UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the period ended March 31, 2001
Commission File Number: 0-10666
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NBTY, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 11-2228617
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
90 Orville Drive, Bohemia, NY 11716
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (631) 567-9500
--------------
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 and Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registration was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
Shares of Common Stock as of March 31, 2001: 65,260,799
NBTY, INC. and SUBSIDIARIES
INDEX
PART I Financial Information
Condensed Consolidated Balance Sheets -
March 31, 2001 (unaudited) and
September 30, 2000 1 - 2
Condensed Consolidated Statements of Operations -
(unaudited) Three months Ended
March 31, 2001 and 2000 3
Condensed Consolidated Statements of Operations -
(unaudited) Six months Ended
March 31, 2001 and 2000 4
Condensed Consolidated Statements of
Stockholders' Equity Six months Ended
March 31,2001 (unaudited) and Year ended
September 30, 2000 5
Condensed Consolidated Statements of Cash Flows -
(unaudited) Six months Ended
March 31, 2001 and 2000 6 - 7
Notes to Condensed Consolidated
Financial Statements (unaudited) 8 - 13
Management's Discussion and Analysis
of Financial Condition and Results of Operations 14 - 20
PART II Other Information 21
Signature 22
NBTY, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollars and shares in thousands)
March 31, September 30,
2001 2000
--------- -------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 43,379 $ 31,464
Accounts receivable, less allowance for
doubtful accounts of $1,216 at
March 31, 2001 and $1,227 at
September 30, 2000. 33,572 24,913
Inventories 147,339 130,741
Deferred income taxes 3,549 3,549
Prepaid property taxes, rent, and other
current assets 17,561 20,269
-----------------------
Total current assets 245,400 210,936
Property, plant and equipment 334,182 326,010
less accumulated depreciation and
amortization 125,976 111,846
-----------------------
208,206 214,164
Intangible assets, net 163,259 172,124
Other assets 8,227 6,389
-----------------------
Total assets $625,092 $603,613
=======================
See notes to condensed consolidated financial statements.
NBTY, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(Dollars and shares in thousands)
March 31, September 30,
2001 2000
--------- -------------
(Unaudited)
Current liabilities:
Current portion of long-term debt
and capital lease obligations $ 12,746 $ 12,829
Accounts payable 59,699 61,100
Accrued expenses and income taxes 49,708 36,893
-----------------------
Total current liabilities 122,153 110,822
Long-term debt 214,680 199,095
Obligations under capital leases 884 1,383
Deferred income taxes 16,939 17,050
Other liabilities 2,807 2,820
-----------------------
Total liabilities 357,463 331,170
Commitments and contingencies
Stockholders' equity:
Common stock, $0.008 Par; authorized 175,000
shares; issued 68,524 shares at March 31,
2001 and 68,524 shares at September 30, 2000
and outstanding 65,261 shares at March 31,
2001 and 68,289 shares at September 30, 2000 548 548
Capital in excess of par 123,798 123,798
Retained earnings 181,886 163,300
-----------------------
306,232 287,646
Less: 3,263 and 235 treasury shares, at cost,
at March 31, 2001 and September 30, 2000,
respectively (17,224) (1,512)
Stock subscriptions receivable (839) (839)
Accumulated other comprehensive loss (20,540) (12,852)
-----------------------
Total stockholders' equity 267,629 272,443
-----------------------
Total liabilities and stockholders'
equity $625,092 $603,613
=======================
See notes to condensed consolidated financial statements.
NBTY, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)
For the three months
ended March 31,
----------------------
2001 2000
---- ----
Net sales $224,775 $200,107
Cost and expenses:
Cost of sales 97,804 84,153
Catalog printing, postage and promotion 11,701 9,604
Selling, general and administrative 82,345 72,334
----------------------
191,850 166,091
----------------------
Income from operations 32,925 34,016
----------------------
Other income (expense):
Interest, net (4,865) (4,739)
Miscellaneous, net 1,123 828
----------------------
(3,742) (3,911)
----------------------
Income before income taxes 29,183 30,105
Income taxes 11,235 12,042
----------------------
Net income $ 17,948 $ 18,063
======================
Net income per share:
Basic $ 0.27 $ 0.27
======================
Diluted $ 0.27 $ 0.26
======================
Weighted average common shares outstanding:
Basic 65,273 67,200
======================
Diluted 66,050 69,630
======================
See notes to condensed consolidated financial statements.
NBTY, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)
For the six months
ended March 31,
----------------------
2001 2000
---- ----
Net sales $391,604 $371,279
Cost and expenses:
Cost of sales 172,309 165,096
Catalog printing, postage and promotion 27,411 17,889
Selling, general and administrative 154,376 136,258
----------------------
354,096 319,243
----------------------
Income from operations 37,508 52,036
----------------------
Other income (expense):
Interest, net (9,835) (9,425)
Miscellaneous, net 2,549 1,523
----------------------
(7,286) (7,902)
----------------------
Income before income taxes 30,222 44,134
Income taxes 11,636 17,654
----------------------
Net income $ 18,586 $ 26,480
======================
Net income per share:
Basic $ 0.28 $ 0.40
======================
Diluted $ 0.28 $ 0.38
======================
Weighted average common shares outstanding:
Basic 66,162 66,659
======================
Diluted 66,736 68,869
======================
See notes to condensed consolidated financial statements.
NBTY, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders' Equity
for the year ended September 30, 2000 and
the six months ended March 31, 2001
(Unaudited)
(Dollars and shares in thousands)
Accumu-
lated
Common stock Treasury stock Other
--------------- Capital --------------- Stock Compre- Total Total
Number in Number sub- hensive Stock- Compre-
of excess Retained of scriptions Income holders' hensive
shares Amount of par earnings shares Amount receivable (Loss) Equity Income
------ ------ ------- -------- ------ ------ ---------- -------- -------- -------
Balances, September 30, 1999 66,096 $529 $106,332 $111,792 - - $(839) $ 6,135 $223,949 $22,101
=======
Net income for year ended
September 30, 2000 51,508 51,508 51,508
Purchase of treasury shares,
at cost 288 (2,511) (2,511)
Acquisition of Nutrition
Warehouse 1,059 8 12,235 12,243
Treasury stock retired (53) (999) (53) 999 -
Exercise of stock options 1,422 11 4,397 4,408
Tax benefit from exercise of
stock options 1,833 1,833
Foreign currency translation
adjustment (18,987) (18,987) (18,987)
---------------------------------------------------------------------------------------------------
Balances, September 30, 2000 68,524 548 123,798 163,300 235 (1,512) (839) (12,852) 272,443 32,521
=======
Net income for the six months
ended March 31, 2001 18,586 18,586 18,586
Purchase of treasury shares,
at cost 3,028 (15,712) (15,712)
Foreign currency translation
adjustment (7,688) (7,688) (7,688)
---------------------------------------------------------------------------------------------------
Balances, March 31, 2001 68,524 $548 $123,798 $181,886 3,263 $(17,224) $(839) $(20,540) $267,629 $10,898
===================================================================================================
See notes to consolidated financial statements.
NBTY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
For the six months
ended March 31,
----------------------
2001 2000
---- ----
Net income $ 18,586 $ 26,480
Adjustments to reconcile net income to
cash provided by operating activities:
Loss on sale of property, plant and equipment 295 468
Depreciation and amortization 21,778 17,338
Provision for allowance for doubtful accounts (11) 7
Tax benefit from exercise of stock options 138
Changes in assets and liabilities:
Increase in accounts receivable (8,655) (60)
(Increase) decrease in inventories (17,639) 13,369
Decrease in prepaid catalog costs and other
current assets 2,330 8,753
Increase in other assets (1,836) (1,225)
Decrease in accounts payable (695) (4,838)
Increase in accrued expenses 13,620 20,401
Decrease in other liabilities (15) (1,372)
----------------------
Net cash provided by operating activities 27,758 79,458
----------------------
Cash flows from investing activities:
Purchase of property, plant and equipment (15,946) (26,454)
Proceeds from sale of property, plant, and
equipment 2,817 25
Purchase of business, net of cash acquired (19,578)
Increase in intangible assets (10)
----------------------
Net cash provided by investing activities (13,129) (46,017)
----------------------
Cash flows from financing activities:
Borrowings (Payments) under long term debt
agreements 24,064 (3,412)
Principal payments under long-term debt
agreements and capital leases (9,123) (1,338)
Proceeds from stock options exercised 14
Purchase of treasury stock (15,712)
----------------------
Net cash used in financing activities (771) (4,736)
----------------------
Effect of exchange rate changes on cash
and cash equivalents (1,943) (454)
----------------------
Net increase in cash and cash equivalents 11,915 28,251
Cash and cash equivalents at beginning of period 31,464 18,269
----------------------
Cash and cash equivalents at end of period $ 43,379 $ 46,520
======================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 10,575 $ 9,572
Cash paid during the period for taxes $ 3,601 $ 827
See notes to condensed consolidated financial statements.
NBTY, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the three months ended March 31, 2001 and 2000
(Unaudited)
(In thousands, except per share amounts)
Supplemental Non-cash Investing and Financing Information:
In connection with the Company's January 1, 2000 acquisition of Nutrition
Warehouse, Inc. and its affiliated companies (NW), the Company issued
approximately 1,059 shares of its common stock with a total then market
value of $12,243.
NBTY, INC. and SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except per share amounts)
1. Principles of consolidation and basis of presentation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All intercompany accounts and
transactions have been eliminated.
In the opinion of the Company, the unaudited condensed consolidated
financial statements contain all adjustments necessary to present fairly its
financial position as of March 31, 2001 and its results of operations for
the three and six months ended March 31, 2001 and 2000 and statements of
cash flows for the six months ended March 31, 2001 and 2000. The condensed
consolidated balance sheet as of September 30, 2000 has been derived from
the audited balance sheet as of that date. The results of operations for the
three and six months ended March 31, 2001 and statements of cash flows for
the six months ended March 31, 2001 are not necessarily indicative of the
results to be expected for the full year. This report should be read in
conjunction with the Company's annual report filed on Form 10-K for the
fiscal year ended September 30, 2000.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to 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. The most significant estimates include the valuation
of inventories, the allowance for doubtful accounts receivable and the
recoverability of long-lived assets. Actual results could differ from those
estimates.
Reclassifications
Certain reclassifications have been made to conform prior year amounts to
the current year presentation.
New accounting standards
Effective October 1, 2000, the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities". As the Company has
determined, it does not have any derivatives or hedging activities, the
adoption of SFAS No. 133 did not affect the Company's financial position or
results of operations as of and for the six months ended March 31, 2001.
In December 1999, the Securities and Exchange Commission staff issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements," ("SAB 101"). SAB 101 does not change existing revenue
recognition rules, but rather addresses and clarifies existing rules and
their application. SAB 101 is effective for the Company beginning July 1,
2001 or fourth quarter of fiscal 2001. Management is currently assessing
the impact of SAB 101 on the Company's results of operations and financial
position.
NBTY, INC. and SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
(In thousands, except per share amounts)
2. Acquisitions
On January 1, 2000, the Company acquired Nutrition Warehouse, Inc. and its
affiliated companies ("NW") for $20 million in cash and approximately 1,059
shares of NBTY stock with a total then market value of $12.2 million. NW
operates an e-commerce/direct response business as well as fourteen retail
stores in various locations in New York. The e-commerce business has been
combined with the Company's Puritan.com operations. Annual revenues
approximated $14 million for the e-commerce/direct response business and $14
million in retail sales for the year ended December 31, 1999. The cash
portion of the acquisition was funded with $20 million in borrowings under
the Company's Credit and Guarantee Agreement.
3. Comprehensive earnings
Comprehensive earnings for the Company includes net income and the effects
of foreign currency translation, which are charged or credited to the
cumulative translation adjustment account within stockholders' equity.
Comprehensive earnings for the three and six months ended March 31, 2001 and
2000 are as follows:
For the three months For the six months
ended March 31, ended March 31,
-------------------- --------------------
2001 2000 2001 2000
---- ---- ---- ----
Net Income $17,948 $18,063 $18,586 $26,480
Changes in cumulative
translation adjustment (10,061) (2,659) (7,688) (5,995)
----------------------------------------------
Comprehensive earnings $ 7,887 $15,404 $10,898 $20,485
==============================================
Accumulated other comprehensive earnings, which is classified as a separate
component of stockholders' equity, is comprised of cumulative translation
adjustments of $(20,540) and $(12,852) at March 31, 2001 and September 30,
2000, respectively.
NBTY, INC. and SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
(In thousands, except per share amounts)
4. Inventories
Inventories have been estimated using the gross profit method for the
interim periods. The components of inventories are as follows:
March 31, September 30,
2001 2000
--------- -------------
Raw materials and Work-in-process $ 57,645 $ 45,083
Finished goods 89,694 85,658
----------------------
$147,339 $130,741
======================
5. Earnings per share (EPS)
Basic EPS computations are based on the weighted average number of common
shares outstanding during the three and six month periods ended March 31,
2001 and 2000. Diluted EPS includes the dilutive effect of outstanding
stock options, as if exercised. The following is a reconciliation between
basic and diluted EPS:
For the three months For the six months
March 31, March 31,
-------------------- --------------------
2001 2000 2001 2000
---- ---- ---- ----
Numerator:
Numerator for basic EPS --
Income available to common stockholders $17,948 $18,063 $18,586 $26,480
==============================================
Numerator for diluted EPS --
Income available to common stockholders $17,948 $18,063 $18,586 $26,480
==============================================
Denominator:
Denominator for basic EPS --
Weighted average shares 65,273 67,200 66,162 66,659
Effect of dilutive securities:
Stock options 777 2,430 574 2,210
----------------------------------------------
Denominator for diluted EPS --
Weighted average shares 66,050 69,630 66,736 68,869
==============================================
Net EPS:
Basic EPS $ 0.27 $ 0.27 $ 0.28 $ 0.40
==============================================
Diluted EPS $ 0.27 $ 0.26 $ 0.28 $ 0.38
==============================================
NBTY, INC. and SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
(In thousands, except per share amounts)
6. Segment Information:
The Company's segments are organized by sales market on a worldwide basis.
The Company's management reporting system evaluates performance based on a
number of factors; however, the primary measure of performance is the pretax
operating income of each segment. Accordingly, the Company reports four
worldwide segments: Puritan's Pride/Direct Response, Retail: United States
and United Kingdom, and Wholesale. All of the Company's products fall into
one of these four segments. The Puritan's Pride/Direct Response segment
generates revenue through the sale of its products primarily through mail
order catalog and the internet. Catalogs are strategically mailed to
customers who order by mail or phoning customer service representatives in
New York, Illinois or the United Kingdom. The Retail United States segment
generates revenue through the sale of proprietary brand and third-party
products through its 515 Company-operated stores. The Retail United Kingdom
segment generates revenue through the sale of proprietary brand and third-
party products in 442 Company-operated stores. The Wholesale segment
(including Network Marketing) is comprised of several divisions each
targeting specific market groups. These market groups include wholesalers,
distributors, mass marketers, retail chains, pharmacies, health food stores,
bulk and international customers.
The following table represents key financial information of the Company's
business segments:
Three months ended Six months ended
March 31, March 31,
------------------- ---------------------
2001 2000 2001 2000
---- ---- ---- ----
Puritan's Pride/Direct Response
Revenue $57,569 $62,905 $ 85,403 $ 92,139
Operating income 19,496 19,396 25,508 24,949
Depreciation and amortization 1,109 753 2,211 1,093
Retail:
United States
Revenue $44,659 $38,496 $ 83,413 $ 72,826
Operating loss (5,680) (2,890) (17,825) (6,385)
Depreciation and amortization 3,676 2,618 7,249 4,893
United Kingdom
Revenue $74,789 $63,640 $135,371 $134,863
Operating income 15,041 12,930 26,978 25,076
Depreciation and amortization 2,967 3,008 6,188 6,246
NBTY, INC. and SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
(In thousands, except per share amounts)
6. Segment Information (continued):
Three months ended Six months ended
March 31, March 31,
--------------------- ---------------------
2001 2000 2001 2000
---- ---- ---- ----
Wholesale
Revenue $ 47,758 $ 35,066 $ 87,418 $ 71,450
Operating income 6,529 7,008 7,961 13,125
Depreciation and amortization 285 189 517 377
Corporate
Operating loss $(2,461) $ (2,428) $ (5,114) $ (4,729)
Depreciation and amortization 2,974 2,428 5,613 4,729
Consolidated totals
Revenue $224,775 $200,107 $391,604 $371,279
Operating income 32,925 34,016 37,508 52,036
Depreciation and
amortization 11,011 8,996 21,778 17,338
Interest expense, net 4,865 4,739 9,835 9,425
Miscellaneous income, net 1,123 828 2,549 1,523
Income taxes 11,235 12,042 11,636 17,654
Net income 17,948 18,063 18,586 26,480
The following table reflects identifiable assets by market segment at March
31, 2001 and 2000:
March 31,
----------------------
2001 2000
---- ----
Puritan's Pride/Direct response $ 66,369 $ 59,712
Retail United States 81,023 74,404
Retail United Kingdom 218,678 222,808
Wholesale 35,714 14,837
Corporate manufacturing assets 223,308 219,829
----------------------
Consolidated totals $625,092 $591,590
======================
NBTY, INC. and SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
(In thousands, except per share amounts)
9. Subsequent events:
On April 27, 2001, the Company entered into an amended and restated Credit
and Guarantee Agreement ("CGA") which provides for aggregate borrowings up
to $199,300. The CGA is comprised of two revolving credit agreements of
$100,000 and $50,000 respectively and a term loan of $49,300. The CGA
provides that loans be made under a selection of rate formulas, including
prime or Euro currency rates. Virtually all of the Company's assets are
collateralized under the CGA. In addition, the Company is subject to
maintenance of various financial ratios and covenants.
In April 2001, the Company entered into a contract to purchase substantially
all of the assets of Global Health Sciences, Inc. and certain of its
operating subsidiaries for approximately $40,000 in cash. Global Health
Sciences, Inc. and its subsidiaries, which manufacturers nutritional
supplements in California, filed voluntary petitions under Chapter 11 of the
Bankruptcy Code. In addition, in May 2001 the Company entered into a
contract to purchase NatureSmart LLC from Whole Foods Market, Inc. for
$28,000 in cash. NatureSmart develops, manufactures and markets nutritional
supplements and is located in Thornton, Colorado. The acquisitions will be
financed by the Company's Credit and Guarantee Agreement.
NBTY, INC. and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL
CONDITION and RESULTS of OPERATIONS
(In thousands, except per share amounts and number of stores)
Results of Operations:
The following table sets forth income statement data of the Company as a
percentage of net sales for the periods indicated:
Three months Six months
Ended Ended
March 31, March 31,
----------------- -----------------
2001 2000 2001 2000
---- ---- ---- ----
Net sales 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 43.5 42.1 44.0 44.5
Catalog printing, postage and promotion 5.2 4.8 7.0 4.8
Selling, general and administrative 36.6 36.1 39.4 36.7
--------------------------------------
85.3 83.0 90.4 86.0
--------------------------------------
Income from operations 14.7 17.0 9.6 14.0
Other income (expenses), net (1.7) (2.0) (1.9) (2.1)
--------------------------------------
Income before income taxes 13.0 15.0 7.7 11.9
Income taxes 5.0 6.0 3.0 4.8
--------------------------------------
Net income 8.0% 9.0% 4.7% 7.1%
======================================
NBTY, INC. and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL
CONDITION and RESULTS of OPERATIONS
(In thousands, except per share amounts and number of stores)
For the three months ended March 31, 2001 compared to the three months ended
March 31, 2000:
Net sales. Net sales in the second quarter ended March 31, 2001 were $224,775
compared with $200,107 for the prior comparable period, an increase of $24,668
or 12.3%. Puritan's Pride/Direct Response sales were $57,569 compared to
$62,905, a decrease of $5,336 or 8.5%, wholesale sales were $47,758 compared
to $35,066, an increase of $12,692 or 36.2% , U.S. retail sales were $44,659
compared to $38,496, an increase of $6,163 or 16.0% and U.K. retail sales were
$74,789 compared to $63,640, an increase of $11,149 or 17.5%. Revenue increases
in three of the Company's four segments are attributed to the continued
consumer acceptance of the broad base of the Company's products. The decrease
in Direct Response reflects the general industry weakness in nutritional
supplements. The Company operated 515 stores in the U.S. and 442 stores in the
U.K. as of March 31, 2001 compared to 415 stores in the U.S. and 422 in the
U.K. as of March 31, 2000. Sales growth in the U.S. retail channel reflected
the greater number of stores compared to last year. U.S. same store sales
increased $110 or 0.3% for stores open more than one year.
Costs and expenses. Cost of sales were $97,804 for 2001, or 43.5% as a
percentage of sales, compared to $84,153, or 42.1% for 2000. The increase of
$13,651 was due primarily to the increase in the wholesale segment's cost of
sales, which increased $10,349, or from 55.4% to 62.3% as a percentage of
sales. The increase was mitigated by a decrease in the Direct Response
segment's cost of sales, which decreased from 36% to 34.8% as a percentage of
sales, primarily due to higher gross margins on new product introductions. The
increase was also mitigated by the U.S. retail segment's cost of sales
decreasing as a percentage of sales from 42% to 39.8%, primarily due to sales
price increases on all product lines during the current quarter.
Catalog printing, postage, and promotion expenses were $11,701 in 2001 compared
with $9,604 in 2000. This increase was due primarily to the Flex-A-Min
advertising campaign and Vitamin World's Savings Passport Program. As a
percentage of sales, catalog printing, postage and promotion expenses were 5.2%
for the current quarter and 4.8% for the prior comparable quarter.
Selling, general and administrative expenses were $82,345 for the quarter, or
36.6% as a percentage of sales, compared with $72,334 or 36.1% as a percentage
of sales in 2000. The largest categories with increases were salaries, fringe
benefits (health insurance), and rent expense which increased primarily due to
the U.S. retail store expansion program.
Interest expense. Interest expense was $4,865 for 2001, an increase of $126
compared to $4,739 in 2000. Interest expense increased due to the additional
borrowings to fund the share repurchase program. The major components are
interest on Senior Subordinated Notes associated with the Holland & Barrett
acquisition, the Credit and Guarantee Agreement (CGA) used for stock
repurchases and for capital expenditures.
NBTY, INC. and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL
CONDITION and RESULTS of OPERATIONS
(In thousands, except per share amounts and number of stores)
For the three months ended March 31, 2001 compared to the three months ended
March 31, 2000:
Other income (expense) - Miscellaneous, net for the three months ended March
31, 2001 increased $295, primarily due to a $81 increase in investment income,
a $412 increase in exchange rate gains on intercompany balances and a $166
decrease in rental income, net.
Income before income taxes was $29,183 for 2001 and $30,105 for 2000. After
income taxes, the Company had a net profit of $17,948 (or basic and diluted
earnings per share of $0.27) for the three months ended March 31, 2001, and
$18,063 (or basic earnings per share of $0.27, diluted earnings per share of
$0.26) for the three months ended March 31, 2000.
NBTY, INC. and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL
CONDITION and RESULTS of OPERATIONS
(In thousands, except per share amounts and number of stores)
For the six months ended March 31, 2001 compared to the six months ended March
31, 2000:
Net sales. Net sales for the six months ended March 31, 2001 were $391,604
compared with $371,279 for the prior comparable period, an increase of $20,325
or 5.5%. Puritan's Pride/Direct Response sales were $85,403 compared to
$92,139, a decrease of $6,736 or 7.3%, wholesale sales were $87,418 compared to
$71,450, an increase of $15,968 or 22.3%, U.S. retail sales were $83,413
compared to $72,826, an increase of $10,587 or 14.5% and U.K. retail sales were
$135,371 compared to $134,863, an increase of $508 or .4%. Revenue increases in
three of the Company's four segments are attributed to continued consumer
acceptance of the broad base of the Company's products. The decrease in Direct
Response reflects the general industry weakness in nutritional supplements.
The Company operated 515 stores in the U.S. and 442 stores in the U.K. as of
March 31, 2001 compared to 415 stores in the U.S. and 422 in the U.K. as of
March 31, 2000. Sales growth in the U.S. retail channel reflected the greater
number of stores compared to last year. U.S. same store sales decreased $4,348
or 6.6% for stores open more than one year.
Costs and expenses. Cost of sales were $172,309 for 2001, or 44% as a
percentage of sales, compared to $165,096, or 44.5% as a percentage of sales.
The Direct Response segment's cost of sales decreased from 36.9% to 34.9% as a
percentage of sales, primarily due to higher gross margins on new product
introductions. Cost of sales for the U.K. retail segment decreased from 42.9%
to 39.9% as a percentage of sales, primarily due to increased efficiencies
gained by the new distribution plant located in Burton on Trent in the U.K. The
decreases in cost of sales, as a percentage of sales, were partially offset by
the increase in the wholesale segment's cost of sales, which increased from
59.1% to 60.6% as a percentage of sales.
Catalog printing, postage, and promotion expenses were $27,411 in 2001,
compared with $17,889 in 2000. This increase was due primarily to an increase
in print and television media advertising in wholesale and costs related to the
Vitamin World Savings Passport Program. As a percentage of sales, catalog
printing, postage and promotion expenses were 7.0% for the six months and 4.8%
for the prior comparable six months.
Selling, general and administrative expenses were $154,376 for 2001, or 39.4%
as a percentage of sales, compared with $136,258 or 36.7% as a percentage of
sales for 2000. The largest categories with increases are salaries, fringe
benefits (health insurance), and rent expense, which increased primarily due to
the U.S. retail store expansion program.
Interest expense. Interest expense was $9,835 for 2001, an increase of $410
compared to $9,425 for 2000. The major components are interest on Senior
Subordinated Notes associated with the Holland & Barrett acquisition, the
Credit and Guarantee Agreement (CGA) used for the stock repurchase and for
capital expenditures. Interest expense increased due primarily to the
additional borrowings to fund the share repurchase program.
NBTY, INC. and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL
CONDITION and RESULTS of OPERATIONS
(In thousands, except per share amounts and number of stores)
For the six months ended March 31, 2001 compared to the six months ended March
31, 2000:
Other income (expense) - Miscellaneous, net for the six months ended March 31,
2001 increased $1,026, primarily due to a $115 increase in investment income, a
$957 increase in exchange rate gains on intercompany balances and a $133
decrease in rental income, net.
Income before income taxes was $30,222 for 2001 and $44,134 for 2000. After
income taxes, the Company had a net profit of $18,586 (or basic and diluted
earnings per share of $.28) for the six months ended March 31, 2001, and
$26,480 (or basic earnings per share of $0.40, diluted earnings per share of
$0.38) for the six months ended March 31, 2000.
NBTY, INC. and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL
CONDITION and RESULTS of OPERATIONS
(Unaudited)
(In thousands, except per share amounts and number of stores)
Liquidity and Capital Resources
- -------------------------------
Working capital was $123.2 million at March 31, 2001, compared with $100.1
million at September 30, 2000, an increase of $23.1 million. The increase
was due primarily to increases in cash, accounts receivable, and
inventories, partially offset by an increase in accrued expenses and
income taxes.
On April 27,2001, the Company entered into an amended and restated Credit
and Guarantee Agreement ("CGA") which provides for aggregate borrowings up
to $199,300. The CGA is comprised of two revolving credit agreements of
$100,000 and $50,000 respectively and a term loan of $49,300. At March
31, 2001, there were borrowings of $69,900 under this facility at an
annual borrowing rate of 7.81%. The CGA provides that loans be made under
a selection of rate formulas, including prime or Euro currency rates.
Virtually all of the Company's assets are collateralized under the CGA.
In addition, the Company is subject to maintenance of various financial
ratios and covenants.
On January 1, 2000, the Company acquired Nutrition Warehouse, Inc. and its
affiliated companies ("NW") for $20 million in cash and approximately 1,059
shares of NBTY stock with a then market value of $12.4 million. The cash
portion of the acquisition was funded by $20 million in borrowings under the
CGA.
In connection with the August 1997 acquisition of Holland & Barrett, the
Company issued $150 million of 8-5/8% senior subordinated Notes ("Notes")
due in 2007. The Notes are unsecured and subordinated in right of payment
for all existing and future indebtedness of the Company.
The Company believes that existing cash balances, internally-generated
funds from operations, and amounts available under the CGA will provide
sufficient liquidity to satisfy the Company's working capital needs for
the next 12 months and to finance anticipated capital expenditures
incurred in the normal course of business and potential acquisitions.
Net cash provided by operating activities was $27.7 million for the six
months ended March 31, 2001 and $79.4 million for the six months ended March
31, 2000. The decrease was primarily due to a decrease in net income as well
as increases in inventory and accounts receivable. Net cash used in
investing activities was $13.1 million in 2001 and $46.0 million in 2000;
primarily due to new retail store openings and plant expansion programs. The
2000 total included the acquisition of Nutrition Warehouse. Net cash used
in financing activities was $.8 million in 2001 and $4.7 million in 2000.
The change was primarily due to the repayment of debt principal and the
purchase of treasury stock, and was offset by additional borrowings of $27
million.
Management believes that inflation did not have a significant impact on its
operations.
NBTY, INC. and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL
CONDITION and RESULTS of OPERATIONS
(Unaudited)
(In thousands, except per share amounts and number of stores)
New accounting standards
- ------------------------
Effective October 1, 2000, the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities". As the Company has
determined, it does not have any derivatives or hedging activities, the
adoption of SFAS No. 133 did not affect the Company's financial position or
results of operations as of and for the six months ended March 31, 2001.
In December 1999, the Securities and Exchange Commission staff issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements," ("SAB 101"). SAB 101 does not change existing revenue
recognition rules, but rather addresses and clarifies existing rules and
their application. SAB 101 is effective for the Company beginning July 1,
2001 or fourth quarter of fiscal 2001. Management is currently assessing
the impact of SAB 101 on the Company's results of operations and financial
position.
This filing contains certain forward-looking statements and information that
are based on the beliefs of management, as well as assumptions made by and
information currently available to the Company's management. When used in
this document, the words "anticipate," "believe," "estimate," and "expect"
and similar expressions, as they relate to the Company are intended to
identify forward-looking statements. Such statements reflect the current
views of the Company with respect to future events and are subject to
certain risks, uncertainties and assumptions. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those described herein as
anticipated, believed, estimated or expected. The Company does not intend to
update these forward-looking statements.
NBTY, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
(Unaudited)
(Votes in thousands)
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities Not applicable.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
There was no Form 8-K filed during the second quarter of the fiscal year
ending September 30, 2001.
NBTY, INC. and SUBSIDIARIES
SIGNATURE
---------
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 there unto duly authorized.
NBTY, INC.
Date May 14, 2001 /s/ Harvey Kamil
------------------------------------
Harvey Kamil, Executive Vice
President, Secretary (Principal
Financial and Accounting Officer)