NBTY Posts Loss After Ephedra Product Charge

NBTY Inc.'s second quarter profits fell by 23 percent, in part because the vitamin and supplement manufacturer stopped selling products containing the controversial herb, ephedra, the company said yesterday.

Bohemia-based NBTY took a one- time $6 million charge to discontinue ephedra-based products. Its net income fell to $20 million, or 29 cents per share, for the fiscal second quarter ending March 31, from $26 million, or 38 cents per share, in the second quarter of 2002.

The company's earnings fell well below analysts' expectations, which stood at an average of 38 cents per share. Excluding the charge, earnings for the quarter would have been 34 cents per share, compared to last year's second quarter earnings of 33 cents per share, the company said.

Still, NBTY's sales jumped 10 percent to $278 million in its fiscal second quarter, compared to $252 during the same quarter last year. Company officials attributed the gains to the strong performance of Nature's Bounty's wholesale division and the United Kingdom-based subsidiary, Holland & Barrett.

While the earnings report was "somewhat disappointing, we believe we have made investments for the future," NBTY chairman and chief executive Scott Rudolph said on a conference call yesterday.

NBTY announced plans to launch a new line of low carbohydrate food products, called CarbWise, that will be shipped beginning in July. During the call, NBTY also confirmed it is a participant in the auction process for Rexall Sundown, a division of Royal Numico.

Last week, the U.S. Department of Justice filed a lawsuit against NBTY, saying it violated regulations on the shipment of a decongestant drug used in the illegal production of methamphetamine, or speed. NBTY, which could face fines up to $145 million, is charged with shipping large amounts of pseudoephedrine to customers unregistered with the U.S. Drug Enforcement Administration.

On the call yesterday, president and chief financial officer Harvey Kamil said the product made up .0002 percent, or $160,000, of sales adding that the extent of the suit and potential fine has "absolutely no precedent." Kamil said decongestant products containing pseudoephedrine could be bought "in any place in the entire country."