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NBTY Inc. Reports Operating Results (10-K)

November 28, 2012 | About:

NBTY Inc. (NTY) filed Annual Report for the period ended 2012-09-30.

Nbty Inc. has a market cap of $1.82 billion; its shares were traded at around $0 with a P/E ratio of 10.4. Nbty Inc. had an annual average earning growth of 13.5% over the past 10 years.

Highlight of Business Operations:

Direct Response/E-Commerce. Through our internet and mail-order catalogs, we are a leader in the U.S. direct response VMHS industry, offering a full line of VMHS products and selected personal care and sports nutrition items under our Puritan's Pride® brand and other brand names, at prices that are generally at a discount to similar products sold in retail stores. We also offer products focusing on other brands through websites associated with our retail operations, such as www.vitaminworld.com, www.hollandandbarrett.com, www.detuinen.nl and www.gnc.co.uk. During fiscal 2012, our Puritan's Pride website, www.puritan.com, generated an average of 1.2 million unique visitors per month. As of September 30, 2012, Puritan's Pride operated across four active websites in three languages. Puritan's Pride is strategically advantaged relative to its competitors, offering high-quality products at low direct-from-manufacturer prices, as well as multi-buy promotions, creating a seamless shopping experience for customers. Our highly automated, industry-leading equipment enables us to process orders quickly, economically and efficiently, with orders typically filled within 24 hours of receipt. Internet sales accounted for approximately 66% of our total fiscal 2012 Direct Response/E-Commerce sales.

For fiscal 2012, 2011 and 2010, we spent approximately $164 million, $152 million and $137 million, respectively, on advertising, promotions and catalogs, including print, media and cooperative advertising. Our in-house advertising staff creates our advertising materials, which include print, radio, television and internet advertising. In the United Kingdom and Ireland, Holland & Barrett advertises on television. Holland & Barrett, GNC (UK) and Nature's Way advertise in national newspapers and conduct sales promotions. DeTuinen advertises on television and in newspapers and conducts sales promotions in the Netherlands. In addition, Holland & Barrett, GNC (UK) and De Tuinen each publishes its own magazine with articles and promotional materials. Solgar and GNC (UK) advertise in trade journals and magazines, operate web sites and conduct sales promotions. In Canada,

During fiscal 2012 and 2011, Wal-Mart, individually, accounted for 23% and 25% of our Wholesale segment's net sales, respectively, and 14% and 15% of our consolidated net sales, respectively. As of September 30, 2012, Wal-Mart, individually, accounted for 18% of our Wholesale segment's gross accounts receivable. We sell products to Wal-Mart under individual purchase orders placed by Wal-Mart under Wal-Mart's standard terms and conditions of sale. These terms and conditions include insurance requirements; representations by us with respect to the quality of our products and our manufacturing process; our obligations to comply with law; and indemnifications by us if we breach our representations or obligations. There is no commitment from Wal-Mart to purchase from us, or from us to sell to Wal-Mart, any minimum amount of product. The loss of Wal-Mart, or any other major customer, would have a material adverse effect on us if we were unable to replace that customer. See "Item 1A. Risk FactorsRisks Relating to Our BusinessOne of our customers accounted for 14% of our consolidated net sales during fiscal 2012, and the loss of this customer, or any of our other major customers, could have a material adverse effect on our results of operations."

Health Canada approval for drug marketing authorizations and NHP licenses can take time. The approval time for NHPs and drugs can vary depending on the product and the application or submission. For NHPs, the Canadian Regulations indicate that certain product licenses should be processed within 60 days. However, the regulations also include provisions to extend this time frame if, for example, more information is required. There can be significant delays. Health Canada has publicly acknowledged that there has been a delay in processing NHP licenses, and until August 3, 2010 the Health Canada "Compliance Policy for Natural Health Products" provided that Health Canada would focus compliance actions against those NHPs that do not have a product license submission number and that Health Canada believes pose a health risk. The policy was not to be construed as authorization to sell any NHP that does not have a product license, and Health Canada could exercise its authority to stop the sale of unlicensed NHPs, or NHP sales that otherwise fail to comply with Canadian Regulations at any time. Effective August 3, 2010, regulations to the Canadian FDA came into force which provide that each application for an NPN that is in process, that has not been disallowed and is for a product that is neither a specified restricted product nor a product that contains an ingredient that is likely to result in injury to the health of a consumer, is to be issued an exemption number. Upon the completion of certain formalities, a product license is deemed to have been issued for a product with an exemption number and such license remains in effect until the associated application is processed. These regulations will automatically be repealed 30 months after they came into force. If Health Canada refuses to issue a product license, the NHP can no longer be sold in Canada unless and until Health Canada issues such a license. We have adopted a compliance strategy to adhere to these new regulations and to Health Canada's policies.

During fiscal 2012 and 2011, Wal-Mart, individually, accounted for 23% and 25% of our Wholesale segment's net sales, respectively, and 14% and 15% of our consolidated net sales, respectively. As of the end of our fiscal 2012, Wal-Mart, individually, accounted for 18% of our Wholesale segment's total gross accounts receivable. Additionally, for fiscal 2012, our other top three wholesale customers collectively accounted for approximately 24%, of our Wholesale segment's net sales and 15% of our consolidated net sales. We do not have a long-term contract with Wal-Mart or any other major customer, and the loss of this customer or any other major customer could have a material adverse effect on our results of operations. In addition, our results of operations and ability to service our debt obligations would be impacted negatively to the extent Wal-Mart is unable to make payments to us, or does not make timely payments on outstanding accounts receivables.

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About the author:

Charlie Tian, Ph.D. - Founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

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