NBTY Reports Third Quarter Results

BOHEMIA, N.Y., July 29, 2005 /PRNewswire-FirstCall via COMTEX/ -- NBTY, Inc. (NTY) (http://www.NBTY.com), a leading global manufacturer and marketer of nutritional supplements, today announced results for the fiscal third quarter ended June 30, 2005.

For the fiscal third quarter ended June 30, 2005, sales increased to $439 million compared to sales of $400 million for the fiscal third quarter ended June 30, 2004. Net income for the fiscal third quarter ended June 30, 2005 was $16 million, or $0.23 per diluted share, compared to $26 million, or $0.37 per diluted share for the fiscal third quarter ended June 30, 2004.

Results for the fiscal third quarter of 2005 were affected by asset impairment charges of $11 million, or $0.14 per diluted share, related to Vitamin World, consisting of a write off of $8 million of goodwill and a write off of $3 million for leasehold improvements. These asset impairment charges are required by accounting principles, and are the result of the continued adverse business climate in the specialty retail channel in the United States.

For the first nine months of fiscal 2005, sales were $1.3 billion, compared to $1.2 billion for the first nine months of fiscal 2004. Net income for the first nine months of fiscal 2005 was $67 million, or $0.97 per diluted share, compared to $91 million, or $1.31 per diluted share, for the first nine months of fiscal 2004. Results for the first nine months of fiscal 2005 were also affected by the aforementioned $11 million Vitamin World impairment charges.

During the fiscal third quarter of 2005, NBTY agreed to acquire substantially all the assets of Solgar(R) from Wyeth for $115 million. Solgar is a prominent supplement company with annual sales of approximately $105 million for 2004. Solgar's products are sold in more than 40 countries and at nearly 5,000 retail locations across the United States. The acquisition is expected to close on August 1, 2005 and will be financed by a $120 million five-year term loan.

In addition, during the fiscal third quarter of 2005, NBTY expanded its presence in Canada with its $8 million acquisition of SISU Inc. SISU is a Canadian-based manufacturer and distributor of a premier line of nutritional supplements with annual sales of approximately $14 million in 2004.

At June 30, 2005, NBTY's total assets were $1.3 billion and working capital was $434 million. Inventory at June 30, 2005 was $479 million, representing an increase of $17 million for the fiscal third quarter of 2005 and an increase of $104 million from September 30, 2004. Although the Company is attempting to lower inventories, this increase is primarily the result of the Company's prior purchase commitments for raw materials in short supply for the joint care product lines. The inventory remains current.

During the fiscal third quarter, the Company expended $28 million for property, plant and equipment, including $19 million for a new 420,000 square foot warehouse facility in Hazelton, Pennsylvania. On July 1, 2005, after the close of the quarter, the Company acquired a 400,000 square foot building in Augusta, Georgia for $11 million. NBTY currently has nearly 4 million square feet of total space for operations, manufacturing and distribution.


For the fiscal third quarter of 2005, sales for the Wholesale/US Nutrition division, which markets Nature's Bounty and Sundown brands, increased 10% to $188 million from $172 million for the fiscal third quarter of 2004. The increase in sales reflects the division's enhanced position in the market place. Product returns for the fiscal third quarter and first nine months of 2005 were $11 million and $33 million, respectively, largely resulting from continued reallocation of shelf space and the decline in the low carb bar market. US Nutrition continues to drive its mass market sales utilizing valuable consumer preference sales data generated by the Company's Vitamin World retail stores and Puritan's Pride Direct Response/E-Commerce operations.

The North American Retail/Vitamin World division increased sales by 10% to $59 million for the fiscal third quarter of 2005 from $53 million for the prior like period. North American Retail operations reported a pre-tax loss of $15 million during this quarter compared to a pre-tax loss of $1 million for the fiscal third quarter of 2004. Results were affected by the aforementioned $11 million asset impairment charges. Same store sales increased 1% during the fiscal third quarter of 2005. During the fiscal third quarter of 2005, Vitamin World opened 6 new stores and closed 11 underperforming stores. At the end of the quarter, the North American Retail division operated a total of 655 stores; 552 in the US and 103 in Canada.

NBTY's European Retail division sales increased by 17% to $143 million from $122 million for the fiscal third quarter a year ago. The European Retail same store sales for the fiscal third quarter 2005 increased 14% (11% in local currency). The European Retail division continues to leverage its premier status, high street locations and brand awareness to achieve these results. The European Retail division's increased sales include sales generated by Holland & Barrett and GNC stores in the UK, DeTuinen stores in the Netherlands, and Nature's Way stores in Ireland. During the fiscal third quarter of 2005, the European Retail division opened 5 new stores, closed 1 store and at the end of the quarter operated a total of 609 stores.

Revenues from Direct Response/Puritan's Pride operations for the fiscal third quarter of 2005 decreased 7% to $49 million from $53 million for the comparable prior period. The total number of orders received in the third quarter remained unchanged from the prior like quarter at approximately 664,000. However, as a result of the Company's decision to lower prices and put pressure on its competitors, the average order fell from $75 to $69 from the comparable prior like period. Online sales increased 22% from $12 million in the third quarter of 2004 to $15 million in the current quarter. Online sales now constitute 30% of total Direct Response/E-Commerce sales compared with 23% of such sales for the prior like period. NBTY remains the leader in the direct response and e-commerce sectors and continues to increase the number of products available via its catalog and web sites.

NBTY Chairman and CEO, Scott Rudolph, said: "Our strong financial and industry position allowed us to further capitalize on market opportunities including the strategic acquisitions of Solgar and SISU. We remain committed to increasing market share and enhancing our position in this highly competitive marketplace. We are confident in the long-term outlook for the Company and our ability to continue to generate long term growth in both revenue and market share."


NBTY is a leading vertically integrated 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 approximately 2,000 products under several brands, including Nature's Bounty(R), Vitamin World(R), Puritan's Pride(R), Holland & Barrett(R), Rexall(R), Sundown(R), MET-Rx(R), WORLDWIDE Sport Nutrition(R), American Health(R), GNC (UK)(R), DeTuinen(R) , LeNaturiste(TM) and SISU(R).

This release refers to non-GAAP financial measures, such as EBITDA. "EBITDA" is defined as earnings before interest, taxes, depreciation and amortization. This non-GAAP financial measure is not prepared in accordance with generally accepted accounting principles and may be different from non- GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation of the non-GAAP measure to the comparable GAAP measure is included in the attached financial tables. Management believes the presentation of EBITDA is relevant and useful because EBITDA is a measurement industry analysts utilize when evaluating NBTY's operating performance. Management also believes EBITDA enhances an investor's understanding of NBTY's results of operations because it measures NBTY's operating performance exclusive of interest and non-cash charges for depreciation and amortization.

Management also provides this non-GAAP measurement as a way to help investors better understand its core operating performance, enhance comparisons of NBTY's core operating performance from period to period and to allow better comparisons of NBTY's operating performance to that of its competitors.

This release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations and business. All of these forward-looking statements, which can be identified by the use of terminology such as "subject to," "believe," "expects," "plan," "project," "estimate," "intend," "may," "will," "should," "can," or "anticipates," or the negative thereof, or variations thereon, or comparable terminology, or by discussions of strategy 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 nutritional supplements; (iv) inability to retain customers of companies (or mailing lists) recently acquired; (v) increased competition; (vi) increased costs; (vii) loss or retirement of key members of management; (viii) increases in the cost of borrowings and/or unavailability of additional debt or equity capital; (ix) unavailability of, or inability to consummate, advantageous acquisitions in the future, including those that may be subject to bankruptcy approval or the inability of NBTY to integrate acquisitions into the mainstream of its business; (x) changes in general worldwide economic and political conditions in the markets in which NBTY may compete from time to time; (xi) the inability of NBTY to gain and/or hold market share of its wholesale and/or retail customers anywhere in the world; (xii) unavailability of electricity in certain geographical areas; (xiii) the inability of NBTY to obtain and/or renew insurance and/or the costs of the same; (xiv) exposure to and expense of defending and resolving, product liability claims and other litigation; (xv) the ability of NBTY to successfully implement its business strategy; (xvi) the inability of NBTY to manage its retail, wholesale, manufacturing and other operations efficiently; (xvii) consumer acceptance of NBTY's products; (xviii) the inability of NBTY to renew leases for its retail locations; (xix) inability of NBTY's retail stores to attain or maintain profitability; (xx) the absence of clinical trials for many of NBTY's products; (xxi) sales and earnings volatility and/or trends for the Company and its market segments; (xxii) the efficacy of NBTY's Internet and on-line sales and marketing; (xxiii) fluctuations in foreign currencies, including the British Pound and the euro; (xxiv) import-export controls on sales to foreign countries; (xxv) the inability of NBTY to secure favorable new sites for, and delays in opening, new retail locations; (xxvi) introduction of and compliance with new federal, state, local or foreign legislation or regulation or adverse determinations by regulators anywhere in the world (including the banning of products) and more particularly proposed Good Manufacturing Practices in the United States, the Food Supplements Directive and Traditional Herbal Medicinal Products Directive in Europe and Section 404 requirements of the Sarbanes- Oxley Act of 2002; (xxvii) the mix of NBTY's products and the profit margins thereon; (xxviii) the availability and pricing of raw materials; (xxix) risk factors discussed in NBTY's filings with the U.S. Securities and Exchange Commission; (xxx) adverse effects on NBTY as a result of increased gasoline prices and potentially reduced traffic flow to NBTY's retail locations; (xxxi) adverse tax determinations; (xxxii) the loss of a significant customer of the Company; and (xxxiii) other factors beyond the Company's control.

NBTY cannot be certain that the measures taken will be sufficient to meet the section 404 requirements of the Sarbanes-Oxley Act of 2002.

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

Consequently, such forward-looking statements should be regarded solely as NBTY's current plans, estimates and beliefs.

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