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, 1995
Commission File Number: 0-10666
Nature's Bounty, Inc.
(Exact name of registrant as specified in its charter)
Delaware 11-2228617
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
90 Orville Drive, Bohemia, NY 11716
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (516) 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 Secu-
rities 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, 1995: 17,871,119
NATURE'S BOUNTY, INC. and SUBSIDIARIES
INDEX
PART I Financial Information
Condensed Consolidated Balance Sheets -
March 31, 1995 and September 30, 1994 1 - 2
Condensed Consolidated Statements of Income -
Three Months Ended March 31, 1995 and 1994 3
Six Months Ended March 31, 1995 and 1994 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended March 31, 1995 and 1994 5 - 6
Notes to Condensed Consolidated Financial Statements 7 - 9
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 - 12
PART II Other Information 13
Signature 14
NATURE'S BOUNTY, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, September 30,
1995 1994
-------------- -------------
(Unaudited)
Current assets:
Cash and cash equivalents $5,175,199 $5,900,594
Accounts receivable, less
allowance for doubtful accounts
of $525,062 at March 31, 1995
and $594,522 at September 30, 1994 10,991,286 10,217,013
Inventories 36,411,843 41,426,175
Current income tax receivable 725,248 1,300,198
Deferred income taxes 1,870,925 1,870,925
Prepaid catalog costs and other
current assets 7,152,086 5,905,990
-------------- -------------
Total current assets 62,326,587 66,620,895
Property, plant and equipment 64,979,489 58,225,483
less accumulated depreciation
and amortization 20,306,502 18,426,040
-------------- -------------
44,672,987 39,799,443
Intangible assets, net 6,023,812 5,524,865
Deferred income taxes 374,772 374,772
Other assets 2,541,624 2,792,127
-------------- -------------
Total assets $115,939,782 $115,112,102
============== =============
See notes to condensed consolidated financial statements.
NATURE'S BOUNTY, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, September 30,
1995 1994
--------------- -------------
(Unaudited)
Current liabilities:
Current portion of long-term debt $ 189,268 $5,698,312
Accounts payable 14,110,099 13,251,382
Accrued expenses 7,759,969 8,209,471
--------------- -------------
Total current liabilities 22,059,336 27,159,165
Long-term debt, less current portion 9,805,579 7,566,144
Deferred income taxes 1,975,933 1,875,933
Other liabilities 493,986 493,986
--------------- -------------
Total liabilities 34,334,834 37,095,228
Commitments and contingencies
Stockholders' equity:
Common stock, $.008 par; authorized
25,000,000 shares; issued and
outstanding 19,207,676 and 17,871,119
shares at March 31, 1995 and
18,777,676 and 17,564,272 at
September 30, 1994, respectively 153,662 150,222
Capital in excess of par 54,151,206 53,208,646
Retained earnings 29,011,089 25,520,727
--------------- -------------
83,315,957 78,879,596
Less cost of common stock in treasury,
1,336,557 shares in 1995 and
1,213,404 shares in 1994 1,711,009 862,722
--------------- -------------
Total stockholders' equity 81,604,948 78,016,873
--------------- -------------
Total liabilities and
stockholders' equity $115,939,782 $115,112,102
=============== =============
See notes to condensed consolidated financial statements.
NATURE'S BOUNTY, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
For the three months
ended March 31,
1995 1994
------------- -------------
Net sales $50,945,058 $47,001,167
Costs and expenses:
Cost of sales 25,725,426 23,111,573
Catalog printing, postage
and promotion 5,546,766 3,622,925
Selling, general and
administrative expenses 15,375,723 13,629,016
---------- ----------
46,647,915 40,363,514
---------- ----------
Income from operations 4,297,143 6,637,653
---------- ----------
Other income (charges):
Interest expense (278,967) (253,465)
Miscellaneous, net 318,191 245,148
---------- ----------
39,224 (8,317)
---------- ----------
Income before income taxes 4,336,367 6,629,336
Income taxes 1,784,547 2,464,050
---------- ----------
Net income $2,551,820 $4,165,286
========== ==========
Earnings per common share and common
share equivalents:
Primary $0.13 $0.21
Fully diluted $0.13 $0.21
===== =====
Weighted average common shares
and common share equivalents:
Primary 20,046,893 20,295,084
Fully diluted 20,046,893 20,295,084
========== ==========
See notes to condensed consolidated financial statements.
NATURE'S BOUNTY, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
For the six months
ended March 31,
1995 1994
------------- -------------
Net sales $88,422,799 $79,741,050
Costs and expenses:
Cost of sales 44,822,933 39,192,070
Catalog printing, postage
and promotion 9,621,907 6,793,351
Selling, general and
administrative expenses 27,991,396 24,601,757
---------- ----------
82,436,236 70,587,178
---------- ----------
Income from operations 5,986,563 9,153,872
---------- ----------
Other income (charges):
Interest expense (518,130) (475,074)
Miscellaneous, net 515,587 705,384
---------- ----------
(2,543) 230,310
---------- ----------
Income before income taxes 5,984,020 9,384,182
Income taxes 2,493,659 3,566,088
---------- ----------
Net income $3,490,361 $5,818,094
========== ==========
Earnings per common share and common
share equivalents:
Primary $0.17 $0.29
Fully diluted $0.17 $0.29
===== =====
Weighted average common shares
and common share equivalents:
Primary 20,064,143 20,286,225
Fully diluted 20,064,143 20,292,242
========== ==========
See notes to condensed consolidated financial statements.
NATURE'S BOUNTY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months
ended March 31,
1995 1994
---------- ----------
Net income $3,490,361 $5,818,094
Adjustments to reconcile net income to
cash used in operating activities:
Loss on sale of property, plant and equipment 519
Depreciation and amortization 2,368,664 1,989,884
Recovery for allowance for doubtful accounts (69,460) (10,756)
Increase in accounts receivable (704,813) (267,209)
(Increase) decrease in inventories 5,014,332 (7,929,021)
Decrease in income tax receivable 574,950 1,845,176
Increase in prepaid catalog
costs and other current assets (1,246,096) (1,464,190)
(Increase) decrease in other assets 424,915 (1,877,030)
Increase (decrease) in accounts payable 858,717 (2,136,407)
Increase (decrease) in accrued expenses 281,498 (19,433)
Increase in deferred taxes 100,000 3,109,865
Decrease in other liabilities (333,788)
---------- ----------
Net cash provided by (used in) operating activities 11,093,068 (1,274,296)
---------- ----------
Cash flow from investing activities:
Increase in intangible assets (970,561) (192,946)
Purchase of property, plant and equipment (6,754,006) (6,311,099)
Proceeds from sale of property, plant
and equipment 11,000
---------- ----------
Net cash used in investing activities (7,724,567) (6,493,045)
---------- ----------
Cash flows from financing activities:
Net payments under line of credit agreement (5,000,000)
Borrowings under long term debt agreement 2,400,000
Principal payments under long-term
debt agreements (669,609) (108,185)
Purchase of treasury stock (848,287)
Proceeds from stock options exercised 24,000 30,000
---------- ----------
Net cash used in financing activities (4,093,896) (78,185)
---------- ----------
Net decrease in cash and cash equivalents (725,395) (7,845,526)
Cash and cash equivalents at beginning of year 5,900,594 10,848,409
---------- ----------
Cash and cash equivalents at end of quarter $5,175,199 $3,002,883
========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $528,790 $485,296
Cash paid during the period for taxes $467,000 $ 27,424
========== ==========
See notes to consolidated condensed financial statements.
NATURE'S BOUNTY, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended March 31, 1995 and 1994
Supplemental Schedule of Investing and Financing Activities:
In December 1994, options were exercised for 430,000 shares of
common stock which were issued to certain officers and
directors for $24,000 and an interest bearing note in the
amount of $191,000. The promissory note, including interest,
was paid by the surrender of 23,153 common shares to the
Company at the prevailing market price. As a result of the
exercise of these options, the Company is entitled to a
compensation deduction for tax purposes of approximately
$1,827,500 and it is estimated that such compensation deduc-
tion will ultimately result in a tax benefit of approximate-
ly $731,000 which has been recorded as an increase in capi-
tal in excess of par. In addition, the Company has adjusted
its current liability to recognize the effect of this tax
benefit.
In December 1993 options were exercised for 60,000 shares of
common stock which were issued to certain directors for
$30,000. As a result of the exercise of these options, the
Company is entitled to a compensation deduction for tax
purposes of approximately $1,140,000, and it is estimated
that such compensation deduction will ultimately result in a
tax benefit to the Company of approximately $43,200 repre-
senting the tax-effected excess of the fair market value of
the stock at the date of exercise over the proceeds re-
ceived. Such benefit has been recorded as an increase to
capital in excess of par.
See notes to condensed consolidated financial statements.
NATURE'S BOUNTY, INC. and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited
condensed consolidated financial statements contain all
adjustments necessary to present fairly its financial posi-
tion as of March 31, 1995 and results of operations for the
three and six months ended March 31, 1995 and 1994 and
statements of cash flows for the six months ended March 31,
1995 and 1994. The consolidated condensed balance sheet as
of September 30, 1994 has been derived from the audited
balance sheet as of that date. This report should be read in
conjunction with the Company's annual report on Form 10-K
for the fiscal year ended September 30, 1994.
2. The results of operations and cash flows for the six months
ended March 31, 1995 are not necessarily indicative of the
results to be expected for the full year.
3. Inventories have been estimated by using the gross profit
method for the interim periods. The components of the
inventories are as follows:
March 31, September 30,
1995 1994
(UNAUDITED)
Raw materials and
work-in-process $17,781,357 $19,867,873
Finished goods 18,630,486 21,558,302
$36,411,843 $41,426,175
4. Intangible assets, at cost, acquired at various dates are as follows:
March 31, September 30,
1995 1994
(UNAUDITED)
Goodwill $ 469,400 $ 469,400
Customer lists 10,540,017 9,640,017
Trademark and licenses 1,041,122 970,561
Covenants not to compete 1,304,538 1,304,538
13,355,077 12,384,516
Less, accumulated
amortization 7,331,265 6,859,651
$ 6,023,812 $ 5,524,865
5. Accrued expenses:
March 31, September 30,
1995 1994
(UNAUDITED)
Payroll and related
payroll taxes $1,794,314 $1,647,347
Customer deposits 1,099,693 2,013,529
Accrued purchases 507,261 1,759,257
Income taxes payable 1,812,355 49,747
Other 2,546,346 2,739,591
$7,759,969 $8,209,471
6. Treasury stock. The Company purchased 100,000 shares in open
market transactions using working capital. An additional
23,153 shares were surrendered to the Company in payment of
stock subscriptions receivable (see note 8). The average
cost of shares was $6.89.
7. Earnings per share are based on the weighted average number of
common shares and common equivalent shares outstanding
during the three and six month periods ended March 31, 1995
and 1994. The calculation of primary and fully diluted
earnings per share include common stock equivalent shares
from dilutive stock options of 2,117,407 for the three month
period ended March 31, 1995 and 2,730,812 for the three
month period ended March 31, 1994. For the six month period
ended March 31, 1995, the calculation of earnings per share
include 2,257,843 primary and fully diluted common stock
equivalent shares and 2,746,349 primary and 2,752,366 fully
diluted common stock equivalents, respectively in 1994.
8. In December 1994, options were exercised for 430,000 shares of
common stock which were issued to certain officers and
directors for $24,000 and an interest bearing note in the
amount of $191,000. The promissory note, including interest,
was paid by the surrender of 23,153 common shares to the
Company at the prevailing market price. As a result of the
exercise of these options, the Company is entitled to a
compensation deduction for tax purposes of approximately
$1,827,500, and it is estimated that such compensation
deduction will ultimately result in a tax benefit of approx-
imately $731,000 which has been recorded as an increase in
capital in excess of par. In addition, the Company has
adjusted its current liability to recognize the effect of
this tax benefit.
The following is a summary of changes in outstanding options
for the Company's Stock Option Plans for the period ended March 31, 1995:
Exercise Price
Shares under option, September 30,
1994 (fully exercisable) 2,825,000 $.50-$.92
Options exercised (430,000) $.50
Shares exercisable, March 31,
1995 (fully exercisable) 2,395,000 $.63-$.92
NATURE'S BOUNTY, INC. and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL
CONDITION and RESULTS of OPERATIONS
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,
1995 1994 1995 1994
Net sales 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 50.5 49.2 50.7 49.1
Catalog printing, postage and promotion 10.9 7.7 10.9 8.5
Selling, general and administrative 30.2 29.0 31.7 30.9
91.6 85.9 93.3 88.5
Income from operations 8.4 14.1 6.7 11.5
Other income (expenses), net 0.1 0.0 0.0 0.3
Income before income taxes 8.5 14.1 6.7 11.8
Income taxes 3.5 5.2 2.8 4.5
Net income 5.0% 8.9% 3.9% 7.3%
Results of Operations
For the three months ended March 31, 1995 compared to three
months ended March 31, 1994:
Net sales. Net sales in the second quarter ended March 31, 1995
were $50,945,058 compared with $47,001,167 for the prior like
period, an increase of $3,943,891 or 8.4%. Of the $3.9 mil-
lion increase, $0.1 million (0.7% increase) was attributable
to wholesale sales, direct mail order vitamin sales increased
$4.2 million (21.2% increase) and the company-operated retail
stores increased $0.6 million (28.3% increase). Mail order
cosmetic sales decreased $1.0 million (25.0% decrease).
Costs and expenses. Cost of sales as a percentage of sales was
50.5% for 1995 and 49.2% for 1994. The increase was attrib-
uted to change in product mix and increased factory overhead.
Catalog printing, postage,and promotion expenses increased to
$5,546,766 in 1995 from $3,622,925 in 1994. Costs associated
with long term contract promotions and coop advertising
increased in the wholesale division. As a percentage of
sales, expenses were 10.9% for the current quarter and 7.7%
for the prior like quarter.
Selling, general and administrative expenses were $15,375,723
for the quarter, 1995 and $13,629,016 for the prior like
quarter, an increase of $1,746,707. As a percentage of sales,
these expenses were 30.2% for the current quarter and 29.0%
for the prior like quarter. Costs primarily increased in
salaries, payroll fringes and commission.
Other income (charges). Included in miscellaneous is rental
income.
Income before income taxes were $4,336,367 for 1995 and
$6,629,336 for 1994. After income taxes, the Company had net
income of $2,551,820 or earnings of $0.13 per share for the
three months ended March 31, 1995 compared with a net income
of $4,165,286 or earnings of $0.21 per share for the quarter
ended March 31, 1994.
For the six months ended March 31, 1995 compared to six months
ended March 31, 1994:
Net sales. Net sales for the six months, 1995 were $88,422,799
compared with $79,741,050 for the prior like period, an
increase of $8,681,749 or 10.9%. Of the $8.7 million in-
crease, $3.7 million (9.6% increase) was attributable to
wholesale sales, direct mail order vitamin sales increased
$5.8 million (19.8% increase) and the company-operated retail
stores increased $1.1 million (24.6% increase). Mail order
cosmetic sales decreased $1.9 million (25.7% decrease).
Costs and expenses. Cost of sales as a percentage of sales was
50.7% for the six month period ended 1995 and 49.1% for 1994.
The increase was primarily attributed to increased factory
overhead and changes in product mix.
Catalog printing, postage,and promotion expenses increased to
$9,621,907 in 1995 from $6,793,351 in 1994. Costs associated
with long term contract promotions and coop advertising
increased in the wholesale division. As a percentage of
sales, expenses were 10.9% in 1995 and 8.5% for the compar-
able six month period.
Selling, general and administrative expenses were $27,991,396
for the six months, 1995 and $24,601,757 in 1994, an increase
of $3,389,639. As a percentage of sales, these expenses were
31.7% and 30.9%, respectively. Costs primarily increased in
salaries, payroll fringes and commission cost.
Other income (charges). Included in miscellaneous is rental
income.
Income before income taxes were $5,984,020 for 1995 and
$9,384,182 for 1994. After income taxes, the Company had net
income of $3,490,361 or earnings of $0.17 per share for the
six months ended March 31, 1995 compared with a net income of
$5,818,094 or earnings of $0.29 per share for the comparable
six months ending March 31, 1994.
Liquidity and Capital Resources
The Company has adequate working capital to meet its obliga-
tions in the normal course of business. The Company has a
three year $15 million Revolving Credit Agreement which
expires March 31, 1996. At March 31, 1995, the entire amount
remained available under the current Agreement. Net cash
provided by operating activities was $11,093,068 in 1995 and
$1,274,296 used in operating activities in 1994. Net cash
used in investing activities was $7,724,567 and $6,493,045 in
1995 and 1994, respectively. Net cash used in financing
activities was $4,093,896 in 1995 and $78,185 in 1994.
On November 7, 1994, the Company purchased a building which it
previously occupied under a long term lease. The purchase
price of approximately $3.1 million was funded with $0.7 in
cash and $2.4 million in a 15 year mortgage note payable.
Management believes that inflation did not have a significant
impact on operations.
NATURE'S BOUNTY, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
Item 1. Legal Proceedings
LITIGATION:
There have been no material developments with
respect to litigation that occurred during this
reporting period. Reference is made to Item 3,
Legal Proceedings in Form 10-K for the year
ended September 30, 1994.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Stockholders approved a proposed name change to NBTY, Inc.
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 fiscal year ending September 30,
1995.
NATURE'S BOUNTY, 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 thereunto duly authorized.
NATURE'S BOUNTY, INC.
Date: April 25, 1995 /s/ HARVEY KAMIL
-----------------------------
Harvey Kamil, Executive Vice
President, Secretary
(Principal Financial
and Accounting Officer)