-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O21NTxODl3ZNsjZsyWc2e0d0jXVqI/ykP6pFzKt+5Dm1sWWrEPz5CnqWBWOE8aSB FtsYiTpxtk3zdQXWa8dAtw== 0000910647-00-000144.txt : 20000516 0000910647-00-000144.hdr.sgml : 20000516 ACCESSION NUMBER: 0000910647-00-000144 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NBTY INC CENTRAL INDEX KEY: 0000070793 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 112228617 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-10666 FILM NUMBER: 632071 BUSINESS ADDRESS: STREET 1: 90 ORVILLE DR CITY: BOHEMIA STATE: NY ZIP: 11716 BUSINESS PHONE: 5165679500 MAIL ADDRESS: STREET 1: 90 ORVILLE DRIVE CITY: BOHEMIA STATE: NY ZIP: 11716 FORMER COMPANY: FORMER CONFORMED NAME: NATURES BOUNTY INC DATE OF NAME CHANGE: 19920703 10-Q 1 BODY OF 10-Q 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, 2000 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 (631) 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 [X] NO [ ] Shares of Common Stock as of March 31, 2000: 67,200,117 NBTY, INC. and SUBSIDIARIES INDEX PART I Financial Information Condensed Consolidated Balance Sheets - March 31, 2000 (unaudited) and September 30, 1999 1 - 2 Condensed Consolidated Statements of Operations - (unaudited) Three months Ended March 31, 2000 and 1999 3 Condensed Consolidated Statements of Operations - (unaudited) Six months Ended March 31, 2000 and 1999 4 Condensed Consolidated Statements of Stockholders' Equity Year ended September 30, 1999 and (unaudited) Six months Ended March 31, 2000 5 Condensed Consolidated Statements of Cash Flows - (unaudited) Six months Ended March 31, 2000 and 1999 6 - 7 Notes to Condensed Consolidated Financial Statements (unaudited) 8 - 12 Management's Discussion and Analysis of Financial Condition and Results of Operations 13 - 18 PART II Other Information 19 Signature 20 NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS
(Dollars and shares in thousands) March 31, September 30, 2000 1999 --------- ------------- (Unaudited) Current assets: Cash and cash equivalents $ 46,520 $ 18,269 Accounts receivable, less allowance for doubtful accounts of $1,241 in 2000 and $1,248 in 1999 24,550 24,336 Inventories 123,691 135,466 Deferred income taxes 3,250 3,250 Prepaid property taxes, rent, and other current assets 15,046 19,243 ----------------------- Total current assets 213,057 200,564 Property, plant and equipment 308,705 277,033 less accumulated depreciation and amortization 100,278 87,471 ----------------------- 208,427 189,562 Intangible assets, net 164,207 141,410 Other assets 5,899 7,848 ----------------------- Total assets $591,590 $539,384 =======================
NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY
(Dollars and shares in thousands) March 31, September 30, 2000 1999 --------- ------------- (Unaudited) Current liabilities: Current portion of long-term debt and capital lease obligations $ 1,997 $ 1,799 Accounts payable 43,548 45,366 Accrued expenses 55,183 32,296 ----------------------- Total current liabilities 100,728 79,461 Long-term debt 215,942 217,136 Obligations under capital leases 3,097 2,372 Deferred income taxes 12,134 12,233 Other liabilities 2,861 4,233 ----------------------- Total liabilities 334,762 315,435 ----------------------- Commitments and contingencies Stockholders' equity: Common stock, $0.008 par; authorized 175,000 shares; issued and outstanding 67,200 shares in 2000 and 66,096 shares in 1999 538 529 Capital in excess of par 118,717 106,332 Retained earnings 138,272 111,792 ----------------------- 257,527 218,653 Stock subscriptions receivable (839) (839) Accumulated other comprehensive earnings 140 6,135 ----------------------- Total stockholders' equity 256,828 223,949 ----------------------- Total liabilities and stockholders' equity $591,590 $539,384 =======================
See notes to condensed consolidated financial statements. NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars and shares in thousands, except per share amounts) For the three months ended March 31, ---------------------- 2000 1999 ---- ---- Net sales $200,107 $167,673 ---------------------- Costs and expenses: Cost of sales 84,153 78,549 Catalog printing, postage and promotion 9,604 9,864 Selling, general and administrative 72,334 62,424 ---------------------- 166,091 150,837 ---------------------- Income from operations 34,016 16,836 ---------------------- Other income (expense): Interest, net (4,739) (5,358) Miscellaneous, net 828 7 ---------------------- (3,911) (5,351) ---------------------- Income before income taxes 30,105 11,485 Income taxes 12,042 4,647 ---------------------- Net income $ 18,063 $ 6,838 ====================== Net income per share: Basic $ 0.27 $ 0.10 ====================== Diluted $ 0.26 $ 0.09 ====================== Weighted average common shares outstanding: Basic 67,200 71,597 ====================== Diluted 69,630 72,513 ======================
See notes to condensed consolidated financial statements. NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars and shares in thousands, except per share amounts) For the six months ended March 31, ---------------------- 2000 1999 ---- ---- Net sales $371,279 $308,686 ---------------------- Costs and expenses: Cost of sales 165,096 147,508 Catalog printing, postage and promotion 17,889 18,652 Selling, general and administrative 136,258 115,895 ---------------------- 319,243 282,055 ---------------------- Income from operations 52,036 26,631 ---------------------- Other income (expense): Interest (9,425) (9,626) Miscellaneous, net 1,523 515 ---------------------- (7,902) (9,111) ---------------------- Income before income taxes 44,134 17,520 Income taxes 17,654 7,214 ---------------------- Net income $ 26,480 $ 10,306 ====================== Net income per share: Basic $ 0.40 $ 0.14 ====================== Diluted $ 0.38 $ 0.14 ====================== Weighted average common shares outstanding: Basic 66,659 71,313 ====================== Diluted 68,869 72,573 ======================
See notes to condensed consolidated financial statements. NBTY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEAR ENDED SEPTEMBER 30, 1999 AND THE SIX MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
(Dollars and shares in thousands) Accumu- lated Other Common stock Treasury stock Compre- Total ----------------- ----------------- Stock hensive Total Compre- Number of Capital in Retained Number of subscriptions Income Stockholders' hensive shares Amount excess of par earnings shares Amount receivable (Loss) Equity Income --------- ------ ------------- -------- --------- ------ ------------- ------- ------------- ------- Balances, September 30, 1998 72,714 $582 $115,661 $105,989 4,511 $ (3,206) $11,313 $230,339 Net income for year ended September 30, 1999 27,279 27,279 $27,279 Purchase of treasury stock, at cost 5,702 (34,438) (34,438) Treasury stock retired (10,213) (82) (16,086) (21,476) (10,213) 37,644 - Exercise of stock options 3,595 29 888 $(839) 78 Tax benefit from exercise of stock options 5,869 5,869 Acquisition of Nutrition Warehouse 1,059 9 12,235 Foreign currency translation adjustment (5,178) (5,178) (5,178) ------------------------------------------------------------------------------------------------------------ Balances, September 30, 1999 66,096 529 106,332 111,792 (839) 6,135 223,949 $22,101 ======= Net income for six months ended March 31, 2000 26,480 26,480 $26,480 Exercise of stock options 45 - 13 13 Tax benefit from exercise of stock options 137 137 Acquisition of Nutrition Warehouse 12,244 Foreign currency translation adjustment (5,995) (5,995) (5,995) ------------------------------------------------------------------------------------------------------------ Balances, March 31, 2000 67,200 $538 $118,717 $138,272 $(839) $ 140 $256,828 $20,485 ===========================================================================================================
See notes to condensed consolidated financial statements. NBTY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands) For the six months ended March 31, ---------------------- 2000 1999 ---- ---- Net income $ 26,480 $ 10,306 Adjustments to reconcile net income to cash provided by operating activities: Loss on sale of property, plant and equipment 468 139 Depreciation and amortization 17,322 13,806 Provision for allowance for doubtful accounts 7 (11) Changes in assets and liabilities: Increase in accounts receivable (60) (1,667) Decrease (increase) in inventories 13,369 (2,337) Decrease (increase) in prepaid catalog costs and other current assets 8,753 (7,993) (Increase) decrease in other assets (1,225) 539 Decrease in accounts payable (4,838) (10,192) Increase in accrued expenses 20,539 13,650 Decrease in other liabilities (1,372) (195) ---------------------- Net cash provided by operating activities 79,442 16,045 ---------------------- Cash flows from investing activities: Purchase of property, plant and equipment (26,454) (21,642) Proceeds from sale of property, plant, and equipment 25 Purchase of business, net of cash acquired (19,578) Increase in intangible assets (10) ---------------------- Net cash used in investing activities (46,017) (21,642) ---------------------- Cash flows from financing activities: (Payments) borrowings under long term debt agreements (3,412) 17,000 Principal payments under long-term debt agreements and capital leases (1,338) (532) Proceeds from stock options exercised 14 Stock subscriptions receivable (866) ---------------------- Net cash (used in)provided by financing activities (4,736) 15,602 ---------------------- Effect of exchange rate changes on cash and cash equivalents (438) 1,171 ---------------------- Net increase in cash and cash equivalents 28,251 11,176 Cash and cash equivalents at beginning of period 18,269 14,308 ---------------------- Cash and cash equivalents at end of period $ 46,520 $ 25,484 ====================== Supplemental Disclosure of Cash Flow Information: Cash paid during the period for interest $ 9,572 $ 9,315 Cash paid during the period for taxes $ 827 $ 7,779
See notes to condensed consolidated financial statements. NBTY, INC. and SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS For the three months ended March 31, 2000 and 1999 (Unaudited) (In thousands, except per share amounts) Supplemental Non-cash Investing and Financing Information: In connection with the Company's January 1, 2000 acquisition of Nutrition Warehouse, Inc. and its affiliated companies (NW), the Company issued approximately 1,059 shares of its common stock with a total then market value of $12,244. During the six months ended March 31, 2000, options were exercised with 45 shares of common stock issued to an executive for cash of $14. As a result of the exercise of those options, the Company expects to receive a compensation deduction for tax purposes of approximately $352 and a tax benefit of approximately $138. During the six months ended March 31, 1999, options were exercised with 3,520 shares of common stock issued to certain officers and an executive for interest-bearing stock subscriptions receivable aggregating $866 and cash of $27. As a result of the exercise of those options, the Company received a compensation deduction for tax purposes of approximately $14,604 and a tax benefit of approximately $5,696. NBTY, INC. and SUBSIDIARIES NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (In thousands, except per share amounts) 1. Principles of consolidation and basis of presentation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. In the opinion of the Company, the unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly its financial position as of March 31, 2000 and its results of operations for the three and six months ended March 31, 2000 and 1999 and statements of cash flows for the six months ended March 31, 2000 and 1999. The condensed consolidated balance sheet as of September 30, 1999 has been derived from the audited balance sheet as of that date. The results of operations for the three and six months ended March 31, 2000 and statements of cash flows for the six months ended March 31, 2000 are not necessarily indicative of the results to be expected for the full year. This report should be read in conjunction with the Company's annual report filed on Form 10-K for the fiscal year ended September 30, 1999. 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, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications Certain reclassifications have been made to conform prior year amounts to the current year presentation. New accounting standards Effective October 1, 1998, Company adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information," which establishes standards for reporting information about operating segments. It also establishes standards for disclosures regarding products and services, geographic areas and major customers. SFAS No. 131 requires comparative information for earlier years to be restated. The adoption of SFAS No. 131 did not affect the Company's results of operations or financial position, but did affect the disclosure of segment information. In June 1998, the FASB issued SFAS No. 133, "Statement of Financial Accounting Standards Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133, as amended, is effective for fiscal years beginning after June 15, 1999 (October 1, 1999 for the Company). SFAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is the type of hedge transaction. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of Statement 133," which postponed the adoption of SFAS No. 133. As such, the Company is not required to adopt the statement until fiscal 2002. Management of the Company anticipates that, due to its limited use of derivative instruments, the adoption of SFAS 133 will not have a significant effect on the Company's results of operations or its financial position, however, it is currently reviewing the impact of adopting such pronouncement. 2. Acquisitions On January 1, 2000, the Company acquired Nutrition Warehouse, Inc. and its affiliated companies ("NW") for $20 million in cash and approximately 1,059 shares of NBTY stock with a total then market value of $12.2 million. NW operates an e-commerce/direct response business as well as 14 retail stores in various locations in New York. The e-commerce business will be combined with the Company's Puritan.com operations. Annual revenues approximated $14 million for the e-commerce/direct response business and $14 million in retail sales for the year ended December 31, 1999. The cash portion of the acquisition was funded with $20 million in borrowings under the Company's Credit and Guarantee Agreement (CGA). In May 1999, the Company acquired the assets and certain liabilities of a network marketing company, Dynamic Essentials, Inc. (DEI) for approximately $1,000 in cash. DEI was formed in December 1998 and had aggregate sales of $2,081 during its first six months. 3. Comprehensive earnings Comprehensive income for the Company includes net income and the effects of foreign currency translation, which are charged or credited to the cumulative translation adjustment account within stockholders' equity. Comprehensive earnings for the three and six months ended March 31, 2000 and 1999 are as follows:
For the three months For the six months ended March 31, ended March 31, -------------------- ------------------ 2000 1999 2000 1999 ---- ---- ---- ---- Net Income $18,063 $6,838 $26,480 $10,306 Changes in cumulative translation adjustment (2,659) (5,343) (5,995) (9,261) ------------------------------------------ Comprehensive earnings $15,404 $1,495 $20,485 $ 1,045 ==========================================
Accumulated other comprehensive earnings, which is classified as a separate component of stockholders' equity, is comprised of cumulative translation adjustments of $140 and $6,135 at March 31, 2000 and September 30, 1999, respectively. 4. Inventories Inventories have been estimated using the gross profit method for the interim periods. The components of inventories are as follows:
March 31, September 30, 2000 1999 --------- ------------- Raw materials and Work-in-process $ 42,610 $ 52,116 Finished goods 81,081 83,350 ----------------------- $123,691 $135,466 =======================
5. Earnings per share (EPS) Basic EPS computations are based on the weighted average number of common shares outstanding during the three and six month periods ended March 31, 2000 and 1999. Diluted EPS include the dilutive effect of outstanding stock options, as if exercised. The following is a reconciliation between the basic and diluted EPS:
For the three months For the six months March 31, March 31, -------------------- ------------------ 2000 1999 2000 1999 ---- ---- ---- ---- Numerator: Numerator for basic EPS -- Income available To common stockholders $18,063 $ 6,838 $26,480 $10,306 =========================================== Numerator for diluted EPS -- Income available To common stockholders $18,063 $ 6,838 $26,480 $10,306 =========================================== Denominator: Denominator for basic EPS -- Weighted average shares 67,200 71,597 66,659 71,313 Effect of dilutive securities: Stock options 2,430 916 2,210 1,260 ------------------------------------------- Denominator for diluted EPS -- Weighted average shares 69,630 72,513 68,869 72,573 =========================================== Net EPS: Basic EPS $ 0.27 $ 0.10 $ 0.40 $ 0.14 =========================================== Diluted EPS $ 0.26 $ 0.09 $ 0.38 $ 0.14 ===========================================
6. Stock options: During the six months ended March 31, 2000, options were exercised with 45 shares of common stock issued to an executive for cash of $14. As a result of the exercise of those options, the Company expects to receive a compensation deduction for tax purposes of approximately $352 and a tax benefit of approximately $138. During the six months ended March 31, 1999, options were exercised with 3,520 shares of common stock issued to certain officers and an executive for interest-bearing stock subscriptions receivable aggregating $866 and cash of $27. As a result of the exercise of those options, the Company received a compensation deduction for tax purposes of approximately $14,604 and a tax benefit of approximately $5,696. 7. Segment Information: The Company's segments are organized by sales market on a worldwide basis. The Company's management reporting system evaluates performance based on a number of factors; however, the primary measure of performance is the pretax operating income of each segment. Accordingly, the Company reports four worldwide segments: Puritan.com/Direct Response, Retail: United States and United Kingdom, and Wholesale. All of the Company's products fall into one of these four segments. The Puritan.com/Direct Response segment generates revenue through the sale of its products primarily through mail order catalog and the internet. Catalogs are strategically mailed to customers who order by mail or phoning customer service representatives in New York, Illinois and the United Kingdom. The Retail United States segment generates revenue through the sale of proprietary brand and third-party products through its 415 Company-operated stores. The Retail United Kingdom segment generates revenue through the sales of proprietary brand and third-party products in 422 Company-operated stores. The Wholesale segment (including Network Marketing) is comprised of several divisions each targeting specific market groups. These market groups include wholesalers, distributors, chains, pharmacies, health food stores, bulk and international customers. The following table represents key financial information of the Company's business segments (in thousands):
Three months ended Six months ended March 31, March 31, -------------------- -------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Puritan.com/Direct Response Revenue $ 62,905 $ 59,006 $ 92,139 $ 89,226 Operating income 19,396 15,133 24,949 20,174 Depreciation and amortization 753 333 1,093 668 Retail: United States Revenue $ 38,496 $ 24,210 $ 72,826 $ 44,999 Operating loss (2,890) (4,778) (6,385) (6,178) Depreciation and amortization 2,618 1,233 4,893 2,214 United Kingdom Revenue $ 63,640 $ 53,753 $134,863 $113,693 Operating income 12,930 7,280 25,076 11,754 Depreciation and amortization 3,008 3,153 6,246 6,223 Wholesale Revenue $ 35,066 $ 30,704 $ 71,450 $ 60,768 Operating income 7,008 1,764 13,125 5,411 Depreciation and amortization 189 108 377 180 Corporate Depreciation and amortization $ 2,428 $ 2,563 $ 4,729 $ 4,530 Consolidated totals Revenue $200,107 $167,673 $371,279 $308,686 Operating income 34,016 16,836 52,036 26,631 Depreciation and amortization 8,996 7,390 17,338 13,815 Interest expense, net 4,739 5,358 9,425 9,626 Income taxes 12,042 4,647 17,653 7,213 Net income 18,063 6,840 26,480 10,306
The following table reflects identifiable assets by market segment at March 31, 2000 and 1999:
March 31, ---------------------- 2000 1999 ---- ---- Puritan.com/Direct response $ 59,712 $ 32,059 Retail United States 74,404 56,678 Retail United Kingdom 222,808 211,054 Wholesale 14,837 16,721 Corporate manufacturing assets 219,829 195,564 ---------------------- Consolidated totals $591,590 $512,076 ======================
8. Subsequent events: The Company acquired the mailing list of Rexall Sundown's SDV vitamin catalog and mail order list on April 17, 2000. The list contains approximately 750 customer names, which will be merged into the existing customer base of the Puritan.com/ direct-response/e-commerce business. NBTY, INC. and SUBSIDIARIES MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS of OPERATIONS (In thousands, except per share amounts) 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, ------------------ ------------------ 2000 1999 2000 1999 ---- ---- ---- ---- Net sales 100.0% 100.0% 100.0% 100.0% Costs and expenses: Cost of sales 42.1 46.8 44.5 47.8 Catalog printing, postage and promotion 4.8 5.9 4.8 6.0 Selling, general and administrative 36.1 37.2 36.7 37.5 ----------------------------------------- 83.0 89.9 86.0 91.3 ----------------------------------------- Income from operations 17.0 10.1 14.0 8.7 Other income (expenses), net (2.0) (3.2) (2.1) (3.0) ----------------------------------------- Income before income taxes 15.0 6.9 11.9 5.7 Income taxes 6.0 2.8 4.8 2.4 ----------------------------------------- Net income 9.0% 4.1% 7.1% 3.3% =========================================
For the three months ended March 31, 2000 compared to the three months ended March 31, 1999: Net sales. Net sales in the second quarter ended March 31, 2000 were $200,107 compared with $167,673 for the prior comparable period, an increase of $32,434 or 19.3%. Puritan.com/Direct Response sales were $62,905 compared to $59,006 (increase of $3,899 or 6.6%), wholesale sales were $35,066 compared to $30,704 (increase of $4,362 or 14.2%), U.S. retail sales were $38,496 compared to $24,210 (increase of $14,286 or 59.0%) and U.K. retail sales were $63,640 compared to $53,753 (increase of $9,887 or 18.4%). Revenue increases in all of the Company's segments are attributed to the continued consumer acceptance of the broad base of the Company's products. The Company operated 415 stores in the U.S. and 422 stores in the U.K. as of March 31, 2000 compared to 277 stores in the U.S. and 415 in the U.K. as of March 31, 1999. Sales growth in the U.S. retail channel reflected the greater number of stores compared to last year. U.S. comparative store sales increased $3,621 or 15.6% for stores open more than one year. Costs and expenses. Cost of sales as a percentage of sales were 42.1% for 2000 and 46.8% for 1999. The decrease is attributed to efficiencies due to economies of scale, increased automation and higher margins for new product introductions. Catalog printing, postage, and promotion expenses were $9,604 in 2000 compared with $9,864 in 1999. This decrease was due primarily to a reduction in print media advertising in direct response. As a percentage of sales, expenses were 4.8% for the current quarter and 5.9% for the prior comparable quarter. Selling, general and administrative expenses were $72,335 for the quarter, or 36.1% as a percentage of sales, compared with $62,424 or 37.2% as a percentage of sales. The largest categories and increases are indirect salaries and rent expense which increased primarily due to the U.S. retail store expansion program. The Company was operating more efficiently and thereby able to increase sales without a proportional increase in these costs. Interest expense. Interest expense was $4,739, a decrease of $619 compared to $5,358 during the comparable quarter. The major components are interest on Senior Subordinated Notes associated with the Holland & Barrett acquisition, the Credit and Guarantee Agreement (CGA) used for stock repurchases and for capital expenditures. Income before income taxes was $30,105 for 2000 and $11,485 for 1999. After income taxes, the Company had a net profit of $18,063 (or basic earnings per share of $0.27, diluted earnings per share of $0.26) for the three month period ended March 31, 2000, and $6,838 (or basic earnings per share of $0.10, diluted earnings per share of $0.09) for the three months ended March 31, 1999. For the six months ended March 31, 2000 compared to the six months ended March 31, 1999: Net sales. Net sales for the six months ended March 31, 2000 were $371,279 compared with $308,686 for the prior comparable period, an increase of $62,593 or 20.3%. Puritan.com/Direct Response sales were $92,139 compared to $89,226 for the prior comparable period (increase of $2,913 or 3.3%), wholesale sales were $71,450 compared to $60,768 (increase of $10,682 or 17.6%), U.S. retail sales were $72,826 compared to $44,999 (increase of $27,827 or 61.8%) and U.K. retail sales were $134,863 compared to $113,693 (increase of $21,170 or 18.6%). Revenue increases in all of the Company's segments are attributed to continued consumer acceptance of the broad base of the Company's products. The Company operated 415 stores in the U.S. and 422 stores in the U.K. as of March 31, 2000 compared to 277 stores in the U.S. and 415 in the U.K. as of March 31, 1999. Sales growth in the U.S. retail channel reflected the greater number of stores compared to last year. U.S. comparative store sales increased $6,223 or 15.9% for stores open more than one year. Costs and expenses. Cost of sales as a percentage of sales were 44.5% for 2000 and 47.8% for 1999. The decrease is attributed to efficiencies due to economies of scale, increased automation and higher margins from new product introductions. Catalog printing, postage, and promotion expenses were $17,889 in 2000, compared with $18,652. This decrease was due primarily to a reduction in print media advertising in direct response. As a percentage of sales, expenses were 4.8% for the six months and 6.0% for the prior six months. Selling, general and administrative expenses were $136,258 for the six months, or 36.7% as a percentage of sales, compared with $115,895 or 37.5% as a percentage of sales. The largest categories and increases are indirect salaries and rent expense, which increased primarily due to the U.S. retail store expansion program. The Company was operating more efficiently and thereby able to increase sales without a proportional increase in these costs. Interest expense. Interest expense was $9,425, an decrease of $201 compared to $9,626 during the comparable six months. The major components are interest on Senior Subordinated Notes associated with the Holland & Barrett acquisition, the Credit and Guarantee Agreement (CGA) used for the stock repurchase and for capital expenditures. Interest expense increased due to the additional borrowings to fund the share repurchase program. Income before income taxes was $44,133 for 2000 and $17,520 for 1999. After income taxes, the Company had a net profit of $26,480 (or basic earnings per share of $0.40, diluted earnings per share of $0.38) for the six month period ended March 31, 2000, and $10,306 (or basic earnings per share of $0.14, diluted earnings per share of $0.14) for the six months ended March 31, 1999. Liquidity and Capital Resources Working capital was $112.3 million at March 31, 2000, compared with $121.1 million at September 30, 1999, a decrease of $6.8 million. On January 1, 2000, the Company acquired Nutrition Warehouse, Inc. and its affiliated companies ("NW") for $20 million in cash and approximately 1,059 shares of NBTY stock with a then market value of $12.4 million. The cash portion of the acquisition was funded by $20 million in borrowings under the Credit and Guarantee Agreement (CGA). In April 1999, the Company entered into an amended and restated CGA which expires September 30, 2003 increasing the borrowing limit from $60 million to $135 million. On February 3, 2000 this amount was adjusted to $129 million. The CGA provides for borrowings for working capital, general corporate purposes and acquisition of the Company's securities. The CGA provides that loans be made under a selection of rate formulas, including prime or Euro currency rates. Virtually all of the Company's assets are collateralized under the CGA and subject to normal banking terms and conditions and the maintenance of various financial ratios and covenants. At March 31, 2000, there were borrowings of $54,000 under this facility. The Company plans on utilizing the funds for working capital needs. In January 2000, the Company borrowed $20 million for the cash portion of the January 3, 2000 acquisition of Nutrition Warehouse, Inc. and during February 2000, the Company paid down $14 million under this facility. In connection with the August 1997 acquisition of Holland & Barrett, the Company issued $150 million of 8-5/8% senior subordinated Notes ("Notes") due in 2007. The Notes are unsecured and subordinated in right of payment for all existing and future indebtedness of the Company. The Company believes that existing cash balances, internally-generated funds from operations, and amounts available under the CGA will provide sufficient liquidity to satisfy the Company's working capital needs for the next 12 months and to finance anticipated capital expenditures incurred in the normal course of business. Net cash provided by operating activities was $79.4 million in 2000 and $16.0 million in 1999 primarily due to increases in net income, depreciation and amortization and accrued expenses as well as a decrease in inventory. Net cash used in investing activities was $46.0 million in 2000 and $21.6 million in 1999 due to the acquisition of NW and retail stores and plant expansion programs. Net cash used in financing activities was $4.7 million in 2000 due to payment of loans and provided by financing activities was $15.6 million in 1999 due to borrowings under the CGA. Management believes that inflation did not have a significant impact on its operations. Year 2000 The Company did not experience any disruptions to its normal operations as a result of the transition into calendar year 2000. Thorough testing of mission critical business processes was performed on and subsequent to January 1, 2000 in order to validate the data integrity of internal and external system interfaces. In addition, the Company is not aware of any disruption in service from its key suppliers and vendors. The total estimated cost associated with achieving worldwide Year 2000 compliance, excluding internal costs, was approximately $1,000. The Company will continue to monitor its business processes and third parties for potential problems that could arise in the first few months of calendar year 2000. Based on the Company's preparations prior January 1, 2000 and the absence of any problems to date, no significant disruptions are anticipated. New accounting standards Effective October 1, 1998, Company adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information," which establishes standards for reporting information about operating segments. It also establishes standards for disclosures regarding products and services, geographic areas and major customers. SFAS No. 131 requires comparative information for earlier years to be restated. The adoption of SFAS No. 131 did not affect the Company's results of operations or financial position, but did affect the disclosure of segment information. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133, as amended, is effective for all fiscal quarters of all fiscal years beginning after June 15, 1999 (October 1, 1999 for the Company). SFAS No. 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of Statement 133," which postponed the adoption of SFAS No. 133. As such, the Company is not required to adopt the statement until fiscal 2002. Management of the Company anticipates that, due to its limited use of derivative instruments, the adoption of SFAS No. 133 will not have a significant effect on the Company's results of operations or its financial position, however, it is currently reviewing the impact of adopting such pronouncement. This filing contains certain forward-looking statements and information that are based on the beliefs of management, as well as assumptions made by and information currently available to the Company's management. When used in this document, the words "anticipate," "believe," "estimate," and "expect" and similar expressions, as they relate to the Company are intended to identify forward-looking statements. Such statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. The Company does not intend to update these forward-looking statements. NBTY, INC. AND SUBSIDIARIES PART II OTHER INFORMATION (Unaudited) (Votes in thousands) Item 1. Legal Proceedings Not applicable. Item 2. Changes in Securities Not applicable. Item 3. Defaults upon Senior Securities Not applicable. Not applicable. Item 4. Submission of Matters to a Vote of Security Holders The following propositions were approved on April 10, 2000, at NBTY, Inc.'s Annual Meeting of Stockholders: Proposition 1: Re-elected Directors to serve until the 2003 Annual Meeting.
Votes for Votes against --------- ------------- Aram Garabedian 53,762 1,628 Bernard Owen 53,762 1,628 Alfred Sacks 53,762 1,628
Proposition 2: Approved the adoption of an Incentive Stock Option Plan.
Votes Votes Votes for against abstained Unvoted ----- ------- --------- ------- 24,129 11,598 151 19,512
Proposition 3: Ratified the designation of PricewaterhouseCoopers LLP as independent accountants to audit the consolidated financial statements of the Company for the 2000 fiscal year.
Votes Votes Votes for against abstained ----- ------- --------- 55,240 103 47
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 the fiscal year ending September 30, 2000. 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 there unto duly authorized. NBTY, INC. Date May 12, 2000 /s/ Harvey Kamil Harvey Kamil, Executive Vice President, Secretary (Principal Financial and Accounting Officer) EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS SEP-30-2000 OCT-01-1999 MAR-31-2000 46,520 0 35,791 1,241 123,691 213,057 308,705 100,278 591,590 100,728 221,036 0 0 538 256,290 591,590 371,279 371,279 165,096 154,147 0 0 9,425 44,134 17,654 26,480 0 0 0 26,480 0.40 0.38
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