NBTY Reports Second Quarter Results

BOHEMIA, N.Y., April 23 /PRNewswire-FirstCall/ -- NBTY, Inc. (Nasdaq: NBTY) (www.NBTY.com), a leading manufacturer and marketer of nutritional supplements, today announced results for the fiscal second quarter and six months ended March 31, 2003.

For the fiscal second quarter ended March 31, 2003, net sales increased 10% to $278 million compared to net sales of $252 million for the fiscal second quarter last year. Excluding one-time events, earnings per diluted share for the fiscal second quarter of 2003 and 2002 were $0.34 and $0.33, respectively. Net income for the fiscal second quarter was $20 million, or $0.29 per diluted share, compared to net income of $26 million or $0.38 per diluted share for the fiscal second quarter last year. Results for the fiscal second quarter of 2003 were affected by a previously announced one-time charge of $6 million reflecting NBTY's March 15, 2003 voluntary discontinuance of sales of products containing ephedra. Without this one-time discontinued product charge, net income and earnings per diluted share for the fiscal second quarter of 2003 would have been $24 million and $0.34, respectively. Included in the pre-tax results for the fiscal second quarter of 2002 was a $5.5 million payment received by NBTY in partial settlement of on-going price fixing litigation in which the Company was a plaintiff. Without this payment, net income and earnings per diluted share for the fiscal second quarter of 2002 would have been $22 million and $0.33, respectively.

For the six months ended March 31, 2003, net sales increased 11% to $519 million compared to $467 million for the same period last fiscal year. Excluding one-time events, earnings per diluted share for the first six months of 2003 and 2002 were $0.59 and $0.49, respectively. Net income for the six-month period was $36 million, or $0.53 per diluted share, compared with net income of $37 million, or $0.54 per diluted share for the comparable period last year. Without the aforementioned one-time $6 million charge, net income and earnings per diluted share for the first six months of fiscal 2003 would have been $40 million and $0.59, respectively. Pre-tax results for the first six months of fiscal 2002 included the previously mentioned $5.5 million payment received by NBTY in a partial settlement of on-going price fixing litigation in which the Company was a plaintiff. Without this payment, net income and earnings per diluted share for the first six months of fiscal 2002 would have been $33 million and $0.49, respectively.

NBTY's belief that its ephedra products were safe when used as directed has been supported by scientific evidence, and the Company has not been a defendant in any lawsuit for any of its ephedra products. However, in light of adverse publicity surrounding ephedra and the current environment in the U.S., NBTY believes it was in the best interest of the Company to cease selling ephedra products which represent an insignificant portion of the Company's overall business.

NBTY continues to enhance its financial strength. At March 31, 2003, total assets were $792 million and working capital was $194 million compared to total assets of $692 million and working capital of $149 million at March 31, 2002. During the fiscal second quarter ended March 31, 2003 total bank debt was reduced by $6 million to $20 million.

OPERATIONS FOR THE FISCAL SECOND QUARTER ENDED MARCH 31, 2003

Sales for the Nature's Bounty wholesale division increased 18% to $85 million from $72 million for the comparable period of fiscal 2002. NBTY remains focused on increasing market share in the wholesale arena and expanding its presence in the nutritional supplement marketplace. NBTY recently added the Marc's store chain to its growing wholesale customer base. Headquartered in Cleveland, Ohio, Marc's owns and operates 54 stores located throughout Northern Ohio. Marc's stores will carry over 180 SKUs of Nature's Bounty brand products.

The Nature's Bounty brand continues to be recognized for its ability to generate greater sales than competing brands. By utilizing consumer sales information received from its Vitamin World and direct-response/e-commerce operations, the Company has been able to provide its mass-market customers with tools to drive sales. The Company continues to respond to consumer preferences and to monitor the market for trends and ideas, and these efforts have translated into increased sales.

The Company will be introducing a new line of low carbohydrate nutritional products. CarbWise(TM) will be sold through food, drug and mass-market channels. Shipments are anticipated in July 2003.

Vitamin World second quarter sales were $54 million compared to $51 million a year ago, an increase of 5%. Same store sales increased 4% for the quarter. Vitamin World operations were profitable with pre-tax income of $1 million compared to a loss of $2.3 million for the comparable quarter last year. Vitamin World currently has 541 stores in operation nationwide.

Holland & Barrett sales increased 20% to $87 million from $73 million for the comparable prior period. Holland & Barrett continues to be a leader in the United Kingdom with same store sales increasing 14% for the fiscal second quarter. Holland & Barrett's retail business has been strategically enhanced with the recent acquisitions of Health & Diet

Group Ltd., with a total of 56 GNC stores, and the FSC wholesale business purchased from Royal Numico. In addition, the planned acquisition of the De Tuinen chain of health food stores, which operates 63 stores in the Netherlands, is expected to be completed by the end of May 2003. Holland & Barrett currently operates 525 stores in the UK, Ireland and Germany.

Revenues from Puritan's Pride direct response/e-commerce operations for the fiscal second quarter decreased 7% to $52 million from $56 million for the comparable prior period. The timing of promotional catalog mailings was not comparable to the second quarter a year ago. The three-for-one sales catalog which ran from January through March last year will be running from March through May this year and is expected to generate a comparable increase in sales for the third quarter. Puritan Pride's advertising expenses for the fiscal second quarter of 2003 increased by $3 million. These investments in additional advertising, sales promotions and efforts to generate faster product delivery to customers are part of NBTY's strategic efforts to increase long-term growth. The operations have already witnessed the success of these initiatives as advertising for new customers in the fiscal second quarter generated over 500,000 responses.

NBTY Chairman and CEO, Scott Rudolph, said: "We are very pleased with the addition of Marc's stores to our wholesale operation's growing customer base. The addition of Marc's stores, combined with our purchase of the FSC wholesale business from Royal Numico, bolsters the expansion of our wholesale operation. We have also significantly enhanced our United Kingdom retail business with the recent acquisition of GNC UK."

"Acquisitions and the expansion of our wholesale customer base are part of our strategic plan to enhance wholesale operations and further our position as the dominant force in the worldwide nutritional supplement market. We are confident in our ability to further capitalize on market opportunities, complement our operations through strategic acquisitions and enhance our financial strength," concluded Mr. Rudolph.

ABOUT NBTY

NBTY is a leading vertically integrated U.S. manufacturer and distributor of a broad line of high-quality, value-priced nutritional supplements in the United States and throughout the world. The Company markets more than 1,100 products under several brands, including Nature's Bounty(R), Vitamin World(R), Puritan's Pride(R), Holland & Barrett(R), Nutrition Headquarters(R), American Health(R), Nutrition Warehouse(R) and Dynamic Essentials(R).

This release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations and business. All of these forward-looking statements, which can be identified by the use of terminology such as "subject to," "believe," "expects," "may," "will," "should," "can," or "anticipates," or the negative thereof, or variations thereon, or comparable terminology, or by discussions of strategy which, although believed to be reasonable, are inherently uncertain. Factors which may materially affect such forward-looking statements include: (i) slow or negative growth in the nutritional supplement industry; (ii) interruption of business or negative impact on sales and earnings due to acts of war, terrorism, bio-terrorism, civil unrest or disruption of mail service; (iii) adverse publicity regarding the consumption of nutritional supplements; (iv) inability to retain customers of companies (or mailing lists) recently acquired; (v) increased competition; (vi) increased costs; (vii) loss or retirement of key members of management; (viii) increases in the cost of borrowings and unavailability of additional debt or equity capital; (ix) unavailability of, or inability to consummate, advantageous acquisitions in the future, including those that may be subject to bankruptcy approval or the inability of the Company (as defined below) to integrate acquisitions into the mainstream of its business; (x) changes in general worldwide economic and political conditions in the markets in which the Company may compete from time to time; (xi) the inability of the Company to gain and/or hold market share of its wholesale and retail customers; (xii) loss or reduction in ephedra sales; (xiii) unavailability of electricity in certain geographical areas; (xiv) exposure to and expense of defending and resolving, product liability claims and other litigation; (xv) the ability of the Company to successfully implement its business strategy; (xvi) the inability of the Company to manage its retail, wholesale, manufacturing and other operations efficiently; (xvii) consumer acceptance of the Company's products; (xviii) the inability of the Company to renew leases on its retail locations; (xix) inability of the Company's retail stores to attain or maintain profitability; (xx) the absence of clinical trials for many of the Company's products; (xxi) sales and earnings volatility and/or trends; (xxii) the effect on Company sales of the rapidly changing nature of the Internet and on-line commerce; (xxiii) fluctuations in foreign currencies, and more particularly the British Pound; (xxiv) import-export controls on sales to foreign countries; (xxv) the inability of the Company to secure favorable new sites for, and delays in opening, new retail locations; (xxvi) introduction of new federal, state, local or foreign legislation or regulation or adverse determinations by regulators, and more particularly the Food Supplements Directive and the Traditional Herbal Medicinal Products Directive in Europe; (xxvii) the mix of the Company's products and the profit margins thereon; (xxviii) the availability and pricing of raw materials; (xxix) risk factors discussed in the Company's filings with the U.S. Securities and Exchange Commission (the "SEC"); and (xxx) other factors beyond the Company's control.

Readers are cautioned not to place undue reliance on forward-looking statements. The Company cannot guarantee future results, trends, events, levels of activity, performance or achievements. The Company does not undertake and specifically declines any obligation to update, republish or revise forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrences of unanticipated events.

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