-----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, HUAN59lhY3R7svZfRn0g4Pnth4r1mgZ5xF0nY7YbqIZ/ghYDQgL73v3RDw8IBbxx QTEftWVbY1ExwZGWDhFc3g== 0000910647-01-500133.txt : 20010516 0000910647-01-500133.hdr.sgml : 20010516 ACCESSION NUMBER: 0000910647-01-500133 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 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: 1636338 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 nbty-q2.txt FORM 10-Q FOR MARCH 31, 2001 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, 2001 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, 2001: 65,260,799 NBTY, INC. and SUBSIDIARIES INDEX PART I Financial Information Condensed Consolidated Balance Sheets - March 31, 2001 (unaudited) and September 30, 2000 1 - 2 Condensed Consolidated Statements of Operations - (unaudited) Three months Ended March 31, 2001 and 2000 3 Condensed Consolidated Statements of Operations - (unaudited) Six months Ended March 31, 2001 and 2000 4 Condensed Consolidated Statements of Stockholders' Equity Six months Ended March 31,2001 (unaudited) and Year ended September 30, 2000 5 Condensed Consolidated Statements of Cash Flows - (unaudited) Six months Ended March 31, 2001 and 2000 6 - 7 Notes to Condensed Consolidated Financial Statements (unaudited) 8 - 13 Management's Discussion and Analysis of Financial Condition and Results of Operations 14 - 20 PART II Other Information 21 Signature 22 NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS
(Dollars and shares in thousands) March 31, September 30, 2001 2000 --------- ------------- (Unaudited) Current assets: Cash and cash equivalents $ 43,379 $ 31,464 Accounts receivable, less allowance for doubtful accounts of $1,216 at March 31, 2001 and $1,227 at September 30, 2000. 33,572 24,913 Inventories 147,339 130,741 Deferred income taxes 3,549 3,549 Prepaid property taxes, rent, and other current assets 17,561 20,269 ----------------------- Total current assets 245,400 210,936 Property, plant and equipment 334,182 326,010 less accumulated depreciation and amortization 125,976 111,846 ----------------------- 208,206 214,164 Intangible assets, net 163,259 172,124 Other assets 8,227 6,389 ----------------------- Total assets $625,092 $603,613 =======================
See notes to condensed consolidated financial statements. NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY
(Dollars and shares in thousands) March 31, September 30, 2001 2000 --------- ------------- (Unaudited) Current liabilities: Current portion of long-term debt and capital lease obligations $ 12,746 $ 12,829 Accounts payable 59,699 61,100 Accrued expenses and income taxes 49,708 36,893 ----------------------- Total current liabilities 122,153 110,822 Long-term debt 214,680 199,095 Obligations under capital leases 884 1,383 Deferred income taxes 16,939 17,050 Other liabilities 2,807 2,820 ----------------------- Total liabilities 357,463 331,170 Commitments and contingencies Stockholders' equity: Common stock, $0.008 Par; authorized 175,000 shares; issued 68,524 shares at March 31, 2001 and 68,524 shares at September 30, 2000 and outstanding 65,261 shares at March 31, 2001 and 68,289 shares at September 30, 2000 548 548 Capital in excess of par 123,798 123,798 Retained earnings 181,886 163,300 ----------------------- 306,232 287,646 Less: 3,263 and 235 treasury shares, at cost, at March 31, 2001 and September 30, 2000, respectively (17,224) (1,512) Stock subscriptions receivable (839) (839) Accumulated other comprehensive loss (20,540) (12,852) ----------------------- Total stockholders' equity 267,629 272,443 ----------------------- Total liabilities and stockholders' equity $625,092 $603,613 =======================
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, ---------------------- 2001 2000 ---- ---- Net sales $224,775 $200,107 Cost and expenses: Cost of sales 97,804 84,153 Catalog printing, postage and promotion 11,701 9,604 Selling, general and administrative 82,345 72,334 ---------------------- 191,850 166,091 ---------------------- Income from operations 32,925 34,016 ---------------------- Other income (expense): Interest, net (4,865) (4,739) Miscellaneous, net 1,123 828 ---------------------- (3,742) (3,911) ---------------------- Income before income taxes 29,183 30,105 Income taxes 11,235 12,042 ---------------------- Net income $ 17,948 $ 18,063 ====================== Net income per share: Basic $ 0.27 $ 0.27 ====================== Diluted $ 0.27 $ 0.26 ====================== Weighted average common shares outstanding: Basic 65,273 67,200 ====================== Diluted 66,050 69,630 ======================
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, ---------------------- 2001 2000 ---- ---- Net sales $391,604 $371,279 Cost and expenses: Cost of sales 172,309 165,096 Catalog printing, postage and promotion 27,411 17,889 Selling, general and administrative 154,376 136,258 ---------------------- 354,096 319,243 ---------------------- Income from operations 37,508 52,036 ---------------------- Other income (expense): Interest, net (9,835) (9,425) Miscellaneous, net 2,549 1,523 ---------------------- (7,286) (7,902) ---------------------- Income before income taxes 30,222 44,134 Income taxes 11,636 17,654 ---------------------- Net income $ 18,586 $ 26,480 ====================== Net income per share: Basic $ 0.28 $ 0.40 ====================== Diluted $ 0.28 $ 0.38 ====================== Weighted average common shares outstanding: Basic 66,162 66,659 ====================== Diluted 66,736 68,869 ======================
See notes to condensed consolidated financial statements. NBTY, Inc. and Subsidiaries Condensed Consolidated Statements of Stockholders' Equity for the year ended September 30, 2000 and the six months ended March 31, 2001 (Unaudited)
(Dollars and shares in thousands) Accumu- lated Common stock Treasury stock Other --------------- Capital --------------- Stock Compre- Total Total Number in Number sub- hensive Stock- Compre- of excess Retained of scriptions Income holders' hensive shares Amount of par earnings shares Amount receivable (Loss) Equity Income ------ ------ ------- -------- ------ ------ ---------- -------- -------- ------- Balances, September 30, 1999 66,096 $529 $106,332 $111,792 - - $(839) $ 6,135 $223,949 $22,101 ======= Net income for year ended September 30, 2000 51,508 51,508 51,508 Purchase of treasury shares, at cost 288 (2,511) (2,511) Acquisition of Nutrition Warehouse 1,059 8 12,235 12,243 Treasury stock retired (53) (999) (53) 999 - Exercise of stock options 1,422 11 4,397 4,408 Tax benefit from exercise of stock options 1,833 1,833 Foreign currency translation adjustment (18,987) (18,987) (18,987) --------------------------------------------------------------------------------------------------- Balances, September 30, 2000 68,524 548 123,798 163,300 235 (1,512) (839) (12,852) 272,443 32,521 ======= Net income for the six months ended March 31, 2001 18,586 18,586 18,586 Purchase of treasury shares, at cost 3,028 (15,712) (15,712) Foreign currency translation adjustment (7,688) (7,688) (7,688) --------------------------------------------------------------------------------------------------- Balances, March 31, 2001 68,524 $548 $123,798 $181,886 3,263 $(17,224) $(839) $(20,540) $267,629 $10,898 ===================================================================================================
See notes to consolidated financial statements. NBTY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands) For the six months ended March 31, ---------------------- 2001 2000 ---- ---- Net income $ 18,586 $ 26,480 Adjustments to reconcile net income to cash provided by operating activities: Loss on sale of property, plant and equipment 295 468 Depreciation and amortization 21,778 17,338 Provision for allowance for doubtful accounts (11) 7 Tax benefit from exercise of stock options 138 Changes in assets and liabilities: Increase in accounts receivable (8,655) (60) (Increase) decrease in inventories (17,639) 13,369 Decrease in prepaid catalog costs and other current assets 2,330 8,753 Increase in other assets (1,836) (1,225) Decrease in accounts payable (695) (4,838) Increase in accrued expenses 13,620 20,401 Decrease in other liabilities (15) (1,372) ---------------------- Net cash provided by operating activities 27,758 79,458 ---------------------- Cash flows from investing activities: Purchase of property, plant and equipment (15,946) (26,454) Proceeds from sale of property, plant, and equipment 2,817 25 Purchase of business, net of cash acquired (19,578) Increase in intangible assets (10) ---------------------- Net cash provided by investing activities (13,129) (46,017) ---------------------- Cash flows from financing activities: Borrowings (Payments) under long term debt agreements 24,064 (3,412) Principal payments under long-term debt agreements and capital leases (9,123) (1,338) Proceeds from stock options exercised 14 Purchase of treasury stock (15,712) ---------------------- Net cash used in financing activities (771) (4,736) ---------------------- Effect of exchange rate changes on cash and cash equivalents (1,943) (454) ---------------------- Net increase in cash and cash equivalents 11,915 28,251 Cash and cash equivalents at beginning of period 31,464 18,269 ---------------------- Cash and cash equivalents at end of period $ 43,379 $ 46,520 ====================== Supplemental Disclosure of Cash Flow Information: Cash paid during the period for interest $ 10,575 $ 9,572 Cash paid during the period for taxes $ 3,601 $ 827
See notes to condensed consolidated financial statements. NBTY, INC. and SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS For the three months ended March 31, 2001 and 2000 (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 $12,243. 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, 2001 and its results of operations for the three and six months ended March 31, 2001 and 2000 and statements of cash flows for the six months ended March 31, 2001 and 2000. The condensed consolidated balance sheet as of September 30, 2000 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, 2001 and statements of cash flows for the six months ended March 31, 2001 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, 2000. 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. The most significant estimates include the valuation of inventories, the allowance for doubtful accounts receivable and the recoverability of long-lived assets. 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, 2000, the Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". As the Company has determined, it does not have any derivatives or hedging activities, the adoption of SFAS No. 133 did not affect the Company's financial position or results of operations as of and for the six months ended March 31, 2001. In December 1999, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements," ("SAB 101"). SAB 101 does not change existing revenue recognition rules, but rather addresses and clarifies existing rules and their application. SAB 101 is effective for the Company beginning July 1, 2001 or fourth quarter of fiscal 2001. Management is currently assessing the impact of SAB 101 on the Company's results of operations and financial position. NBTY, INC. and SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued (Unaudited) (In thousands, except per share amounts) 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 fourteen retail stores in various locations in New York. The e-commerce business has been 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. 3. Comprehensive earnings Comprehensive earnings 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, 2001 and 2000 are as follows:
For the three months For the six months ended March 31, ended March 31, -------------------- -------------------- 2001 2000 2001 2000 ---- ---- ---- ---- Net Income $17,948 $18,063 $18,586 $26,480 Changes in cumulative translation adjustment (10,061) (2,659) (7,688) (5,995) ---------------------------------------------- Comprehensive earnings $ 7,887 $15,404 $10,898 $20,485 ==============================================
Accumulated other comprehensive earnings, which is classified as a separate component of stockholders' equity, is comprised of cumulative translation adjustments of $(20,540) and $(12,852) at March 31, 2001 and September 30, 2000, respectively. NBTY, INC. and SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued (Unaudited) (In thousands, except per share amounts) 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, 2001 2000 --------- ------------- Raw materials and Work-in-process $ 57,645 $ 45,083 Finished goods 89,694 85,658 ---------------------- $147,339 $130,741 ======================
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, 2001 and 2000. Diluted EPS includes the dilutive effect of outstanding stock options, as if exercised. The following is a reconciliation between basic and diluted EPS:
For the three months For the six months March 31, March 31, -------------------- -------------------- 2001 2000 2001 2000 ---- ---- ---- ---- Numerator: Numerator for basic EPS -- Income available to common stockholders $17,948 $18,063 $18,586 $26,480 ============================================== Numerator for diluted EPS -- Income available to common stockholders $17,948 $18,063 $18,586 $26,480 ============================================== Denominator: Denominator for basic EPS -- Weighted average shares 65,273 67,200 66,162 66,659 Effect of dilutive securities: Stock options 777 2,430 574 2,210 ---------------------------------------------- Denominator for diluted EPS -- Weighted average shares 66,050 69,630 66,736 68,869 ============================================== Net EPS: Basic EPS $ 0.27 $ 0.27 $ 0.28 $ 0.40 ============================================== Diluted EPS $ 0.27 $ 0.26 $ 0.28 $ 0.38 ==============================================
NBTY, INC. and SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued (Unaudited) (In thousands, except per share amounts) 6. 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's Pride/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's Pride/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 or the United Kingdom. The Retail United States segment generates revenue through the sale of proprietary brand and third-party products through its 515 Company-operated stores. The Retail United Kingdom segment generates revenue through the sale of proprietary brand and third- party products in 442 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, mass marketers, retail chains, pharmacies, health food stores, bulk and international customers. The following table represents key financial information of the Company's business segments:
Three months ended Six months ended March 31, March 31, ------------------- --------------------- 2001 2000 2001 2000 ---- ---- ---- ---- Puritan's Pride/Direct Response Revenue $57,569 $62,905 $ 85,403 $ 92,139 Operating income 19,496 19,396 25,508 24,949 Depreciation and amortization 1,109 753 2,211 1,093 Retail: United States Revenue $44,659 $38,496 $ 83,413 $ 72,826 Operating loss (5,680) (2,890) (17,825) (6,385) Depreciation and amortization 3,676 2,618 7,249 4,893 United Kingdom Revenue $74,789 $63,640 $135,371 $134,863 Operating income 15,041 12,930 26,978 25,076 Depreciation and amortization 2,967 3,008 6,188 6,246
NBTY, INC. and SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued (Unaudited) (In thousands, except per share amounts) 6. Segment Information (continued):
Three months ended Six months ended March 31, March 31, --------------------- --------------------- 2001 2000 2001 2000 ---- ---- ---- ---- Wholesale Revenue $ 47,758 $ 35,066 $ 87,418 $ 71,450 Operating income 6,529 7,008 7,961 13,125 Depreciation and amortization 285 189 517 377 Corporate Operating loss $(2,461) $ (2,428) $ (5,114) $ (4,729) Depreciation and amortization 2,974 2,428 5,613 4,729 Consolidated totals Revenue $224,775 $200,107 $391,604 $371,279 Operating income 32,925 34,016 37,508 52,036 Depreciation and amortization 11,011 8,996 21,778 17,338 Interest expense, net 4,865 4,739 9,835 9,425 Miscellaneous income, net 1,123 828 2,549 1,523 Income taxes 11,235 12,042 11,636 17,654 Net income 17,948 18,063 18,586 26,480
The following table reflects identifiable assets by market segment at March 31, 2001 and 2000:
March 31, ---------------------- 2001 2000 ---- ---- Puritan's Pride/Direct response $ 66,369 $ 59,712 Retail United States 81,023 74,404 Retail United Kingdom 218,678 222,808 Wholesale 35,714 14,837 Corporate manufacturing assets 223,308 219,829 ---------------------- Consolidated totals $625,092 $591,590 ======================
NBTY, INC. and SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued (Unaudited) (In thousands, except per share amounts) 9. Subsequent events: On April 27, 2001, the Company entered into an amended and restated Credit and Guarantee Agreement ("CGA") which provides for aggregate borrowings up to $199,300. The CGA is comprised of two revolving credit agreements of $100,000 and $50,000 respectively and a term loan of $49,300. 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. In addition, the Company is subject to maintenance of various financial ratios and covenants. In April 2001, the Company entered into a contract to purchase substantially all of the assets of Global Health Sciences, Inc. and certain of its operating subsidiaries for approximately $40,000 in cash. Global Health Sciences, Inc. and its subsidiaries, which manufacturers nutritional supplements in California, filed voluntary petitions under Chapter 11 of the Bankruptcy Code. In addition, in May 2001 the Company entered into a contract to purchase NatureSmart LLC from Whole Foods Market, Inc. for $28,000 in cash. NatureSmart develops, manufactures and markets nutritional supplements and is located in Thornton, Colorado. The acquisitions will be financed by the Company's Credit and Guarantee Agreement. NBTY, INC. and SUBSIDIARIES MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS of OPERATIONS (In thousands, except per share amounts and number of stores) 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, ----------------- ----------------- 2001 2000 2001 2000 ---- ---- ---- ---- Net sales 100.0% 100.0% 100.0% 100.0% Costs and expenses: Cost of sales 43.5 42.1 44.0 44.5 Catalog printing, postage and promotion 5.2 4.8 7.0 4.8 Selling, general and administrative 36.6 36.1 39.4 36.7 -------------------------------------- 85.3 83.0 90.4 86.0 -------------------------------------- Income from operations 14.7 17.0 9.6 14.0 Other income (expenses), net (1.7) (2.0) (1.9) (2.1) -------------------------------------- Income before income taxes 13.0 15.0 7.7 11.9 Income taxes 5.0 6.0 3.0 4.8 -------------------------------------- Net income 8.0% 9.0% 4.7% 7.1% ======================================
NBTY, INC. and SUBSIDIARIES MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS of OPERATIONS (In thousands, except per share amounts and number of stores) For the three months ended March 31, 2001 compared to the three months ended March 31, 2000: Net sales. Net sales in the second quarter ended March 31, 2001 were $224,775 compared with $200,107 for the prior comparable period, an increase of $24,668 or 12.3%. Puritan's Pride/Direct Response sales were $57,569 compared to $62,905, a decrease of $5,336 or 8.5%, wholesale sales were $47,758 compared to $35,066, an increase of $12,692 or 36.2% , U.S. retail sales were $44,659 compared to $38,496, an increase of $6,163 or 16.0% and U.K. retail sales were $74,789 compared to $63,640, an increase of $11,149 or 17.5%. Revenue increases in three of the Company's four segments are attributed to the continued consumer acceptance of the broad base of the Company's products. The decrease in Direct Response reflects the general industry weakness in nutritional supplements. The Company operated 515 stores in the U.S. and 442 stores in the U.K. as of March 31, 2001 compared to 415 stores in the U.S. and 422 in the U.K. as of March 31, 2000. Sales growth in the U.S. retail channel reflected the greater number of stores compared to last year. U.S. same store sales increased $110 or 0.3% for stores open more than one year. Costs and expenses. Cost of sales were $97,804 for 2001, or 43.5% as a percentage of sales, compared to $84,153, or 42.1% for 2000. The increase of $13,651 was due primarily to the increase in the wholesale segment's cost of sales, which increased $10,349, or from 55.4% to 62.3% as a percentage of sales. The increase was mitigated by a decrease in the Direct Response segment's cost of sales, which decreased from 36% to 34.8% as a percentage of sales, primarily due to higher gross margins on new product introductions. The increase was also mitigated by the U.S. retail segment's cost of sales decreasing as a percentage of sales from 42% to 39.8%, primarily due to sales price increases on all product lines during the current quarter. Catalog printing, postage, and promotion expenses were $11,701 in 2001 compared with $9,604 in 2000. This increase was due primarily to the Flex-A-Min advertising campaign and Vitamin World's Savings Passport Program. As a percentage of sales, catalog printing, postage and promotion expenses were 5.2% for the current quarter and 4.8% for the prior comparable quarter. Selling, general and administrative expenses were $82,345 for the quarter, or 36.6% as a percentage of sales, compared with $72,334 or 36.1% as a percentage of sales in 2000. The largest categories with increases were salaries, fringe benefits (health insurance), and rent expense which increased primarily due to the U.S. retail store expansion program. Interest expense. Interest expense was $4,865 for 2001, an increase of $126 compared to $4,739 in 2000. Interest expense increased due to the additional borrowings to fund the share repurchase program. 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. NBTY, INC. and SUBSIDIARIES MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS of OPERATIONS (In thousands, except per share amounts and number of stores) For the three months ended March 31, 2001 compared to the three months ended March 31, 2000: Other income (expense) - Miscellaneous, net for the three months ended March 31, 2001 increased $295, primarily due to a $81 increase in investment income, a $412 increase in exchange rate gains on intercompany balances and a $166 decrease in rental income, net. Income before income taxes was $29,183 for 2001 and $30,105 for 2000. After income taxes, the Company had a net profit of $17,948 (or basic and diluted earnings per share of $0.27) for the three months ended March 31, 2001, and $18,063 (or basic earnings per share of $0.27, diluted earnings per share of $0.26) for the three months ended March 31, 2000. NBTY, INC. and SUBSIDIARIES MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS of OPERATIONS (In thousands, except per share amounts and number of stores) For the six months ended March 31, 2001 compared to the six months ended March 31, 2000: Net sales. Net sales for the six months ended March 31, 2001 were $391,604 compared with $371,279 for the prior comparable period, an increase of $20,325 or 5.5%. Puritan's Pride/Direct Response sales were $85,403 compared to $92,139, a decrease of $6,736 or 7.3%, wholesale sales were $87,418 compared to $71,450, an increase of $15,968 or 22.3%, U.S. retail sales were $83,413 compared to $72,826, an increase of $10,587 or 14.5% and U.K. retail sales were $135,371 compared to $134,863, an increase of $508 or .4%. Revenue increases in three of the Company's four segments are attributed to continued consumer acceptance of the broad base of the Company's products. The decrease in Direct Response reflects the general industry weakness in nutritional supplements. The Company operated 515 stores in the U.S. and 442 stores in the U.K. as of March 31, 2001 compared to 415 stores in the U.S. and 422 in the U.K. as of March 31, 2000. Sales growth in the U.S. retail channel reflected the greater number of stores compared to last year. U.S. same store sales decreased $4,348 or 6.6% for stores open more than one year. Costs and expenses. Cost of sales were $172,309 for 2001, or 44% as a percentage of sales, compared to $165,096, or 44.5% as a percentage of sales. The Direct Response segment's cost of sales decreased from 36.9% to 34.9% as a percentage of sales, primarily due to higher gross margins on new product introductions. Cost of sales for the U.K. retail segment decreased from 42.9% to 39.9% as a percentage of sales, primarily due to increased efficiencies gained by the new distribution plant located in Burton on Trent in the U.K. The decreases in cost of sales, as a percentage of sales, were partially offset by the increase in the wholesale segment's cost of sales, which increased from 59.1% to 60.6% as a percentage of sales. Catalog printing, postage, and promotion expenses were $27,411 in 2001, compared with $17,889 in 2000. This increase was due primarily to an increase in print and television media advertising in wholesale and costs related to the Vitamin World Savings Passport Program. As a percentage of sales, catalog printing, postage and promotion expenses were 7.0% for the six months and 4.8% for the prior comparable six months. Selling, general and administrative expenses were $154,376 for 2001, or 39.4% as a percentage of sales, compared with $136,258 or 36.7% as a percentage of sales for 2000. The largest categories with increases are salaries, fringe benefits (health insurance), and rent expense, which increased primarily due to the U.S. retail store expansion program. Interest expense. Interest expense was $9,835 for 2001, an increase of $410 compared to $9,425 for 2000. 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 primarily to the additional borrowings to fund the share repurchase program. NBTY, INC. and SUBSIDIARIES MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS of OPERATIONS (In thousands, except per share amounts and number of stores) For the six months ended March 31, 2001 compared to the six months ended March 31, 2000: Other income (expense) - Miscellaneous, net for the six months ended March 31, 2001 increased $1,026, primarily due to a $115 increase in investment income, a $957 increase in exchange rate gains on intercompany balances and a $133 decrease in rental income, net. Income before income taxes was $30,222 for 2001 and $44,134 for 2000. After income taxes, the Company had a net profit of $18,586 (or basic and diluted earnings per share of $.28) for the six months ended March 31, 2001, and $26,480 (or basic earnings per share of $0.40, diluted earnings per share of $0.38) for the six months ended March 31, 2000. NBTY, INC. and SUBSIDIARIES MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS of OPERATIONS (Unaudited) (In thousands, except per share amounts and number of stores) Liquidity and Capital Resources - ------------------------------- Working capital was $123.2 million at March 31, 2001, compared with $100.1 million at September 30, 2000, an increase of $23.1 million. The increase was due primarily to increases in cash, accounts receivable, and inventories, partially offset by an increase in accrued expenses and income taxes. On April 27,2001, the Company entered into an amended and restated Credit and Guarantee Agreement ("CGA") which provides for aggregate borrowings up to $199,300. The CGA is comprised of two revolving credit agreements of $100,000 and $50,000 respectively and a term loan of $49,300. At March 31, 2001, there were borrowings of $69,900 under this facility at an annual borrowing rate of 7.81%. 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. In addition, the Company is subject to maintenance of various financial ratios and covenants. 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 CGA. 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 and potential acquisitions. Net cash provided by operating activities was $27.7 million for the six months ended March 31, 2001 and $79.4 million for the six months ended March 31, 2000. The decrease was primarily due to a decrease in net income as well as increases in inventory and accounts receivable. Net cash used in investing activities was $13.1 million in 2001 and $46.0 million in 2000; primarily due to new retail store openings and plant expansion programs. The 2000 total included the acquisition of Nutrition Warehouse. Net cash used in financing activities was $.8 million in 2001 and $4.7 million in 2000. The change was primarily due to the repayment of debt principal and the purchase of treasury stock, and was offset by additional borrowings of $27 million. Management believes that inflation did not have a significant impact on its operations. NBTY, INC. and SUBSIDIARIES MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS of OPERATIONS (Unaudited) (In thousands, except per share amounts and number of stores) New accounting standards - ------------------------ Effective October 1, 2000, the Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". As the Company has determined, it does not have any derivatives or hedging activities, the adoption of SFAS No. 133 did not affect the Company's financial position or results of operations as of and for the six months ended March 31, 2001. In December 1999, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements," ("SAB 101"). SAB 101 does not change existing revenue recognition rules, but rather addresses and clarifies existing rules and their application. SAB 101 is effective for the Company beginning July 1, 2001 or fourth quarter of fiscal 2001. Management is currently assessing the impact of SAB 101 on the Company's results of operations and financial position. 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 Not applicable. 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, 2001. 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 14, 2001 /s/ Harvey Kamil ------------------------------------ Harvey Kamil, Executive Vice President, Secretary (Principal Financial and Accounting Officer) -----END PRIVACY-ENHANCED MESSAGE-----