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 June 30, 1995
Commission File Number: 0-10666
NBTY, 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 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 v NO
Shares of Common Stock as of June 30, 1995: 17,766,119
NBTY, INC. and SUBSIDIARIES
INDEX
PART I Financial Information
Condensed Consolidated Balance Sheets
-June 30, 1995 and September 30, 1994 1 - 2
Condensed Consolidated Statements of Income
-Three Months Ended June 30, 1995 and 1994 3
-Nine Months Ended June 30, 1995 and 1994 4
Condensed Consolidated Statements of Cash Flows
-Nine Months Ended June 30, 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
NBTY, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, September 30,
1995 1994
-------------- -------------
(Unaudited)
Current assets:
Cash and cash equivalents $2,234,018 $5,900,594
Accounts receivable, less
allowance for doubtful accounts
of $540,527 at June 30, 1995
and $594,522 at September 30, 1994 10,413,694 10,217,013
Inventories 39,766,992 41,426,175
Current income tax receivable 1,545,313 1,300,198
Deferred income taxes 1,870,925 1,870,925
Prepaid catalog costs and other
current assets 7,058,438 5,905,990
------------ ------------
Total current assets 62,889,380 66,620,895
Property, plant and equipment 68,513,077 58,225,483
less accumulated depreciation
and amortization 21,316,594 18,426,040
------------ ------------
47,196,483 39,799,443
Intangible assets, net 5,792,925 5,524,865
Deferred income taxes 374,772 374,772
Other assets 2,204,742 2,792,127
------------ ------------
Total assets $118,458,302 $115,112,102
============ ============
See notes to condensed consolidated financial statements.
NBTY, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, September 30,
1995 1994
------------ -------------
(Unaudited)
Current liabilities:
Current portion of long-term debt $ 271,668 $ 5,698,312
Accounts payable 14,197,073 13,251,382
Accrued expenses 8,965,436 8,209,471
------------ ------------
Total current liabilities 23,434,177 27,159,165
Long-term debt, less current portion 10,382,115 7,566,144
Deferred income taxes 2,025,933 1,875,933
Other liabilities 493,986 493,986
------------ ------------
Total liabilities 36,336,211 37,095,228
Commitments and contingencies
Stockholders' equity:
Common stock, $.008 par; authorized
25,000,000 shares; issued and
outstanding 19,207,676 and 17,766,119
shares at June 30, 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 30,163,232 25,520,728
------------ ------------
84,468,100 78,879,596
Less cost of common stock in treasury,
1,441,557 shares in 1995 and
1,213,404 shares in 1994 2,346,009 862,722
------------ ------------
Total stockholders' equity 82,122,091 78,016,874
------------ ------------
Total liabilities and
stockholders' equity $118,458,302 $115,112,102
============ ============
See notes to condensed consolidated financial statements.
NBTY, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
For the three months
ended June 30,
1995 1994
------------ ------------
Net sales $41,649,806 $35,862,726
Costs and expenses:
Cost of sales 21,085,603 17,473,439
Catalog printing, postage
and promotion 5,049,906 3,561,213
Selling, general and
administrative expenses 13,479,144 11,790,875
----------- -----------
39,614,653 32,825,527
----------- -----------
Income from operations 2,035,153 3,037,199
----------- -----------
Other income (charges):
Interest expense (271,305) (224,381)
Miscellaneous, net 239,721 323,601
----------- -----------
(31,584) 99,220
----------- -----------
Income before income taxes 2,003,569 3,136,419
Income taxes 851,428 1,191,838
----------- -----------
Net income $ 1,152,141 $ 1,944,581
=========== ===========
Earnings per common share and common
share equivalents:
Primary $0.06 $0.10
Fully diluted $0.06 $0.10
===== =====
Weighted average common shares
and common share equivalents:
Primary 19,899,088 20,245,305
Fully diluted 19,921,056 20,245,305
========== ==========
See notes to condensed consolidated financial statements.
NBTY, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
For the nine months
ended June 30,
1995 1994
------------ ------------
Net sales $130,072,605 $115,603,776
Costs and expenses:
Cost of sales 65,908,535 56,665,509
Catalog printing, postage
and promotion 14,671,813 10,354,564
Selling, general and
administrative expenses 41,470,539 36,392,632
------------ ------------
122,050,887 103,412,705
------------ ------------
Income from operations 8,021,718 12,191,071
------------ ------------
Other income (charges):
Interest expense (789,435) (699,455)
Miscellaneous, net 755,308 1,028,985
------------ ------------
(34,127) 329,530
------------ ------------
Income before income taxes 7,987,591 12,520,601
Income taxes 3,345,087 4,757,926
------------ ------------
Net income $ 4,642,504 $ 7,762,675
============ ============
Earnings per common share and common
share equivalents:
Primary $0.23 $0.38
Fully diluted $0.23 $0.38
===== =====
Weighted average common shares
and common share equivalents:
Primary 20,009,232 20,275,679
Fully diluted 20,018,159 20,275,679
========== ==========
See notes to condensed consolidated financial statements.
NBTY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months
ended June 30,
1995 1994
------------ ------------
Net income $ 4,642,504 $ 7,762,675
Adjustments to reconcile net income to
cash used in operating activities:
Loss on sale of property, plant and equipment 519
Depreciation and amortization 3,650,650 2,999,343
Recovery for allowance for doubtful accounts (53,995) (62,251)
(Increase) decrease in accounts receivable (142,686) 855,648
(Increase) decrease in inventories 1,659,183 (13,272,294)
(Increase) decrease in income tax receivable (245,115) 2,477,816
Increase in prepaid catalog costs and other
current assets (1,152,448) (1,541,626)
(Increase) decrease in other assets 753,267 (1,415,854)
Increase (decrease) in accounts payable 945,691 (2,275,455)
Increase (decrease) in accrued expenses 1,486,965 (489,748)
Increase in deferred taxes 150,000 4,301,704
Decrease in other liabilities (353,225)
------------ ------------
Net cash provided by (used in) operating activities 11,694,016 (1,012,748)
------------ ------------
Cash flow from investing activities:
Increase in intangible assets (1,003,038) (220,291)
Purchase of property, plant and equipment (10,287,594) (8,502,221)
Proceeds from sale of property, plant and equipment 11,000
------------ ------------
Net cash used in investing activities (11,290,632) (8,711,512)
------------ ------------
Cash flows from financing activities:
Net payments under line of credit agreement (5,000,000)
Borrowings under long term debt agreement 3,102,500
Principal payments under long-term debt agreements (713,173) (164,094)
Purchase of treasury stock (1,483,287)
Proceeds from stock options exercised 24,000 30,000
----------- -----------
Net cash used in financing activities (4,069,960) (134,094)
----------- -----------
Net decrease in cash and cash equivalents (3,666,576) (9,858,354)
Cash and cash equivalents at beginning of year 5,900,594 10,848,409
----------- -----------
Cash and cash equivalents at end of quarter $ 2,234,018 $ 990,055
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 800,095 $ 709,677
Cash paid during the period for taxes $ 1,287,065 $ 31,770
=========== ===========
See notes to consolidated condensed financial statements.
NBTY, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended June 30, 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 deduction will ultimately result in a
tax benefit of approximately $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.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 representing
the tax-effected excess of the fair market value of the stock at the
date of exercise over the proceeds received. Such benefit has been
recorded as an increase to capital in excess of par.
See notes to condensed consolidated financial statements.
NBTY, 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 position as of June 30, 1995 and results of
operations for the three and nine months ended June 30, 1995 and 1994
and statements of cash flows for the nine months ended June 30, 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 nine months ended
June 30, 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:
June 30, September 30,
1995 1994
(UNAUDITED)
Raw materials and work-in-process $17,121,022 $19,867,873
Finished goods 22,645,970 21,558,302
$39,766,992 $41,426,175
4. Intangible assets, at cost, acquired at various dates are as follows:
June 30, September 30,
1995 1994
(UNAUDITED)
Goodwill $ 469,400 $ 469,400
Customer lists 10,540,017 9,640,017
Trademark and licenses 1,073,599 970,561
Covenants not to compete 1,304,538 1,304,538
13,387,554 12,384,516
Less, accumulated amortization 7,594,629 6,859,651
$ 5,792,925 $ 5,524,865
5. Accrued expenses:
June 30, September 30,
1995 1994
(UNAUDITED)
Payroll and related payroll taxes $1,698,205 $1,647,347
Customer deposits 1,236,032 2,013,529
Accrued purchases 643,593 1,759,257
Income taxes payable 2,471,834 49,747
Other 2,915,772 2,739,591
$8,965,436 $8,209,471
6. Treasury stock. The Company purchased 205,000 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 $6.50.
7. Earnings per share are based on the weighted average number of common
shares and common equivalent shares outstanding during the three and
nine month periods ended June 30, 1995 and 1994. The calculation of
primary and fully diluted earnings per share include common stock
equivalent shares from dilutive stock options of 2,094,506 primary and
2,116,474 fully diluted common stock equivalents for the three month
period ended June 30, 1995 and 2,681,033 primary and fully diluted
common stock equivalent shares for the three month period ended June 30,
1994. For the nine month period ended June 30, 1995, the calculation of
earnings per share include 2,203,506 primary and 2,212,433 fully diluted
common stock equivalent shares and 2,727,671 primary and 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 approximately $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 June 30, 1995:
Exercise Price
Shares under option, September 30,
1994 (fully exercisable) 2,825,000 $.50-$.92
Options exercised (430,000) $.50
Shares exercisable, June 30,
1995 (fully exercisable) 2,395,000 $.63-$.92
NBTY, 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 Nine months
ended ended
June 30, June 30,
1995 1994 1995 1994
Net sales 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 50.6 48.7 50.7 49.0
Catalog printing, postage and
promotion 12.1 9.9 11.3 9.0
Selling, general and
administrative 32.4 32.9 31.9 31.5
95.1 91.5 93.9 89.5
Income from operations 4.9 8.5 6.1 10.5
Other income (expenses), net (0.1) 0.3 0.0 0.3
Income before income taxes 4.8 8.8 6.1 10.8
Income taxes 2.0 3.4 2.5 4.1
Net income 2.8% 5.4% 3.6% 6.7%
Results of Operations
For the three months ended June 30, 1995 compared to three months ended
June 30, 1994:
Net sales. Net sales in the third quarter ended June 30, 1995 were
$41,649,806 compared with $35,862,726 for the prior like period, an
increase of $5,787,080 or 16.1%. Vitamin and nutritional supplement
sales increased $7.4 million (22.9%); Beautiful Visions and cosmetic
sales decreased $1.6 million (48.4%). Of the $7.4 million increase in
vitamin and nutritional supplement sales, $2.5 million (15.0% increase)
was attributable to wholesale sales, direct mail order vitamin sales
increased $3.9 million (29.8% increase) and retail stores increased $1.0
million (46.0% increase).
Costs and expenses. Cost of sales as a percentage of sales was 50.6%
for 1995 and 48.7% for 1994. The increase was attributed to costs
associated with increased penetration in the mass market.
Catalog printing, postage,and promotion expenses increased to $5,049,906
in 1995 from $3,561,213 in 1994 an increase of $1,488,693. As a
percentage of sales, expenses were 12.1% for the current quarter and
9.9% for the prior like quarter. Costs associated with long term
contract promotions and coop advertising in the wholesale division
increased $946,347; other advertising increased by $542,346. Selling,
general and administrative expenses were $13,479,144 for the quarter,
32.4% as a percentage of sales compared with $1,790,875 or 32.9% of
sales - an increase of $1,688,268. Increases were primarily in salaries,
payroll fringes and professional fees.
Other income (charges). Included in miscellaneous is rental
income.Income before income taxes were $2,003,569 for 1995 and
$3,136,419 for 1994. After income taxes, the Company had net income of
$1,152,141 or earnings of $0.06 per share for the three months ended
June 30, 1995 compared with a net income of $1,944,581 or earnings of
$0.10 per share for the quarter ended June 30, 1994.
For the nine months ended June 30, 1995 compared to nine months ended
June 30, 1994:
Net sales. Net sales for the nine months, 1995 were $130,072,605
compared with $115,603,776 for the prior like period, an increase of
$14,468,829 or 12.5%. Vitamin and nutritional supplemental sales
increased $17,797,998 (17.0%); Beautiful Visions and cosmetic sales
decreased $3,329,168 (30.3% decrease). Of the $17.8 million increase in
vitamin and nutritional supplement sales, $6.0 million (10.9% increase)
was attributable to wholesale sales, direct mail order vitamin sales
increased $9.7 million (22.9% increase) and retail stores increased $2.1
million (31.6% increase).
Costs and expenses. Cost of sales as a percentage of sales was 50.7%
for the nine month period ended 1995 and 49.0% for 1994. The increase
was primarily attributed to increased factory overhead, changes in
product mix and the costs associated with increased penetration in the
mass market.
Catalog printing, postage,and promotion expenses increased to
$14,671,813 in 1995 from $10,354,564 in 1994 an increase of $4,317,249.
Costs associated with long term contract promotions and coop advertising
increased in the wholesale division increased $3,116,510; other
advertising increased $1,200,739. As a percentage of sales, expenses
were 11.3% in 1995 and 9.0% for the comparable nine month period.
Selling, general and administrative expenses were $41,470,539 for the
nine months, 1995 and $36,392,632 in 1994, an increase of $5,077,908. As
a percentage of sales, these expenses were 31.9% and 31.5%,
respectively. Costs primarily increased in salaries, payroll fringes and
commission cost.
Other income (charges) includes rental income in miscellaneous.Income
before income taxes were $7,987,591 for 1995 and $12,520,601 for 1994.
After income taxes, the Company had net income of $4,642,504 or earnings
of $0.23 per share for the nine months ended June 30, 1995 compared with
a net income of $7,762,675 or earnings of $0.38 per share for the
comparable nine months ending June 30, 1994.
Liquidity and Capital Resources
The Company has adequate working capital to meet its obligations in the
normal course of business. The Company has a three year $15 million
Revolving Credit Agreement which expires March 31, 1996. At June 30,
1995, the entire amount remained available under the current Agreement.
At June 30, 1995, the Company was in violation of certain restrictive
covenants which were waived. In addition, the Company has a $10 million
equipment lease commitment through December 31, 1995 which it intends to
renew. At June 30, 1995, $9.3 million of this amount remained available.
Net cash provided by operating activities was $11,694,016 in 1995 and
$1,012,748 used in operating activities in 1994. Net cash used in
investing activities was $11,290,632 and $8,711,512 in 1995 and 1994,
respectively. Net cash used in financing activities was $4,069,960 in
1995 and $134,094 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.
NBTY, 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 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 third quarter of fiscal year
ending September 30, 1995.
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 thereunto duly authorized.
NBTY, INC.
Date: July 27, 1995 HARVEY KAMIL
Harvey Kamil,
Executive Vice President, Secretary
(Principal Financial and Accounting
Officer)