RONKONKOMA, N.Y., April 23 /PRNewswire-FirstCall/ -- NBTY, Inc. (NYSE: NTY) (www.NBTY.com), a leading global manufacturer and marketer of nutritional supplements, today announced results for the fiscal second quarter and first six months ended March 31, 2009.
For the fiscal second quarter ended March 31, 2009, net sales were $596 million compared to $533 million for the fiscal second quarter ended March 31, 2008, an increase of $63 million or 12%. Included in this total are net sales of $23 million from Julian Graves, acquired in the fiscal fourth quarter of 2008. The Leiner Health Products business, which was acquired in July 2008, has been fully integrated into NBTY operations; accordingly its sales can no longer be separately identified.
Net income for the fiscal second quarter ended March 31, 2009 was $23 million, or $0.37 per diluted share, compared to $44 million, or $0.67 per diluted share, for the fiscal second quarter ended March 31, 2008.
The decline in net income for the fiscal second quarter of 2009 reflects lower gross profit margins due to higher raw material costs which were not offset by higher prices charged to customers and the impact of a stronger US dollar as compared to the British Pound Sterling. The British pound sterling declined 27% compared to the prior like quarter. Without fluctuations in foreign exchange rates, earnings per diluted share would have been $0.09 higher for the fiscal second quarter of 2009.
Adjusted EBITDA for the fiscal second quarter of 2009 was $62 million, compared to $84 million for the fiscal second quarter of 2008. At March 31, 2009, working capital was $530 million, a decrease of $43 million compared to September 30, 2008. At March 31, 2009, total assets were $1.8 billion, and book value per share was $15.81.
Since October 1, 2008, the Company repaid $15 million under its term loan and $55 million under its revolving credit agreement. As of March 31, 2009, $320 million remained undrawn under the Company's $325 million Revolving Credit Facility. The Company is in compliance with all of its covenants under outstanding credit facilities.
For the six months ended March 31, 2009, net sales were $1.3 billion compared to $1.0 billion for the six months ended March 31, 2008, an increase of $213 million or 20%.
Net income for the six months ended March 31, 2009 was $37 million, or $0.58 per diluted share, compared to $90 million, or $1.34 per diluted share, for the six months ended March 31, 2008. The decrease in net income for the six months ended March 31, 2009 reflects the aforementioned lower gross profit margins, decreases in foreign exchange rates and previously announced costs associated with the write off and termination of the information technology programs in our Direct Response business, which programs were ineffective and uneconomical.
Adjusted EBITDA for the six months ended March 31, 2009 was $116 million, compared to $171 million for the six months ended March 31, 2008.
Overall gross profit margins for the fiscal second quarter of 2009 decreased to 42% from 51% for the fiscal second quarter of 2008. As previously discussed, a portion of this decrease was anticipated due to lower gross margins on Leiner private label business. Additional cost pressures occurred at the time of the Leiner acquisition in July 2008, when Leiner inventory levels were not adequate to maintain customer fulfillment levels. At the same time, certain raw material costs were increasing due to tight supply and inflationary pressures. In order to maintain adequate customer fulfillment levels, the Company was forced to purchase products at these higher costs. These conditions continued to negatively impact results for the last two quarters. The Company believes operations are stabilizing.
OPERATIONS FOR THE FISCAL SECOND QUARTER ENDED MARCH 31, 2009
Net sales for the Wholesale/US Nutrition division, which markets various brands including Nature's Bounty, Osteo Bi-Flex, Rexall, Ester-C and Leiner products, increased $90 million, or 35%, to $350 million. Since acquiring Leiner, the Company has eliminated in excess of $30 million in annualized non-manufacturing costs.
Gross profit for the Wholesale operation decreased to 27% from 41% for the prior like quarter. Operating results were adversely affected by higher raw material costs which were not offset by higher prices charged to wholesale customers. While the gross profit percentage decreased during this period, the Company continued to increase its market share. The Nielsen Company tracks industry-wide sales of vitamins, minerals, herbs and other supplements in the food, drug and mass market sectors. For the thirteen week period ended March 28, 2009, Nielsen reported an increase in the entire category of 8%. According to Nielsen, for that same period, the Company's Wholesale brands reported a 10% increase.
The Wholesale/US Nutrition division utilizes valuable consumer preference sales data generated by the Company's Vitamin World retail stores and Puritan's Pride Direct Response/E-Commerce operations to empower its wholesale customers with this latest data. The Vitamin World stores are used as a laboratory for new ideas and are an effective tool in determining and monitoring consumer preferences. This information, as well as scanned sales data from the Vitamin World stores, is shared on a real time basis with our wholesale customers to give them a competitive advantage.
Net sales for the North American Retail division, comprised of Vitamin World Stores in the United States and LeNaturiste stores in Canada, were $52 million, unchanged from the prior like quarter. While operating in a difficult retail environment in the US and Canada, Vitamin World same store sales increased 4% for the fiscal second quarter of 2009. Vitamin World results seem to indicate that the new modernization of the stores has had a favorable impact on the US Stores.
Net sales at LeNaturiste decreased 18%, all attributable to a weaker Canadian dollar, and the division operated at a loss of $1 million. LeNaturiste will continue to focus on increasing gross margins by utilizing more in-house manufactured products and more targeted promotions.
During the fiscal second quarter of 2009, the North American Retail division closed 3 stores and added 3 new stores. At the end of the fiscal second quarter of 2009, the North American Retail division operated a total of 531 stores, consisting of 444 Vitamin World stores in the United States and 87 LeNaturiste stores in Canada. Vitamin World plans to add 3 stores and close 5 stores during the remainder of fiscal 2009.
European Retail net sales for the fiscal second quarter ended March 31, 2009 decreased $24 million, or 15% to $134 million compared to $158 million for the prior like quarter. Julian Graves recorded net sales of $23 million. European Retail division same store sales in local currency decreased 5% from the prior like period. On a monthly basis, in local currency, same store sales decreased 10% in both January and February but increased 4% in March.
As previously announced, the Julian Graves acquisition continues to be the subject of an inquiry from the UK Competition Commission for potential anti-trust implications. In conjunction with this inquiry, Julian Graves business has not been integrated with the Company's European operations and incurred a loss of $0.5 million during the fiscal second quarter ended March 31, 2009.
The European Retail division continues to leverage its premier status, high street locations and brand awareness in a difficult retail environment. The European Retail division consists of 531 Holland & Barrett stores, 345 Julian Graves stores and 31 GNC stores in the UK, 22 Nature's Way stores in Ireland, and 71 DeTuinen stores in the Netherlands, for a total of 1,000 stores in Europe. In addition, during the fiscal second quarter of 2009, Holland & Barrett opened 3 franchised stores in South Africa, for a total of 7 franchised stores in South Africa.
Net sales from Direct Response/E-Commerce operations for the fiscal second quarter of 2009 decreased $4 million, or 6% to $59 million from $63 million for the fiscal second quarter of 2008. As this division varies its promotional strategy throughout the fiscal year, its results should be viewed on an annual and not quarterly basis. For the fiscal second quarter of 2009, compared with the prior like quarter, gross profit percentage for this division increased 5% to 64%; average order size increased $8 to $78. This division was reorganized during the first fiscal quarter of 2009. Online sales represented 43% of total Direct Response/E-Commerce sales. Puritan's Pride is the leader in the Direct Response and E-Commerce sectors and continues to increase the number of products available via its catalog and web sites.
NBTY Chairman and CEO, Scott Rudolph, said: "Profitability for the quarter was affected by inflationary pressures and foreign exchange declines. We continue to garner greater market share and enhance our position as the global leader in the nutritional supplement industry. The overall success of NBTY, and its ability to generate long-term growth, reflects our commitment to providing the highest quality products to our customers."
NBTY is a leading global vertically integrated manufacturer, marketer and distributor of a broad line of high-quality, value-priced nutritional supplements in the United States and throughout the world. Under a number of NBTY and third party brands, the Company offers over 25,000 products, including products marketed by the Company's Nature's Bounty(R) (www.NaturesBounty.com), Vitamin World(R) (www.VitaminWorld.com), Puritan's Pride(R) (www.Puritan.com), Holland & Barrett(R) (www.HollandAndBarrett.com), Rexall(R) (www.Rexall.com), Sundown(R) (www.SundownNutrition.com), MET-Rx(R) (www.MetRX.com), Worldwide Sport Nutrition(R) (www.SportNutrition.com), American Health(R) (www.AmericanHealthUS.com), GNC (UK)(R) (www.GNC.co.uk), DeTuinen(R) (www.DeTuinen.nl), LeNaturiste(TM) (www.LeNaturiste.com), SISU(R) (www.SISU.com), Solgar(R) (www.Solgar.com), Good 'n' Natural(R) (www.goodnnatural.com), Home Health(TM) (www.homehealthus.com), Julian Graves, and Ester-C(R) (www.Ester-C.com) brands. NBTY routinely posts information that may be important to investors on its web site.
This release refers to non-GAAP financial measures, such as Adjusted EBITDA. "Adjusted EBITDA" is defined as net income, excluding the aggregate amount of all non-cash losses reducing net income, plus interest, taxes, depreciation and amortization. This non-GAAP financial measure is not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation of the non-GAAP measure to the comparable GAAP measure is included in the attached financial tables. Management believes the presentation of Adjusted EBITDA is relevant and useful because Adjusted EBITDA is a measurement industry
analysts utilize when evaluating NBTY's operating performance. Management also believes Adjusted
EBITDA enhances an investor's understanding of NBTY's results of operations because it measures NBTY's operating performance exclusive of interest and non-cash charges for depreciation and amortization. Management also provides this non-GAAP measurement as a way to help investors better understand its core operating performance, enhance comparisons of NBTY's core operating performance from period to period and to allow better comparisons of NBTY's operating performance to that of its competitors.
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. These forward-looking statements can be identified by the use of terminology such as "subject to," "believe," "expects," "plan," "project," "estimate," "intend," "may," "will," "should," "can," or "anticipates," or the negative thereof, or variations thereon, or comparable terminology, or by discussions of strategy. Although all of these forward looking statements are believed to be reasonable, they 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 God, acts of war, terrorism, bio-
terrorism, civil unrest or disruption of mail service; (iii) adverse publicity regarding 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/or 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 NBTY to integrate acquisitions into the mainstream of its business; (x) changes in general worldwide economic and political conditions in the markets in which NBTY may compete from time to time; (xi) the inability of NBTY to gain and/or hold market share of its wholesale and/or retail customers anywhere in the world; (xii) unavailability of electricity in certain geographical areas; (xiii) the inability of NBTY to obtain and/or renew insurance and/or the costs of the same; (xiv) exposure to and expense of defending and resolving product liability and intellectual property claims and other litigation; (xv) the ability of NBTY to successfully implement its business strategy; (xvi) the inability of NBTY to manage its retail, wholesale, manufacturing and other operations efficiently; (xvii) consumer acceptance of NBTY's products; (xviii) the inability of NBTY to renew leases for its retail locations; (xix) the inability of NBTY's retail stores to attain or maintain profitability; (xx) the absence of clinical trials for many of NBTY's products; (xxi) sales and earnings volatility and/or trends for the Company and its market segments; (xxii) the efficacy of NBTY's Internet and on-line sales and marketing strategies; (xxiii) fluctuations in foreign currencies, including the British pound, the Euro and the Canadian dollar; (xxiv) import-export controls on sales to foreign countries; (xxv) the inability of NBTY to secure favorable new sites for, and delays in opening, new retail and manufacturing locations; (xxvi) introduction of and compliance with new federal, state, local or foreign legislation or regulation or adverse determinations by regulators anywhere in the world (including the banning of products) and more particularly Good Manufacturing Practices in the United States, the Food Supplements Directive and Traditional Herbal Medicinal Products Directive in Europe and Section 404 requirements of the Sarbanes-Oxley Act of 2002; (xxvii) the mix of NBTY's products and the profit margins thereon; (xxviii) the availability and pricing of raw materials; (xxix) risk factors discussed in NBTY's filings with the U.S. Securities and Exchange Commission; (xxx) adverse effects on NBTY as a result of increased energy prices and potentially reduced traffic flow to NBTY's retail locations; (xxxi) adverse tax determinations; (xxxii) the loss of a significant customer of the Company; (xxxiii) potential investment losses as a result of liquidity conditions; and (xxxiv) other factors beyond the Company's control.
Readers are cautioned not to place undue reliance on forward-looking statements. NBTY cannot guarantee future results, trends, events, levels of activity, performance or achievements. NBTY 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.
Consequently, such forward-looking statements should be regarded solely as NBTY's current plans, estimates and beliefs.
NBTY, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In thousands, except per share amounts) Three months ended March 31, 2009 2008 Net sales $595,553 $532,518 Costs and expenses: Cost of sales 343,644 261,284 Advertising, promotion and catalog 33,028 39,007 Selling, general and administrative 174,657 166,409 551,329 466,700 Income from operations 44,224 65,818 Other income (expense): Interest (8,888) (3,657) Miscellaneous, net 279 3,786 (8,609) 129 Income before provision for income taxes 35,615 65,947 Provision for income taxes 12,545 21,721 Net income $23,070 $44,226 Net income per share: Basic $0.37 $0.69 Diluted $0.37 $0.67 Weighted average common shares outstanding: Basic 61,600 64,102 Diluted 62,948 65,817 NBTY, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In thousands, except per share amounts) Six months ended March 31, 2009 2008 Net sales $1,256,105 $1,043,376 Costs and expenses: Cost of sales 732,147 501,615 Advertising, promotion and catalog 64,319 73,176 Selling, general and administrative 370,557 334,531 IT project termination costs 8,647 - 1,175,670 909,322 Income from operations 80,435 134,054 Other income (expense): Interest (18,377) (7,519) Miscellaneous, net (5,356) 8,673 (23,733) 1,154 Income before provision for income taxes 56,702 135,208 Provision for income taxes 20,157 45,160 Net income $36,545 $90,048 Net income per share: Basic $0.59 $1.37 Diluted $0.58 $1.34 Weighted average common shares outstanding: Basic 61,600 65,510 Diluted 63,043 67,313 SALES (Unaudited) THREE MONTHS ENDED MARCH 31, Percentage (In thousands) 2009 2008 Change Wholesale / US Nutrition $349,801 $259,363 35% North American Retail 51,916 51,904 0% European Retail 134,438 158,070 -15% Direct Response / E-Commerce 59,398 63,181 -6% Total $595,553 $532,518 12% GROSS PROFIT PERCENTAGES (Unaudited) THREE MONTHS ENDED MARCH 31, Increase 2009 2008 - Decrease Wholesale / US Nutrition 27% 41% -14% North American Retail 66% 62% 4% European Retail 63% 61% 2% Direct Response / E-Commerce 64% 59% 5% Total 42% 51% -9% SALES (Unaudited) SIX MONTHS ENDED MARCH 31, Percentage (In thousands) 2009 2008 Change Wholesale / US Nutrition $756,768 $518,298 46% North American Retail 100,354 108,086 -7% European Retail 290,464 316,666 -8% Direct Response / E-Commerce 108,519 100,326 8% Total $1,256,105 $1,043,376 20% GROSS PROFIT PERCENTAGES (Unaudited) SIX MONTHS ENDED MARCH 31, Increase 2009 2008 - Decrease Wholesale / US Nutrition 27% 42% -15% North American Retail 67% 60% 7% European Retail 63% 62% 1% Direct Response / E-Commerce 62% 60% 2% Total 42% 52% -10% ADJUSTED EBITDA** Reconciliation of GAAP Measures to Non-GAAP Measures (Unaudited) (In thousands) THREE MONTHS ENDED MARCH 31, 2009 Pretax Depreciation Income and Non-cash Adjusted (Loss) amortization Interest charges EBITDA** Wholesale / US Nutrition $30,084 $3,586 $- $(74) $33,596 North American Retail 914 745 23 1,682 European Retail 20,318 3,403 38 23,759 Direct Response / E-Commerce 21,198 1,267 (62) 22,403 Segment Results 72,514 9,001 - (75) 81,440 Corporate / Manufacturing (36,899) 8,278 8,888 442 (19,291) Total $35,615 $17,279 $8,888 $367 $62,149 THREE MONTHS ENDED MARCH 31, 2008 Pretax Depreciation Income and Non-cash Adjusted (Loss) amortization Interest charges EBITDA** Wholesale / US Nutrition $41,507 $2,578 $- $48 $44,133 North American Retail 522 804 16 1,342 European Retail 34,266 2,970 41 37,277 Direct Response / E-Commerce 15,750 1,374 20 17,144 Segment Results 92,045 7,726 - 125 99,896 Corporate / Manufacturing (26,098) 5,998 3,657 393 (16,050) Total $65,947 $13,724 $3,657 $518 $83,846 ** SINCE ADJUSTED EBITDA IS NOT A MEASURE OF PERFORMANCE CALCULATED IN ACCORDANCE WITH U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP"), IT SHOULD NOT BE CONSIDERED IN ISOLATION OF, OR AS A SUBSTITUTE FOR OR SUPERIOR TO, OTHER MEASURES OF FINANCIAL PERFORMANCE PREPARED IN ACCORDANCE WITH GAAP, SUCH AS OPERATING INCOME, NET INCOME AND CASH FLOWS FROM OPERATING ACTIVITIES. IN ADDITION, THE COMPANY'S DEFINITION OF ADJUSTED EBITDA IS NOT NECESSARILY COMPARABLE TO SIMILARLY TITLED MEASURES REPORTED BY OTHER COMPANIES. ADJUSTED EBITDA** Reconciliation of GAAP Measures to Non-GAAP Measures (Unaudited) (In thousands) SIX MONTHS ENDED MARCH 31, 2009 Pretax Depreciation Income and Non-cash Adjusted (Loss) amortization Interest charges EBITDA** Wholesale / US Nutrition $72,098 $7,310 $- $(27) $79,381 North American Retail 1,161 1,497 - 47 2,705 European Retail 46,489 6,964 - 90 53,543 Direct Response / E-Commerce 23,403 2,532 - 4,623 30,558 Segment Results 143,151 18,303 - 4,733 166,187 Corporate / Manufacturing (86,449) 16,497 18,377 1,003 (50,572) Total $56,702 $34,800 $18,377 $5,736 $115,615 SIX MONTHS ENDED MARCH 31, 2008 Pretax Depreciation Income and Non-cash Adjusted (Loss) amortization Interest charges EBITDA** Wholesale / US Nutrition $95,488 $5,272 $- $48 $100,808 North American Retail (342) 1,654 - 366 1,678 European Retail 69,333 6,032 - 41 75,406 Direct Response / E-Commerce 22,872 2,740 - 20 25,632 Segment Results 187,351 15,698 - 475 203,524 Corporate / Manufacturing (52,143) 11,957 7,519 393 (32,274) Total $135,208 $27,655 $7,519 $868 $171,250 ** SINCE ADJUSTED EBITDA IS NOT A MEASURE OF PERFORMANCE CALCULATED IN ACCORDANCE WITH U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP"), IT SHOULD NOT BE CONSIDERED IN ISOLATION OF, OR AS A SUBSTITUTE FOR OR SUPERIOR TO, OTHER MEASURES OF FINANCIAL PERFORMANCE PREPARED IN ACCORDANCE WITH GAAP, SUCH AS OPERATING INCOME, NET INCOME AND CASH FLOWS FROM OPERATING ACTIVITIES. IN ADDITION, THE COMPANY'S DEFINITION OF ADJUSTED EBITDA IS NOT NECESSARILY COMPARABLE TO SIMILARLY TITLED MEASURES REPORTED BY OTHER COMPANIES. NBTY, Inc. Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except per share amounts) March 31, September 30, 2009 2008 Current assets: Cash and cash equivalents $43,801 $ 90,180 Accounts receivable, net 134,111 122,878 Inventories 613,401 585,239 Deferred income taxes 25,300 25,098 Other current assets 36,587 75,971 Total current assets 853,200 899,366 Property, plant and equipment, net 394,645 419,066 Goodwill 323,337 342,379 Intangible assets, net 217,945 230,424 Other assets 37,151 45,123 Total assets $1,826,278 $1,936,358 Current liabilities: Current portion of long-term debt $32,077 $33,309 Accounts payable 156,256 120,620 Accrued expenses and other current liabilities 134,817 172,035 Total current liabilities 323,150 325,964 Long-term debt, net of current portion 464,010 538,402 Deferred income taxes 32,992 49,139 Other liabilities 32,366 24,657 Total liabilities 852,518 938,162 Commitments and contingencies Stockholders' equity: Common stock, $0.008 par; authorized 175,000 shares; issued and outstanding 61,600 and 61,599 shares at March 31, 2009 and September 30, 2008, respectively 493 493 Capital in excess of par 142,065 140,990 Retained earnings 875,613 839,068 Accumulated other comprehensive (loss) income (44,411) 17,645 Total stockholders' equity 973,760 998,196 Total liabilities and stockholders' equity $1,826,278 $1,936,358 NBTY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) Six Months ended March 31, 2009 2008 Cash flows from operating activities: Net income $36,545 $90,048 Adjustments to reconcile net income to cash provided by operating activities: Impairments and disposals of property, plant and equipment 688 482 Depreciation and amortization 34,800 27,655 IT project termination costs 4,667 - Foreign currency transaction loss (gain) 6,669 (1,385) Stock-based compensation 1,069 518 Amortization of deferred charges 631 372 Allowance for doubtful accounts 850 (174) Inventory reserves 7,177 2,465 Deferred income taxes 383 903 Excess income tax benefit from exercise of stock options - (4,984) Changes in operating assets and liabilities, net of acquisitions: Accounts receivable (16,256) (153) Inventories (57,941) (8,156) Other assets 10,568 4,241 Accounts payable 47,219 13,927 Accrued expenses and other liabilities (20,843) (10,946) Net cash provided by operating activities 56,226 114,813 Cash flows from investing activities: Purchase of property, plant and equipment (35,639) (21,693) Purchase of available-for-sale investments - (159,884) Proceeds from sale of available-for-sale investments - 248,728 Cash paid for acquisitions, net of cash acquired (264) (5,072) Escrow refund, net of purchase price adjustments 11,989 - Net cash (used in) provided by investing activities (23,914) 62,079 Cash flows from financing activities: Principal payments under long-term debt agreements and capital leases (16,785) (481) Proceeds from borrowings under the Revolving Credit Facility 60,000 - Principal payments under the Revolving Credit Facility (115,000) - Excess income tax benefit from exercise of stock options - 4,984 Proceeds from stock options exercised 6 3,852 Purchase of treasury stock (subsequently retired) - (171,008) Net cash used in financing activities (71,779) (162,653) Effect of exchange rate changes on cash and cash equivalents (6,912) (2,233) Net (decrease) increase in cash and cash equivalents (46,379) 12,006 Cash and cash equivalents at beginning of period 90,180 92,902 Cash and cash equivalents at end of period $43,801 $104,908
Contact: Harvey Kamil Carl Hymans NBTY, Inc. G.S. Schwartz & Co. President and Chief Financial Officer 212-725-4500 631-200-2020 firstname.lastname@example.org
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