FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[x] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the fiscal year ended September 30, 1996.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ________________
to__________________.
Commission file number 0-10666
NBTY, INC.
(Exact name of registrant as specified in charter)
DELAWARE 11-2228617
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
90 Orville Drive 11716
---------------- -----
Bohemia, New York (Zip Code)
-----------------
(Address of principal executive office)
(516) 567-9500
- --------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.008 per share
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 Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment for this Form 10-K [X].
The aggregate market value of the voting stock held by nonaffiliates of the
registrant, based upon the closing price of shares of Common Stock on the
National Association of Securities Dealers Automated Quotation ("NASDAQ")
National Market System at November 22, 1996 was approximately $251,552,000.
The number of shares of Common Stock of the registrant outstanding at
November 22, 1996 was approximately 18,592,119.
Documents Incorporated by Reference: None
PART I
Item 1. BUSINESS
Products
NBTY, Inc. (the "Company"), collectively with its subsidiaries is a
manufacturer and marketer of nutritional supplements in the United States.
It sells more than 500 products consisting of vitamins and other nutritional
supplements such as minerals, amino acids and herbs. Vitamins, minerals and
amino acids are sold as a single vitamin and in multi-vitamin combinations
and in varying potency levels in powder, tablet, soft gel, chewable, and
hard shell capsule form. The Company's branded products are sold by
independent and chain pharmacies, wholesalers, supermarkets and health food
stores and by direct mail.
Marketing and Distribution
The Company markets its products through different channels of
distribution: wholesale-retail and direct mail.
Wholesale. The Company markets its products under various brand names
to various stores including drug store chains and supermarkets, independent
pharmacies, health food stores, health food store wholesalers and other
retailers such as mass merchandisers. The Nature's Bounty brand is sold to
drug store chains and drug wholesalers. The Company sells a full line of
products to supermarket chains and wholesalers under the brand name Natural
Wealth at prices designed for the "price conscious" consumer.
In addition to a complete line of vitamins and other nutritional
supplements, the Company sells a comprehensive line of over-the-counter
products such as cold remedies and analgesic formulas to independent
pharmacies under the Hudson brand name.
The Company sells directly to health food stores under the brand name
Good'N Natural and sells products, including a specialty line of vitamins,
to health food wholesalers under the brand name American Health.
Retail. The Company operates 83 retail locations in thirty states
under the name Vitamin World. Such locations carry a full line of products
under the Vitamin World brand name and products manufactured by others.
Through direct interaction between the Company's personnel and the public,
the Company is able to identify buying trends, customer preferences or
dislikes, acceptances of new products and price trends in various regions of
the country. This information is useful in initiating sales programs for
all divisions of the Company.
Direct Mail. The Company offers its full line of vitamins and other
nutritional supplement products as well as selected personal care items
under its Puritan's Pride brand name at prices which are normally at a
discount from those of similar products sold in retail stores.
International. The Company has expanded sales of various products to
many countries throughout Europe, Asia and Latin America. In the United
Kingdom, the Company has leased a warehouse for distribution of its products
under the Vitamin World brand name.
Sales and Advertising
The Company has approximately 70 sales employees located throughout
the country who are paid on a salary plus commission basis. In addition,
the Company sells through commissioned sales representative organizations
which sell the Company's products on an exclusive basis.
In 1995 and 1996, the Company spent approximately $19.3 million and
$17.6 million, respectively, on advertising in print and media, cooperative
advertising with its customers. The Company creates its own advertising
materials through a staff of approximately 22 employees. The Company
expects advertising costs to increase as net sales increase.
Manufacturing, Distribution and Quality Control
All manufacturing is conducted in accordance with good manufacturing
practice standards of the United States Food and Drug Administration and
other applicable regulatory standards. The Company believes that the
capacity of its manufacturing and distribution facilities is adequate to
meet the requirements of its current business and, at the completion of its
expansion program, will be adequate to meet the requirements of anticipated
increases in net sales. The Company manufactures approximately 60% of its
vitamins and other nutritional supplements and expects to increase such
percentage upon completion of its manufacturing improvement program.
The Company's manufacturing process places special emphasis on quality
control. All raw materials used in production initially are held in
quarantine during which time the Company's laboratory employees assay the
production against the manufacture's certificate of analysis. Once cleared,
a lot number is assigned, samples are retained and the material is processed
by formulating, mixing and granulating, compression and sometimes coating
operations. After the tablet is manufactured, laboratory
employees test its weight, purity, potency, dissolution and stability. When
a product such as vitamin tablets is ready for bottling, the Company's
automated equipment counts the tablets, inserts them into bottles, adds a
tamper-resistant cap with an inner safety seal and affixes a label. The
Company uses computer-generated documentation for picking and packing for
order fulfillment.
The principal raw materials used in the manufacturing process are
natural and synthetic vitamins, purchased from bulk manufacturers in the
United States, Japan and Europe. Although raw materials are available from
numerous sources, one supplier currently provides approximately 25% of the
Company's purchases, and no other single supplier accounts for more than 10%
of the Company's raw material purchases.
Research and Development
In 1994, 1995 and 1996, the Company did not expend any significant
amounts for research and development of new products.
Government Regulation
The processing, formulation, packaging, labeling and advertising of
the Company's products are subject to regulation by one or more federal
agencies, including the United States Food and Drug Administration (the
"FDA"), the Federal Trade Commission (the "FTC"), the Consumer Product
Safety Commission, the United States Department of Agriculture and the
Environmental Protection Agency. These activities are also regulated by
various agencies of the states and localities in which the Company's
products are sold. In particular, the FDA regulates the safety, labeling
and distribution of dietary supplements, including vitamins, minerals and
herbs, food additives, food supplements, over-the-counter ("OTC") and
prescription drugs and cosmetics. In addition, the FTC has overlapping
jurisdiction with the FDA to regulate the labeling, promotion and
advertising of vitamins, OTC drugs, cosmetics and foods. In addition, the
United States Postal Service regulates advertising claims with respect to
the Company's products sold by mail order.
In The Dietary Supplement Health and Education Act of 1994 ("DSHEA")
was enacted on October 25, 1994. DSHEA amends the Federal Food, Drug and
Cosmetic Act by defining dietary supplements, which include vitamins,
minerals, amino acids, nutritional supplements and herbs as a new category
of food separate from conventional food. DSHEA provides a regulatory
framework to ensure safe, quality dietary supplements and the dissemination
of accurate information about such products. Under DSHEA, the FDA is
generally prohibited from regulating the active ingredients in dietary
supplements as food additives or as drugs unless product claims, such as
claims that a product may heal, mitigate, cure or prevent an illness,
disease or malady, trigger drug status.
DSHEA provides for specific nutritional labeling requirements for
dietary supplements effective January 1, 1997, although final regulations
have not been published and implementation will be delayed. DSHEA permits
substantiated, truthful and non-misleading statements of nutritional support
to be made in labeling, such as statements describing general well-being
resulting from consumption of a dietary ingredient or the role of a nutrient
or dietary ingredient in affecting or maintaining structure or function of
the body. Any statement of nutritional support beyond such "traditional"
claims must be accompanied by disclosure that the FDA has not evaluated such
statement and that the product is not intended to cure or prevent any
disease. The Company anticipates that the FDA will promulgate good
manufacturing practices ("GMPs") which are specific to dietary supplements
and require at least some of the quality control provisions contained in the
GMPs for drugs. The Company currently manufactures its vitamins and
nutritional supplement products in compliance with the applicable food GMPs.
The FDA has proposed but not finalized regulations to implement DSHEA.
The Company cannot determine what effect such regulations, when promulgated,
will have on its business in the future. Such regulations are most likely
to require expanded or different labeling for the Company's vitamins and
nutritional products and could, among other things, require the recall,
reformulation or discontinuance of certain products, additional
recordkeeping, warnings, notification procedures and expanded documentation
of the properties of certain products and scientific substantiation
regarding ingredients, product claims, safety or efficacy. The Company
believes that it is in material compliance with all applicable laws.
DSHEA created two new governmental bodies. The Commission on Dietary
Supplements was established for two years to provide recommendations for the
regulation of supplement labeling and health claims, including procedures
for making disease-related claims. The Office of Dietary Supplements,
established within the National Institute of Health, is charged with
coordinating research on dietary supplements and disease prevention,
compiling research results, and advising the Secretary of Health and Human
Services on supplement regulation, safety and health claims.
Although the vitamin and nutritional supplement industry is subject to
regulations by the FDA and local authorities, dietary supplements, including
vitamins, minerals, herbs and nutritional supplements, have now been
statutorily affirmed as a food and not as a drug or food additive.
Therefore, the regulation of dietary supplements is far less restrictive
than that imposed upon manufactures and distributors of drugs or food
additives. Unlike food additives, which are more pervasively regulated, and
new drugs, which require regulatory approval of formulation and labeling
prior to marketing, dietary supplement companies are authorized to make
substantiated statements of nutritional support and to market new,
manufacture-substantiated-as-safe dietary supplement products without FDA
preclearances. Failure to comply with applicable FDA requirements can
result in sanctions being imposed on the Company or the manufacturers of its
products, including, depending on the product category, warning letters,
fines, product recalls and seizures.
The OTC pharmaceutical products distributed by the Company are subject
to regulation by a number of Federal and State governmental agencies. In
particular, the FDA regulates the formulation, manufacture, packaging and
labeling of all OTC pharmaceutical products. The Company believes that the
OTC pharmaceutical products distributed by the Company comply in all
material respects with existing regulations.
The Company is subject to regulation under various international,
state and local laws which include provisions regulating, among other
things, the operations of direct sales programs. The Company believes that
it is in material compliance with such provisions and has, in certain cases,
established procedures providing greater protection for its distributors
than is required by law.
Competition
The market for vitamins and other nutritional supplements is highly
competitive in all of the Company's channels of distribution. The Company's
Nature's Bounty and Natural Wealth brands compete for sales to drug store
chains and supermarkets with heavily advertised national brands manufactured
by large pharmaceutical companies, as well as Your Life and Nature Made,
sold by Leiner Health Products, Inc. and Pharmavite Corp., respectively.
The Vitamin World stores compete with specialty vitamin stores, such as GNC
Stores, health food stores and other retail stores. With respect to direct
mail sales, the Company's Puritan's Pride brand is the largest seller of
vitamins and other nutritional supplements and competes with a large number
of smaller, usually less geographically diverse, direct mail companies, some
of which manufacture their own products and some of which sell products
manufactured by others.
It is not possible to estimate accurately the number of competitors
since the nutritional supplement industry is fragmented. The Company is not
capable of assessing market penetration of such competitors since they do
not publish marketing figures. No one company dominates the industry.
However, it is the Company's belief that there may be between one and two
dozen companies competing for the drug store and supermarket business. In
its Vitamin World operations, the Company competes regionally with specialty
vitamin stores, such as GNC stores and local drug stores, health food
stores, supermarkets, department stores and mass merchandisers.
The Company believes that it competes favorably with other direct mail
sellers of similar products on a basis of price and customer service,
including speed of delivery and new product offerings. The Company believes
that it competes favorably with the large pharmaceutical companies and other
companies which sell to wholesalers, on the basis of price, breadth of
product line, reputation and customer service, including innovative
packaging and displays and other services. The Company believes that it
derives a competitive advantage from its ability to manufacture and package
its own vitamin and nutritional supplement products, which affords it the
flexibility to respond to the shifting demands of each channel of
distribution and, consequently, the ability to achieve the manufacturing and
operating efficiencies resulting from larger production runs of products
which can be packaged for sale in one or more such channels.
Trademarks
The Company owns trademarks registered with the United States Patent
and Trademark Office and many other major jurisdictions of the world for its
Nature's Bounty, Good'N Natural, Hudson, American Health, Puritan's Pride,
Vitamin World, Natural Wealth and Stur-Dee trademarks, among others, and has
rights to use other names essential to its business. Federally registered
trademarks have a perpetual life, as long as they are renewed on a timely
basis and used properly as trademarks, subject to the rights of third
parties to seek cancellation of the trademarks if they claim priority or
confusion of usage. The Company regards its trademarks and other propriety
rights as valuable assets and believes they have significant value in the
marketing of its products. The Company vigorously protects its trademarks
against infringement.
Employees
The Company employs approximately 1,300 persons, of whom 41 are in
executive and administrative capacities, approximately 80 are in sales,
approximately 400 are in the Company's Vitamin World stores and the
remainder are in manufacturing, shipping and packaging. None of the
Company's employees are represented by a labor union. The Company believes
its relationship with its employees is excellent.
Item 2. PROPERTIES
The Company owns a total of approximately 625,000 square feet of plant
facilities located at 60, 90, 105 and 115 Orville Drive in Bohemia, New York
and 4320 Veterans Memorial Highway, Holbrook, New York, of which 100,000
square feet is devoted to manufacturing, 72,000 square feet is utilized for
offices and the balance is or is to be used for shipping and warehouse. In
1995, the Company purchased a 62 acre plot in close proximity to its other
facilities in Islip, New York in order to construct an additional
manufacturing facility.
The Company operates 68 retail stores and 15 kiosks in thirty states
under the name Vitamin World. The stores have an average selling area of
1,000 square feet and each kiosk has a selling area of approximately 190
square feet. Generally, the Company leases the stores and kiosks for three
to five years for annual base rents ranging from $12,000 to $94,000 and
percentage rents in the event sales exceed a specified amount.
Item 3. LEGAL PROCEEDINGS
L-tryptophan Litigation. The Company and certain other companies in
the industry, including distributors, wholesalers and retailers (the
"Indemnified Group") had been named as defendants in cases arising out of
the ingestion of products containing L-Tryptophan. The Company had been
named in more than 265 such lawsuits, of which 4 are still pending against
the Company. All of such companies have entered into an agreement with the
Company's supplier of bulk L-tryptophan, Showa Denko America, Inc. (the
"Supplier") under which the Supplier, a U.S. subsidiary of a major Japanese
corporation, Showa Denko K.K., has assumed the defense of all claims against
the Indemnified Group and has agreed to pay the legal fees and expenses in
that defense. The Supplier and Showa Denko K.K. have agreed to indemnify
the Indemnified Group against any judgments and to fund settlements arising
out of those actions and claims.
The Supplier has posted a revolving, irrevocable letter of credit of
$20 million to be used for the benefit of the Indemnified Group in the event
that the Supplier is unable or unwilling to satisfy any claims or judgments.
While not all of these suits quantify the amount demanded, it can
reasonably be assumed that the amount required to either settle these cases
or to pay judgments rendered therein will be paid by the Supplier or by the
Company's product liability insurance carrier. To date, no cases in which
the Company is a party have been reached for trial.
Shareholder Litigation. In October 1994, litigation was commenced in
the U.S. District Court, Eastern District of New York, against the Company
and two of its officers (the "Defendants"). The Complaint alleges that
false and misleading statements and representations were made concerning the
Company's sales and earnings estimates for the fourth fiscal quarter and the
year ending September 30, 1994. The allegations are that: (a) sales were
artificially inflated; (b) costs were improperly capitalized; (c) sales and
profit margins were materially declining; (d) inventory and accounts
receivable were overstated; and (e) that because of the foregoing, the
Company would incur a loss in its fourth fiscal quarter. The Plaintiffs'
seek Class Action certification and an unspecified amount of monetary
damages. The Company and its officers deny the allegations of the complaint
and intend to vigorously contest the litigation. In 1994, prior to
commencement of these lawsuits, the Company purchased a directors and
officers Indemnity Policy. Special counsel has been retained to represent
the Company and its officers. Since the outcome of any litigation is
uncertain, the Company is unable to predict (i) whether it will ultimately
prevail; (ii) whether it will be fully or partially indemnified, if at all;
(iii) the amount of loss, if any, that may be attributable to the above; and
(iv) the amount of expense which may be incurred in the defense of these
actions.
Miscellaneous Claims and Litigations. The Company is involved in
miscellaneous claims and litigation, which taken individually or in the
aggregate, would not materially impact on the Company's financial position
or its business.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On February 14, 1996, at the annual meeting of the shareholders, the
following directors were elected: Bernard G. Owen and Alfred Sacks.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
DIVIDEND POLICY
Since 1973, the Company has not paid any cash dividends on its Common
Stock. On April 24, 1992, the Company effected a two-for-one stock split in
the form of a 100% stock dividend to stockholders of record on May 8, 1992.
On September 25, 1992, the Company effected a three-for-one stock split in
the form of a 200% stock dividend to stockholders of record on November 2,
1992. In addition, on August 3, 1993, the Company effected a two-for-one
stock split in the form of a 100% stock dividend to shareholders of record
on August 13, 1993. Future determination as to the payment of cash or stock
dividends will depend upon the Company's results of operations, financial
condition and capital requirements and such other factors as the Company's
Board of Directors may consider.
PRICE RANGE OF COMMON STOCK
The Common Stock is traded in the over-the-counter market and is
included for quotation on the National Association of Securities Dealers
National Market System under the trading symbol "NBTY". The following table
sets forth, for the periods indicated, the high and low closing sale prices
for the Common Stock, as reported on NASDAQ/NMS:
<TABLE>
<CAPTION>
Fiscal year ended September 30, 1995
High Low
---- ---
<S> <C> <C>
First Quarter 10-1/2 4-3/4
Second Quarter 8-3/8 5-1/16
Third Quarter 6-7/8 5-7/16
Fourth Quarter 7-1/4 5-1/2
Fiscal year ended September 30, 1996
First Quarter 5-3/4 4
Second Quarter 7-13/16 4-5/8
Third Quarter 11-3/8 7-7/16
Fourth Quarter 17-7/8 9-3/8
</TABLE>
On November 21, 1996, the closing sale price of the Common Stock was
$16.44. There were approximately 682 record holders of Common Stock as of
November 21, 1996. The Company believes that there were in excess of 10,000
beneficial holders of Common Stock as of such date.
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Selected Income
Statement Data:
Net Sales $100,907 $138,430 $156,057 $178,760 $194,403
Costs & Expenses:
Cost of Sales 50,555 67,951 79,891 93,875 95,638
Catalog, printing, postage
& promotion 7,455 11,507 14,786 19,262 17,635
Selling, general
& administrative 35,516 42,776 49,208 56,728 58,515
------------------------------------------------------------
Income from operations 7,381 16,196 12,172 8,895 22,615
Interest expense 1,321 1,227 914 1,084 1,445
Other, net (181) 743 1,285 571 1,203
------------------------------------------------------------
Income before income taxes 5,879 15,712 12,543 8,382 22,373
Income taxes 2,071 5,939 4,767 3,246 9,021
------------------------------------------------------------
Net income $ 3,808 $ 9,773 $ 7,776 $ 5,136 $ 13,352
============================================================
Per Share Data:
Earnings per common share:
Primary $0.28 $0.53 $0.38 $0.26 $0.67
Fully-diluted $0.25 $0.53 $0.38 $0.26 $0.67
Weighted average number of
shares outstanding:
Primary 13,718 18,435 20,257 19,974 19,976
Fully-diluted 15,250 18,523 20,257 19,974 19,976
Selected Balance Sheet Data:
Working capital $ 13,082 $ 42,869 $ 39,462 $ 40,665 $ 52,268
Total assets $ 58,300 $102,647 $115,112 $123,529 $145,550
Long-term debt and capital
lease, obligations, less
current portion $ 20,987 $ 8,265 $ 7,566 $ 10,924 $ 18,398
Total stockholders' equity $ 16,490 $ 70,002 $ 78,017 $ 82,615 $ 96,950
</TABLE>
All amounts in thousands, except Per Share Data
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
Results of Operations
The following table sets forth income statement data of the Company as
a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
Year Ended September 30
------------------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 51.2 52.5 49.2
Catalog printing & promotion 9.5 10.8 9.1
Selling, general & administrative 31.5 31.7 30.1
-------------------------------------
92.2 95.0 88.4
-------------------------------------
Income from operations 7.8 5.0 11.6
Interest expense and other .2 (.3) (.1)
-------------------------------------
Income before income taxes 8.0 4.7 11.5
Income taxes 3.1 1.8 4.6
-------------------------------------
Net income 5.0% 2.9% 6.9%
=====================================
</TABLE>
1996 Compared to 1995
Net Sales. Net sales for 1996 were $194.4 million, an increase of
$15.6 million or 8.8% over 1995. Of the $15.6 million increase, $10.6
million was attributable to wholesale-retail sales and $13.2 million was
attributable to mail order sales, less a decrease of $8.2 million from
Beautiful Visions, a cosmetic catalog which was sold in October, 1995.
Cost and Expenses. Cost of sales for 1996 was $95.6 million, an
increase of $1.8 million or 1.9% over 1995. Gross profit increased to 50.8%
in 1996 from 47.5% in 1995. Such increase was due to various factors,
including increased sales of higher margin products, long-term purchase
commitments of raw materials resulting in lower costs and manufacturing
efficiencies.
Catalog, Printing, Postage and Promotion. Catalog, printing, postage
and promotion for 1996 was $17.6 million, an decrease of $1.6 million over
1995. Such cost, as a percentage of net sales was 9.1% in 1996 compared
with 10.8% in 1995. The decrease was mainly due to the discontinuance of
the Beautiful Visions mail order operation.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for 1996 was $58.5 million, an increase of $1.8
million over 1995; as a percentage of net sales, these costs were 30.1% in
1996 and 31.7% in 1995. Decreases in payroll fringes and other
miscellaneous costs were offset by increases in outlet store rentals and
professional fees.
Interest expense. Interest expense in 1996 was $1.4 million, an
increase of $.4 million.
Income taxes. The Company's effective tax rate was 40.3% in 1996 and
38.7% in 1995. The Company adopted Statement of Accounting Standard
("SFAS") No. 109, "Accounting for Income Taxes", in 1993. The impact from
the implementation of SFAS No. 109 was not material to the Company's
financial statements.
Seasonality. The Company believes that its business is not seasonal
except that historically it has the lowest net sales in its first fiscal
quarter, slightly higher net sales in its second fiscal quarter and may have
higher net sales in a quarter depending upon when it has engaged in
significant promotional activities.
1995 Compared to 1994
Net Sales. Net sales for 1995 were $178.8 million, an increase of
$22.7 million or 14.5% over 1994. Of the $22.7 million increase, $12.5
million was attributable to wholesale-retail sales and $10.3 million was
attributable to mail order sales. In October, 1995, Beautiful Visions, a
cosmetic catalog operation, was sold. Sales for such operation in 1995 were
$8.3 million, a decrease of $5 million from the prior year.
Cost and Expense. Cost of sales for 1995 was $93.9 million, an
increase of $14.0 million or 17.5% over 1994. Gross profit decreased to
47.5% in 1995 from 48.8% in 1994. Such decrease as a percentage of net
sales was due to various factors which included pricing pressures and write-
downs for labels and unsold Beautiful Visions inventory.
Catalog, Printing, Postage and Promotion. Catalog, printing, postage
and promotion for 1995 was $19.2 million, an increase of $4.5 million or
30.3% over 1994. Such cost, as a percentage of net sales was 10.8% in 1995
compared with 9.5% in 1994. This increase was mainly due to expanded trade
advertising and costs associated with promotional programs to independent
stores and chain stores.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for 1995 was $56.7 million, an increase of $7.5
million or 15.3% over 1994; as a percentage of net sales, these costs
remained relatively constant at 31.7% in 1995 and 31.5% in 1994. The
increase was primarily a result of increases in salaries, wages, fringe
benefits and professional services.
Interest Expense. Interest expense in 1995 was $1.0 million, an
increase of $.1 million.
Income Taxes. The Company's effective tax rate was 38.7% in 1995 and
38.0% in 1994. The Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes", in 1993. The
impact from the implementation of SFAS No. 109 was not material to the
Company's financial statements.
Seasonality. The Company believes that its business is not seasonal
except that historically it has the lowest net sales in its first fiscal
quarter, slightly higher net sales in its second fiscal quarter and may have
highest net sales in a quarter depending upon when it has engaged in
significant promotional activities.
Liquidity and Capital Resources.
Working capital was $51.9 million at September 30, 1996, compared with
$40.7 million at September 30, 1995, an increase of $11.3 million.
The Company finances its working capital with internally-generated
funds. The Company maintains an unsecured $15 million Revolving Credit
Agreement (RCA) expiring on March 31, 1999 and a $8.4 million Master
Equipment Lease Agreement (MELA) expiring on December 31, 1996. As of
September 30, 1996, $15 million remained available under the RCA and $7.4
million under the MELA.
In September 1990, the Company financed its plant expansion program
with the proceeds of an $8 million taxable Industrial Development Revenue
Bond due September 1, 2000 with monthly principal and interest payments of
$74,821 through 2000 and a final payment of $6,891,258 on September 1, 2000.
A portion of this loan, which is collateralized by a mortgage in favor of an
insurance company, was also utilized to repay debt which was outstanding in
1989.
The mix of revenues among wholesale, direct mail and retail sales
remained relatively constant for 1996, 1995 and 1994.
The Company believes that existing cash balances, internally-generated
funds from operations and amounts available under the RCA and MELA will
provide sufficient liquidity to satisfy the Company's working capital needs
for the next 24 months and to finance anticipated capital expenditures
incurred in the ordinary course of business.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See attached financial statements. Part IV, Item 14. Exhibits.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names and other relevant information regarding
officers, directors, and
significant employees of the Company as of October 31, 1996. Their stated
positions are as follows:
<TABLE>
<CAPTION>
Year Commencement
first of term of
elected office as
Name Age Position Director Officer
- ---- --- -------- -------- ------------
<S> <C> <S> <C> <C>
Scott Rudolph 39 Chairman of
the Board
and President 1986 1986
Harvey Kamil 52 Executive Vice
President,
Secretary ---- 1982
Barry Drucker 48 Senior Vice
President-Sales ---- 1985
Patricia E. Ciccarone 40 Vice President-
Vitamin World ---- 1992
James P. Flaherty 38 Vice President-
Advertising ---- 1988
Abraham K. Kleinman 71 Vice President-
Manufacturing ---- 1982
Jean Palladino 61 Vice President-
Hudson ---- 1988
Abraham Rubenstein 66 Vice President-
Mail Order ---- 1985
William J. Shanahan 38 Vice President-
Data Processing ---- 1988
Robert Silverman 34 Vice President-
Good'N Natural ---- 1991
James A. Taylor 56 Vice President-
Production ---- 1982
William Dougherty 45 Vice President-
Merchandising ---- 1996
Arthur Rudolph 68 Director 1971 1971
Aram Garabedian 61 Director 1971 ----
Bernard G. Owen 68 Director 1971 ----
Alfred Sacks 68 Director 1971 ----
Murray Daly 69 Director 1971 ----
Glenn Cohen 37 Director 1988 ----
Bud Solk 62 Director 1994 ----
Nathan Rosenblatt 39 Director 1994 ----
</TABLE>
The Directors of the Company are elected to serve a three year term or
until their respective successors are elected and qualified. Officers of
the Company hold office until the meeting of the Board of Directors
immediately following the next annual shareholders meeting or until removal
by the Board, whether with or without cause.
Scott Rudolph is the Chairman of the Board of Directors, President,
Chief Executive and is a shareholder of the Company. He is a trustee
of Dowling College, Long Island, New York. He joined the Company in
1986.
Harvey Kamil is Executive Vice President. He joined the Company in
July 1982.
Barry Drucker is Senior Vice President of Sales. He joined the
Company in 1976.
Patricia E. Ciccarone is Vice President of Vitamin World. She joined
the Company in 1988.
James P. Flaherty is Vice President of Advertising. He joined the
Company in 1979.
Abraham H. Kleinman is Vice President of Manufacturing. He joined the
Company in December, 1973.
Jean Palladino is Vice President of The Hudson Corporation. She
joined the Company in 1986.
Abraham Rubenstein is Vice President of Mail Order. He joined the
Company in January, 1985.
William J. Shanahan is Vice President of Data Processing. He joined
the Company in 1980.
Robert Silverman is Vice President of Good'N Natural. He joined the
Company in 1985.
James E. Taylor is Vice President of Production. He joined the
Company in December 1981.
William Dougherty is Vice President of Merchandising. He joined the
Company in 1994.
Arthur Rudolph founded Arco Pharmaceuticals, Inc. the Company's
predecessor, in 1960 and had served as the Company's Chief Executive
Officer and Chairman of the Board of Directors since that date until
his resignation in September 1993. However, he remains a member of
the Board of Directors. He was responsible for the formation of the
Company in 1971. He is the father of Scott Rudolph.
Aram Garabedian is, and has been since 1988, a real estate developer
in Rhode Island. He had been associated with the Company and its
predecessor, Arco Pharmaceuticals, Inc., for 20 years in a sales
capacity and as an officer. He has served as a director since 1971.
Bernard G. Owen has been engaged as President of Cafiero, Cuchel and
Owen Insurance Agency for the past twenty-five years.
Alfred Sacks has been engaged as President of Al Sacks, Inc., an
insurance agency for the past thirty years.
Murray Daly, formerly a Vice President of J. P. Egan Office Equipment
Co., is currently a consultant to the office equipment industry.
Glenn Cohen is the President of Glenn-Scott Landscaping, Inc.
Bud Solk is President of Chase/Ehrenberg & Rosene, Inc., an
advertising and marketing agency located in Chicago, Illinois.
Previously, Mr. Solk had been President of Bud Solk Associates, Inc.,
which he founded in 1958.
Nathan Rosenblatt is the President and Chief Executive Officer of
Ashland Maintenance Corp., a commercial maintenance organization
located in Long Island, New York.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
Securities ownership of persons owning of record, or beneficially, 5% or
more of the outstanding Common Stock, as of September 30, 1996. The Company
is not aware of any other beneficial holders of 5% or more of the Common
Stock. All information with respect to beneficial ownership, set forth in
the foregoing stock ownership table, is based on information furnished by
the shareholder, director or officer, or contained in filings made with the
Securities and Exchange Commission.
<TABLE>
<CAPTION>
Amount & Nature Percent
Name and Address of of Beneficial of
Title of Class Beneficial Owner Ownership (1) Class (1)
- -------------- ------------------- --------------- ---------
<S> <C> <C> <C>
Common Stock Scott Rudolph 3,673,555 18.8
(Par Value 90 Orville Drive Record and
$.008) Bohemia, NY 11716 Beneficial
Common Stock Harvey Kamil 718,439 3.8
(Par Value 90 Orville Drive Record and
$.008) Bohemia, NY 1716 Beneficial
Common Stock NBTY, Inc. 1,062,228 5.7
(Par Value Profit Sharing Plan Record and
$.008) Beneficial
<F1> Includes shares issuable upon exercise of options held by executive
officers and directors.
</TABLE>
(b) Security Ownership of Management (directors and Officers)
<TABLE>
<CAPTION>
Amount &
Nature of Percent
Name and Address of Beneficial of
Title of Class Beneficial Owner Ownership (1) Class (1)
- -------------- ------------------- ------------- ---------
<S> <C> <C> <C>
Common Stock Scott Rudolph(2) 3,673,555 18.8
(Par Value 90 Orville Drive Record and
$.008) Bohemia, NY 11716 Beneficial
Common Stock Harvey Kamil 718,439 3.8
(Par Value 90 Orville Drive Record and
$.008) Bohemia, NY 11716 Beneficial
Common Stock Arthur Rudolph 671,500 3.6
(Par value 90 Orville Drive Record and
$.008) Bohemia, NY 11716 Beneficial
Common Stock Barry Drucker 43,600 Nil
(Par Value 90 Orville Drive Record and
$.008) Bohemia, NY 11716 Beneficial
Common Stock Aram Garabedian 24,000 Nil
(Par Value 90 Orville Drive Record and
$.008) Bohemia, NY 11716 Beneficial
Common Stock Bernard G. Owen 31,500 Nil
(Par Value 90 Orville Drive Record and
$.008) Bohemia, NY 11716 Beneficial
Common Stock Alfred Sacks 15,000 Nil
(Par Value 90 Orville Drive Record and
$.008) Bohemia, NY 11716 Beneficial
Common Stock Murray Daly 22,000 Nil
(Par Value 90 Orville Drive Record and
$.008) Bohemia, NY 11716 Beneficial
Common Stock Glenn Cohen 12,000 Nil
(Par Value 90 Orville Drive Record and
$.008) Bohemia, NY 11716 Beneficial
Common Stock Bud Solk 0 ___
(Par Value 90 Orville Drive Record and
$.008) Bohemia, NY 11716 Beneficial
Common Stock Nathan Rosenblatt 0 ___
(Par Value 90 Orville Drive Record and
$.008) Bohemia, NY 11716 Beneficial
Common Stock All Directors, 4,801,994 23.7
(Par Value Officers and as a Record and
$.008) group (11 persons) Beneficial
<F1> Each named person or group is deemed to be the beneficial owner of
securities which may be acquired within 60 days through the exercise
or conversion of options, if any, and such securities are deemed to be
outstanding for the purpose of computing the percentage beneficially
owned by such person or group. Such securities are not deemed to be
outstanding for the purpose of computing the percentage of class
beneficially owned by any person or group. Accordingly, the indicated
number of shares includes shares issuable upon exercise of options
(including employee stock options) and any other beneficial ownership
of securities held by such person or group.
<F2> Includes shares held in a Trust created by Arthur Rudolph for the
benefit of Scott Rudolph and others.
</TABLE>
NBTY Inc. Profit Sharing Plan (formerly Employee Stock Ownership Plan and
Trust)
The basic terms of the Plan are as follows:
Eligibility
All employees of the Company, including officers, over the age of 21
and who have been employed by the Company for one year or more are eligible
participants in the Plan.
Contributions
Contributions are made on a voluntary basis by the Company. There is
no minimum contribution required in any one year.
There will be no contributions required by an employee. All
contributions will be made by the Company at the rate of up to 15% of the
Company's annual payroll, at the discretion of the Company. Each eligible
employee receives an account or share in the Trust and the cash and/or
shares of stock contributed to the Plan each year are credited to his or her
account.
Vesting
Once an employee is eligible, a portion of the stock in his or her
account becomes "vested" each year, as follows:
<TABLE>
<CAPTION>
Number of Years Percentage of Shares
of Service earned each year
--------------- --------------------
<S> <C>
0 - 2 0%
3 20%
4 20%
5 20%
6 20%
7 20%
</TABLE>
Distribution
If an employee retires, is disabled, dies or his or her employment is
otherwise terminated, that employee or that employee's estate will receive
the vested portion held in trust for that employee.
At the end of the vesting period, the employees become full beneficial
owners of the stock. There is no tax consequence attached to his or her
Plan for an employee until that employee sells the shares, at which time any
profit realized by the employee is taxed as a capital gain.
Distribution is to be made only in the shares of NBTY, Inc. which
shares were purchased for the Trust from the cash contributions of the
Company.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has had, and in the future may continue to have, business
transactions with firms affiliated with certain of the Company's directors.
Each such transaction is in the ordinary course of the Company's business.
During the fiscal year ended September 30, 1996, the following
transactions occurred:
A. Gail Radvin, Inc., a corporation wholly-owned by Gail Radvin,
received commissions from the Company totalling $417,182 on account of sales
made in certain foreign countries. Gail Radvin is the sister of Arthur
Rudolph ( a director) and the aunt of Scott Rudolph (Chairman and
President).
B. Chase/Ehrenberg & Rosene, Inc., a company partly owned by Bud
Solk, a director, placed $505,832 of advertising for the Company.
C. Cafiero, Cuchel & Owen, a company partly-owned by Bernard G. Owen,
a director, received $2,091,228 in premiums for various policies obtained
for the Company.
D. In February, 1996, the following officers, in connection with the
exercise of stock options, executed promissory notes in favor of the
Company. Each of the notes was with full recourse, each bore interest at
the prime rate, and was due and payable as set forth below:
(i) Scott Rudolph $312,500 12/31/96
(ii) Harvey Kamil $125,000 12/31/96
E. Arthur Rudolph, a director, has been retained under a Consulting
Agreement, at a monthly fee of $25,000, which Agreement expires on December
31, 1996. The Company and Mr. Rudolph are presently negotiating a renewal
of the Agreement under substantially comparable terms.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULE AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report
Page
Number
------
1. Financial Statements
Report of Independent Accountants F-1
Consolidated Balance Sheets as of
September 30, 1996 and 1995 F-2
Consolidated Statements of Income for the years
ended September 30, 1996, 1995 and 1994 F-3
Consolidated Statements of Stockholders' Equity
for the years ended September 30, 1996, 1995 and 1994 F-4
Consolidated Statements of Cash Flows for the years
ended September 30, 1996, 1995 and 1994 F-5 to F-6
Notes to Consolidated Financial Statements F-7 to F-18
2. Financial Statement Schedule
Schedule II S-1
Schedules not listed above are omitted because of the absence of the
conditions under which they are required or because the required information
is included in the financial statements or notes thereto.
3. Exhibits
11. Statement Re: Computation of Per Share Earnings
(b) Reports on Form 8-K
None.
NBTY, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Coopers Coopers & Lybrand L.L.P.
& Lybrand a professional services firm
REPORT of INDEPENDENT ACCOUNTANTS
To the Board of Directors of NBTY, Inc.:
We have audited the consolidated financial statements and the financial
statement schedule of NBTY, Inc. and Subsidiaries (formerly Nature's Bounty,
Inc. and Subsidiaries) listed in Item 14(a) of this Form 10-K. These
financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and the financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of NBTY, Inc. and Subsidiaries as of September 30, 1996 and 1995,
and the consolidated results of their operations and their cash flows for
each of the three years in the period ended September 30, 1996, in
conformity with generally accepted accounting principles. In addition, in
our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Melville, New York
November 5, 1996.
NBTY, Inc. and Subsidiaries
Consolidated Balance Sheets
September 30, 1996 and 1995
<TABLE>
<CAPTION>
ASSETS: 1996 1995 LIABILITIES AND STOCKHOLDERS' EQUITY: 1996 1995
<S> <C> <C> <S> <C> <C>
Current assets: Current liabilities:
Cash and cash equivalents $ 9,292,374 $ 10,378,476 Current portion of long-term debt
and capital lease obligations $ 934,887 $ 358,675
Short-term investments 11,024,624 Accounts payable 10,943,228 16,411,562
Accrued expenses 14,704,507 10,287,989
------------ ------------
Accounts receivable, less allowance Total current liabilities 26,582,622 27,058,226
for doubtful accounts of $793,669
in 1996 and $576,579 in 1995 11,625,112 12,354,545 Long-term debt 15,178,412 9,705,534
Obligations under capital leases 3,219,127 1,218,920
(less current portion)
Inventories 38,070,071 36,972,592 Deferred income taxes 2,827,198 2,161,537
Other liabilities 792,985 768,985
------------ ------------
Deferred income taxes 3,155,163 1,846,875 Total liabilities 48,600,344 40,913,202
------------ ------------
Prepaid catalog costs and other Commitments and contingencies
current assets 5,682,874 6,170,243
------------ ------------
Stockholders' equity:
Total current assets 78,850,218 67,722,731 Common stock, $.008 par; authorized
25,000,000 shares; issued 20,079,676
shares in 1996 and 19,207,676 shares
in 1995 and outstanding 18,592,119
shares in 1996 and 17,766,119 shares
in 1995 160,638 153,662
Property, plant and equipment, net 61,731,625 48,324,576 Capital in excess of par 56,012,910 54,151,206
Retained earnings 44,008,465 30,656,586
------------ ------------
Intangible assets, net 3,974,573 5,813,031 100,182,013 84,961,454
Less 1,487,557 and 1,441,557 treasury
Other assets 993,785 1,668,309 shares at cost, in 1996 and 1995,
------------ ------------ respectively 2,648,256 2,346,009
Stock subscriptions receivable 583,900
------------ ------------
Total stockholders' equity 96,949,857 82,615,445
------------ ------------
Total assets $145,550,201 $123,528,647 Total liabilities and
============ ============ stockholders' equity $145,550,201 $123,528,647
============ ============
</TABLE>
See notes to consolidated financial statements.
NBTY, Inc. and Subsidiaries
Consolidated Statements of Income
Years ended September 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Net sales $194,403,040 $178,759,871 $156,057,056
------------ ------------ ------------
Costs and expenses:
Cost of sales 95,638,272 93,875,162 79,891,302
Catalog printing, postage and promotion 17,634,801 19,261,733 14,786,217
Selling, general and administrative 58,515,059 56,728,368 49,207,943
------------ ------------ ------------
171,788,132 169,865,263 143,885,462
------------ ------------ ------------
Income from operations 22,614,908 8,894,608 12,171,594
------------ ------------ ------------
Other income (expenses):
Interest, net (1,445,036) (1,084,331) (913,583)
Miscellaneous, net 1,203,061 571,098 1,284,953
------------ ------------ ------------
(241,975) (513,233) 371,370
------------ ------------ ------------
Income before income taxes 22,372,933 8,381,375 12,542,964
Income taxes 9,021,054 3,245,517 4,766,526
------------ ------------ ------------
Net income $ 13,351,879 $ 5,135,858 $ 7,776,438
============ ============ ============
Net income per share
Primary $ 0.67 $ 0.26 $ 0.38
============ ============ ============
Weighted average common shares outstanding
Primary 19,975,678 19,974,270 20,257,325
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
NBTY, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Years ended September 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Common stock Treasury stock
------------------ ------------------- Stock
Number of Capital in Retained Number of subscriptions
shares Amount excess of par earnings shares Amount receivables Total
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1993 18,717,676 $149,742 $52,970,926 $17,744,290 1,213,404 $ (862,722) $70,002,236
Net income for year ended
September 30, 1994 7,776,438 7,776,438
Expenses associated with
prior year public offering
of stock (225,000) (225,000)
Exercise of stock options 60,000 480 29,520 30,000
Tax benefit from exercise of
stock options 433,200 433,200
---------- -------- ----------- ----------- --------- ----------- --------- -----------
Balance, September 30, 1994 18,777,676 150,222 53,208,646 25,520,728 1,213,404 (862,722) 78,016,874
Net income for year ended
September 30, 1995 5,135,858 5,135,858
Exercise of stock options 430,000 3,440 211,560 215,000
Tax benefit from exercise
of stock options 731,000 731,000
Purchase of treasury stock,
at cost 228,153 (1,483,287) (1,483,287)
---------- -------- ----------- ----------- --------- ----------- --------- -----------
Balance, September 30, 1995 19,207,676 153,662 54,151,206 30,656,586 1,441,557 (2,346,009) 82,615,445
Net income for year ended
September 30, 1996 13,351,879 13,351,879
Exercise of stock options 872,000 6,976 587,904 $(583,900) 10,980
Tax benefit from exercise
of stock options 1,273,800 1,273,800
Purchase of treasury stock,
at cost 46,000 (302,247) (302,247)
---------- -------- ----------- ----------- --------- ----------- --------- -----------
Balance, September 30, 1996 20,079,676 $160,638 $56,012,910 $44,008,465 1,487,557 $(2,648,256) $(583,900) $96,949,857
========== ======== =========== =========== ========= =========== ========= ===========
</TABLE>
See notes to consolidated financial statements.
NBTY, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Years ended September 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $13,351,879 $ 5,135,858 $ 7,776,438
Adjustments to reconcile net income to cash
provided by operating activities:
Loss on disposal/sale of property, plant
and equipment 422 374,126 519
Depreciation and amortization 5,623,277 4,840,570 4,243,985
Provision (recovery) for allowance for doubtful
accounts 217,090 (17,943) 89,968
Deferred income taxes (642,627) 684,426 3,046,493
Changes in assets and liabilities:
Accounts receivable 1,615,504 (2,119,589) (454,841)
Inventories (2,035,883) 4,453,583 (10,770,809)
Income tax receivable 1,300,198 3,089,929
Prepaid catalog costs and other current assets 487,369 (264,253) (2,297,276)
Other assets 674,524 1,123,818 (2,465,151)
Accounts payable (5,468,334) 3,160,180 (2,828,998)
Accrued expenses 5,690,318 2,809,518 3,226,894
Other liabilities 24,000 274,999 (353,225)
----------- ----------- -----------
Net cash provided by operating activities 19,537,539 21,755,491 2,303,926
----------- ----------- -----------
Cash flows from investment activities:
Purchase of property, plant and equipment (15,750,517) (11,547,570) (11,592,662)
Increase in intangible assets (66,691) (1,063,953) (253,772)
Proceeds from sale of property, plant and equipment 4,270 11,000
Purchase of short-term investments (11,024,624)
Receipt of payments on notes from sale of direct
mail cosmetics business 741,303
Proceeds from sale of direct mail cosmetic business 350,000
----------- ----------- -----------
Net cash used in investing activities (25,746,259) (12,611,523) (11,835,434)
----------- ----------- -----------
Cash flows from financing activities:
Net (payments) borrowings under line of credit agreement (5,000,000) 5,000,000
Borrowings under long-term debt agreements 6,000,000 2,400,000
Principal payments under long-term debt agreements
and capital leases (586,115) (797,799) (221,307)
Purchase of treasury stock (302,247) (1,292,287)
Proceeds from stock options exercised 10,980 24,000 30,000
Proceeds from public offering, less expenses (225,000)
----------- ----------- -----------
Net cash provided by (used in) financing activities 5,122,618 (4,666,086) 4,583,693
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (1,086,102) 4,477,882 (4,947,815)
Cash and cash equivalents at beginning of year 10,378,476 5,900,594 10,848,409
----------- ----------- -----------
Cash and cash equivalents at end of year $ 9,292,374 $10,378,476 $ 5,900,594
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 1,454,380 $ 1,085,647 $ 913,145
=========== =========== ===========
Cash paid during the period for income taxes $ 5,386,714 $ 1,648,765 $ 2,349,198
=========== =========== ===========
</TABLE>
Non-cash investing and financing information:
The Company entered into capital leases for machinery and equipment
aggregating $2,635,412 during fiscal 1996 and $1,416,472 in fiscal 1995.
During fiscal 1996, 1995 and 1994, options were exercised with shares of
common stock issued to certain officers and directors. Accordingly, the tax
benefit of approximately $1,274,000, $731,000 and $433,000 for the years
ended September 30, 1996, 1995 and 1994, respectively, was recorded as an
increase in capital in excess of par and a reduction in taxes currently
payable. (See Note 11.)
On October 9, 1995, the Company sold certain assets of its direct-mail
cosmetics business for approximately $2,495,000. The Company received
$350,000 in cash and non-interest bearing notes aggregating approximately
$2,145,000 for inventory, a customer list and other intangible assets. The
notes will be paid over a three-year period based on a predetermined formula
with guaranteed minimum payments. A final payment for the remaining
outstanding balance will be made on September 30, 1998.
See notes to consolidated financial statements.
NBTY, Inc. and Subsidiaries
Notes to Financial Statements
1. Business Operations and Summary of Significant Accounting Policies:
Business operations
NBTY, Inc., formerly Nature's Bounty, Inc. (the "Company"),
manufactures and distributes vitamins, food supplements and health and
beauty aids. The processing, formulation, packaging, labeling and
advertising of the Company's products are subject to regulation by one
or more federal agencies, including the Food and Drug Administration,
the Federal Trade Commission, the Consumer Product Safety Commission,
the United States Department of Agriculture, the United States
Environmental Protection Agency and the United States Postal Service.
Principles of consolidation and basis of presentation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All material intercompany
accounts and transactions have been eliminated.
Revenue recognition
The Company recognizes revenue upon shipment or, with respect to its
own retail store operations, upon the sale of products. The Company
has no single customer that represents more than 10% of annual net
sales or accounts receivable as of September 30, 1996.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined on a first-in, first-out basis. The cost elements of
inventory include materials, labor and overhead. One supplier
provided approximately 12% of the Company's purchases in 1996.
Prepaid catalog costs
Mail order production and mailing costs are capitalized as prepaid
catalog costs and charged to income over the catalog period, which
typically approximates three months.
Property, plant and equipment
Property, plant and equipment are carried at cost. Depreciation is
provided on a straight-line basis over the estimated useful lives of
the related assets. Expenditures which significantly improve or
extend the life of an asset are capitalized.
Maintenance and repairs are charged to expense in the year incurred.
Cost and related accumulated depreciation for property, plant and
equipment are removed from the accounts upon sale or disposition and
the resulting gain or loss is reflected in earnings.
Intangible assets
Goodwill represents the excess of purchase price over the fair value
of identifiable net assets of companies acquired. Goodwill and other
intangibles are amortized on a straight-line basis over appropriate
periods not exceeding 40 years.
Income taxes
The Company recognizes deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in
the financial statements or tax returns. Deferred tax liabilities and
assets are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to
reverse.
Cash and cash equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of
three months or less to be cash equivalents.
Short-term investments
Short-term interest bearing investments are those with maturities of
less than one year but greater than three months when purchased.
These investments are readily convertible to cash and are stated at
market value, which approximates cost. Realized gains and losses are
included in other income on a specific identification basis in the
period they are realized.
Common shares and earnings per share
Earnings per share are based on the weighted average number of common
shares outstanding during the period. Common stock equivalents are
not included in income per share computations since their effect on
the calculation is immaterial.
Stock-based plans
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," which establishes financial accounting and
reporting standards for stock based plans. The Statement, which
becomes effective in fiscal 1997, requires the Company to choose
between accounting for issuances of stock and other equity instruments
to employees based on their fair value or to continue to use an
intrinsic value based method and disclosing the pro forma effects such
accounting would have had on the Company's net income and earnings per
share. The Company will continue to use the intrinsic value based
method, which generally does not result in compensation cost.
Reclassifications
Certain reclassifications have been made to conform prior year amounts
to the current year presentation
2. Sale of Direct-Mail Cosmetics Business:
On October 9, 1995, the Company sold certain assets of its direct-mail
cosmetics business for approximately $2,495,000. The Company received
$350,000 in cash and non interest bearing notes aggregating
approximately $2,145,000 for inventory, a customer list and other
intangible assets. The notes will be paid over a three-year period
based on a predetermined formula with guaranteed minimum payments. A
final payment for the remaining outstanding balance will be made on
September 30, 1998. Revenues applicable to this marginally
unprofitable business were $136,648, $8,283,517 and $13,276,045 for
fiscal 1996, 1995 and 1994, respectively.
3. Inventories:
<TABLE>
<CAPTION>
September 30,
-------------------------
1996 1995
<S> <C> <C>
Raw materials $17,131,532 $15,898,215
Work-in-process 1,522,803 1,848,629
Finished goods 19,415,736 19,225,748
----------- -----------
$38,070,071 $36,972,592
=========== ===========
</TABLE>
4. Property, Plant and Equipment:
<TABLE>
<CAPTION>
September 30,
-------------------------
1996 1995
<S> <C> <C>
Land $ 4,764,965 $ 3,064,965
Buildings and leasehold improvements 38,087,461 31,830,638
Machinery and equipment 28,560,427 22,279,226
Furniture and fixtures 8,484,103 6,065,382
Transportation equipment 640,982 200,982
Computer equipment 8,544,945 7,296,395
----------- -----------
89,082,883 70,737,588
Less accumulated depreciation and amortization 27,351,258 22,413,012
----------- -----------
$61,731,625 $48,324,576
=========== ===========
</TABLE>
Depreciation and amortization of property, plant and equipment for the
years ended September 30, 1996, 1995 and 1994 was approximately
$4,974,000, $4,064,000 and $3,190,000, respectively.
Property, plant and equipment includes approximately $4,052,000 and
$1,416,000 for assets recorded under capital leases for fiscal 1996
and 1995, respectively.
5. Intangible Assets:
Intangible assets, at cost, acquired at various dates are as follows:
<TABLE>
<CAPTION>
September 30,
------------------------- Amortization
1996 1995 period
<S> <C> <C> <C>
Goodwill $ 469,400 $ 469,400 20-40
Customer lists 8,783,475 10,540,017 6-15
Trademark and licenses 1,201,205 1,134,514 2-3
Covenants not to compete 1,304,538 1,304,538 5-7
----------- -----------
11,758,618 13,448,469
Less accumulated amortization 7,784,045 7,635,438
----------- -----------
$ 3,974,573 $ 5,813,031
=========== ===========
</TABLE>
Amortization included in the consolidated statements of income under
the caption "selling, general and administrative expenses" in 1996,
1995 and 1994 was approximately $649,000, $776,000 and $1,054,000,
respectively.
Effective October 1, 1993, the Company changed its estimates of the
lives of certain customer lists. Customer list amortization lives
that previously averaged 6 years were increased to an average of 15
years. This change was made to better reflect the estimated periods
during which an individual will remain a customer of the Company. The
change had the effect of reducing amortization expense by
approximately $500,000 and increasing the net income by $310,000 in
1994.
6. Accrued Expenses:
<TABLE>
<CAPTION>
September 30,
-------------------------
1996 1995
<S> <C> <C>
Payroll and related payroll taxes $ 2,730,453 $ 2,166,355
Customer deposits 1,862,837 2,034,175
Accrued purchases 1,765,420 1,734,844
Income taxes payable 2,670,270 39,815
Other 5,675,527 4,312,800
----------- -----------
$14,704,507 $10,287,989
=========== ===========
</TABLE>
7. Long-Term Debt:
<TABLE>
<CAPTION>
September 30,
-------------------------
1996 1995
<S> <C> <C>
Mortgages:
First mortgage, payable in monthly principal and interest
(10.375%) installments (a) $ 7,447,859 $ 7,566,144
First mortgage payable in monthly principal and interest
(9.73%) installments of $25,396 (b) 2,257,729 2,338,432
First mortgage, payable in monthly principal and interest
(7.375%) installments of $55,196 (c) 5,926,038
----------- -----------
15,631,626 9,904,576
Less current portion 453,214 199,042
----------- -----------
$15,178,412 $ 9,705,534
=========== ===========
<Fa> In September 1990, the Company obtained an $8,000,000 first
mortgage, collateralized by the underlying building, issued
through the Town of Islip, New York Industrial Development
Agency. The taxable bond, held by an insurance company, has
monthly principal and interest payments of $74,821 for ten years
through 2000, with a final payment of $6,891,258 in September 2000.
<Fb> In November 1994, the Company purchased a building which it
previously occupied under a long-term lease. The purchase price
of approximately $3,090,000 was funded with $690,000 in cash and
the balance through a 15-year mortgage note payable. This
agreement contains restrictive covenants identical to the
covenants noted under the revolving credit facility described below.
<Fc> In April 1996, the Company obtained a $6,000,000 first
mortgage with a fixed interest rate of 7.375%, collateralized by
the underlying real estate. The mortgage has monthly principal
and interest payments of $55,196 for fifteen years through 2011.
</TABLE>
On April 3, 1996, the Company renewed a revolving credit agreement
(the "Agreement") with two banks that provides for unsecured
borrowings up to $15,000,000 which expires March 31, 1999. As of
September 30, 1996, there were no borrowings under this Agreement.
Under the most restrictive covenants of the Agreement, the Company is
required to maintain tangible net worth of at least $84,000,000, a
current ratio of at least 1.75 to 1.00 and has a limitation on the
amount of capital expenditures.
Required principal payments of long-term debt are as follows:
<TABLE>
<CAPTION>
Years ended
September 30,
<C> <C>
1997 $ 453,214
1998 494,324
1999 539,266
2000 7,419,600
2001 443,875
Thereafter 6,281,347
-----------
$15,631,626
===========
</TABLE>
8. Capital Lease Obligations:
The Company entered into six capital leases for machinery and
equipment aggregating $2,635,412 during fiscal 1996 and two capital
leases for machinery and equipment aggregating $1,416,472 in fiscal
1995. The leases provide the Company with bargain purchase options at
the end of such lease terms.
Future minimum payments under capital lease obligations as of
September 30, 1996 are as follows:
<TABLE>
<C> <C>
1997 $ 758,872
1998 758,872
1999 758,872
2000 758,872
2001 758,872
Thereafter 870,186
----------
4,664,546
Less, amount representing interest 963,746
----------
Present value of minimum lease payments (including $481,673
due within one year) $3,700,800
==========
</TABLE>
9. Income Taxes:
Provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Year ended September 30,
-----------------------------------
1996 1995 1994
<S> <C> <C> <C>
Federal
Current $7,551,755 $2,224,935 $ 856,774
Deferred (501,249) 636,516 3,156,289
State
Current 2,111,926 336,156 515,893
Deferred (141,378) 47,910 237,570
---------- ---------- ----------
Total provision $9,021,054 $3,245,517 $4,766,526
========== ========== ==========
</TABLE>
The following is a reconciliation of the income tax expense computed
using the statutory federal income tax rate to the actual income tax
expense and its effective income tax rate.
<TABLE>
<CAPTION>
Year ended September 30,
-----------------------------------------------------------------------
1996 1995 1994
----------------------- ---------------------- ----------------------
Percent of Percent of Percent of
pretax pretax pretax
Amount income Amount income Amount income
<S> <C> <C> <C> <C> <C> <C>
Income tax expense at
statutory rate $7,830,527 35.0% $2,849,668 34.0% $4,390,037 35.0%
State income taxes, net of
federal income tax benefit 1,280,856 5.7% 253,483 3.0% 489,751 3.9%
Other, individually less than 5% (90,329) (0.4%) 142,366 1.7% (113,262) (0.9%)
---------- ----- ---------- ----- ---------- -----
Actual income tax provision $9,021,054 40.3% $3,245,517 38.7% $4,766,526 38.0%
========== ===== ========== ===== ========== =====
</TABLE>
The components of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
1996 1995
-----------------------
<S> <C> <C>
Deferred tax assets:
Current:
Inventory capitalization $ 243,000 $ 178,034
Accrued expenses and reserves not currently deductible 2,591,137 1,049,584
Tax credits 321,026 555,822
Miscellaneous 63,435
---------- ----------
Current deferred tax assets 3,155,163 1,846,875
---------- ----------
Noncurrent:
Intangibles 334,820 231,701
Reserves not currently deductible 200,070 342,910
---------- ----------
Total noncurrent 534,890 574,611
---------- ----------
Deferred tax liabilities:
Property, plant and equipment (3,362,088) (2,736,148)
---------- ----------
Net deferred tax asset (liability) $ 327,965 $ (314,662)
========== ==========
</TABLE>
Available state tax credits of $321,026 and $555,822 in 1996 and 1995,
respectively, are scheduled to expire through fiscal 2002.
10. Commitments:
Leases
The Company conducts retail operations under operating leases which
expire at various dates through 2011. Some of the leases contain
renewal options and provide for additional rentals based upon sales
plus certain tax and maintenance costs.
Future minimal rental payments under the retail location and
automotive leases that have initial or noncancelable lease terms in
excess of one year at September 30, 1996 are as follows:
<TABLE>
<CAPTION>
Year ending
September 30,
<S> <C>
1997 $ 3,319,803
1998 3,010,636
1999 2,807,311
2000 2,375,884
2001 1,660,407
Thereafter 811,796
-----------
$13,985,837
===========
</TABLE>
Operating lease rental expense, including real estate tax and
maintenance costs and leases on a month to month basis, was
approximately $1,979,000, $1,248,000 and $1,200,000 for the years
ended September 30, 1996, 1995 and 1994, respectively.
Purchase commitments
The Company was committed to make future purchases under various
purchase order arrangements with fixed price provisions aggregating
approximately $12,923,000 and $972,000 at September 30, 1996 and 1995,
respectively.
Employment and consulting agreement agreements
The Company has employment agreements with two of its officers. The
agreements, which expire in January 2004, provide for minimum salary
levels, as adjusted for cost of living changes, as well as contain
provisions regarding severance and changes in control of the Company.
The commitment for salaries as of September 30, 1996 was approximately
$749,000 per year.
The Company also has a two-year consulting agreement with its former
chairman and current director which expires on December 31, 1996.
Such agreement required annual payments of approximately $300,000.
The parties are presently negotiating a renewal of the agreement under
substantially comparable terms. In addition, an entity owned by a
relative of an officer received sales commissions of $417,000,
$510,000 and $351,000 in 1996, 1995 and 1994, respectively.
11. Stock Option Plans:
The Board of Directors approved the issuance of 1,608,000 non-
qualified stock options on December 11, 1989, exercisable at $0.50 per
share, which options terminated on December 10, 1994. The Board also
approved the issuance of 2,220,000 non-qualified options on September
23, 1990, exercisable at $0.63 per share, which options terminate on
September 23, 2000. In addition, on March 11, 1992, the Board of
Directors approved the issuance of an aggregate of 1,800,000 non-
qualified stock options to directors and officers, exercisable at
$0.92 per share, and expiring on March 10, 2002. The exercise price
of each of the aforementioned issuances was in excess of the market
price at the date such options were granted.
During fiscal 1996, options were exercised with 872,000 shares of
common stock issued to certain officers and directors for $10,980 and
interest bearing notes in the amount of $583,900. As a result of the
exercise of these options, the Company is entitled to a compensation
deduction for tax purposes of approximately $3,145,000 which should
ultimately result in a tax benefit to the Company of approximately
$1,273,800. Accordingly, the Company has recorded an increase in
capital in excess of par and has adjusted its current liability to
recognize the effect of this tax benefit.
During fiscal 1995, options were exercised with 430,000 shares of
common stock issued to certain officers and directors for $24,000 and
an interest bearing note in the amount of $191,000. The promissory
note, including interest, was paid by the surrender of 23,153 NBTY
common shares to the Company at the prevailing market price. As a
result of the exercise of these options, the Company was entitled to a
compensation deduction of approximately $1,827,500 which resulted in a
tax benefit of approximately $731,000. Such benefit was recorded as
an increase in capital in excess of par and a reduction to taxes
currently payable.
During fiscal 1994, options were exercised with 60,000 shares of
common stock issued to certain directors for $30,000. As a result of
the exercise of these options, the Company was entitled to a
compensation deduction for tax purposes of approximately $1,140,000
which resulted in a tax benefit of approximately $433,200. Such
benefit was recorded as an increase to capital in excess of par and a
reduction to taxes currently payable.
A summary of stock option activity is as follows:
<TABLE>
<CAPTION>
Common Exercise price
shares per share
--------- --------------
<S> <C> <C>
Shares under option, September 30, 1994 (fully exercisable) 2,825,000 $.50 - $.92
Exercised in 1995 430,000 $.50
--------- --------------
2,395,000 $.63 - $.92
Shares under option, September 30, 1995 (fully exercisable)
Exercised in 1996 872,000 $.63 - $.92
--------- --------------
Shares under option, September 30, 1996 (fully exercisable) 1,523,000 $.63 - $.92
========= ==============
</TABLE>
12. Employee Benefit Plans:
The Company maintains a defined contribution savings plan, which
qualifies under Section 401(k) of the Internal Revenue Code, and an
employee stock ownership plan. The accompanying financial statements
reflect contributions to these plans in the approximate amount of
$489,000, $498,000 and $103,000 for the years ended September 30,
1996, 1995 and 1994, respectively.
13. Litigation:
L-tryptophan:
The Company and certain other companies in the industry, including
distributors, wholesalers and retailers (the "Indemnified Group") had
been named as defendants in cases arising out of the ingestion of
products containing L-tryptophan. The Company had been named in more
than 265 lawsuits, 4 of which are still pending against the Company.
The Indemnified Group has entered into an agreement with the Company's
supplier of bulk L-tryptophan, Showa Denko America, Inc. (the
"Supplier"), under which the Supplier, a U.S. subsidiary of a major
Japanese corporation, Showa Denko K.K., has assumed the defense of all
claims against the Indemnified Group and has agreed to pay the legal
fees and expenses in that defense. The Supplier and Showa Denko K.K.
has agreed to indemnify the Indemnified Group against any judgments
and to fund settlements arising out of those actions and claims.
The Supplier has posted a revolving, irrevocable letter of credit of
$20 million to be used for the benefit of the Indemnified Group in the
event that the Supplier is unable or unwilling to satisfy any claims
or judgments.
While not all of these suits quantify the amount demanded, it can
reasonably be assumed that the amount required to either settle these
cases or to pay judgments rendered therein will be paid by the
Supplier or by the Company's product liability insurance carrier. To
date, no cases in which the Company is a party have reached trial.
While the outcome of any litigation is uncertain, it is the opinion of
management and legal counsel of the Company that it is remote that the
Company will incur a material loss as a result of the L-tryptophan
litigation and claims. Accordingly, no provision for liability, if
any, that may result therefrom has been made in the Company's
financial statements.
Shareholder litigation:
In October 1994, litigation was commenced in the U.S. District Court,
Eastern District of New York, against the Company and two of its
officers. The complaint alleges that false and misleading statements
and representations were made concerning the Company's sales and
earnings estimates for the fourth fiscal quarter and the year ended
September 30, 1994. The allegations are that: (a) sales were
artificially inflated; (b) costs were improperly capitalized; (c)
sales and profit margins were materially declining; (d) inventory and
accounts receivable were overstated; and (e) that because of the
foregoing, the Company would incur a loss in its fourth fiscal
quarter. The Plaintiffs seek Class Action certification and an
unspecified amount of monetary damages. The Company and its officers
deny the allegations of the complaints and intend to vigorously
contest the litigation. In 1994, prior to commencement of these
lawsuits, the Company purchased a directors and officers Indemnity
Policy. Special counsel has been retained to represent the Company
and its officers. Since the outcome of any litigation is uncertain,
the Company is unable to predict (i) whether it will ultimately
prevail; (ii) whether it will be fully or partially indemnified, if at
all; (iii) the amount of loss, if any, that may be attributable to the
above, and (iv) the amount of expense which may be incurred in the
defense of these actions.
Other litigation:
The Company is also involved in miscellaneous claims and litigation
which, taken individually or in the aggregate, would not have a
material adverse effect on the Company's financial position or its
business.
14. Quarterly Results of Operations (Unaudited):
The following is a summary of the unaudited quarterly results of
operations for fiscal 1996 and 1995 (dollars in thousands, except per
share data):
<TABLE>
<CAPTION>
Quarter ended
------------------------------------------------
December 31, March 31, June 30, September 30,
------------ --------- -------- -------------
<S> <C> <C> <C> <C>
1996:
Net sales $38,589 $55,605 $47,900 $52,309
Gross profit 17,779 27,760 24,453 28,773
Income (loss) before
income taxes (412) 7,502 6,503 8,780(a)
Net income (loss) (251) 4,576 3,763 5,264
Earnings (loss) per share $(0.01) $0.23 $0.19 $0.26
1995:
Net sales $37,478 $50,945 $41,650 $48,687
Gross profit 18,380 25,220 20,564 20,720
Income before income taxes 1,648 4,336 2,004 394(b)
Net income 939 2,552 1,152 493
Earnings per share $0.05 $0.13 $0.06 $0.02
<Fa> 1996 year-end adjustments resulting in an increase to pre-tax
income of approximately $2 million related to adjustments of
inventory amounts.
<Fb> 1995 year-end adjustments resulting in a charge to operations
included approximately $1,475,000 for various accruals and for
the write-off of certain equipment associated with the Company's
cosmetic pencil operation, and $900,000 pertaining to the
identification of obsolete inventory.
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: December 9, 1996 By: /s/ Scott Rudolph
Scott Rudolph
President, Chief Executive Officer
Dated: December 9, 1996 By: /s/ Harvey Kamil
Harvey Kamil
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Dated: December 9, 1996 By: /s/ Scott Rudolph
Scott Rudolph
Chairman, President and
Chief Executive Officer
Dated: December 9, 1996 By: /s/ Arthur Rudolph
Arthur Rudolph, Director
Dated: December 9, 1996 By: /s/ Aram Garabedian
Aram Garabedian, Director
Dated: December 9, 1996 By: /s/ Bernard G. Owen
Bernard G. Owen, Director
Dated: December 9, 1996 By: /s/ Alfred Sacks
Alfred Sacks, Director
Dated: December 9, 1996 By: /s/ Murray Daly
Murray Daly, Director
Dated: December 9, 1996 By: /s/ Glenn Cohen
Glenn Cohen, Director
Dated: December 9, 1996 By: /s/ Bud Solk
Bud Solk, Director
Dated: December 9, 1996 By: /s/ Nathan Rosenblatt
Nathan Rosenblatt, Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 20,316,998
<SECURITIES> 0
<RECEIVABLES> 12,418,781
<ALLOWANCES> 793,669
<INVENTORY> 38,070,071
<CURRENT-ASSETS> 78,850,218
<PP&E> 89,082,883
<DEPRECIATION> 27,351,258
<TOTAL-ASSETS> 145,550,201
<CURRENT-LIABILITIES> 26,582,622
<BONDS> 16,113,299
0
0
<COMMON> 160,638
<OTHER-SE> 96,789,219
<TOTAL-LIABILITY-AND-EQUITY> 145,550,201
<SALES> 194,403,040
<TOTAL-REVENUES> 194,403,040
<CGS> 95,638,272
<TOTAL-COSTS> 95,638,272
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,445,036
<INCOME-PRETAX> 22,372,933
<INCOME-TAX> 9,021,054
<INCOME-CONTINUING> 13,351,879
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,351,879
<EPS-PRIMARY> 0.67
<EPS-DILUTED> 0.67
</TABLE>
