Registration Statement No. 333-50745
Filed Pursuant to Rule 424(b)(4)
Prospectus Supplement
(To Prospectus Dated May 1, 1998)
1,442,308 Shares
REXALL SUNDOWN, INC.
Common Stock
-------------------------
Of the 1,442,308 shares of Common Stock, $.01 par value (the "Common
Stock") of Rexall Sundown, Inc. (the "Company"), offered hereby 721,154 are
being sold by Abraham & Sons, LLC and 721,154 are being sold by Priddy Brothers
Holdings, Inc. (collectively, the "Selling Shareholders"). The Company will not
receive any of the proceeds from the sale of the Common Stock offered hereby.
The Common Stock is listed on the Nasdaq National Market under the symbol
"RXSD." On May 5, 1998, the last reported sale price for the Common Stock as
reported on the Nasdaq National Market, was $31.3125 per share. See "Price Range
of Common Stock."
See "Risk Factors" on page 4 of the accompanying Prospectus for a
discussion of certain factors that should be considered by prospective investors
in the Common Stock offered hereby.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The shares of Common Stock will be purchased from the Selling
Shareholders by Smith Barney Inc. ("Salomon Smith Barney") at a price of
$30.3125 per share (resulting in $43,719,961 aggregate net proceeds to the
Selling Shareholders).
The shares of Common Stock may be offered by Salomon Smith Barney from
time to time in one or more transactions (which may involve block transactions)
on the Nasdaq National Market, in the over-the-counter market, through
negotiated transactions or otherwise at market prices prevailing at the time of
the sale or at prices otherwise negotiated, subject to prior sale, when, as and
if delivered to and accepted by Salomon Smith Barney.
The Company and the Selling Shareholders, on the one hand, and Salomon
Smith Barney, on the other hand, have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act").
The shares of Common Stock are offered, subject to prior sale, when, as
and if accepted by Salomon Smith Barney. It is expected that delivery of the
shares of Common Stock will be made on or about May 8, 1998 at the office of
Salomon Smith Barney, New York, New York, against payment therefor in
immediately available funds.
-------------------------
Salomon Smith Barney
The date of this Prospectus Supplement is May 5, 1998.
S-1
<PAGE>
The information in this Prospectus Supplement is qualified in its
entirety by the more detailed information and consolidated financial statements
and notes thereto appearing or incorporated by reference in the accompanying
Prospectus. Prior to making an investment decision with respect to the shares of
Common Stock offered hereby, prospective investors should carefully consider the
information contained in this Prospectus Supplement and the accompanying
Prospectus and incorporated by reference therein.
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Securities Offered .......................................Common Stock, par value $.01 per share
Common Stock Outstanding after the Offering ..............71,384,330 Shares (1)
Common Stock Offered by the Selling
Shareholders............................................1,442,308 Shares
Nasdaq National Market Symbol ............................RXSD
</TABLE>
- --------------
(1) Does not include shares reserved for issuance pursuant to outstanding
employee and director options.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Common Stock by the Selling Shareholders.
SELLING SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock by the Selling Shareholders as of the date
of, and as adjusted to reflect, the sale of the shares of Common Stock offered
hereby.
<TABLE>
<CAPTION>
Number of
Shares Beneficially Shares Shares Beneficially
Owned Prior to Offered Owned After
Offering Hereby Offering
- -------------------------------------------------------------------------------------------------------------------
Selling Shareholder Number Percent Number Percent
------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Abraham & Sons, LLC (1) ........................ 2,163,462 3.0% 721,154 1,442,308 2.0%
Priddy Brothers Holdings, Inc. (1)(2) .......... 721,154 1.0% 721,154 0 *
</TABLE>
- -----------------
* Less than 1%.
(1) Abraham & Sons, LLC is a limited liability company that is beneficially
owned by a charitable trust that is controlled by Ed Priddy, Mark
Priddy and John Priddy. Each of Ed, Mark and John Priddy is a Vice
President of the Company and John Priddy is also a Director of the
Company.
(2) Ed Priddy, Mark Priddy and John Priddy are the sole stockholders of
Priddy Brothers Holdings, Inc. with each owning one-third of the
outstanding shares thereof.
S-2
<PAGE>
DIVIDEND POLICY
The Company presently intends to retain all earnings for the operation
and development of its business and does not anticipate paying any cash
dividends on the Common Stock in the foreseeable future. Any future
determination as to the payment of cash dividends will depend on a number of
factors, including future earnings, capital requirements, the financial
condition and prospects of the Company and any restrictions under credit
agreements existing from time to time, as well as such other factors as the
Company's Board of Directors may deem relevant. The Company's current line of
credit prohibits the payment of any dividends on the Company's Common Stock.
S-3
<PAGE>
UNDERWRITING
Upon the terms and subject to the conditions set forth in an
underwriting agreement (the "Underwriting Agreement"), the Selling Shareholders
have agreed to sell to Salomon Smith Barney, and Salomon Smith Barney has agreed
to purchase from the Selling Shareholders, 1,442,308 shares of Common Stock. In
the Underwriting Agreement, Salomon Smith Barney has agreed, subject to the
terms and conditions set forth herein, to purchase all of the shares of Common
Stock offered hereby if any are purchased.
It is expected that all or a substantial portion of the shares of
Common Stock offered hereby may be sold by Salomon Smith Barney to purchasers in
one or more transactions (which may involve block transactions) in the Nasdaq
National Market or otherwise. The distribution of the shares of Common Stock may
also be effected from time to time in special offerings, exchange distributions
and/or secondary distributions pursuant to and in accordance with the rules of
the Nasdaq National Market, in the over-the-counter market, in negotiated
transactions through the writing of options on the shares of Common Stock
(whether such options are listed on an options exchange or otherwise), or in a
combination of such methods of prevailing market prices or at negotiated prices.
Salomon Smith Barney may effect such transactions by selling shares of Common
Stock to or through dealers, and such dealers may receive compensation in the
form of discounts, concessions or commissions from Salomon Smith Barney and/or
purchasers of such shares of Common Stock for whom they may act as agents or to
whom they may sell as principal.
The Company and the Selling Shareholders, on the one hand, and Salomon
Smith Barney, on the other hand, have agreed to indemnify each other against, or
contribute to payments that the other may be required to make in respect of,
certain liabilities.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered
hereby has been passed upon for the Company by Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A., Miami, Florida. Pillsbury, Madison & Sutro LLP,
Los Angeles, California has acted as counsel for the Selling Shareholders.
Cravath, Swaine & Moore, New York, New York has acted as counsel for the
Underwriter.
S-4
<PAGE>
PROSPECTUS
1,442,308 Shares
REXALL SUNDOWN, INC.
Common Stock
This Prospectus relates to an aggregate of 1,442,308 shares (the
"Shares") of common stock, par value $.01 per share (the "Common Stock") of
Rexall Sundown, Inc., a Florida corporation (the "Company"), which may be
offered, from time to time by certain shareholders of the Company (the "Selling
Shareholders"). The Company is registering the Shares on behalf of the Selling
Shareholders but the registration of the Shares does not necessarily mean that
any of the Shares will be offered or sold by the Selling Shareholders. See
"Selling Shareholders." The Company will not receive any of the proceeds from
the sale of Shares by the Selling Shareholders.
The Company's Common Stock is quoted on the Nasdaq National Market
under the symbol "RXSD." On April 29, 1998, the closing sale price of the Common
Stock as reported by the Nasdaq National Market was $32.00 per share.
The Company has been advised by the Selling Shareholders that they may
sell all or a portion of the Shares offered hereby from time to time on the
Nasdaq National Market or in the over-the-counter market in negotiated
transactions, directly or through broker-dealers or otherwise, and that such
Shares will be sold at market prices prevailing at the time of such sales or at
negotiated prices. Such broker-dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling Shareholders
and/or purchasers of the Shares for whom they may act as agent (which
compensation may be in excess of customary commissions). To the extent required,
the specific Shares to be sold, the respective purchase prices and public
offering prices, names of such agent, dealer or underwriter, and any applicable
commissions or discounts with respect to a particular offer, will be set forth
in an accompanying Prospectus Supplement or, if appropriate, a post-effective
amendment to the Registration Statement of which this Prospectus is a part. In
connection with such sales, the Selling Shareholders and any broker-dealers
participating in such sales may be deemed to be underwriters as that term is
defined under the Securities Act of 1933, as amended (the "Securities Act").
Neither the Company nor the Selling Shareholders can presently estimate the
amount of commissions or discounts, if any, that will be paid by the Selling
Shareholders on account of sales of the Shares from time to time. In addition,
the Company has agreed to indemnify the Selling Shareholders against certain
liabilities, including liabilities under the Securities Act. See "Plan of
Distribution."
The Company will pay all the expenses incurred in registering the
Shares, other than underwriting and brokerage commissions, discounts and fees.
The Company will pay all counsel fees and expenses incurred by the Selling
Shareholders in connection with the offering hereby up to $20,000. The Shares
are being registered at the request of the Selling Shareholders pursuant to a
Registration Rights Agreement between the Selling Shareholders and the Company
entered into in connection with the acquisition of Richardson Labs, Inc. by the
Company in January 1998.
See "Risk Factors" beginning on Page 4 for a discussion of certain
factors that should be considered by prospective investors of the Shares offered
hereby.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is May 1, 1998
1
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied (at prescribed rates) at the public reference facilities maintained by
the Commission at 450 Fifth Street, NW, Room 1024, Washington, D.C. 20549 and at
the following regional offices of the Commission: 7 World Trade Center, Suite
1300, New York, New York 10048; 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and 3475 Lenox Road, NE, Suite 1000, Atlanta, Georgia 30326. In
addition, such reports, proxy statements and other information can be obtained
from the Commission's web site at http://www.sec.gov. Quotations relating to the
Company's Common Stock appear on the Nasdaq National Market. Such reports, proxy
statements and other information concerning the Company can also be inspected at
the offices of the National Association of Securities Dealers, Inc., 1735 K
Street, NW, Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on
Form S-3 (the "Registration Statement") under the Securities Act, with respect
to the shares of Common Stock offered hereby. This Prospectus, which is a part
of the Registration Statement, does not contain all the information set forth
in, or annexed as exhibits to, such Registration Statement, certain portions of
which have been omitted pursuant to rules and regulations of the Commission. For
further information with respect to the Company and the shares of Common Stock
offered hereby, reference is hereby made to such Registration Statement,
including the exhibits thereto. Copies of such Registration Statement, including
exhibits, may be obtained from the aforementioned public reference facilities of
the Commission upon payment of the prescribed fees, examined at no charge at
such facilities or downloaded at no charge from the Commission's web site listed
above. Statements contained herein concerning any document filed as an exhibit
are not necessarily complete and, in each instance, reference is made to the
copy of such document filed as an exhibit to the Registration Statement. Each
such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission under
the Exchange Act are incorporated in and made a part of this Prospectus by
reference:
(a) the Company's Annual Report on Form 10-K for the fiscal year
August 31, 1997;
(b) the Company's Current Report on Form 8-K dated February 11,
1998, as amended on Form 8-K/A dated March 13, 1998;
(c) the Company's Proxy Statement dated December 29, 1997;
(d) the Company's Quarterly Reports on Form 10-Q for the fiscal
quarters ended November 30, 1997 and February 28, 1998; and
(e) the description of the Common Stock contained in the Company's
Registration Statement on Form 8-A dated June 7, 1993
(Registration No. 0-21884).
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of this offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein, or in any other
subsequently filed documents, which also are incorporated or deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
2
<PAGE>
This Prospectus incorporates documents by reference which are not
presented herein or delivered herewith. The Company hereby undertakes to
provide, without charge, to each person, including any beneficial owner, to whom
a copy of this Prospectus is delivered, on the written or oral request of such
person, a copy of any or all of the information incorporated herein by
reference. Exhibits to any of such documents, however, will not be provided
unless such exhibits are specifically incorporated by reference into such
documents. The requests should be addressed to the Company's principal executive
offices: Attn: Secretary, 851 Broken Sound Parkway, NW, Boca Raton, Florida
33487, telephone number (561) 241-9400.
THE COMPANY
General
Rexall Sundown, Inc. (the "Company") develops, manufactures, markets
and sells vitamins, nutritional supplements and consumer health products through
three channels of distribution: sales to retailers, direct sales through
independent distributors and mail order. The Company offers a broad product line
of approximately 1,300 products consisting of approximately 1,900 stock keeping
units ("SKUs"), including vitamins in both multivitamin and single-entity
formulas, minerals, herbals, homeopathic remedies, weight management products,
skin care products and over-the-counter ("OTC") pharmaceuticals.
The Company was incorporated in the State of Florida in 1976. The
Company's principal executive offices are located at 851 Broken Sound Parkway,
NW, Boca Raton, Florida 33487, and its telephone number is (561) 241-9400. As
used herein, the "Company" means Rexall Sundown, Inc. and its subsidiaries,
except where the context indicates otherwise.
Recent Developments
On January 29, 1998, the Company consummated a merger with Richardson
Labs, Inc. ("Richardson"), located at 3475 Commercial Court, Meridian, Idaho
83642, whereby the Company issued 2,884,616 shares of Common Stock, to
Richardson's stockholders in exchange for all of the outstanding shares of
common stock of Richardson. Richardson develops, markets and sells a broad line
of dietary supplements consisting of approximately 100 SKUs primarily in diet
and weight management, women's and children's health and sports nutrition.
Distribution of its products occurs through the mass market, including mass
merchandisers, drug stores and grocery stores and specialty stores, including
health food retailers, natural product supermarkets and vitamin stores.
The transaction was accounted for as a pooling of interests and,
accordingly, the Company's financial statements will include the financial
position and results of operations of Richardson for all periods presented. Net
sales and pro forma income (includes a pro forma adjustment for income taxes
3
<PAGE>
related to the Subchapter S status of Richardson) of the Company, Richardson and
the combined companies for the year ended August 31, 1997, 1996 and 1995 are as
follows:
<TABLE>
<CAPTION>
Fiscal year ended August 31,
-------------------------------------------------------
1995 1996 1997
---- ---- ----
Net sales:
<S> <C> <C> <C>
Rexall Sundown $ 148,734 $ 187,040 $ 263,369
Richardson 19,803 28,978 27,254
---------- ---------- ----------
Combined $ 168,537 $ 216,018 $ 290,623
========== ========== ==========
Pro forma income from continuing operations:
Rexall Sundown $ 12,338 $ 20,293 $ 35,061
Richardson 10 2,760 2,115
----------- ----------- -----------
Combined $ 12,348 $ 23,053 $ 37,176
=========== =========== ===========
Diluted income per share from continuing operations:
Historical as previously reported $ 0.21 $ 0.33 $ 0.52
=========== =========== ===========
Pro forma with Richardson $ 0.20 $ 0.36 $ 0.53
=========== =========== ===========
Weighted average common shares outstanding:
Basic 61,558 63,108 68,572
=========== =========== ===========
Diluted 61,879 64,337 70,792
=========== =========== ===========
</TABLE>
RISK FACTORS
The Shares offered hereby involve a high degree of risk, including the
risks described below. Prospective investors should carefully consider the
specific factors set forth below, as well as the other information contained in
this Prospectus, before deciding to invest in the Common Stock offered hereby.
This Prospectus contains certain "forward-looking statements" within
the meaning of section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), which represent the Company's expectations or beliefs,
including, but not limited to, statements concerning industry performance, the
Company's operations, economic performance, financial condition, growth and
acquisition strategies and margins and growth in sales of the Company's
products. For this purpose, any statements contained in this Prospectus that are
not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, words such as "may," "will,"
"expect," "believe," "anticipate," "intend," "estimate" or "continue" or the
negative or other variations thereof or comparable terminology are intended to
identify forward-looking statements. These statements by their nature involve
substantial risks and uncertainties, certain of which are beyond the Company's
control, and actual results may differ materially depending on a variety of
important factors, including those described below under this "Risk Factors"
section and elsewhere in this Prospectus.
Uncertainty Related to Acquisitions
The Company intends to continue to pursue the acquisition of
complementary products, product lines or businesses. Acquisitions involve a
number of risks that could adversely affect the Company's operating results,
including the diversion of management's attention, the assimilation of
operations and personnel of the acquired companies, the amortization of acquired
4
<PAGE>
intangible assets and the potential loss of key employees of the acquired
companies. There can be no assurance that the Company will consummate future
acquisitions on satisfactory terms, if at all, that adequate financing will be
available on terms acceptable to the Company, if at all, that any acquired
products, product lines or businesses will be successfully integrated or that
such products, product lines or businesses will ultimately have a positive
impact on the Company, its financial condition or results of operations.
Government Regulation
The manufacturing, 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
("FDA"), the Federal Trade Commission ("FTC"), the Consumer Product Safety
Commission, the United States Department of Agriculture, the United States
Postal Service, the United States Environmental Protection Agency and the
Occupational Safety and Health Administration. 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,
herbs, food, OTC and prescription drugs and cosmetics. The regulations that are
promulgated by the FDA relating to the manufacturing process are known as
Current Good Manufacturing Practices ("CGMPs"), and are different for drug and
food products. In addition, the FTC has overlapping jurisdiction with the FDA to
regulate the labeling, promotion and advertising of vitamins, OTC drugs,
cosmetics and foods.
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,
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 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 and FDA's final regulations require that all dietary
supplements must be labeled in compliance with the regulations by no later than
March 23, 1999. 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 a
structure or function of the body. The Company anticipates that the FDA will
finalize CGMPs which are specific to dietary supplements and require at least
some of the quality control provisions contained in the CGMPs for drugs. The
Company currently manufactures its vitamins and nutritional supplement products
in compliance with the applicable food CGMPs.
The FDA has finalized some of its regulations, including those relating
to nutritional labeling requirements. The FDA also has under development
additional regulations to implement DSHEA. Final labeling regulations require
expanded or different labeling for the Company's vitamin and nutritional
products. The Company cannot determine what effect such regulations, when fully
implemented, will have on its business in the future. Such regulations 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.
Failure to comply with applicable FDA requirements can result in sanctions being
imposed on the Company or the manufacturers of its products, including, warning
letters, fines, product recalls and seizures.
Governmental regulations in foreign countries where the Company plans
to commence or expand sales may prevent or delay entry into a market or prevent
or delay the introduction, or require the reformulation, of certain of the
Company's products.
The Company's network marketing subsidiary, Rexall Showcase
International, Inc. ("Rexall Showcase"), is subject to regulation under various
international, state and local laws which include provisions regulating, among
other things, the operation of direct sales programs. In addition, many
5
<PAGE>
countries currently have laws that would restrict or prohibit direct sales
companies, such as Rexall Showcase, from conducting business therein.
In addition, the Company cannot predict whether new domestic or foreign
legislation regulating its activities will be enacted. Such new legislation
could have a material adverse effect on the Company.
Managing and Maintaining Growth
The Company is currently experiencing a period of rapid growth and
expansion which has placed, and could continue to place, a significant strain on
the Company's management, customer service and support operations, sales and
administrative personnel and other resources. In order to serve the needs of its
existing and future customers, the Company has substantially increased and will
continue to increase its workforce, which requires the Company to attract,
train, motivate and manage qualified employees. The Company's ability to manage
its planned growth requires the Company to continue to expand its operating,
management, information and financial systems, all of which may significantly
increase its operating expenses. If the Company fails to achieve its growth as
planned or is unsuccessful in managing its anticipated growth, there could be a
material adverse effect on the Company. In addition, the Company's retail
customers are not generally bound to purchase products from the Company for any
significant length of time. Although the Company has entered into agreements
with certain of its retail customers, these agreements can generally be canceled
on short notice without cause and with minimal or no liability to such
customers. The loss of a significant customer or a number of customers, or a
significant reduction in purchase volume by or financial difficulty of such
customers, for any reason, could have a material adverse effect on the Company.
Effect of Adverse Publicity
The Company's products consist of vitamins, minerals, herbs and other
ingredients that the Company regards as safe when taken as suggested by the
Company and that various scientific studies have suggested may involve health
benefits. While the Company conducts extensive quality control testing on its
products, the Company generally does not conduct or sponsor clinical studies
relating to the benefits of its products. The Company is highly dependent upon
consumers' perception of the overall integrity of its business, as well as the
safety and quality of its products and similar products distributed by other
companies which may not adhere to the same quality standards as the Company. The
Company could be adversely affected if any of the Company's products or any
similar products distributed by other companies should prove or be asserted to
be harmful to consumers or should scientific studies provide unfavorable
findings regarding the effectiveness of the Company's products. Rexall
Showcase's ability to attract and retain independent distributors could be
adversely affected by negative publicity relating to it or to other direct sales
organizations or by the announcement by any governmental agency of investigatory
proceedings regarding the business practices of Rexall Showcase or other direct
sales organizations.
Reliance on Independent Distributors of Rexall Showcase
Rexall Showcase's sales are directly dependent upon the efforts of its
independent distributors, and any growth in sales volume will require an
increase in the productivity or the number of such distributors. As is typical
in the direct sales industry, there is turnover in distributors from year to
year, which requires the sponsoring and training of new distributors by existing
distributors in order to maintain the size of the distributor network. The
Company experiences seasonal decreases in distributor sponsoring and product
sales due to summer and winter holiday periods. Other factors such as general
economic conditions and negative publicity relating to Rexall Showcase or other
direct sales organizations could also adversely affect the ability of Rexall
Showcase to maintain or expand its distributor network. The loss of a key
distributor or group of distributors could adversely affect sales of Rexall
Showcase products and impair Rexall Showcase's ability to attract new
distributors.
6
<PAGE>
Centralized Location of Manufacturing Operations; Availability of Raw Materials
The Company currently manufactures and packages substantially all of
its products at its manufacturing facilities in Boca Raton and Deerfield Beach,
Florida, and, until the opening of its distribution facility in Sparks, Nevada,
distributed all of its products from its two distribution facilities in Boca
Raton. In addition, as part of the Company's recent acquisition of Richardson,
the Company also has a packaging and distribution facility in Meridian, Idaho.
Accordingly, any event resulting in the slowdown or stoppage of the Company's
manufacturing operations or distribution facilities in southern Florida could
have a material adverse effect on the Company. The Company maintains business
interruption insurance. There can be no assurance, however, that such insurance
will continue to be available at a reasonable cost or, if available, will be
adequate to cover any losses that may be incurred from an interruption in the
Company's manufacturing and distribution operations.
Most of the raw materials in the Company's products are obtained from
third-party suppliers. Although the Company believes that all of its sources for
raw materials are reliable, any interruption of such supply could have a
material adverse effect on the Company.
Risks Associated with International Operations
An element of the Company's future growth strategy is to increase the
distribution and sale of the Company's products into international markets. The
Company's existing and planned international operations are subject to political
and economic uncertainties, including, among other things, inflation, risk of
renegotiation or modification of existing agreements or arrangements with
governmental authorities, transportation, tariffs, export controls, government
regulation, trademark availability and registration issues, currency exchange
rate fluctuations, foreign exchange restrictions which limit the repatriation of
investments and earnings therefrom, changes in taxation, hostilities or
confiscation of property. Changes related to these matters could have a material
adverse effect on the Company.
Competition
The market for the sale of vitamins and nutritional supplements is
highly competitive. Competition is based principally upon price, quality of
products and marketing support. There are numerous companies in the vitamin and
nutritional supplement industry selling products to retailers, including mass
merchandisers, drug store chains, independent drug stores, supermarkets and
health food stores. Most of these companies are privately held and the Company
is unable to precisely assess the size of such competitors. No company is
believed to control more than 10% of this market.
The market for OTC pharmaceuticals and health and beauty care products
is also highly competitive. Competition is based principally upon price, quality
of products, customer service and marketing support. The Rexall brand competes
with nationally advertised brand name products and private label products.
Although Rexall Showcase competes with other health and nutritional
food companies, the Company believes its primary competition stems from other
direct sales companies. The Company competes in the recruitment of independent
sales people with other direct sales organizations whose product lines may or
may not compete with the Company's products.
Certain of the Company's competitors are substantially larger than the
Company and have greater financial resources.
Product Liability Claims
As a marketer of vitamin and nutritional supplements and other products
that are ingested by consumers or applied to their bodies, the Company may be
subjected to various product liability claims, including, among others, that its
products contain contaminants or include inadequate instructions as to use or
inadequate warnings concerning side effects and interactions with other
7
<PAGE>
substances. While such claims to date have not been material to the Company and
the Company maintains product liability insurance, there can be no assurance
that product liability claims and the resultant adverse publicity will not have
a material adverse effect on the Company.
Potential Year 2000 Issues
The Company has initiated a Company-wide task force to review and
evaluate the Year 2000 issue as it relates to its internal computer systems and
third party computer systems as well as those of its vendors. The Company
expects to incur internal staff costs as well as consulting and other expenses
related to these issues. In addition, the appropriate course of action may
include a replacement or an upgrade of certain systems or equipment. The Company
believes the cost of such remedial corrective actions will not be material to
the Company's financial position, results of operations or cashflows.
The task force is also working with the Company's vendors who are at
various stages in analyzing this issue; there can be no assurance that the
systems of other companies on which the Company's systems rely or interface with
will also be timely converted. The Company will continue to evaluate the
appropriate courses of corrective action as needed.
Concentration of Ownership; Certain Anti-takeover Considerations
The Company's directors and executive officers and certain of its
affiliates beneficially own approximately 52% of the outstanding Common Stock,
substantially all of which are beneficially owned or controlled by Carl
DeSantis, Dean DeSantis and Damon DeSantis. Accordingly, these shareholders will
continue to have the ability to elect all of the directors of the Company and to
thereby direct or substantially influence the management, policies and business
operations of the Company and will have the power to control the outcome of any
matters submitted to a vote of the Company's shareholders. The Company's Board
of Directors has the authority to approve the issuance of 5,000,000 shares of
preferred stock and to fix the rights, preferences, privileges and restrictions,
including voting rights, of those shares without any further vote or action by
the Company's shareholders. The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of holders of any
preferred stock that may be issued in the future. Certain provisions of Florida
law, as well as the issuance of preferred stock, could delay or inhibit the
removal of incumbent directors and could delay, defer, make more difficult or
prevent a merger, tender offer or proxy contest, or any change in control
involving the Company, as well as the removal of management, even if such events
would be beneficial to the interests of the Company's shareholders, and may
limit the price certain investors may be willing to pay in the future for shares
of Common Stock.
Volatility of Stock Price
The Company's stock price has experienced significant volatility over
the past several years. Moreover, the stock market has from time to time
experienced extreme price and volume fluctuations which may be unrelated to the
operating performance of particular companies. Market conditions in the vitamin
and nutritional supplement industry and factors such as announcements of new
products by the Company, its competitors or third parties, and changes in
earnings estimates by analysts may have a significant effect on the price of the
Common Stock.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares being offered by the Selling Shareholders hereunder. Expenses expected to
be incurred by the Company in connection with this offering are estimated at
approximately $30,000. See "Selling Shareholders."
8
<PAGE>
SELLING SHAREHOLDERS
All of the Shares offered hereby were acquired by the Selling
Shareholders in connection with the sale of their ownership interest in
Richardson to the Company. The following table sets forth certain information
with respect to the beneficial ownership of the Common Stock by the Selling
Shareholders.
<TABLE>
<CAPTION>
Number of Number of Shares Ownership of Shares of
Name and Address of Shares Owned Offered Hereby Common Stock After
Selling Shareholder (1) Prior to Offering Offering (2)
- -------------------- ----------------- ------------
Shares Percentage Shares Percentage
------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C>
Abraham & Sons, LLC (3) 2,163,462 3.0% 721,154 1,442,308 2.0%
Priddy Brothers Holdings, Inc. (3)(4) 721,154 1.0% 721,154 0 *
- --------------------------------
* Less than 1%.
</TABLE>
(1) The address of Abraham & Sons, LLC and Priddy Brothers Holdings,
Inc. is 3475 Commercial Court, Meridian, Idaho 83642.
(2) Assumes all Shares registered hereby are sold. Since the Selling
Shareholders may sell all, some or none of their Shares, no actual
estimate can be made of the aggregate number of Shares that are to be
offered hereby or the number or percentage of Shares that each Selling
Shareholder will own upon completion of the offering to which this
Prospectus relates.
(3) Abraham & Sons, LLC is a limited liability company that is wholly-owned
by a charitable trust that is controlled by Ed Priddy, the Executive
Vice President, Chief Operating Officer and Chief Financial Officer of
Richardson, Mark Priddy, the Executive Vice President and Chief
Executive Officer of Richardson and John Priddy, the President of
Richardson. Each of Ed, Mark and John Priddy is a Vice President of the
Company and John Priddy is also a Director of the Company.
(4) Ed Priddy, Mark Priddy and John Priddy are the sole stockholders of
Priddy Brothers Holdings, Inc. with each owning one-third of the
outstanding shares thereof.
PLAN OF DISTRIBUTION
The Selling Shareholders have advised the Company that they may from
time to time sell all or part of the Shares in one or more transactions in the
over-the-counter market or on the Nasdaq National Market, in negotiated
transactions, or a combination of such methods of sale, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Selling Shareholders may effect such
transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Shareholders and/or purchasers of
the Shares from whom they may act as agent (which compensation may be in excess
of customary commissions). In connection with such sales, the Selling
Shareholders and any broker-dealers or agents participating in such sales may be
deemed to be underwriters as that term is defined under the Securities Act.
Neither the Company nor the Selling Shareholders can presently estimate the
amount of commissions or discounts, if any, that will be paid by the Selling
Shareholders on account of their sale of Common Stock from time to time.
Under the securities laws of certain states, the Shares may be sold in
such states only through registered or licensed brokers or dealers. In addition,
in certain states the Shares may not be sold unless the Shares have been
registered or qualified for sale in such state or an exemption from registration
or qualification is available and is satisfied.
9
<PAGE>
The Company will pay all of the expenses, estimated to be approximately
$30,000 (which includes all counsel fees and expenses of the Selling
Shareholders in connection with the offering hereby), incident to the
registration, offer and sale of the Shares to the public hereunder other than
commissions, fees and discounts of underwriters, brokers, dealers and agents.
The Company has agreed to indemnify the Selling Shareholders and any
underwriters against certain liabilities, including liabilities under the
Securities Act. The Selling Shareholders have also agreed to indemnify the
Company, its directors, officers, agents and representatives against certain
liabilities, including liabilities under the Securities Act. The Company will
not receive any of the proceeds from the sale of any of the Shares by the
Selling Shareholders.
The Company has advised the Selling Shareholders that the
anti-manipulation rules of Regulation M under the Exchange Act may apply to
sales of Shares in the market and to the activities of the Selling Shareholders
and their affiliates. In addition, the Company will make copies of this
Prospectus available to the Selling Shareholders and has informed them of the
need for delivery of copies of this Prospectus to purchasers at or prior to the
time of any sale of the Shares offered hereby. The Selling Shareholders may
indemnify any broker-dealer that participates in transactions involving the sale
of the Shares against certain liabilities, including liabilities arising under
the Securities Act. At the time a particular offer of Shares is made, if
required, a Prospectus Supplement will be distributed that will set forth the
number of Shares being offered and the terms of the offering, including the name
of any underwriter, dealer or agent, the purchase price paid by any underwriter,
any discount commission and other item constituting compensation, any discount,
commission or concession allowed or reallowed or paid to any dealer, and the
proposed selling price to the public.
The Company has agreed with the Selling Shareholders to use its best
efforts to keep the Registration Statement of which this Prospectus constitutes
a part effective for a period of time equal to the earlier of the disposition of
the Shares or such time as all of the Shares constituting consideration for
Richardson may be sold in one transaction under Rule 144 of the Securities Act.
The Company intends to de-register any of the Shares not sold by the Selling
Shareholders at the end of such period; however, at such time any unsold Shares
will be freely tradable subject to compliance with Rule 144.
At the time a particular offer of Shares is made, to the extent
required, a supplement to this Prospectus will be distributed which will
identify and set forth the aggregate number of Shares being offered and the
terms of the offering, including the name or names of any underwriters, dealers
or agents, the purchase price paid by any underwriter for Shares purchased from
the Selling Shareholders, any discounts, commissions and other items
constituting compensation from the Selling Shareholders and/or the Company and
any discounts, commissions or concessions allowed or reallowed or paid to
dealers, including the proposed selling price to the public. Such supplement to
this Prospectus and, if necessary, a post-effective amendment to the
Registration Statement of which this Prospectus is a part, will be filed with
the Commission to reflect the disclosure of additional information with respect
to the distribution of the Shares.
LEGAL MATTERS
The validity of the shares of Common Stock being offered hereby is
being passed upon for the Company by Greenberg, Traurig, Hoffman, Lipoff, Rosen
& Quentel, P.A., 1221 Brickell Avenue, Miami, Florida 33131.
EXPERTS
The financial statements of the Company incorporated in this Prospectus
by reference to the Company's Annual Report on Form 10-K for the year ended
August 31, 1997, have been incorporated herein in reliance upon the report of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
10
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus Supplement or the accompanying
Prospectus and, if given or made, such information or representations must not 1,442,308 Shares
be relied upon as having been authorized by the Company or any underwriter,
dealer or agent. Neither the delivery of this Prospectus Supplement or the
accompanying Prospectus nor any sale made hereunder shall under any
circumstances create any implication that there has been no change in the
affairs of the Company since the date of this Prospectus Supplement. Neither Rexall Sundown, Inc.
this Prospectus Supplement nor the accompanying Prospectus constitutes an offer
to sell or a solicitation of any offer to buy the equity securities in any
jurisdiction in which such offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do so or to any
person to whom it is unlawful to make such offer or solicitation. Common Stock
------------------------
TABLE OF CONTENTS
Page _____________________________
Prospectus Supplement PROSPECTUS SUPPLEMENT
May 5, 1998
The Offering.......................................... S-2 _____________________________
Use of Proceeds....................................... S-2
Selling Shareholders.................................. S-2
Dividend Policy....................................... S-3
Underwriting.......................................... S-4
Legal Matters......................................... S-4
Prospectus Salomon Smith Barney
Available Information................................... 2
Incorporation of Certain Documents
by Reference.......................................... 2
The Company............................................. 3
Risk Factors............................................ 4
Use of Proceeds......................................... 8
Selling Shareholders.................................... 9
Plan of Distribution.................................... 9
Legal Matters.......................................... 10
Experts................................................ 10
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</TABLE>
