FOR IMMEDIATE RELEASE
- ---------------------
Contact: Harvey Kamil Carl Hymans
NBTY, Inc. G.S. Schwartz & Co.
President and CFO 212-725-4500
631-244-2020 carlh@schwartz.com
NBTY REPORTS STRONG THIRD QUARTER RESULTS
BOHEMIA, N.Y. - JULY 22, 2003 - NBTY, Inc. (Nasdaq: NBTY) (www.NBTY.com), a
leading manufacturer and marketer of nutritional supplements, today announced
results for the fiscal third quarter and nine months ended June 30, 2003.
For the fiscal third quarter ended June 30, 2003, net sales increased 22% to
$308 million compared to net sales of $252 million for the fiscal third quarter
last year. Net income for the fiscal third quarter was $29 million, or $0.43 per
diluted share, compared to reported net income of $30 million, or $0.44 per
diluted share for the fiscal third quarter of 2002. Included in the results for
the current quarter is a $4 million after-tax benefit to record available
foreign tax credits. Results for the fiscal third quarter of 2002 include a $15
million pre-tax settlement payment received from price fixing litigation in
which the Company was a plaintiff. Excluding this one-time payment, net income
would have been $20 million or $0.30 per diluted share for the fiscal third
quarter last year.
For the nine months ended June 30, 2003, net sales increased 15% to $828 million
compared to $719 million for the same period last fiscal year. Net income for
the nine-month period was $66 million, or $0.96 per diluted share, compared with
reported net income of $66 million, or $0.98 per diluted share. Included in the
results for the current nine-month period is a $4 million after-tax benefit to
record available foreign tax credits. Results for the fiscal nine-month period
of 2002 include a total of $21 million in pre-tax settlement payments in the
aforementioned price fixing litigation. Excluding these one-time payments, net
income for the nine months ended June 30, 2002 would have been $54 million, or
$0.79 per diluted share for the comparable period last year.
NBTY continues to enhance its financial strength. At June 30, 2003, total assets
were $846 million and working capital was $218 million compared with total
assets of $725 million and working capital of $153 million at June 30, 2002.
OPERATIONS FOR THE FISCAL THIRD QUARTER ENDED JUNE 30, 2003
Sales for the Nature's Bounty wholesale division increased 17% to $94 million
from $80 million for the comparable period of fiscal 2002. The increase reflects
greater sales of core products and strong sales response to new product
introductions and promotions.
NBTY remains focused on increasing market share in the wholesale arena and
expanding its presence in the nutritional supplement marketplace. The Nature's
Bounty brand continues to be recognized for its ability to generate greater
sales than competing brands. By utilizing consumer sales information received
from its Vitamin World and direct-response/e-commerce operations, the Company
has been able to provide its mass-market customers with tools to drive sales.
The Company continues to respond to consumer preferences and to monitor the
market for trends and ideas, and these efforts have translated into increased
sales.
Vitamin World third quarter sales were $54 million compared to $51 million a
year ago, an increase of 6%. Same store sales increased 5% for the quarter.
Vitamin World operations continued to generate profitability with pre-tax income
of $902 thousand compared to a loss of $94 thousand for the comparable quarter
last year. Vitamin World currently has 536 stores in operation nationwide.
Total sales from NBTY's European retail operations increased 39% to $99 million
from $71 million a year ago. Of this increase, $15 million is attributed to
Health & Diet Group Ltd., with 56 GNC stores in the United Kingdom, and the De
Tuinen chain of health food stores, with 63 stores in the Netherlands. The
integration of these two strategic acquisitions is on schedule and profitability
is anticipated within the next two quarters. Holland & Barrett continues to be a
leader in the UK and Ireland. Same store sales for this operation increased 18%
for the fiscal third quarter. The total European division currently operates 586
stores in the UK, Ireland, and the Netherlands.
Revenues from Puritan's Pride direct response/e-commerce operations for the
fiscal third quarter increased 23% to $61 million from $49 million for the
comparable prior period. The increase in sales reflects the success of key
investments made in the second quarter in additional advertising, sales
promotions and faster product delivery to customers.
ACQUISITION OF REXALL SUNDOWN
As part of its strategic effort to expand the Company's wholesale operation,
NBTY agreed to acquire Rexall Sundown, Inc. ("Rexall") from Royal Numico, N.V.
for $250 million in cash. NBTY has obtained regulatory approval for this
acquisition and expects to close the transaction on July 24, 2003. To finance
this transaction the Company will enter into a new senior credit facility
consisting of $275 million in term loans and $100 million in a revolving credit
agreement.
Rexall, a prominent nutritional supplement company, had sales for the last
twelve months ended March 31, 2003 of $434 million with pro forma EBITDA of $39
million. Rexall's portfolio of nutritional supplement brands includes Rexall,
Sundown, Osteo Bi-Flex, CarbSolutions, MET-Rx and WORLDWIDE Sports Nutrition.
NBTY Chairman and CEO, Scott Rudolph, said: "Once again, we have recorded
another strong quarter. The Rexall acquisition is indicative of our commitment
to the wholesale segment. We anticipate this acquisition to provide substantial
synergies and further solidify the Company's position as the dominant force in
the worldwide nutritional supplement market. It will provide NBTY with an
enhanced sales infrastructure, additional manufacturing capacity, and the
opportunity to offer a greater number and variety of products to our growing
customer base. We are confident in the long-term outlook for the Company and in
NBTY's ability to further capitalize on market opportunities."
ABOUT NBTY
NBTY is a leading vertically integrated U.S. manufacturer and distributor of a
broad line of high-quality, value-priced nutritional supplements in the United
States and throughout the world. The Company markets more than 1,100 products
under several brands, including Nature's Bounty(R), Vitamin World(R), Puritan's
Pride(R), Holland & Barrett(R), Nutrition Headquarters(R), American Health(R),
Nutrition Warehouse(R) and GNC (UK)(R).
This release contains certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 with respect to our
financial condition, results of operations and business. All of these
forward-looking statements, which can be identified by the use of terminology
such as "subject to," "believe," "expects," "may," "will," "should," "can," or
"anticipates," or the negative thereof, or variations thereon, or comparable
terminology, or by discussions of strategy which, although believed to be
reasonable, are inherently uncertain. Factors which may materially affect such
forward-looking statements include: (i) slow or negative growth in the
nutritional supplement industry; (ii) interruption of business or negative
impact on sales and earnings due to acts of war, terrorism, bio-terrorism, civil
unrest or disruption of mail service; (iii) adverse publicity regarding the
consumption of nutritional supplements; (iv) inability to retain customers of
companies (or mailing lists) recently acquired; (v) increased competition; (vi)
increased costs; (vii) loss or retirement of key members of management; (viii)
increases in the cost of borrowings and unavailability of additional debt or
equity capital; (ix) unavailability of, or inability to consummate, advantageous
acquisitions in the future, including those that may be subject to bankruptcy
approval or the inability of the Company (as defined below) to integrate
acquisitions into the mainstream of its business; (x) changes in general
worldwide economic and political conditions in the markets in which the Company
may compete from time to time; (xi) the inability of the Company to gain and/or
hold market share of its wholesale and retail customers; (xii) loss or reduction
in ephedra sales; (xiii) unavailability of electricity in certain geographical
areas; (xiv) exposure to and expense of defending and resolving, product
liability claims and other litigation; (xv) the ability of the Company to
successfully implement its business strategy; (xvi) the inability of the Company
to manage its retail, wholesale, manufacturing and other operations efficiently;
(xvii) consumer acceptance of the Company's products; (xviii) the inability of
the Company to renew leases on its retail locations; (xix) inability of the
Company's retail stores to attain or maintain profitability; (xx) the absence of
clinical trials for many of the Company's products; (xxi) sales and earnings
volatility and/or trends; (xxii) the effect on Company sales of the rapidly
changing nature of the Internet and on-line commerce; (xxiii) fluctuations in
foreign currencies, and more particularly the British Pound; (xxiv)
import-export controls on sales to foreign countries; (xxv) the inability of the
Company to secure favorable new sites for, and delays in opening, new retail
locations; (xxvi) introduction of new federal, state, local or foreign
legislation or regulation or adverse determinations by regulators, and more
particularly the Food Supplements Directive and the Traditional Herbal Medicinal
Products Directive in Europe; (xxvii) the mix of the Company's products and the
profit margins thereon; (xxviii) the availability and pricing of raw materials;
(xxix) risk factors discussed in the Company's filings with the U.S. Securities
and Exchange Commission (the "SEC"); and (xxx) other factors beyond the
Company's control.
Readers are cautioned not to place undue reliance on forward-looking statements.
The Company cannot guarantee future results, trends, events, levels of activity,
performance or achievements. The Company does not undertake and specifically
declines any obligation to update, republish or revise forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrences of unanticipated events.
NBTY, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)
For the three months
ended June 30,
2003 2002
--------- ---------
Net sales $ 308,474 $ 251,987
Cost and expenses:
Cost of sales 141,196 111,907
Catalog printing, postage and promotion 15,378 12,544
Selling, general and administrative 110,924 89,217
Litigation recovery of raw material costs (15,051)
--------- ---------
267,498 198,617
--------- ---------
Income from operations 40,976 53,370
--------- ---------
Other income (Expense):
Interest (3,890) (4,354)
Miscellaneous, net 2,023 270
--------- ---------
(1,867) (4,084)
--------- ---------
Income before income taxes 39,109 49,286
Provision for income taxes 9,641 19,579
--------- ---------
Net income $ 29,468 $ 29,707
========= =========
Net income per share:
Basic $ 0.44 $ 0.45
========= =========
Diluted $ 0.43 $ 0.44
========= =========
Weighted average common shares outstanding:
Basic 66,263 66,056
========= =========
Diluted 68,287 68,017
========= =========
NBTY, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Dollars and Shares in Thousands, Except Per Share Amounts)
For the nine months
ended June 30,
2003 2002
--------- ---------
Net sales $ 827,701 $ 718,621
Cost and expenses:
Cost of sales 372,555 325,805
Discontinued product charge 6,000
Catalog printing, postage and promotion 46,015 34,285
Selling, general and administrative 303,470 257,765
Litigation recovery of raw material costs (20,518)
--------- ---------
728,040 597,337
--------- ---------
Income from operations 99,661 121,284
--------- ---------
Other income (expense):
Interest (11,709) (14,588)
Miscellaneous, net 5,536 2,325
--------- ---------
(6,173) (12,263)
--------- ---------
Income before income taxes 93,488 109,021
Provision for income taxes 27,786 42,577
--------- ---------
Net income $ 65,702 $ 66,444
========= =========
Net income per share:
Basic $ 0.99 $ 1.01
========= =========
Diluted $ 0.96 $ 0.98
========= =========
Weighted average common shares outstanding:
Basic 66,232 65,895
========= =========
Diluted 68,233 67,723
========= =========
SALES
(THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
% INCREASE % INCREASE
2003 2002 (% DECREASE) 2003 2002 (% DECREASE)
------------------------------------ -----------------------------------
Wholesale $ 93,939 $ 80,151 17% $252,906 $217,676 16%
US Retail / Vitamin World 54,423 51,287 6% 158,242 146,347 8%
European Retail /
Holland & Barrett / GNC 99,202 71,165 39% 268,903 216,484 24%
Direct Response /
Puritan's Pride 60,910 49,384 23% 147,650 138,114 7%
------------------------------------ -----------------------------------
Total $308,474 $251,987 22% $827,701 $718,621 15%
------------------------------------ -----------------------------------
GROSS PROFIT
PERCENTAGES
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
% INCREASE % INCREASE
2003 2002 (% DECREASE) 2003 2002 (% DECREASE)
------------------------------------ -----------------------------------
Wholesale 41% 45% -4% 41% 40% 1%
US Retail / Vitamin World 59% 59% 0% 59% 58% 1%
European Retail /
Holland & Barrett / GNC 60% 62% -2% 61% 62% -1%
Direct Response /
Puritan's Pride 62% 60% 2% 62% 62% 0%
------------------------------------ -----------------------------------
Total (without discontinued
product charge) 54% 56% -2% 55% 55% 0%
Discontinued product charge -1% -1%
------------------------------------ -----------------------------------
Total 54% 56% -2% 54% 55% -1%
------------------------------------ -----------------------------------
INCOME FROM OPERATIONS BY SEGMENT
(Thousands)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
2003 2002 2003 2002
------------------------- -------------------------
Wholesale $ 21,630 $ 20,559 $ 53,784 $ 44,211
US Retail / Vitamin World 902 (94) 340 (5,034)
European Retail /
Holland & Barrett / GNC 19,182 18,533 64,542 59,041
Direct Response / Puritan's Pride 19,771 17,711 44,744 51,940
------------------------- -------------------------
Segment Results 61,485 56,709 163,410 150,158
Corporate Expenses (20,509) (18,390) (57,748) (49,392)
Discontinued Product Charge (6,000)
Litigation Recovery of Raw Material Costs 15,051 20,518
------------------------- -------------------------
Income from Operations $ 40,976 $ 53,370 $ 99,662 $ 121,284
========================= =========================
NBTY, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
(Dollars and shares in thousands)
June 30, September 30,
2003 2002
--------- ------------
Current assets:
Cash and cash equivalents $ 38,459 $ 26,229
Investments in bonds 6,191 8,194
Accounts receivable, less
allowance for doubtful accounts
of $4,237 at June 30, 2003
and $4,194 at September 30, 2002 56,067 41,362
Inventories 235,477 204,402
Deferred income taxes 12,206 11,206
Prepaid expenses and other
current assets 45,838 24,691
--------- ---------
Total current assets 394,238 316,084
Property, plant and equipment 421,570 392,033
less accumulated depreciation
and amortization 198,507 175,788
--------- ---------
223,063 216,245
Goodwill 174,888 144,999
Intangible assets, net 44,864 48,413
Other assets 8,522 8,936
--------- ---------
Total Assets $ 845,575 $ 734,677
========= =========
NBTY, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
(Dollars and shares in thousands)
June 30, September 30,
2003 2002
--------- ------------
Current liabilities:
Current portion of long-term debt
and capital lease obligations $ 15,079 $ 23,044
Accounts payable 73,884 48,616
Accrued expenses and other current liabilities 87,691 58,714
--------- ---------
Total Current Liabilities
176,654 130,374
Long-term debt 154,422 163,874
Deferred income taxes 16,692 16,928
Other liabilities 3,927 4,244
--------- ---------
Total liabilities 351,695 315,420
--------- ---------
Commitments and contingencies
Stockholders' equity:
Common stock, $0.008 par; authorized 175,000
shares; issued and outstanding 66,263 shares
at June 30, 2003 and 66,133 shares at
September 30, 2002 530 529
Capital in excess of par 128,282 126,283
Retained earnings 353,571 287,868
--------- ---------
482,383 414,680
Accumulated other comprehensive income 11,497 4,577
--------- ---------
Total stockholders' equity 493,880 419,257
--------- ---------
Total liabilities and stockholders' equity $ 845,575 $ 734,677
========= =========
NBTY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(DOLLARS IN THOUSANDS)
FOR THE NINE MONTHS ENDED JUNE 30,
2003 2002
---------- ----------
Cash flows from operating activities:
Net income $ 65,703 $ 66,444
Adjustments to reconcile net income to
net cash provided by operating activities:
Gain on disposal/sale of property, plant and equipment (843) (75)
Depreciation and amortization 32,539 31,512
Foreign currency exchange rate (gain) loss (970) 463
Amortization of deferred financing costs 591 585
Amortization of bond discount 93 93
Allowance for doubtful accounts (43) 1,384
Deferred income tax (1,000)
Compensation expense for ESOP 1,283
Tax benefit from exercise of stock options 113 1,385
Changes in assets and liabilities, net of acquisitions:
Accounts receivable (12,912) (11,295)
Inventories (13,323) 6,984
Prepaid expenses and other current assets (17,201) (8,206)
Other assets (1,209) 1,074
Accounts payable 5,743 (2,571)
Accrued expenses and other current liabilities 21,330 19,088
Other liabilities (318) 42
---------- ----------
Net cash provided by operating activities 79,576 106,907
---------- ----------
Cash flows from investing activities:
Cash paid for acquisitions, net of cash acquired (32,049) (7,256)
Purchase of property, plant and equipment (24,852) (16,427)
Proceeds from sale of property, plant, and equipment 1,454 1,004
Proceeds from sale of intangibles 25
Purchase of investments (8,242)
Release of cash held in escrow 2,403 4,600
---------- ----------
Net cash used in investing activities (53,044) (26,296)
---------- ----------
Cash flows from financing activities:
Principal payments under long-term
debt agreements and capital leases (17,510) (79,477)
Proceeds from stock options exercised 176 1,385
---------- ----------
Net cash used in financing activities (17,334) (78,092)
---------- ----------
Effect of exchange rate changes on cash
and cash equivalents 3,032 1,623
---------- ----------
Net increase in cash and cash equivalents 12,230 4,142
Cash and cash equivalents at beginning of period 26,229 34,434
---------- ----------
Cash and cash equivalents at end of period $ 38,459 $ 38,576
========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 8,656 $ 11,427
Cash paid during the period for taxes $ 21,035 $ 30,619