francisco in 2002 on behalf of all California consumers who bought various nutrition bars. Plaintiffs allege misbranding of nutrition bars and violations of California unfair competition statutes, misleading advertising and other similar causes of action. Plaintiffs seek restitution, legal fees and injunctive relief. We have defended this action vigorously. Since December 2007, with Rexall's and the other defendants' renewed motion for judgment on the pleadings pending, the Court has stayed the case for all purposes, pending rulings on relevant cases before the California Supreme Court. Although the California Supreme Court has resolved some of those cases, others remain pending as of this date. Accordingly, the case remains stayed. The Court held a case-management conference ("CMC") on August 5, 2009. At that time, the parties requested, and the Court agreed, to keep the stay in place for at least another six months. The Court scheduled a subsequent CMC for February 25, 2010, but canceled that conference upon being informed by the parties that the California Supreme Court had not yet acted. The Court has set another CMC for May 21, 2010, and instructed the parties to report back before that date as to the status of the cases before the California Supreme Court. By agreement of the parties, the May 21, 2010 CMC has been continued for six months. The California Supreme Court still has not resolved the outstanding issues pending before it. Based upon the information currently available, no determination can be made at this time as to the final outcome of this case, nor can its materiality be accurately ascertained.

Claims in the Ordinary Course

        In addition to the foregoing, other regulatory inquiries, claims, suits and complaints (including product liability, intellectual property and California Proposition 65 claims) arise in the ordinary course of our business. We believe that such other inquiries, claims, suits and complaints would not have a material adverse effect on our consolidated financial condition or results of operations, if adversely determined against us.

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NBTY, Inc.
Item 1A. Risk Factors

Risk Factors

        In addition to the other information set forth in this report, you should carefully consider the risk factors disclosed under Part I—Item 1A, "Risk Factors" in our 2009 Form 10-K, which could materially adversely affect our business, financial condition, operating results and cash flows. The risks and uncertainties described in our 2009 Form 10-K are not the only ones we face. Risks and uncertainties not currently known to us or that we currently deem immaterial also may materially adversely affect our business, financial condition operating results or cash flows. Since September 30, 2009, there have been no significant changes relating to risk factors.

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NBTY, Inc.
Item 5. Other Information

        At our 2010 Annual Meeting of Shareholders held February 26, 2010, the following matters were voted upon:

        Proposition 1:    Re-elected Directors to serve until the 2013 Annual Meeting.

	Votes for		Votes withheld		Broker non-votes
Michael L. Ashner		41,073,482		11,811,067		6,373,960
Glenn Cohen		37,627,673		15,256,876		6,373,960
Arthur Rudolph		35,127,415		17,757,134		6,373,960

        Proposition 2:    Ratified the appointment of PricewaterhouseCoopers LLP as independent registered public accountants to audit the consolidated financial statements of the Company for the year ending September 30, 2010.

Votes for		Votes against		Votes abstain
	59,188,750		26,234		43,525

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NBTY, Inc.
Item 6. Exhibits

Exhibit No.		Description
	3.1	Restated Certificate of Incorporation of NBTY, Inc. (incorporated by reference to exhibit 3.1 to the Form 10-K of NBTY, Inc. for the fiscal year ended September 30, 2005, filed on December 22, 2005).
	3.2	Amended and Restated By-Laws of NBTY, Inc. (incorporated by reference to exhibit 3.2 to the Form 8-K of NBTY, Inc. filed on March 4, 2010).
	4.1	Indenture, dated as of September 23, 2005, among NBTY, Inc., the Guarantors (as defined therein), and The Bank of New York, as Trustee (incorporated by reference to exhibit 4.2 to NBTY, Inc.'s Form 8-K filed on September 27, 2005).
	4.2	Registration Rights Agreement, dated as of September 23, 2005, among NBTY, Inc., the Guarantors (as defined therein) and J.P. Morgan Securities, Inc., Adams Harkness, Inc., BNP Paribas Securities Corp., HSBC Securities (USA), Inc., and RBC Capital Markets Corporation (incorporated by reference to exhibit 4.3 to NBTY, Inc.'s Form 8-K filed on September 27, 2005).
	10.1	Eighth Amendment to Executive Consulting Agreement, effective January 1, 2010, by and between NBTY, Inc. and Rudolph Management Associates, Inc. (incorporated by reference to exhibit 10.1 to the Form 10-Q of NBTY, Inc. for the fiscal quarter ended December 31, 2009, filed on February 9, 2010).
	31.1	Rule 13a-14(a) Certification of Principal Executive Officer.*
	31.2	Rule 13a-14(a) Certification of Principal Financial Officer.*
	32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
	32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

*

Filed herewith

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SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	NBTY, INC. (Registrant)
Date: May 10, 2010	By:	/s/ SCOTT RUDOLPH Scott Rudolph Chairman and Chief Executive Officer (Principal Executive Officer)
Date: May 10, 2010	By:	/s/ HARVEY KAMIL Harvey Kamil President and Chief Financial Officer (Principal Financial and Accounting Officer)

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