UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 11-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 01666
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
NBTY, Inc. Employees' Stock Ownership Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
NBTY, INC.
90 Orville Drive
Bohemia, NY 11716
FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
INDEX
Page(s)
Report of Independent Accountants 1-2
Financial Statements
Statements of Net Assets Available for Benefits 3
Statement of Changes in Net Assets Available for Benefits 4
Notes to Financial Statements 5-8
Supplemental Schedule
Schedule H, line 4i - Schedule of Assets (Held at End of Year) 9
Report of Independent Auditors
To the Board of Directors and Trustees of the
NBTY, Inc. Employees' Stock Ownership Plan
In our opinion, the accompanying statement of net assets available for
benefits and the related statement of changes in net assets available for
benefits present fairly, in all material respects, the net assets available
for benefits of the NBTY, Inc. Employees' Stock Ownership Plan (the "Plan")
at December 31, 2002, and the changes in net assets available for benefits
for the year ended December 31, 2002 in conformity with accounting
principles generally accepted in the United States of America. These
financial statements are the responsibility of the Plan's management; our
responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
As discussed in Note 2, the Plan changed the manner in which it accounts
for distributions to participants effective January 1, 2002.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule of Assets
(Held at End of Year) is presented for the purpose of additional analysis
and is not a required part of the basic financial statements but is
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974. This supplemental schedule is the
responsibility of the Plan's management. The supplemental schedule has
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
PricewaterhouseCoopers LLP
New York, New York
May 30, 2003
The accompanying notes are an integral part of these financial statements.
1
Report of Independent Auditors
Trustee of NBTY, Inc. Employees' Stock Ownership Plan
Bohemia, New York
We have audited the accompanying statement of net assets available for
benefits of NBTY, Inc. Employees' Stock Ownership Plan (the "Plan") as of
December 31, 2001. This financial statement is the responsibility of the
Plan's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the net assets available for benefits of the Plan
as of December 31, 2001 in conformity with accounting principles generally
accepted in the United States of America.
Nussbaum Yates & Wolpow, P.C.
Melville, New York
June 11, 2002
The accompanying notes are an integral part of these financial statements.
2
NBTY, Inc. Employees' Stock Ownership Plan
Statements of Net Assets Available for Benefits
December 31, 2002 and 2001
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2002 2001
<s> <c> <c>
Assets
Investment in NBTY, Inc. common stock, at fair value $51,466,100 $34,009,993
Cash and cash equivalents 20,709 22,636
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Net assets available for benefits $51,486,809 $34,032,629
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The accompanying notes are an integral part of these financial statements.
3
NBTY, Inc. Employees' Stock Ownership Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2002
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<s> <c>
Additions to net assets attributed to
Investment income
Net appreciation in fair value of investments $17,693,857
Interest 291
Employer contributions 2,239,500
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Total additions 19,933,648
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Deductions
Distributions to participants 2,479,189
Administration fees 279
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Total deductions 2,479,468
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Net increase 17,454,180
Net assets available for benefits
Beginning of year 34,032,629
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End of year $51,486,809
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The accompanying notes are an integral part of these financial statements.
4
NBTY, Inc. Employees' Stock Ownership Plan
Notes to Financial Statements
December 31, 2002 and 2001
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1. Description of Plan
The following description of the NBTY, Inc. Employees' Stock Ownership Plan
(the "Plan") provides only general information. Participants should refer
to the Plan agreement for a more complete description of the Plan's
provisions.
General
The Plan is an employee stock ownership plan covering substantially all
employees of NBTY, Inc. and its subsidiaries (the "Employer") who are
employed at calendar year-end, have completed one year of service
(providing they worked at least 1,000 hours during such plan year) and who
have attained the age of 20-1/2. The assets of the Plan are to be invested
primarily in common stock of NBTY, Inc. for the purpose of providing its
eligible employees with the benefits of ownership of common stock of NBTY,
Inc. under the terms of the Plan. The Plan is designed to comply with
Section 4975(e)(7) and the regulations thereunder of the Internal Revenue
Code of 1986, as Amended (Code) and is subject to the applicable provisions
of the Employee Retirement Income Security Act of 1974 (ERISA). Assets of
the Plan are held by a trust established under the Plan. The Plan is
administered by the Employer.
No distributions from the Plan will be made until a participant retires,
dies, or otherwise terminates employment with the Employer. Distributions
are made in the form of Company common shares plus cash for any fractional
share.
Employer Contributions
The Plan provides that the Board of Directors of the Employer, at its sole
discretion, shall determine the amount, if any, that the Employer shall
contribute either in cash or shares of the Employer's common stock to the
trust fund for each Plan year, not to exceed the maximum amount allowed by
the applicable provisions of the Internal Revenue Code. Participants are
neither required nor permitted to make any contributions under the Plan.
Allocations to Participants' Accounts
Employer contributions are allocated to each participant's account in the
same proportion that each participant's considered compensation bears to
the total considered compensation of all participants for such year. Any
earnings or losses are allocated in the same proportion that each
participant's account bears to the total of all such accounts as of the
beginning of the Plan year. All shares of NBTY, Inc. common stock are
allocated to participants' accounts at the end of the calendar year.
Forfeitures
In 2002 and 2001, forfeited nonvested accounts of terminated participants
totaled $358,292 and $175,719, respectively. Forfeitures are allocated to
participants in the same manner as Employer contributions.
Diversification
Diversification is offered to participants who have attained age 55 and
have completed 10 years of Plan participation. A participant meeting this
criteria may elect to diversify up to 25 percent of their account balance,
less any amount which applies to prior elections. The election may be made
over a six-year period; in the sixth year the percentage changes to 50
percent. An election under this option results in a transfer of the
applicable portion of the participant's account to the NBTY,
5
NBTY, Inc. Employees' Stock Ownership Plan
Notes to Financial Statements
December 31, 2002 and 2001
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Inc. 401(k) Savings Plan, which is also sponsored by the Employer. There
were no diversifications and, accordingly, no transfers out of the Plan
during the current year.
Vested Benefits
If a participant's employment with the Employer is terminated at or after
the participant attains age 65, and completes five years of service, or if
the participant's employment is terminated at any age because of
disability, the participant shall be vested in and entitled to receive 100
percent of the entire amount then in the participant's account. In the
event that the termination of a participant is caused by death, the
beneficiary shall be vested in and entitled to receive 100 percent of the
entire amount then in the participant's account. If a participant's
employment with the Employer is terminated before age 65, for any reason
other than disability or death, the participant shall be entitled to an
amount equal to a percentage of the balances then in the participant's
account, according to the following schedule:
Years of Service Percentage
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<s> <c>
Less than 5 0%
5 or more 100%
However, if the Plan is determined to be top heavy, the participant shall
be entitled to an amount equal to a percentage of the balances then in the
participant's account in accordance with the following schedule:
Years of Service Percentage
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<s> <c>
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
Payment of Benefits
Payments of common stock or cash shall be in the form of a lump sum or in
installments over a period not exceeding 15 years, at the election of the
participant or beneficiary. Payments related to the participant's Employer
stock account will be made in Employer stock. The participant's general
investment account will be distributed in the form of cash or Employer
stock. Unless the participant elects otherwise, the payments shall
commence no later than one year after the close of the Plan year in which
the participant terminates employment due to death, disability or
retirement, and no later than five years after the close of the plan year
in which the participant terminates employment for any other reason.
6
NBTY, Inc. Employees' Stock Ownership Plan
Notes to Financial Statements
December 31, 2002 and 2001
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2. Summary of Significant Accounting Policies
Basis of Accounting
The accompanying financial statements are prepared on the accrual basis of
accounting.
Use of 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 and liabilities and
changes therein, and disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
Investment Valuation
Investments of the Plan are stated at fair value. Securities traded in
public markets are valued at their quoted market prices. Purchases and
sales of securities are reflected on a trade-date basis.
Payment of Benefits
Benefits are recorded when paid. The value of a participant's benefit is
determined based upon the fair market value of securities or cash
distributed on the date of distribution. During the current year, the Plan
changed its methodology for valuing distributions to participants. Prior
to the 2002 Plan year, distributions to participants were valued utilizing
the fair value of securities or other assets distributed on the Plan's
previous year-end date. The change in accounting policy had no impact on
the net assets available for benefits as of December 31, 2002 and 2001.
Cash and Cash Equivalents
The Plan considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
3. Investments
Investments held by the Plan at fair value that represent five percent or
more of the Plan's net assets consist of NBTY, Inc. common stock. The
following table presents the Plan's investments in NBTY, Inc. common stock
as determined by the last quoted trading price on December 31, 2002 and
2001.
2002 2001
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Number of Fair Number of Fair
Shares Value Cost Shares Value Cost
<s> <c> <c> <c> <c> <c>
2,927,537 $51,466,100 $7,054,811 2,906,837 $34,009,993 $4,849,180
4. Party-in-Interest Transactions
During 2002, the Plan purchased in the open market a total of 75,000 shares
for $529,500 of the Employer's common stock as part of its investment
portfolio. In addition, during 2002, the Employer issued 100,000 shares of
the Employer's common stock to the Plan valued at $1,710,000. These
transactions qualify as party-in-interest transactions.
7
NBTY, Inc. Employees' Stock Ownership Plan
Notes to Financial Statements
December 31, 2002 and 2001
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5. Administration of Plan Assets
The Trustee, appointed by the Employer, has sole responsibility for
administration of the trust established under the Plan and for the
management of the assets of the Plan held under the trust. Certain
administrative functions are performed by officers or employees of the
Employer. No such officer or employee receives compensation from the Plan.
Most administrative expenses of the Plan are paid directly by the Employer.
6. Plan Termination
Although the Employer has not expressed any intention to do so, it has the
right to discontinue its contributions and to terminate the Plan at any
time, subject to the provisions of the Plan and ERISA. In the event of
Plan termination, participants will become fully vested in their respective
account balances.
7. Tax Status
The Internal Revenue Service has determined and informed the Company by a
letter dated April 19, 2000 that the Plan is qualified and the trust
established under the Plan is tax exempt, under the appropriate sections of
the Code. Although the Plan has been amended since receiving the
determination letter, the Plan administrator and the Plan's tax counsel
believe that the Plan is designed and is currently being operated in
compliance with applicable requirements of the Code.
8
NBTY, Inc. Employees' Stock Ownership Plan
Schedule H, line 4i - Schedule of Assets (Held at End of Year)
December 31, 2002
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(a) (b) (c) (d) (e)
Description of Investment
Identity of Issue, Including Maturity Date,
Borrower, Lessor, Rate of Interest, Collateral, Current
or Similar Party Par or Maturity Value Cost Value
<s> <c> <c> <c> <c>
* NBTY, Inc. 2,927,537 shares of common stock $7,054,811 $51,466,100
<FN>
* Party-in-interest
</FN>
9
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
NBTY, INC. EMPLOYEES' STOCK OWNERSHIP PLAN
Date: June 27, 2003
By: /s/ Harvey Kamil
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Harvey Kamil