-----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, QDO7msF6YdhUbNOfoDwHPNnDIci7yzHq6wTQEqyiqKjduKWsVybv583Mxq30Ct3T snRks5rCZIegliSKxk30+A== 0000910647-99-000057.txt : 19990215 0000910647-99-000057.hdr.sgml : 19990215 ACCESSION NUMBER: 0000910647-99-000057 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990212 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: 99537084 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 FORM 10-Q FOR THE 1ST QUARTER 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 December 31, 1998 Commission File Number: 0-10666 ------- NBTY, Inc. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 11-2228617 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 90 Orville Drive, Bohemia, NY 11716 - ---------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (516) 567-9500 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registration was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- Shares of Common Stock as of December 31, 1998: 71,542,394 ---------- NBTY, INC. and SUBSIDIARIES INDEX PART I Financial Information Condensed Consolidated Balance Sheets - December 31, 1998 (unaudited)and September 30, 1998 1 - 2 Condensed Consolidated Statements of Operations - (unaudited) - Three Months Ended December 31, 1998 and 1997 3 Condensed Consolidated Statements of Cash Flows - (unaudited) Three months Ended December 31, 1998 and 1997 4 - 5 Notes to Condensed Consolidated Financial Statements (unaudited) 6 - 10 Management's Discussion and Analysis of Financial Condition and Results of Operations (unaudited) 11 - 17 PART II Other Information 18 Signature 19 NBTY, INC. and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands) December 31, September 30, 1998 1998 ------------ ------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 18,373 $ 14,308 Accounts receivable, less allowance for doubtful accounts ($1,175 at December 31, 1998; $1,116 at September 30, 1998) 25,004 23,433 Inventories 127,227 119,607 Deferred income taxes 2,994 2,994 Prepaid property taxes, rent, and other current assets 15,838 13,614 ------------------------- Total current assets 189,436 173,956 Property, plant and equipment 243,411 234,081 less accumulated depreciation and amortization 72,068 67,746 ------------------------- Intangible assets, net 147,797 152,426 Other assets 8,547 7,740 ------------------------- Total assets $517,123 $500,457 ========================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt and capital lease obligations $ 1,266 $ 1,218 Accounts payable 46,953 50,389 Accrued expenses 31,686 33,243 ------------------------- Total current liabilities 79,905 84,850 Long-term debt 188,338 171,230 Obligations under capital leases 1,943 2,106 Deferred income taxes 8,143 8,203 Other liabilities 3,532 3,729 ------------------------- Total liabilities 281,861 270,118 ------------------------- Commitments and contingencies Stockholders' equity: Common stock, $0.008 par; authorized 75,000 shares; issued 71,542 shares December 31, 1998 and 72,714 shares September 30, 1998 and outstanding 71,542 shares December 31, 1998 and 68,203 shares September 30, 1998 572 582 Capital in excess of par 118,676 115,661 Retained earnings 109,458 105,989 ------------------------- 228,706 222,232 Less 4,511 treasury shares at cost - (3,206) Stock subscriptions receivable (839) - Accumulated other comprehensive earnings 7,395 11,313 ------------------------- Total stockholders' equity 235,262 230,339 ------------------------- Total liabilities and stockholders' equity $517,123 $500,457 =========================
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 December 31, 1998 1997 ---- ---- Net sales $141,013 $129,533 --------------------- Costs and expenses: Cost of sales 68,958 65,216 Catalog printing, postage and promotion 8,788 5,111 Selling, general and administrative 53,472 44,274 --------------------- 131,218 114,601 --------------------- Income from operations 9,795 14,932 --------------------- Other income (expense): Interest, net (4,268) (4,106) Miscellaneous, net 508 664 --------------------- (3,760) (3,442) --------------------- Income before income taxes 6,035 11,490 Income taxes 2,567 3,473 --------------------- Net income $ 3,468 $ 8,017 ===================== Net income per share: Basic $0.05 $0.12 ===================== Diluted $0.05 $0.12 ===================== Weighted average common shares outstanding: Basic 71,034 64,611 ===================== Diluted 72,630 68,919 =====================
See notes to condensed consolidated financial statements. NBTY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands)
For the three months ended December 31, 1998 1997 ---- ---- Net income $ 3,468 $ 8,017 Adjustments to reconcile net income to cash used in operating activities: Gain (loss) on sale of property, plant and equipment 8 5 Depreciation and amortization 6,360 4,944 Provision for allowance for doubtful accounts (130) (3) Decrease in deferred taxes (488) Changes in assets and liabilities, net of acquistions: Increase in accounts receivable (3,169) (1,781) Increase in inventories (8,279) (12,735) Increase in prepaid catalog costs and other current assets (6,564) (4,172) Decrease in other assets 583 2,142 Decrease in accounts payable (2,914) (1,882) (Decrease) increase in accrued expenses 5,252 (8,238) Decrease in other liabilities (195) ---------------------- Net cash used in operating activities (5,580) (14,191) ---------------------- Cash flow from investing activities: Purchase of property, plant and equipment (10,562) (11,172) Proceeds from sale of property, plant and equipment 3 Proceeds from sale of short term investments 8,362 ---------------------- Net cash used in investing activities (10,562) (2,807) ---------------------- Cash flows from financing activities: Dividends paid (1,050) Borrowings under long term debt agreements 17,000 45,000 Cash held in escrow 144,730 Principal payments under long-term debt agreements and capital leases (232) (421) Repayment of promissory note (170,280) Stock subscriptions receivable (839) ---------------------- Net cash provided by financing activities 15,928 17,979 ---------------------- Effect of Exchange Rate Changes on Cash and Cash Equivalents 4,279 (1,290) ---------------------- Net increase (decrease) in cash and cash equivalents 4,065 (309) Cash and cash equivalents at beginning of quarter 14,308 20,262 ---------------------- Cash and cash equivalents at end of quarter $ 18,373 $ 19,953 ====================== Supplemental Disclosure of Cash Flow Information: Cash paid during the period for interest $ 4,119 $ 2,586 Cash paid during the period for taxes $ 2,985 $ 6,527
See notes to condensed consolidated financial statements. NBTY, INC. and SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS For the three months ended December 31, 1998 and 1997 (Unaudited) (In thousands, except per share amounts) Supplemental non-cash investing and financing information: During the three months ended December 31, 1998, options were exercised with 3,340 shares of common stock issued to certain officers for interest-bearing stock subscriptions receivable aggregating $839. As a result of the exercise of those options, the Company received a compensation deduction for tax purposes of approximately $13,774 and a tax benefit of approximately $5,372. 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 of NBTY, Inc. and Subsidiaries have been prepared to give retroactive effect to the merger between Nutrition Headquarters, Inc., Lee Nutrition, Inc. and Nutro Laboratories, Inc. (collectively, the "Nutrition Headquarters Group" and together with NBTY, the "Company") on April 20, 1998. Under the terms of the merger agreement, each share of Nutrition Headquarters Group common stock was exchanged for approximately 30 shares of NBTY's common stock with approximately 8,772 shares of NBTY's common stock exchanged for all the outstanding stock of Nutrition Headquarters Group. 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 December 31, 1998 and its results of operations for the three months ended December 31, 1998 and 1997 and statements of cash flows for the three months ended December 31, 1998 and 1997. The condensed consolidated balance sheet as of September 30, 1998 has been derived from the audited balance sheet as of that date. The results of operations for the three months ended December 31, 1998 and statements of cash flows for the three months ended December 31, 1998 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, 1998. 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. Income taxes Prior to the merger, Nutrition Headquarters Group had been treated as an S corporation for Federal and state income tax purposes. Accordingly, taxable income was reported to the individual stockholders for inclusion in their respective income tax returns with no provision for these taxes, other than certain minimum taxes, included in the Company's consolidated financial statements. Common shares and earnings per share On March 9, 1998, the Company's Certificate of Incorporation was amended to authorize the issuance of up to 75 million shares of common stock, par value $.008 per share. In addition, the Company's Board of Directors declared a three-for-one stock split in the form of a 200% stock dividend effective March 23, 1998. All per common share amounts have been retroactively restated to account for the above stock split and the merger of NHG with NBTY. In addition, stock options and respective exercise prices have been amended to reflect these transactions. The Company retired 4,511 treasury shares during fiscal 1999 and accordingly, retired shares are considered unissued. In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." The statement requires the presentation of both "basic" and "diluted" EPS on the face of the income statement. Basic EPS is based on the weighted average number of shares of common stock outstanding during each period while diluted EPS is based on the weighted average number of shares of common stock and common stock equivalents outstanding during each period. The Company adopted the provisions of SFAS 128 effective October 1, 1998. Reclassifications Certain reclassifications have been made to conform prior year amounts to the current year presentation. Accounting changes In February 1998, the American Institute of Certified Public Accountants' Accounting Standards Executive Committee issued Statement of Position No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" ("SOP No. 98-1"). SOP No. 98-1 requires certain costs incurred in connection with developing or obtaining internal-use software to be capitalized and other costs to be expensed. The Company adopted SOP 98-1 during fiscal 1998, and its application had no material effect on the Company's financial position or results of operations. In April 1998, the American Institute of Certified Public Accountants' Accounting Standards Executive Committee issued Statement of Position No. 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP No. 98-5"). SOP No. 98-5 requires that all start-up (or pre-opening) activities and organization costs be expensed as incurred. The Company adopted SOP 98-5 on October 1, 1998, and its application had no material effect on the Company's financial position or results of operations. New accounting standards In June 1997, the FASB issued 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. This SFAS is effective for the Company on September 30, 1999. 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 is effective 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. 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. 2. Acquisitions In August 1998, the Company acquired certain assets of three privately held vitamin mail order companies: Home Health Products, Inc., Barth-Spencer Corporation and Darby Health Group, Inc. for $7.8 million in cash. The aggregate sales of these companies were approximately $20 million in 1997. The mail order databases of the acquired operations will be incorporated into NBTY's active mail order customer base to increase the number of active customers. 3. Comprehensive earnings On June 1, 1997, the FASB issued SFAS No. 130, "Reporting of Comprehensive Income," which establishes standards for the reporting and display of comprehensive income, its components (revenue, expenses, gains and losses) and accumulated balances in a full set of general purpose financial statements. Comprehensive income for the Company includes net income and the effects of translation which are charged or credited to the cumulative translation adjustments account within stockholders' equity. SFAS No. 130 was adopted on October 1, 1998. Comprehensive earnings for the three months ended December 31, 1998 and 1997 are as follows:
For the three months ended December 31, 1998 1997 Net income $ 3,468 $ 8,017 Changes in cumulative translation adjustment (3,918) 3,249 ------- ------- Comprehensive earnings $ 450 $11,266 ======= =======
Accumulated other comprehensive earnings, which had been classified as a separate component of stockholders' equity, is comprised of cumulative translation adjustments of $7,395 and $11,313 at December 31, 1998 and September 30, 1998, respectively. 4. Inventories Inventories have been estimated using the gross profit method for the interim periods. The components of the inventories are as follows:
December 31, September 30, 1998 1998 ---- ---- Raw materials and Work-in-process $ 53,735 $ 50,913 Finished goods 73,492 68,694 -------- -------- $127,227 $119,607 ======== ========
5. Earnings per share (EPS) Basic EPS computations are based on the weighted average number of common shares outstanding during the three month periods ended December 31, 1998 and 1997. Diluted EPS include the effect of outstanding stock options, if exercised. The following is a reconciliation between the basic and diluted EPS, as required by SFAS No. 128:
For the three months December 31, 1998 1997 ---- ---- Numerator: Numerator for basic EPS -- income available to common stockholders $ 3,468 $ 8,017 ======= ======= Numerator for dilutive EPS -- income available to common stockholders $ 3,468 $ 8,017 ======= ======= Denominator: Denominator for basic EPS -- weighted average shares 71,034 64,611 Effect of dilutive securities: Stock options 1,596 4,308 ------- ------- Denominator for diluted EPS -- Weighted average shares 72,630 68,919 ======= ======= Net EPS: Basic EPS $ 0.05 $ 0.12 ======= ======= Diluted EPS $ 0.05 $ 0.12 ======= =======
6. Foreign operations: The following information has been summarized by geographic area as of December 31, 1998 and 1997 and for the three months then ended:
Three months ended December 31, 1998 Identifiable Operating Assets Sales Income United States $288,973 $ 80,549 $ 5,481 United Kingdom 228,150 60,464 4,314 -------- -------- ------- $517,123 $141,013 $ 9,795 ======== ======== ======= Three months ended December 31, 1997 Identifiable Operating Assets Sales Income United States $277,155 $ 79,640 $11,934 United Kingdom 223,302 49,893 2,998 -------- -------- ------- $500,457 $129,533 $14,932 ======== ======== =======
NBTY, INC. and SUBSIDIARIES MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS of OPERATIONS (Unaudited) (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 ended December 31, ----------------- 1998 1997 ---- ---- Net sales 100.0% 100.0% Cost and expenses: Cost of sales 48.9 50.3 Catalog printing, postage and promotion 6.3 4.0 Selling, general and administrative 37.9 34.2 ---------------- 93.1 88.5 ---------------- Income from operations 6.9 11.5 Other income (expenses), net (2.6) (2.6) ---------------- Income before income taxes 4.3 8.9 Income taxes 1.8 2.7 ---------------- Net income 2.5% 6.2% ================
Results of Operations - --------------------- For the three months ended December 31, 1998 compared to the three months ended December 31, 1997: Net sales. Net sales in the first quarter ended December 31, 1998 were $141,013 compared with $129,533 for the prior comparable period, an increase of $11,480 or 8.9%. Mail order sales were $30,220, compared to $32,059 for the prior comparable period (decrease of $1,839 or 5.7%), wholesale sales were $30,064 compared to $33,379 (decrease of $3,315 or 9.9%), U.S. retail revenues were $20,789 compared to $14,838 (increase of $5,951 or 40.1%) and U.K. retail revenues were $59,940 compared to $49,257 (increase $10,683 or 21.7%). The Company operated 253 stores in the U.S. and 415 stores in the U.K. as of December 31, 1998 compared to 131 stores in the U.S. and 418 in the U.K. as of December 31, 1997. Costs and expenses. Cost of sales as a percentage of sales were 48.9% for 1998 and 50.3% for 1997. The decrease was associated with changes in product mix and lower raw material pricing from suppliers. In addition, in the three months ended December 31, 1998 compared to the three months ended December 31, 1997, a significant number of products supplied by outside vendors to Holland and Barrett were replaced by NBTY supplied products. Catalog printing, postage, and promotion expenses were $8,788 in 1998, an increase of $3.7 million (71.9% increase), from $5,111 in 1997. As a percentage of sales, expenses were 6.3% for the current quarter and 4.0% for the prior comparable quarter. Such increase was principally due to H&B's television commercials in October 1998 and greater number of catalogs being mailed. Selling, general and administrative expenses were $53,472 for the quarter, or 37.9% as a percentage of sales, compared with $44,274 or 34.2% as a percentage of sales, an increase of $9.2 million (20.8% increase). The largest segments and increases are indirect salaries, rents, freight and property taxes. These expenses increased due primarily to the U.S. retail expansion program. Interest expense. Interest expense was $4,268, an increase of $162 compared to $4,106 during the comparable quarter. The major component is interest associated with the Holland & Barrett acquisition and the Credit and Guarantee Agreement. Income taxes. Prior to the merger, NHG had been treated as an S corporation for Federal and state tax purposes. Accordingly, taxable income was reported to the individual stockholders for inclusion in their respective income tax returns with no provision for these taxes, other than certain minimum taxes, included in the Company's Consolidated Financial Statements. Income before income taxes was $6,035 for 1998 and $11,490 for 1997. After income taxes, the Company had a net profit of $3,468 (or basic earnings per share of $0.05, diluted earnings per share of $0.05) for the three month period ended December 31, 1998, and $8,017 (or basic earnings per share of $0.12, diluted earnings per share of $0.12) for the three months ended December 31, 1997. Liquidity and Capital Resources - ------------------------------- Working capital was $109.5 million at December 31, 1998, compared with $89.1 million at September 30, 1998, an increase of $20.4 million. In September 1997, the Company entered into a Credit and Guarantee Agreement (CGA) which expires September 30, 2003. In April 1998, the borrowing limit provided under the terms of the CGA was increased to $60,000. The CGA provides that loans be made under a selection of rate formulas, including prime or Euro currency rates. The Agreement, which is unsecured, provides for the maintenance of various financial ratios and covenants. At December 31, 1998, there were borrowings of $25,000 under this facility. The Company issued $150 million 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. In November and December 1997, the Company paid an aggregate $5,350 in connection with a litigation settlement, net of a reimbursement made by an insurance carrier. In December 1997, the Company purchased a building for a purchase price of approximately $3,900 with operating funds. In April 1998, the Company sold certain assets of its cosmetic pencil operation for approximately $6 million, of which $4.5 million was paid in cash. On July 1, 1998, the Company sold 3,450 shares of common stock in a public offering. The Company realized approximately $55 million which was used to repay borrowings under the Company's Credit and Guarantee Agreement and for working capital. The Company believes that existing cash balances, internally-generated funds from operations, amounts available under the CGA and proceeds from the July 1998 public offering of the Company's common stock will provide sufficient liquidity to satisfy the Companies' working capital needs for the next 12 months and to finance anticipated capital expenditures incurred in the normal course of business. Net cash used in operating activities was $5.6 million in 1998 and $14.2 million in 1997 primarily due to increases in inventory. Net cash used in investing activities was $10.6 million in 1998 and $2.8 million in 1997 due to plant expansion. Net cash provided by financing activities was $15.9 million in 1998 due to borrowing under the CGA and $18.0 million in 1997. Management believes that inflation did not have a significant impact on its operations. Year 2000. The Year 2000 problem is a result of software computer programs being written using two digits rather than four to define the applicable year. The Company recognizes the risk that its software programs or computer hardware that have date-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the Year 2000. This could result in system failures or miscalculations causing disruptions to operations including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. The Company recognizes the need to ensure that its operations will not be adversely impacted by Year 2000 software and hardware failure. The Company is developing a plan to ensure that its systems are compliant with the requirements to process transactions in the Year 2000. That plan consists of four phases: assessment, remediation, testing and implementation, and encompasses internal information technology (IT) systems and non-IT systems, as well as third party exposures. The following is a status report of the Company's effort to date: The Company's State of Readiness The Company has not yet completed the assessment of its IT systems and non-IT systems. Third Parties And Their Exposure To The Year 2000 The Company has requested from a majority of its principal suppliers and vendors written statements regarding their knowledge of and plans for meeting Year 2000 requirements. To date, the Company is not aware of any principal supplier or vendor with a Year 2000 issue that could materially impact the Company's results of operations, liquidity, or capital resources. However, the Company has no means of ensuring that external agents will be Year 2000 ready. The inability of external agents to complete their Year 2000 resolution process in a timely fashion could materially impact the Company. The effect of non-compliance by external agents cannot be determined. Risks Management of the Company believes that it is working on an effective program to resolve the Year 2000 issue in a timely manner. The Company has not yet completed all necessary phases of the Year 2000 program. The Company has retained an outside firm to assist the Company's personnel. It is estimated that the costs of this project will approximate $200. In the event that the Company does not complete any additional phases, the Company could experience business interruptions. In addition, disruptions in the economy generally resulting from the Year 2000 issues could also materially adversely affect the Company. The amount of potential liability and lost revenue cannot be reasonably estimated at this time. Contingency Plans The Company currently has no contingency plans in place in the event it does not complete all phases of the Year 2000 program. The Company plans to evaluate the status of completion in September 1999 and determine whether such a plan is necessary. New pronouncements - ------------------ In June 1997, the FASB issued 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. This SFAS is effective for the Company on September 30, 1999. Management anticipates that the adoption of SFAS No. 131 will no have a significant effect on results of operations or its financial position. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS 133 is effective for all fiscal quarters of all 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. 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. 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) (In thousands) Item 1. Legal Proceedings LITIGATION: Gehe ag (Holland & Barrett's former parent company), has filed an action, in February 1998, against the Company for non-payment of a deferred tax in connection with the H&B acquisition. The Company and its corporate counsel believe there is no payment due Gehe. In November and December 1997, the Company paid an aggregate $5,350 in connection with a litigation settlement, net of a reimbursement made by its insurance carrier. Reference is made to Note 15 in Form 10-K for the year ended September 30, 1998. 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 first quarter of the fiscal year ending September 30, 1999. 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 February 11, 1999 /s/ Harvey Kamil ------------------------------------- Harvey Kamil, Executive Vice President, Secretary (Principal Financial and Accounting Officer) EX-27 2 FINANCIAL DATA SCHEDULE FOR 1ST QUARTER 10-Q
5 1,000 3-MOS SEP-30-1999 OCT-01-1998 DEC-31-1998 18,373 0 26,179 1,175 127,227 189,436 243,411 72,068 517,123 79,905 191,547 0 0 572 234,690 517,123 141,013 141,013 68,958 62,260 0 0 4,268 6,035 2,567 3,468 0 0 0 3,468 0.05 0.05
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