10-Q 1 a07-3275_110q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended December 31, 2006

o 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: 001-31788

NBTY, INC.

(Exact name of registrant as specified in its charter)

Delaware		11-2228617
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

90 Orville Drive
Bohemia, New York 11716

(Address of principal executive offices) (Zip Code)

(631) 567-9500

(Registrant’s telephone number, including area code)

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 o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x

Accelerated filer o

Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO x

The number of shares of Common Stock (par value $.008 per share) outstanding as of January 30, 2007 was 67,218,639.

NBTY, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FISCAL QUARTER ENDED DECEMBER 31, 2006
INDEX

		Page
PART I. Financial Information
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income	4
	Condensed Consolidated Statements of Stockholders’ Equity and Comprehensive Income	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	49
Item 4.	Controls and Procedures	50
PART II. Other Information
Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	53
Item 6.	Exhibits	54
Signatures		56
Exhibits

FORWARD-LOOKING STATEMENTS

INFORMATION CONTAINED IN THIS FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF NBTY, INC. AND ITS SUBSIDIARIES (COLLECTIVELY, THE ‘‘COMPANY’’). IN ADDITION, WHEN USED IN THIS REPORT, THE WORDS ‘‘SUBJECT TO,’’ ‘‘BELIEVE,’’ ‘‘EXPECT,’’ ‘‘PLAN,’’ ‘‘PROJECT,’’ ‘‘ESTIMATE,’’ ‘‘INTEND,’’ ‘‘MAY,’’ ‘‘SHOULD,’’ ‘‘CAN,’’ OR ‘‘ANTICIPATE,’’ OR THE NEGATIVE THEREOF, OR VARIATIONS THEREON, OR SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH ARE INHERENTLY UNCERTAIN. SIMILARLY, DISCUSSIONS OF STRATEGY ALTHOUGH BELIEVED TO BE REASONABLE, ARE ALSO FORWARD-LOOKING STATEMENTS AND ARE INHERENTLY UNCERTAIN. ALL FORWARD-LOOKING STATEMENTS ARE SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM PROJECTED RESULTS. FACTORS WHICH MAY MATERIALLY AFFECT SUCH FORWARD-LOOKING STATEMENTS INCLUDE: (I) SLOW OR NEGATIVE GROWTH IN THE NUTRITIONAL SUPPLEMENT INDUSTRY; (II) INTERRUPTION OF BUSINESS OR NEGATIVE IMPACT ON SALES AND EARNINGS DUE TO ACTS OF GOD, ACTS OF WAR, TERRORISM, BIO-TERRORISM, CIVIL UNREST OR DISRUPTION OF MAIL SERVICE; (III) ADVERSE PUBLICITY REGARDING NUTRITIONAL SUPPLEMENTS; (IV) OUR INABILITY TO RETAIN CUSTOMERS OF COMPANIES (OR MAILING LISTS) RECENTLY ACQUIRED; (V) INCREASED COMPETITION; (VI) INCREASED COSTS; (VII) LOSS OR RETIREMENT OF KEY MEMBERS OF OUR MANAGEMENT; (VIII) INCREASES IN OUR COST OF BORROWINGS OR UNAVAILABILITY OF ADDITIONAL DEBT OR EQUITY CAPITAL, OR BOTH; (IX) UNAVAILABILITY OF, OR INABILITY TO CONSUMMATE, ADVANTAGEOUS ACQUISITIONS IN THE FUTURE, OR OUR INABILITY TO INTEGRATE THE ACQUISITIONS INTO THE MAINSTREAM OF OUR BUSINESS; (X) CHANGES IN GENERAL WORLDWIDE ECONOMIC AND POLITICAL CONDITIONS IN THE MARKETS IN WHICH WE MAY COMPETE FROM TIME TO TIME; (XI) OUR INABILITY TO GAIN OR HOLD MARKET SHARE OF OUR WHOLESALE OR RETAIL CUSTOMERS ANYWHERE IN THE WORLD; (XII) UNAVAILABILITY OF ELECTRICITY IN CERTAIN GEOGRAPHICAL AREAS; (XIII) OUR INABILITY TO OBTAIN OR RENEW INSURANCE OR THE COSTS OF SAME; (XIV) EXPOSURE TO AND EXPENSE OF DEFENDING AND RESOLVING PRODUCT LIABILITY CLAIMS, INTELLECTUAL PROPERTY CLAIMS AND OTHER LITIGATION; (XV) OUR INABILITY TO IMPLEMENT OUR BUSINESS STRATEGY SUCCESSFULLY; (XVI) OUR INABILITY TO MANAGE OUR RETAIL, WHOLESALE, MANUFACTURING AND OTHER OPERATIONS EFFICIENTLY; (XVII) CONSUMER ACCEPTANCE OF OUR PRODUCTS; (XVIII) OUR INABILITY TO RENEW LEASES FOR OUR RETAIL LOCATIONS; (XIX) THE INABILITY OF OUR RETAIL STORES TO ATTAIN OR MAINTAIN PROFITABILITY; (XX) THE ABSENCE OF CLINICAL TRIALS FOR MANY OF OUR PRODUCTS; (XXI) SALES AND EARNINGS VOLATILITY OR TRENDS FOR US AND OUR MARKET SEGMENTS; (XXII) THE EFFICACY OF OUR INTERNET AND ON-LINE SALES AND MARKETING STRATEGIES; (XXIII) FLUCTUATIONS IN FOREIGN CURRENCIES, INCLUDING THE BRITISH POUND, THE EURO AND THE CANADIAN DOLLAR; (XXIV) IMPORT-EXPORT CONTROLS ON SALES TO FOREIGN COUNTRIES; (XXV) OUR INABILITY TO SECURE FAVORABLE NEW SITES FOR, AND DELAYS IN OPENING, NEW RETAIL LOCATIONS; (XXVI) INTRODUCTION OF, AND COMPLIANCE WITH, NEW FEDERAL, STATE, LOCAL OR FOREIGN LEGISLATION OR REGULATION, OR ADVERSE DETERMINATIONS BY REGULATORS ANYWHERE IN THE WORLD (INCLUDING THE BANNING OF PRODUCTS) AND, MORE PARTICULARLY, PROPOSED GOOD MANUFACTURING PRACTICES AND SECTION 404 REQUIREMENTS OF THE SARBANES-OXLEY ACT OF 2002 IN THE UNITED STATES, AND THE FOOD SUPPLEMENTS DIRECTIVE AND TRADITIONAL HERBAL MEDICINAL PRODUCTS DIRECTIVE IN EUROPE;

(XXVII) THE MIX OF OUR PRODUCTS AND THE PROFIT MARGINS THEREON; (XXVIII) THE AVAILABILITY AND PRICING OF RAW MATERIALS; (XXIX) RISK FACTORS DISCUSSED ELSEWHERE IN THIS REPORT AND IN THE FORM 10-K for the fiscal year ended September 30, 2006; (XXX) ADVERSE EFFECTS ON US OF INCREASED GASOLINE PRICES AND POTENTIALLY REDUCED TRAFFIC FLOW TO OUR RETAIL LOCATIONS; (XXXI) ADVERSE TAX DETERMINATIONS; (XXXII) THE LOSS OF A SIGNIFICANT CUSTOMER; AND (XXXIII) OTHER FACTORS BEYOND OUR CONTROL.

CONSEQUENTLY, SUCH FORWARD-LOOKING STATEMENTS SHOULD BE REGARDED SOLELY AS THE COMPANY’S CURRENT PLANS, ESTIMATES AND BELIEFS. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS. THE COMPANY CANNOT GUARANTEE FUTURE RESULTS, EVENTS, AND LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS. THE COMPANY DOES NOT UNDERTAKE AND SPECIFICALLY DECLINES ANY OBLIGATION TO UPDATE, REPUBLISH OR REVISE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCES OF UNANTICIPATED EVENTS.

INDUSTRY DATA USED THROUGHOUT THIS REPORT WAS OBTAINED FROM INDUSTRY PUBLICATIONS AND INTERNAL COMPANY ESTIMATES. WHILE THE COMPANY BELIEVES SUCH INFORMATION TO BE RELIABLE, ITS ACCURACY HAS NOT BEEN INDEPENDENTLY VERIFIED AND CANNOT BE GUARANTEED.

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

NBTY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)
(Dollars and shares in thousands, except per share amounts)

	December 31,			September 30,
	2006			2006
Assets
Current assets:
Cash and cash equivalents		$	49,996		$	89,805
Investments		59,874			—
Accounts receivable, less allowance for doubtful accounts of $10,080 at December 31, 2006 and $10,361 at September 30, 2006		94,102			89,154
Inventories		366,735			354,496
Deferred income taxes		26,670			26,636
Prepaid expenses and other current assets		39,000			42,261
Total current assets		636,377			602,352
Property, plant and equipment, net of accumulated depreciation of $305,241 and $296,069, respectively		319,634			309,437
Goodwill		248,064			235,959
Other intangible assets, net		164,470			146,169
Other assets		29,107			10,393
Total assets		$	1,397,652		$	1,304,310
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt		$	797		$	18,660
Accounts payable		71,040			64,211
Accrued expenses and other current liabilities		142,495			127,768
Total current liabilities		214,332			210,639
Long-term debt, net of current portion		209,671			191,045
Deferred income taxes		64,431			55,276
Other liabilities		10,920			7,918
Total liabilities		499,354			464,878
Commitments and contingencies
Stockholders’ equity:
Common stock, $.008 par; authorized 175,000 shares; issued and outstanding 67,214 shares at December 31, 2006 and 67,212 shares at September 30, 2006		538			538
Capital in excess of par		138,809			138,777
Retained earnings		721,916			671,060
Accumulated other comprehensive income		37,035			29,057
Total stockholders’ equity		898,298			839,432
Total liabilities and stockholders’ equity		$	1,397,652		$	1,304,310

The accompanying notes are an integral part of these condensed consolidated financial statements.

NBTY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)
(Dollars and shares in thousands, except per share amounts)

	For the three months
	ended December 31,
	2006			2005
Net sales	$	506,237		$	455,270
Costs and expenses:
Cost of sales	247,047			245,949
Advertising, promotion and catalog	26,763			25,160
Selling, general and administrative	151,939			145,655
	425,749			416,764
Income from operations	80,488			38,506
Other income (expense):
Interest	(5,063		)	(8,992		)
Miscellaneous, net	1,339			1,149
	(3,724		)	(7,843		)
Income before provision for income taxes	76,764			30,663
Provision for income taxes	25,908			7,743
Net income	$	50,856		$	22,920
Net income per share:
Basic	$	0.76		$	0.34
Diluted	$	0.73		$	0.33
Weighted average common shares outstanding:
Basic	67,213			67,193
Diluted	69,331			69,034

The accompanying notes are an integral part of these condensed consolidated financial statements.

NBTY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

(Unaudited)
(Dollars and shares in thousands)

										Accumulated
	Common Stock					Capital				Other			Total			Total
	Number of					in Excess		Retained		Comprehensive			Stockholders’			Comprehensive
	Shares		Amount			of Par		Earnings		Income			Equity			Income
Balance, September 30, 2005		67,191		$	537	$	138,657	$	559,275		$	17,586		$	716,055
Components of comprehensive income:
Net income								111,785						111,785			$	111,785
Foreign currency translation adjustment and other, net of taxes											11,471			11,471			11,471
																	$	123,256
Exercise of stock options		21		1		105								106
Tax benefit from exercise of stock options						15								15
Balance, September 30, 2006		67,212		538		138,777		671,060			29,057			839,432
Components of comprehensive income:
Net income								50,856						50,856			$	50,856
Foreign currency translation adjustment and other, net of taxes											7,978			7,978			7,978
																	$	58,834
Exercise of stock options		2		—		12								12
Tax benefit from exercise of stock options						20								20
Balance, December 31, 2006		67,214		$	538	$	138,809	$	721,916		$	37,035		$	898,298

The accompanying notes are an integral part of these condensed consolidated financial statements.

NBTY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)

	For the three months
	ended December 31,
	2006			2005
Cash flows from operating activities:
Net income	$	50,856		$	22,920
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
Provision relating to impairments and disposals of property, plant and equipment	392			2,281
Depreciation and amortization	14,231			14,144
Foreign currency transaction loss	318			276
Amortization and write-off of deferred financing costs	1,303			1,554
Amortization and write-off of bond discount	31			204
(Recovery of) / provision for doubtful accounts	(135		)	255
Inventory reserves	2,292			2,783
Deferred income taxes	3,886			1,161
Excess income tax benefit from exercise of stock options	(20		)	(15		)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	(2,516		)	(11,882		)
Inventories	(5,087		)	52,750
Prepaid expenses and other current assets	4,443			10,056
Other assets	(163		)	2
Accounts payable	2,834			2,883
Accrued expenses and other liabilities	10,241			240
Net cash provided by operating activities	82,906			99,612
Cash flows from investing activities:
Purchase of property, plant and equipment	(6,212		)	(9,488		)
Proceeds from sale of property, plant and equipment	—			41
Purchase of available-for-sale investments	(214,718		)	—
Proceeds from sale of available-for-sale investments	154,844			39,900
Cash paid for acquisitions, net of cash acquired	(38,219		)	—
Restricted cash	(18,360		)	—
Purchase price settlements, net	—			1,586
Purchase of intangible assets	—			(228		)
Net cash (used in) provided by investing activities	(122,665		)	31,811

(Continued)

NBTY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(Dollars in thousands)

	For the three months
	ended December 31,
	2006				2005
Cash flows from financing activities:
Principal payments under long-term debt agreements and capital leases		$	(196	)	$	(121,220	)
Principal payments under the Revolving Credit Facility		—			(6,000		)
Payments for financing fees		(1,649		)	—
Excess income tax benefit from exercise of stock options		20			15
Proceeds from stock options exercised		12			18
Net cash used in financing activities		(1,813		)	(127,187		)
Effect of exchange rate changes on cash and cash equivalents		1,763			(1,660		)
Net increase in cash and cash equivalents		(39,809		)	2,576
Cash and cash equivalents at beginning of period		89,805			67,282
Cash and cash equivalents at end of period		$	49,996		$	69,858

The accompanying notes are an integral part of these condensed consolidated financial statements.

NBTY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars and shares in thousands, except per share amounts)

1. Principles of Consolidation and Basis of Presentation

These condensed consolidated financial statements include the accounts of NBTY, Inc. and its wholly-owned subsidiaries (“NBTY” or the “Company”). All significant intercompany transactions and balances have been eliminated. These condensed consolidated financial statements are unaudited. However, such statements reflect all adjustments, which in the opinion of management, are necessary for a fair statement of the results of the interim periods presented. These condensed consolidated financial statements have been prepared in conformity with Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and therefore do not include all information or notes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2006. The September 30, 2006 balance sheet was derived from audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the three months ended December 31, 2006 are not necessarily indicative of the results for the full fiscal year ending September 30, 2007 or for any other period.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The most significant estimates include:

· sales returns and other allowances;

· allowance for doubtful accounts;

· inventory valuation and obsolescence;

· valuation and recoverability of long-lived and indefinite-lived intangible assets including the values assigned to acquired intangible assets, goodwill and property, plant and equipment;

· income taxes; and

· accruals for the outcome of current litigation.

Management continually reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. Based on these reviews, estimates are adjusted as deemed appropriate. Actual results could differ from those estimates.

NBTY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollars and shares in thousands, except per share amounts)

Fair Value of Financial Instruments

The carrying value of the Company’s financial instruments approximates fair value due to their short maturities and variable interest rates, with the exception of the 7 1/8% Senior Subordinated Notes. The face value and the fair value of the 7 1/8% Senior Subordinated Notes at December 31, 2006, based on then quoted market prices, was $190,000 and $187,625, respectively.

Significant Customers and Concentration of Credit Risk

Financial instruments which potentially subject the Company to credit risk consist primarily of cash and cash equivalents (the amounts of which may, at times, exceed Federal Deposit Insurance Corporation limits on insurable amounts), investments and trade accounts receivable. The Company mitigates its risk by investing in or through major financial institutions. At December 31, 2006, the Company’s investments consisted of auction rate securities which were classified as available-for-sale investments and reported at fair value (which approximates cost). The Company believes that no significant concentration of credit risk existed at December 31, 2006 with respect to these securities.

The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by a review of their current credit information. Collections and payments from customers are continuously monitored. The Company maintains an allowance for doubtful accounts, which is based upon historical experience as well as specific customer collection issues that have been identified. While such bad debt expenses have historically been within expectations and allowances established, the Company cannot guarantee that it will continue to experience the same credit loss rates that it has in the past. If the financial condition of customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

For the three months ended December 31, 2006 and 2005 the following individual customers accounted for the following percentages of the Wholesale / US Nutrition division’s net sales, respectively:

	% of Wholesale / US Nutrition division’s net sales
	Three months ended December 31,
	2006			2005
Customer A		7	%		11	%
Customer B		16	%		15	%
Customer C		11	%		8	%

Customer A is primarily a supplier to Customer B. Therefore, the loss of Customer B would likely result in the loss of most of the net sales to Customer A. While no one customer represented, individually, more than 10 percent of the Company’s consolidated net sales for the three months ended December 31, 2006 and 2005, the loss of any one of these customers would have a material adverse effect on the Wholesale/US Nutrition division if the Company were unable to replace such customer(s).

NBTY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollars and shares in thousands, except per share amounts)

The following individual customers accounted for 10% or more of the Wholesale/US Nutrition division’s total gross accounts receivable as of December 31, 2006 and September 30, 2006, respectively:

	December 31,			September 30,
	2006			2006
Customer B		11	%		12	%
Customer C		13	%		9	%

Accounts receivable are presented net of the following reserves at December 31, 2006 and September 30, 2006:

	December 31,			September 30,
	2006			2006
Allowance for sales returns		$	10,496		$	10,778
Promotional program incentive allowance		32,696			30,439
		$	43,192		$	41,217

Supplemental Disclosure of Cash Flow Information

	For the three months
	ended December 31,
	2006			2005
Cash interest paid (net of capitalized interest of $201 and $438, respectively)	$	7,105		$	4,231
Cash income taxes paid (net of refunds of $409 and $8,303, respectively)	$	12,101		$	(608	)
Non-cash investing and financing information:
Acquisitions accounted for under the purchase method:
Fair value of assets acquired	$	47,579		$	—
Liabilities assumed	(9,313		)	—
Less: Cash acquired	(47		)	—
Net cash paid	$	38,219		$	—
Property, plant and equipment additions included in accounts payable	$	1,311		$	1,282

Recent Accounting Developments

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and enhances disclosures about fair value measurements. This statement applies when other accounting pronouncements require fair value measurements; it does not require new fair value measurements. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those years. The Company will adopt SFAS 157 on October 1, 2008. The Company is currently evaluating the impact of adopting this standard in its consolidated financial statements and related disclosures.

NBTY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollars and shares in thousands, except per share amounts)

The FASB ratified the consensuses reached in Emerging Issues Task Force (“EITF” or, the “Task Force”) Issue No. 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)” (“EITF 06-3”). The Task Force reached a consensus that the scope of the Issue includes any tax assessed by a governmental authority that is both imposed on and current with a specific revenue-producing transaction between a seller and a customer, and may include, but is not limited to, sales, use, value added, and some excise taxes. The scope of this Issue excludes tax schemes that are based on gross receipts and taxes that are imposed during the inventory procurement process. The presentation of taxes within the scope of this Issue on either a gross or a net basis is an accounting policy decision that should be disclosed under Accounting Principles Board (“APB”) Opinion No. 22, “Disclosure of Accounting Policies.” Furthermore, for taxes reported on a gross basis, a company should disclose the aggregate amount of those taxes in interim and annual financial statements for each period for which an income statement is presented if that amount is significant. The disclosures required under this consensus should be applied retrospectively to interim and annual financial statements for all periods presented, if those amounts are significant. The consensus in EITF 06-3 should be applied to interim and annual reporting periods beginning after December 15, 2006. The Company will adopt EITF 06-3 on January 1, 2007, the second fiscal quarter of the fiscal year ending September 30, 2007. The Company does not anticipate that the adoption will have a significant impact on its consolidated financial position or results of operations.

In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109.” (“FIN 48”). This Interpretation clarifies the accounting for uncertainty in tax positions and requires that the Company recognize in its financial statements, the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position and provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This Interpretation is effective for fiscal years beginning after December 15, 2006. The Company will adopt the provisions of FIN 48 on October 1, 2007, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The Company is currently evaluating the impact of adopting FIN 48 in its financial statements.

2. Acquisitions

The Company accounts for acquisitions under the purchase method of accounting in accordance with SFAS No. 141, “Business Combinations.” Under the purchase method of accounting, the total purchase price is allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values. The excess of the purchase price over their estimated fair values is recorded as goodwill. The fair value assigned to the tangible and intangible assets acquired and liabilities assumed is based upon estimates and assumptions developed by management and other information compiled by management, including a valuation.

NBTY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollars and shares in thousands, except per share amounts)

Fiscal 2007 Acquisitions

Zila Nutraceuticals, Inc.

On October 2, 2006 the Company acquired 100% of the stock of Zila Nutraceuticals, Inc., a division of Zila, Inc. Once acquired, the Company changed the name of Zila Nutraceuticals, Inc. to The Ester-C Company (“Ester-C”). Ester-C manufactures and markets Ester-C®, which is known throughout multiple markets including health food stores and mass market retailers. This acquisition represents an opportunity for the Company to enhance its presence in key markets. The purchase price for Ester-C was $37,500 in cash and up to a $3,000 contingent cash payment which is based upon EBITDA (as defined in the purchase agreement) of Ester-C during the one-year period following the closing. The $37,500 purchase price includes approximately $6,800 of working capital and is subject to a post-closing adjustment based on the final Ester-C working capital at closing. The Company also incurred approximately $766 of direct transaction costs for a total purchase price of approximately $38,266, subject to adjustment for the items noted above. The goodwill associated with this acquisition is deductible for tax purposes. Ester-C had approximately $21,000 in net revenue for the twelve months ended July 31, 2006. The $37,500 purchase price was paid by the Company out of cash on hand. This acquisition contributed $4,082 in net sales and $2,991 of operating income to NBTY’s wholesale segment for the fiscal first quarter ended December 31, 2006. The Company is in the process of completing the allocation of the purchase price to the net assets acquired and liabilities assumed.

Fiscal 2006 Acquisitions

In fiscal 2006, the Company did not acquire any businesses.

Fiscal 2005 Acquisitions

Solgar

On August 1, 2005, the Company acquired substantially all of the assets of Solgar Vitamin and Herb, a division of Wyeth Consumer Healthcare (“Wyeth”) for a purchase price of $115,000 in cash. Solgar, a prominent supplement company established in 1947, manufactures and distributes premium-branded nutritional supplements including multivitamins, minerals, botanicals and specialty formulas designed to meet the specific needs of men, women, children and seniors. Solgar’s headquarters and major manufacturing facility are located in Bergen County, New Jersey. Solgar’s products are sold at nearly 10,000 health food stores, natural product stores, natural pharmacies and specialty stores across the United States and internationally. The Solgar acquisition strengthened NBTY’s presence in the health food store market, as the Solgar brand focused on serving the needs of the independent health food store across the United States and internationally.

SISU

On June 8, 2005, the Company acquired SISU, Inc. (“SISU”), a Canadian-based manufacturer and distributor of premium quality vitamins and supplements sold to independent health food stores. The purchase price for this business was approximately $8,224 in cash. None of the goodwill associated with this acquisition will be deductible for tax purposes.

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The Company has not yet finalized the working capital adjustment (as defined in the purchase agreement) relating to the SISU acquisition. The purchase agreement stipulates an adjustment to the purchase price between buyer and seller for the excess or shortfall of the final working capital threshold as stated in such agreement. The Company and SISU’s seller are in a dispute with respect to the calculation of the final working capital. Upon the resolution of this dispute, final allocations to the acquired assets and liabilities could result in future adjustments to goodwill and actual results may differ from those presented herein. Although management believes that the current allocation of the estimated purchase price is reasonable, the final allocation may differ significantly from the amounts reflected in the accompanying consolidated financial statements.

Le Naturiste

On February 25, 2005, the Company acquired Le Naturiste Jean-Marc Brunet (“Le Naturiste”), a chain of retail stores located throughout Quebec. Le Naturiste is an Eastern Canadian-based company in the business of developing, packaging, marketing and retailing an in-house range of privately-labeled health and natural products. At the time of the acquisition, the Le Naturiste chain operated 99 company-owned stores and 4 franchised stores. The purchase price for this business was approximately $5,048 in cash. None of the goodwill associated with this acquisition will be deductible for tax purposes.

3. Investments

At December 31, 2006, investments consisted of auction rate securities, which are long-term variable rate bonds tied to short-term interest rates that are reset through a “dutch auction” process which occurs every 7 to 35 days. These investments are recorded at fair value; any unrealized gains/losses are included in other comprehensive income, unless a loss is determined to be other than temporary. Despite the long-term nature of their stated contractual maturities, there is a ready liquid market for these securities based on the interest rate reset mechanism. The Company classifies such securities as current assets in the accompanying balance sheets because the Company has the ability and intent to sell these securities as necessary to meet its current liquidity requirements. As of December 31, 2006, there were no unrealized holding gains or losses.

Interest income included in ‘‘Miscellaneous, net’’ in the Condensed Consolidated Statements of Income was $880 and $733 for the three months ended December 31, 2006 and 2005, respectively.

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4. Comprehensive Income

Comprehensive income includes net income, the effects of foreign currency translation, unrealized gains and losses on available-for-sale securities and changes in the fair value of the interest rate swap agreement treated as a cash flow hedge, which are charged or credited to accumulated other comprehensive income, net of tax. Comprehensive income for the three months ended December 31, 2006 and 2005 was as follows:

	For the three months
	ended December 31,
	2006		2005
Net income, as reported	$	50,856	$	22,920
Changes in:
Unrealized holding gains (losses)	5		(2		)
Interest rate swap valuation adjustments	—		2
Foreign currency translation adjustments	7,973		(5,070		)
Total comprehensive income	$	58,834	$	17,850

The change in cumulative foreign currency translation adjustment primarily relates to the Company’s investment in its European subsidiaries and fluctuations in exchange rates between their local currencies and the U.S. Dollar.

During the three months ended December 31, 2006, the Company recorded an increase in its deferred tax liability of $5,012 relating to other comprehensive income earned during the period. During the three months ended December 31, 2005, the Company recorded a decrease in its deferred tax liability of $3,187 relating to other comprehensive losses incurred during the period.

5. Inventories

The components of inventories were as follows:

	December 31,			September 30,
	2006			2006
Raw materials		$	96,108		$	89,186
Work-in-process		10,579			11,409
Finished goods		260,048			253,901
Total		$	366,735		$	354,496

6. Net Income Per Share

Basic net income per share is based on the weighted average number of common shares outstanding during the three month periods ended December 31, 2006 and 2005. Diluted net income per share includes the dilutive effect of outstanding stock options, which resulted in a dilutive effect of 2,118 and 1,841 shares for the three months ended December 31, 2006 and 2005, respectively. There were no outstanding stock options at December 31, 2006 and 2005, respectively, that would have been anti-dilutive in the calculation of dilutive net income per share.

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7. Goodwill and Other Intangible Assets, net

Goodwill

Goodwill represents the excess purchase price over the fair value of identifiable net assets of companies acquired. Goodwill and other intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). The Company tests goodwill annually as of September 30, the last day of its fourth fiscal quarter, of each year unless an event occurs that would indicate the value is impaired at an interim date.

The changes in the carrying amount of goodwill by segment for the three month period ended December 31, 2006, were as follows:

	Wholesale / US Nutrition				European Retail		Direct Response/ Puritan’s Pride			Consolidated
Balance at September 30, 2006		$	73,253		$	147,509		$	15,197		$	235,959
Acquisition of Ester-C		5,713									5,713
Foreign currency translation		(69		)	6,461						6,392
Balance at December 31, 2006		$	78,897		$	153,970		$	15,197		$	248,064

The Company is in the process of completing the allocation of the purchase price to the net assets acquired and liabilities assumed for the acquisition of Ester-C. Accordingly, the goodwill amount associated with this acquisition is preliminary.

Other Intangible Assets

Other definite lived intangibles are amortized on a straight-line basis over periods not exceeding 20 years. The carrying amounts of acquired other intangible assets as of December 31, 2006 and September 30, 2006 were as follows:

	December 31, 2006					September 30, 2006
	Gross					Gross					Amortization
	carrying		Accumulated			carrying		Accumulated			period
	amount		amortization			amount		amortization			(years)
Definite lived intangible assets
Brands	$	97,964		$	12,691	$	82,675		$	11,449		20
Customer lists	62,047			33,260		62,025			32,278			2-15
Private label and customer relationships	39,876			3,752		34,211			3,167			10-20
Trademarks and licenses	17,719			5,528		17,146			5,123			2-20
Covenants not to compete	3,026			2,731		3,034			2,705			3-5
	220,632			57,962		199,091			54,722
Indefinite lived intangible asset
Trademark	1,800			—		1,800			—
Total intangible assets	$	222,432		$	57,962	$	200,891		$	54,722

Aggregate amortization expense of definite lived intangible assets included in “Selling, general and administrative” expenses for the three months ended December 31, 2006 and 2005 was approximately $3,308 and $3,123, respectively.

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Assuming no changes in the Company’s definite lived intangible assets, estimated amortization expense for each of the five succeeding fiscal years is as follows:

For the fiscal year ending September 30,
2007	$	12,986
2008	$	12,834
2009	$	11,609
2010	$	11,506
2011	$	11,465

8. Accrued Expenses and Other Current Liabilities

The components of accrued expenses and other current liabilities were as follows:

	December 31,			September 30,
	2006			2006
Accrued compensation and related taxes		$	27,593		$	26,247
Income taxes payable		32,702			22,268
Accrued purchases		19,190			13,379
Litigation		11,726			12,294
Other		51,284			53,580
		$	142,495		$	127,768

9. Long-Term Debt

Long-term debt consisted of the following:

	December 31,			September 30,
	2006			2006
Senior debt:
7-1/8% Senior subordinated notes due 2015 (“7-1/8% Notes”), net of unamortized discount of $1,526 and $1,557 at December 31, 2006 and September 30, 2006, respectively (a)		$	188,474		$	188,443
Mortgage:
First mortgage payable in monthly principal and interest (7.375%) installments of $55, maturing May 2011		2,490			2,608
Capital Leases:
Capital lease obligations payable in monthly principal and interest (weighted-average imputed interest rate of 3.5%) installments of $28, maturing on or before June 2009		750			733
Multicurrency Term Loan Facility; interest at LIBOR plus margin; maturing December 2008 (b)		18,754			17,921
		210,468			209,705
Less: current portion		797			18,660
Total		$	209,671		$	191,045

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(a) In September 2005, the Company issued 10-year 7 1/8% Senior Subordinated Notes due 2015 in the aggregate principal amount of $200,000 (the “7 1/8% Notes”). The 7 1/8% Notes are guaranteed by all of the Company’s domestic subsidiaries and are full, unconditional and joint and several and uncollaterized and subordinated in right of payment for all existing and future indebtedness of the Company. The 7 1/8% Notes are subject to redemption, at the option of the Company, in whole or in part, at any time on or after October 1, 2010, and prior to maturity at certain fixed redemption prices plus accrued interest. In addition, on or prior to October 1, 2008, the Company may redeem in the aggregate up to 35% of the 7 1/8% Notes with the net cash proceeds received by the Company from certain types of equity offerings (as defined), at a redemption value equal to 107.125% of the principal amount plus accrued interest, provided that at least 65% of the aggregate principal amount of notes remains outstanding immediately after any such redemption. The notes do not have any sinking fund requirements. Interest is paid semi-annually on April 1st and October 1st. During fiscal 2006, the Company purchased, on the open market, $10,000 face value of the 7 1/8% Notes for $9,575. The Company recorded a gain on extinguishment of debt of $425 and wrote-off $264 of the related unamortized deferred financing fees during the fiscal year ended September 30, 2006 as a result of this transaction.

(b) In September 2006, the Company entered into a multicurrency term facility agreement with JP Morgan Chase Bank. During the fiscal quarter ended December 31, 2006, the Company amended the terms of the facility to extend the maturity to December 2008. As part of the amendment, the Company is required to maintain cash collateral in the amount of the outstanding loan balance. As a result, the cash collateral, which is considered restricted as to withdrawal or use, of $18,754, is included in Other Assets within the Condensed Consolidated Balance Sheet at December 31, 2006. At December 31, 2006, the amount outstanding under this facility was a loan denominated in the British Pounds Sterling in the amount of £9,575, which approximated $18,754 in US Dollars based upon the exchange rate as of December 31, 2006. Interest is payable in quarterly installments at LIBOR plus applicable margin. At December 31, 2006, the interest rate was approximately 6.30%.

Revolving Credit Agreement (“RCA”)

On November 3, 2006, the Company entered into a Revolving Credit Agreement (“RCA”) with JP Morgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, and Bank of America, N.A., BNP Paribas, Citibank, N.A., and HSBC Bank USA, National Association, as Co-Syndication Agents. The RCA provides for revolving credit loans in the aggregate principal amount of up to $325,000 to be used for (a) the repayment of all obligations outstanding under the Company’s prior credit agreement (which consisted solely of commitment fees since the Company had previously repaid all amounts borrowed under the prior credit agreement), (b) working capital and other general corporate purposes, and (c) acquisitions. In connection with the RCA, the Company’s prior credit agreement was terminated. At December 31, 2006, there were no borrowings outstanding under the RCA. The terms and requirements of the RCA are substantially the same as the prior credit agreement. The Company’s obligations under the RCA are secured by substantially all of its assets and are guaranteed by certain subsidiaries of the Company, in each case to the extent set forth in the Guarantee and Collateral Agreement (the “Guarantee”) that was entered into on November 3, 2006.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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Interest rates charged on borrowings can vary depending on the interest rate option utilized. Options for the rate can either be the Alternate Base Rate or LIBOR plus applicable margin. The Company is required to pay a commitment fee, which varies between .20% and .375% per annum, depending on the Company’s ratio of consolidated indebtedness to consolidated Adjusted EBITDA, on any unused portion of the revolving credit facility. The RCA defines Adjusted EBITDA as net income, excluding the aggregate amount of all non-cash losses reducing net income (excluding any non-cash losses that results in an accrual of a reserve for cash charges in any future period and the reversal thereof), plus interest, taxes, depreciation and amortization. Virtually all of the Company’s assets are collateralized under the RCA. Under the RCA, the Company is obligated to maintain various financial ratios and covenants that are typical for such facilities. The Company was in compliance with all financial covenants under the RCA as of December 31, 2006.

Capital Lease Obligations

The Company entered into various capital leases for computer equipment which provide the Company with bargain purchase options at the end of such lease terms.

10. Income Taxes

The Company’s provision for income taxes is impacted by a number of factors, including federal taxes, its international tax structure, state tax rates in the jurisdictions where the Company conducts business, and the Company’s ability to utilize state tax credits that expire between 2013 and 2016. Therefore, the Company’s overall effective income tax rate could vary as a result of these factors. The effective income tax rate for the three months ended December 31, 2006 was 33.8%, compared to 25.3% for the prior comparable period. The effective income tax rates are generally less than the U.S. federal statutory tax rate, primarily due to the enhanced structure of foreign subsidiaries which could also continue to impact future fiscal quarters, as well as the impact of a provision of the American Jobs Creation Act of 2004 related to Foreign Earnings Repatriation which only impacted the quarters in fiscal year 2006.

11. Impairments of Long-Lived Assets

In accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), carrying values are reviewed for impairment whenever events or changes in circumstances indicate that the assets’ carrying values may not be recoverable from the estimated future cash flows. The estimated future undiscounted cash flows associated with the asset would be compared to the asset’s carrying amount to determine if a write down to a new depreciable basis is required. If required, an impairment charge is recorded based on an estimate of future discounted cash flows. Management considers a history of cash flow losses on a store by store basis to be its primary indicator of potential impairment.

During the three months ended December 31, 2006 and 2005, management evaluated certain retail stores that had reached a certain level of maturity and were sustaining operating losses for an impairment review under the provisions of SFAS 144. During the three months ended December 31, 2006 and 2005, the Company recognized impairment charges of $353 and $2,125, respectively on assets to be held and used. The impairment charges related primarily to leasehold improvements and furniture and fixtures for

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North American Retail operations and were included in the Consolidated Statements of Income under the caption “Selling, general and administrative” expenses for the three months ended December 31, 2006 and 2005, respectively.

12. Employee Benefits Plans

The Company maintains defined contribution plans which collectively cover substantially all full-time U.S. based employees. The defined contribution plans are funded through employer contributions to the Employee Stock Ownership Plan and through employees’ contributions and employer’s matching contributions to the 401(k) plan. The accompanying financial statements reflect contributions to these plans of approximately $475 and $668 for the three months ended December 31, 2006 and 2005, respectively.

Certain international subsidiaries of the Company (mainly in the U.K.) have company sponsored defined contribution plans to comply with local statutes and practices. The accompanying financial statements reflect contributions to these plans by such subsidiaries in the approximate amount of $383 and $259 for the three months ended December 31, 2006 and 2005, respectively.

13. Segment Information

The Company is organized by sales segments on a worldwide basis. The Company’s management reporting system evaluates performance based on a number of factors; however, the primary measures of performance are the net sales, gross profit and income or loss from operations (prior to corporate allocations) of each segment, as these are the key performance indicators reviewed by management. Operating income or loss for each segment does not include corporate general and administrative expenses, interest expense and other miscellaneous income/expense items. Corporate general and administrative expenses include, but are not limited to: human resources, legal, finance, IT, and various other corporate level activity related expenses. Such unallocated expenses remain within corporate. Corporate also includes the manufacturing assets of the Company and, accordingly, certain items associated with these activities, remain unallocated in the corporate segment. Management evaluates the European Retail operations excluding the impact of any intercompany transfer pricing.

The Company reports four segments: Wholesale / US Nutrition; North American Retail; European Retail; and Direct Response/Puritan’s Pride. All of the Company’s products fall into one or more of these four segments. The Wholesale / US Nutrition segment is comprised of several divisions, each targeting specific market groups which include wholesalers, distributors, supermarket and drug store chains, pharmacies, health food stores, bulk and international customers. The North American Retail segment generates revenue through its 473 owned and operated Vitamin World stores selling proprietary brand and third-party products and through its Canadian operation of 92 Company-owned Le Naturiste stores and 1 franchised Le Naturiste store. The European Retail segment generates revenue through its 597 Company-owned stores and 22 franchised stores. Such revenue consists of sales of proprietary brand and third-party products as well as franchise fees. The Direct Response/Puritan’s Pride segment generates revenue through the sale of proprietary brand and third-party products primarily through mail order catalog and the Internet. Catalogs are strategically mailed to customers who order by mail, internet, or by phoning customer service representatives in New York, Illinois or the United Kingdom.

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The following table represents key financial information of the Company’s business segments:

	For the three months
	ended December 31,
	2006			2005
Wholesale / US Nutrition:
Net sales	$	246,728		$	224,239
Income from operations	$	49,589		$	23,981
Depreciation and amortization	$	2,789		$	2,554
Capital expenditures	$	329		$	965
North American Retail:
Net sales	$	54,973		$	58,442
Income (loss) from operations	$	1,087		$	(3,392	)
Depreciation and amortization	$	1,137		$	1,473
Capital expenditures	$	178		$	896
Stores open at end of period	566			625
European Retail:
Net sales	$	152,966		$	139,566
Income from operations	$	38,824		$	35,788
Depreciation and amortization	$	2,828		$	2,658
Capital expenditures	$	2,474		$	897
Stores open at end of period	619			610
Direct Response/Puritan’s Pride:
Net sales	$	51,570		$	33,023
Income from operations	$	15,593		$	6,628
Depreciation and amortization	$	1,265		$	1,255
Capital expenditures	$	660		$	272
Corporate/Manufacturing:
Corporate expenses	$	(24,605	)	$	(24,499	)
Interest	$	(5,063	)	$	(8,992	)
Miscellaneous, net	$	1,339		$	1,149
Depreciation and amortization—manufacturing	$	4,331		$	4,331
Depreciation and amortization—other	$	1,881		$	1,873
Capital expenditures—manufacturing	$	1,047		$	5,961
Capital expenditures—other	$	1,524		$	497

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	For the three months
	ended December 31,
	2006			2005
Consolidated totals:
Net sales	$	506,237		$	455,270
Income from operations	$	80,488		$	38,506
Depreciation and amortization	$	14,231		$	14,144
Capital expenditures	$	6,212		$	9,488
Reconciliation to Income before provision for income taxes
Wholesale / US Nutrition:
Income from operations	$	49,589		$	23,981
Retail:
North America—Income (loss) from operations	1,087			(3,392		)
Europe—Income from operations	38,824			35,788
Direct Response/Puritan’s Pride:
Income from operations	15,593			6,628
Corporate / Manufacturing:
Corporate expenses	(24,605		)	(24,499		)
Interest	(5,063		)	(8,992		)
Miscellaneous, net	1,339			1,149
Income before provision for income taxes	$	76,764		$	30,663

The Company’s net sales by location of customer were as follows:

	For the three months
	ended December 31,
	2006		2005
Net sales by location of customer
United States	$	305,239	$	275,566
United Kingdom	145,783		133,539
Holland	13,955		11,964
Ireland	4,925		3,882
Canada	8,359		8,523
Other foreign countries	27,976		21,796
Consolidated net sales	$	506,237	$	455,270

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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The Company’s assets by segment were as follows:

	December 31,			September 30,
	2006			2006
Wholesale / US Nutrition		$	513,503		$	469,875
North American Retail / Vitamin World		44,793			47,298
European Retail /Holland & Barrett / GNC (UK)		367,315			312,973
Direct Response / Puritan’s Pride		66,596			64,784
Corporate / Manufacturing		405,445			409,380
Consolidated assets		$	1,397,652		$	1,304,310

Approximately 35% of the Company’s net sales during the three months ended December 31, 2006 and 2005 were denominated in currencies other than U.S. dollars, principally British Pounds, Euros and Canadian dollars. A significant weakening of such currencies versus the U.S. dollar could have a material adverse effect on the Company.

Foreign subsidiaries accounted for the following percentages of total assets and total liabilities:

	December 31, 2006			September 30, 2006
Total Assets		30	%		28	%
Total Liabilities		19	%		19	%

14. Related Party Transactions

The Company maintains a consulting agreement with Rudolph Management Associates, Inc. for the services of Arthur Rudolph, a director of the Company and the father of Scott Rudolph, the Company’s Chief Executive Officer. The agreement requires Mr. Rudolph to provide consulting services to the Company through December 31, 2007, in exchange for a consulting fee of $450 per year, payable monthly. In addition, Mr. Rudolph receives certain fringe benefits accorded to other executives of the Company. During the three months ended December 31, 2006 and 2005, the Company made payments under this agreement of $113 and $113, respectively.

An entity owned by a relative of a director and the Chief Executive Officer received sales commissions from the Company of $136 and $163 for the three months ended December 31, 2006 and 2005, respectively.

15. Litigation Summary and Indemnification of Officers and Directors

Prohormone products

New York Action

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vitamin and nutritional supplement industry. By Decision and Order filed July 18, 2006, the Court granted Vitamin World’s motion for summary judgment and dismissed all claims. The plaintiffs have appealed.

California Action

On July 25, 2002, a putative consumer class-action lawsuit was filed in California state court against MET-Rx USA, Inc. (“MET-Rx”), an indirect subsidiary of Rexall Sundown, Inc. (“Rexall”), claiming that the advertising and marketing of certain prohormone supplements were false and misleading, or alternatively, that the prohormone products contained ingredients that were controlled substances under California law. Plaintiffs seek equitable and monetary relief. On June 18, 2004, this case was coordinated with several other class-action cases brought against other companies relating to the sale of products containing androstenediol, one of the prohormones contained in MET-Rx products. The coordinated proceedings have been assigned to a coordination judge for further pretrial proceedings. No trial date has been set, the court has not yet certified a class, and the matter is currently in discovery. The Company has defended vigorously against the claims asserted. Because this action is still in the early stages, no determination can be made at this time as to its final outcome, nor can its materiality be accurately ascertained.

New Jersey Action

In March 2004, a putative class-action lawsuit was filed in New Jersey against MET-Rx, claiming that the advertising and marketing of certain prohormone supplements were false and misleading and that plaintiff and the putative class of New Jersey purchasers of these products were entitled to damages and injunctive relief. Because these allegations are virtually identical to allegations made in a putative nationwide class-action previously filed in California, the Company moved to dismiss or stay the New Jersey action pending the outcome of the California action. The motion was granted, and the New Jersey action is stayed at this time.

Florida Action

In July 2002, a putative class-action lawsuit was filed in Florida against MET-Rx, claiming that the advertising and marketing of certain prohormone supplements were false and misleading, that the products were ineffective, and alternatively, that the products were anabolic steroids whose sale violated Florida law. Plaintiff seeks equitable and monetary relief. This case has been largely inactive since its filing. No determination can be made at this time as to its final outcome, nor can its materiality be accurately ascertained.

Nutrition Bars

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on relevant cases before the California Supreme Court. Because it is unclear when the Supreme Court will issue rulings in these cases, Rexall cannot estimate how long the case will be stayed. Based upon the information available at this time, the Company believes that its accrual is adequate for the exposure in the nutrition bar litigation. However, no determination can be made at this time as to the final outcome of this case, nor can its materiality be accurately ascertained.

Shareholder Litigation

From June 24, 2004 through September 3, 2004, six separate shareholder class-actions were filed against the Company and certain of its officers and directors in the U.S. District Court for the Eastern District of New York, on behalf of shareholders who purchased shares of the Company’s common stock between February 9, 2004 and July 22, 2004 (the potential “Class Period”). The actions allege that the Company failed to disclose material facts during the Class Period that resulted in a decline in the price of its stock after June 16, 2004 and July 22, 2004, respectively. The Court consolidated the six class-actions in March 2005 and appointed lead plaintiff and counsel. The lead plaintiffs filed a consolidated amended complaint alleging an amended class period from November 10, 2003 to July 22, 2004. Along with the officers and directors, the Company filed a motion to dismiss the action. The motion was denied on May 1, 2006, and the matter is now in discovery.

A purported shareholder of the Company delivered a demand in July 2004 that the Company’s board of directors commence a civil action against certain of the Company’s officers and directors based on certain of the allegations described above. The Company’s board of directors, based on the investigation and recommendation of a special committee of the Board, determined not to commence any such lawsuit. On or about April 28, 2005, a state court derivative action was filed in the Supreme Court of the State of New York, Suffolk County, by this purported shareholder alleging wrongful rejection of his demand and breaches of fiduciary duties by some of the Company’s individual directors and officers. The Company is named as a nominal defendant. This derivative complaint is predicated upon the same allegations as a previously-dismissed Eastern District consolidated derivative action. Along with the named officers and directors, the Company filed a motion to dismiss. On January 3, 2007, the Court directed plaintiff to serve and file within 90 days an amended complaint with allegations sufficient to cure deficiencies in plaintiff’s prior complaint, observing that plaintiff could not have satisfied the requirements to state a claim under Delaware law at the time plaintiff originally filed the derivative complaint. In the event that plaintiff files an amended complaint, defendants will renew their motion to dismiss for failure to state a claim.

The Company and its named officers and directors believe these suits are without merit and vigorously have defended these actions. Given the stages of the proceedings, however, no determination can be made at this time as to the final outcome of these actions, nor can their materiality be accurately ascertained. The Company maintains policies of directors’ and officers’ personal liability insurance.

In addition to the foregoing, other regulatory inquiries, claims, suits and complaints (including product liability and intellectual property claims) arise in the ordinary course of the Company’s business. The Company believes that such other inquiries, claims, suits and complaints would not have a material adverse effect on the Company’s consolidated financial condition or results of operations, if adversely determined against the Company.

NBTY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollars and shares in thousands, except per share amounts)

Indemnification of Officers and Directors

The Company is incorporated under the laws of Delaware. Section 145(a) of the Delaware General Corporation Law (the “DGCL”) provides that a corporation may indemnify officers and directors of the corporation against expenses incurred by them if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceedings, if they had no reasonable cause to believe that their conduct was unlawful.

As permitted by the DGCL, the Company has provided in its certificate of incorporation for the indemnification to the full extent permitted by Section 145 of the DGCL of the persons who may be indemnified pursuant thereto. Further, the Company has provided in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit.

Finally, the directors and officers of the Company are covered by directors’ and officers’ insurance policies maintained by the Company.

16. Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes

The 71¤8% Notes are guaranteed by all of the Company’s domestic subsidiaries. The Solgar domestic subsidiary became a guarantor of the 71¤8% Notes effective July 1, 2006. The Company’s domestic subsidiaries are wholly-owned by the Company. These guarantees are full, unconditional and joint and several. The following condensed consolidating financial information presents:

(1) Condensed consolidating financial statements as of December 31, 2006 and September 30, 2006 and for the three months ended December 31, 2006 and 2005 of (a) NBTY Inc., the parent and issuer, (b) the guarantor subsidiaries, (c) the non-guarantor subsidiaries and (d) the Company on a consolidated basis, and

(2) Elimination entries necessary to consolidate NBTY Inc., the parent, with guarantor and non-guarantor subsidiaries.

NBTY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollars and shares in thousands, except per share amounts)

The condensed consolidating financial statements are presented using the equity method of accounting for investments in wholly-owned subsidiaries. Under this method, the investments in subsidiaries are recorded at cost and adjusted for the Company’s share of the subsidiaries’ cumulative results of operations, capital contributions, distributions and other equity changes. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. This financial information should be read in conjunction with the consolidated financial statements and other notes related thereto.

NBTY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
AS OF DECEMBER 31, 2006

	Parent			Guarantor				Non- Guarantor
	Company			Subsidiaries				Subsidiaries				Eliminations				Consolidated
Assets
Current assets:
Cash and cash equivalents	$	6,165			$	(3,190	)		$	47,021			$	—			$	49,996
Investments	59,874				—				—				—				59,874
Accounts receivable, net	—				87,151				13,793				(6,842		)		94,102
Intercompany	(832,429		)		201,838				630,591				—				—
Inventories	—				290,061				83,340				(6,666		)		366,735
Deferred income taxes	—				25,923				747				—				26,670
Prepaid expenses and other
current assets	—				19,513				19,487				—				39,000
Total current assets	(766,390		)		621,296				794,979				(13,508		)		636,377
Property, plant and equipment, net	36,819				217,443				65,372				—				319,634
Goodwill	—				99,557				148,507				—				248,064
Other intangible assets, net	—				133,931				30,539				—				164,470
Other assets	—				10,313				18,794				—				29,107
Note Receivable - Intercompany	391,720				—				—				(391,720		)		—
Investments in subsidiaries	1,493,559				—				—				(1,493,559		)		—
Total assets	$	1,155,708			$	1,082,540			$	1,058,191			$	(1,898,787	)		$	1,397,652
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt	$	619			$	178			$	—			$	—			$	797
Accounts payable	—				39,610				31,430				—				71,040
Accrued expenses and other current liabilities	—				106,274				43,063				(6,842		)		142,495
Total current liabilities	619				146,062				74,493				(6,842		)		214,332
Long-term debt, net of current portion	190,676				241				410,474				(391,720		)		209,671
Deferred income taxes	63,319				(3,520		)		4,632				—				64,431
Other liabilities	2,796				4,779				3,345				—				10,920
Total liabilities	257,410				147,562				492,944				(398,562		)		499,354
Commitments and contingencies
Stockholders’ Equity:
Common stock	538				—				—				—				538
Capital in excess of par	138,809				390,286				301,271				(691,557		)		138,809
Retained earnings	721,916				544,692				281,876				(826,568		)		721,916
Accumulated other comprehensive income	37,035				—				(17,900		)		17,900				37,035
Total stockholders’ equity	898,298				934,978				565,247				(1,500,225		)		898,298
Total liabilities and stockholders’ equity	$	1,155,708			$	1,082,540			$	1,058,191			$	(1,898,787	)		$	1,397,652

NBTY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollars and shares in thousands, except per share amounts)

NBTY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
AS OF SEPTEMBER 30, 2006

	Parent			Guarantor			Non- Guarantor
	Company			Subsidiaries			Subsidiaries				Eliminations				Consolidated
Assets
Current assets:
Cash and cash equivalents	$	59,966			$	9,385		$	20,454			$	—			$	89,805
Accounts receivable, net	—				72,932			16,222				—				89,154
Intercompany	(808,655		)		165,124			643,531				—				—
Inventories	—				284,717			76,729				(6,950		)		354,496
Deferred income taxes	—				25,923			713				—				26,636
Prepaid expenses and other current assets	—				25,221			17,040				—				42,261
Total current assets	(748,689		)		583,302			774,689				(6,950		)		602,352
Property, plant and equipment, net	37,613				208,065			63,759				—				309,437
Goodwill	—				93,844			142,115				—				235,959
Other intangible assets, net	—				116,141			30,028				—				146,169
Other assets	—				10,354			39				—				10,393
Note Receivable—Intercompany	374,320				—			—				(374,320		)		—
Investments in subsidiaries	1,393,822				—			—				(1,393,822		)		—
Total assets	$	1,057,066			$	1,011,706		$	1,010,630			$	(1,775,092	)		$	1,304,310
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt	$	608			$	131		$	17,921			$	—			$	18,660
Accounts payable	—				40,943			23,268				—				64,211
Accrued expenses and other current liabilities	4,819				84,807			38,142				—				127,768
Total current liabilities	5,427				125,881			79,331				—				210,639
Long-term debt, net of current portion	190,805				240			374,320				(374,320		)		191,045
Deferred income taxes	19,883				31,013			4,380				—				55,276
Other liabilities	1,519				3,179			3,220				—				7,918
Total liabilities	217,634				160,313			461,251				(374,320		)		464,878
Commitments and contingencies
Stockholders’ Equity:
Common stock	538				—			—				—				538
Capital in excess of par	138,777				352,019			301,272				(653,291		)		138,777
Retained earnings	671,060				499,374			261,508				(760,882		)		671,060
Accumulated other comprehensive income	29,057				—			(13,401		)		13,401				29,057
Total stockholders’ equity	839,432				851,393			549,379				(1,400,772		)		839,432
Total liabilities and stockholders’ equity	$	1,057,066			$	1,011,706		$	1,010,630			$	(1,775,092	)		$	1,304,310

NBTY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollars and shares in thousands, except per share amounts)

NBTY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
THREE MONTHS ENDED DECEMBER 31, 2006

	Parent			Guarantor				Non- Guarantor
	Company			Subsidiaries				Subsidiaries				Eliminations				Consolidated
Net sales	$	—			$	349,550			$	175,442			$	(18,755	)		$	506,237
Costs and expenses:
Cost of sales	—				192,562				73,240				(18,755		)		247,047
Advertising, promotion and catalog	—				22,796				3,967				—				26,763
Selling, general and administrative	24,605				64,265				63,069				—				151,939
	24,605				279,623				140,276				(18,755		)		425,749
Income from operations	(24,605		)		69,927				35,166				—				80,488
Other income (expense):
Equity in income of subsidiaries	65,686				—				—				(65,686		)		—
Intercompany interest	6,699				—				(6,699		)		—				—
Interest	(4,760		)		(14		)		(289		)		—				(5,063		)
Miscellaneous, net	612				(192		)		919				—				1,339
	68,237				(206		)		(6,069		)		(65,686		)		(3,724		)
Income before provision for income taxes	43,632				69,721				29,097				(65,686		)		76,764
(Benefit)/ provision for income taxes	(7,224		)		24,403				8,729				—				25,908
Net income	$	50,856			$	45,318			$	20,368			$	(65,686	)		$	50,856

NBTY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollars and shares in thousands, except per share amounts)

NBTY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
THREE MONTHS ENDED DECEMBER 31, 2005

	Parent			Guarantor			Non- Guarantor
	Company			Subsidiaries			Subsidiaries				Eliminations				Consolidated
Net sales	$	—			$	290,809		$	174,966			$	(10,505	)		$	455,270
Costs and expenses:
Cost of sales	—				179,273			77,181				(10,505		)		245,949
Advertising, promotion and catalog	—				20,952			4,208				—				25,160
Selling, general and administrative	21,406				66,511			57,738				—				145,655
	21,406				266,736			139,127				(10,505		)		416,764
Income from operations	(21,406		)		24,073			35,839				—				38,506
Other income (expense):
Equity in income of subsidiaries	37,442				—			—				(37,442		)		—
Intercompany interest	5,519				—			(5,519		)		—				—
Interest	(8,992		)		—			—				—				(8,992		)
Miscellaneous, net	304				428			417				—				1,149
	34,273				428			(5,102		)		(37,442		)		(7,843		)
Income before provision for income taxes	12,867				24,501			30,737				(37,442		)		30,663
(Benefit)\provision for income taxes	(10,053		)		8,575			9,221				—				7,743
Net income	$	22,920			$	15,926		$	21,516			$	(37,442	)		$	22,920

NBTY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollars and shares in thousands, except per share amounts)

NBTY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 2006

	Parent			Guarantor				Non-Guarantor
	Company			Subsidiaries				Subsidiaries				Eliminations				Consolidated
Cash flows from operating activities:
Net income	$	50,856			$	45,318			$	20,368			$	(65,686	)		$	50,856
Adjustments to reconcile net income to net cash & cash equivalents provided by operating activities:
Equity in earnings of subsidiaries	(65,686		)		—				—				65,686				—
Provision relating to impairments and disposals of property, plant and equipment	10				361				21				—				392
Depreciation and amortization	1,880				8,986				3,365				—				14,231
Foreign currency transaction loss/(gain)	825				(413		)		(94		)		—				318
Amortization and write-off of deferred financing costs	1,303				—				—				—				1,303
Amortization and write-off of bond discount	31				—				—				—				31
(Recovery of) provision for doubtful accounts	—				(160		)		25				—				(135		)
Inventory reserves	—				1,657				635				—				2,292
Deferred income taxes	—				3,886				—				—				3,886
Excess income tax benefit from exercise of stock options	(20		)		—				—				—				(20		)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	—				(4,600		)		2,084				—				(2,516		)
Inventories	—				(765		)		(4,322		)		—				(5,087		)
Prepaid expenses and other current assets	—				6,118				(1,675		)		—				4,443
Other assets	—				(163		)		—				—				(163		)
Accounts payable	—				(4,189		)		7,023				—				2,834
Accrued expenses and other liabilities	—				6,919				3,322				—				10,241
Net cash (used in) provided by operating activities	(10,801		)		62,955				30,752				—				82,906
Cash flows from investing activities:
Intercompany accounts	57,124				(71,578		)		14,454				—				—
Purchase of property, plant and equipment	(876		)		(3,476		)		(1,860		)		—				(6,212		)
Purchase of available-for-sale investments	(214,718		)		—				—				—				(214,718		)
Proceeds from sale of available-for-sale investments	154,844				—				—				—				154,844
Cash paid for acquisitions, net of cash acquired	(38,219		)		—				—				—				(38,219		)
Restricted cash	—				—				(18,360		)		—				(18,360		)
Net cash used in investing activities	(41,845		)		(75,054		)		(5,766		)		—				(122,665		)
Cash flows from financing activities:
Principal payments under long-term debt agreements and capital leases	(151		)		(45		)		—				—				(196		)
Payments for financing fees	(1,649		)		—				—				—				(1,649		)
Excess income tax benefit from exercise of stock options	20				—				—				—				20
Proceeds from stock options exercised	12				—				—				—				12
Net cash used in financing activities	(1,768		)		(45		)		—				—				(1,813		)
Effect of exchange rate changes on cash and cash equivalents	613				(431		)		1,581				—				1,763
Net (decrease) increase in cash and cash equivalents	(53,801		)		(12,575		)		26,567				—				(39,809		)
Cash and cash equivalents at beginning of period	59,966				9,385				20,454				—				89,805
Cash and cash equivalents at end of period	$	6,165			$	(3,190	)		$	47,021			$	—			$	49,996

NBTY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollars and shares in thousands, except per share amounts)

NBTY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 2005

	Parent			Guarantor				Non-Guarantor
	Company			Subsidiaries				Subsidiaries				Eliminations				Consolidated
Cash flows from operating activities:
Net income	$	22,920			$	15,926			$	21,516			$	(37,442	)		$	22,920
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
Equity in earnings of subsidiaries	(37,442		)		—				—				37,442				—
Provision relating to impairments and disposals of property, plant and equipment	—				2,281				—				—				2,281
Depreciation and amortization	1,873				8,185				4,086				—				14,144
Foreign currency transaction loss (gain)	95				(74		)		255				—				276
Amortization and write off of deferred financing costs	1,554				—				—				—				1,554
Amortization and write off of bond discount	204				—				—				—				204
Provision for doubtful accounts	—				192				63				—				255
Inventory reserves	—				2,708				75				—				2,783
Deferred income taxes	20				840				301				—				1,161
Excess income tax benefit from exercise of stock options	(15		)		—				—				—				(15		)
Changes in operating assets and liabilities:
Accounts receivable	—				(17,164		)		(142		)		5,424				(11,882		)
Inventories	—				46,508				6,242				—				52,750
Prepaid expenses and other current assets	—				5,056				5,000				—				10,056
Other assets	—				2				—				—				2
Accounts payable	—				(2,473		)		5,356				—				2,883
Accrued expenses and other liabilities	13,910				(5,562		)		(2,684		)		(5,424		)		240
Net cash provided by operating activities	3,119				56,425				40,068				—				99,612
Cash flows from investing activities:
Intercompany accounts	61,009				(51,291		)		(9,718		)		—				—
Purchase of property, plant and equipment	(407		)		(7,720		)		(1,361		)		—				(9,488		)
Proceeds from sale of property, plant and equipment	—				—				41				—				41
Proceeds from sale of available-for-sale investments	39,900				—				—				—				39,900
Purchase price settlements, net	1,586				—				—				—				1,586
Purchase of intangible assets	—				—				(228		)		—				(228		)
Net cash provided by (used in) investing activities	102,088				(59,011		)		(11,266		)		—				31,811
Cash flows from financing activities:
Principal payments under long-term debt agreements	(121,220		)		—				—				—				(121,220		)
Principal payments under the Revolving Credit Facility	(6,000		)		—				—				—				(6,000		)
Excess income tax benefit from exercise of stock options	15				—				—				—				15
Proceeds from stock options exercised	18				—				—				—				18
Net cash used in financing activities	(127,187		)		—				—				—				(127,187		)
Effect of exchange rate changes on cash and cash equivalents	(21		)		—				(1,639		)		—				(1,660		)
Net (decrease) increase in cash and cash equivalents	(22,001		)		(2,586		)		27,163				—				2,576
Cash and cash equivalents at beginning of period	28,028				(2,085		)		41,339				—				67,282
Cash and cash equivalents at end of period	$	6,027			$	(4,671	)		$	68,502			$	—			$	69,858

NBTY, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

(Dollars and shares in thousands, except per share amounts)

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

READERS ARE CAUTIONED THAT CERTAIN STATEMENTS CONTAINED HEREIN ARE FORWARD-LOOKING STATEMENTS AND SHOULD BE READ IN CONJUNCTION WITH THE COMPANY’S DISCLOSURES UNDER THE HEADING “FORWARD LOOKING STATEMENTS” INCLUDED ELSEWHERE HEREIN. THE FOLLOWING DISCUSSION SHOULD ALSO BE READ IN CONJUNCTION WITH THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO INCLUDED ELSEWHERE HEREIN AND THE 2006 FORM 10-K.

NBTY is a leading vertically integrated manufacturer, marketer, distributor and retailer of a broad line of high-quality, value-priced nutritional supplements in the United States and throughout the world. The Company markets approximately 22,000 products under several brands, including Nature’s Bounty®, Vitamin World®, Puritan’s Pride®, Holland & Barrett®, Rexall®, Sundown®, MET-Rx®, WORLDWIDE Sport Nutrition®, American Health®, DeTuinen®, Le Naturiste™, SISU®, Solgar® and Ester-C®.

NBTY markets its products through four distribution channels:

· Wholesale/US Nutrition: wholesale distribution to drug store chains, supermarkets, discounters, independent pharmacies, and health food stores,

· North American Retail: Vitamin World and Nutrition Warehouse retail stores in the U.S. and Le Naturiste retail stores in Canada,

· European Retail: Holland & Barrett and GNC (UK), Nature’s Way and DeTuinen retail stores in the U.K., Ireland, and the Netherlands, respectively and

· Direct Response: Puritan’s Pride sales via catalogs and Internet.

Retail store activity, including both Company-operated and independent franchised stores, during the three months ended December 31, 2006 and 2005 were as follows:

	Three months ended December 31,
	2006			2005
North American Retail stores:
Open at beginning of the period		572			643
Opened during the period		1			5
Closed during the period		(7	)		(23	)
Open at end of the period		566			625
European Retail stores:
Open at beginning of the period		617			612
Opened during the period		2			2
Closed during the period		-			(4	)
Open at end of the period		619			610

The North American Retail segment generates revenue through its 473 owned and operated Vitamin World stores selling proprietary brand and third-party products and through its recently acquired

NBTY, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (Continued)

(Dollars and shares in thousands, except per share amounts)

Canadian operation of 92 Company-operated Le Naturiste stores and 1 franchised Le Naturiste store. The European Retail segment generates revenue through its 597 Company-owned and operated stores and 22 franchised stores.

On October 2, 2006 the Company acquired 100% of the stock of Zila Nutraceuticals, Inc., a division of Zila, Inc., for $37,500 in cash and up to a $3,000 contingent cash payment which is based upon the EBITDA performance of this acquisition during the one-year period following the closing. Once acquired, the Company changed the name of Zila Nutraceuticals, Inc. to The Ester-C Company (“Ester-C”). Ester-C manufactures and markets Ester-C®, which is known throughout multiple markets including health food stores and mass market retailers. This acquisition represents an opportunity for the Company to enhance its presence in key markets. For more information regarding the Company’s acquisitions, see the Notes to the Company’s Condensed Consolidated Financial Statements contained elsewhere herein. The Company continues to evaluate acquisition opportunities across the industry and around the world.

Critical Accounting Policies and Estimates:

The Company’s significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2006. A discussion of the Company’s critical accounting policies and estimates are included in Management’s Discussion and Analysis of Results of Operations and Financial Condition in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2006. Management has discussed the development and selection of these policies with the Audit Committee of the Company’s Board of Directors, and the Audit Committee of the Board of Directors has reviewed the Company’s disclosures of these policies. There have been no material changes to the critical accounting policies or estimates reported in the Management’s Discussion and Analysis section of the audited financial statements for the fiscal year ended September 30, 2006 as filed with the Securities and Exchange Commission.

General:

The Company recognizes revenue in accordance with the Securities and Exchange Commission’s Staff Accounting Bulletin 104. The Company recognizes product sales revenue when title and risk of loss have transferred to the customer, there is persuasive evidence of an arrangement, delivery has occurred, the sales price is fixed or determinable and collectibility is reasonably assured. Since the terms for most sales within the wholesale and direct response segments are F.O.B. destination, generally title and risk of loss transfer to the customer at the time the product is received by the customer. With respect to its own retail store operations, the Company recognizes revenue upon the sale of its products to retail customers. The Company’s net sales represent gross sales invoiced to customers, less certain related charges for discounts, returns, and other promotional program incentive allowances. Accruals provided for these items are presented in the consolidated financial statements as reductions to sales. Cost of sales includes the cost of raw materials and all labor and overhead associated with the manufacturing and packaging of the products. Gross margins are affected by, among other things, changes in the relative sales mix among the Company’s four distribution channels, the level of promotional programs offered, as well as gross margins of acquired entities. Historically, gross margins from the Company’s direct response/e-commerce and retail sales have typically been higher than gross margins from wholesale sales.

NBTY, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (Continued)

(Dollars and shares in thousands, except per share amounts)

Operating results in all periods presented reflect the impact of acquisitions. The timing of those acquisitions and the changing mix of businesses as acquired companies are integrated into the Company may affect the comparability of results from one period to another.

Results of Operations:

The following table sets forth for the periods indicated, the Condensed Consolidated Statements of Income of the Company expressed as a percentage of total net sales. Percentages may not add due to rounding.

	For the three months ended December 31,
	2006		2005
Net sales	100.0	%	100.0	%
Costs and expenses:
Cost of sales	48.8	%	54.0	%
Advertising, promotion and catalog	5.3	%	5.5	%
Selling, general and administrative	30.0	%	32.0	%
	84.1	%	91.5	%
Income from operations	15.9	%	8.5	%
Other income (expense):
Interest	-1.0	%	-2.0	%
Miscellaneous, net	0.3	%	0.3	%
	-0.7	%	-1.7	%
Income before provision for income taxes	15.2	%	6.7	%
Provision for income taxes	5.1	%	1.7	%
Net income	10.0	%	5.0	%

For the three month period ended December 31, 2006 compared to the three month period ended December 31, 2005:

Net sales. Net sales by segment during the current fiscal quarter ended December 31, 2006 as compared with the prior comparable period were as follows:

	Three months ended December 31,				Dollar Change				Percentage Change
	2006		2005		2006 vs. 2005				2006 vs. 2005
Wholesale / US Nutrition	$	246,728	$	224,239		$	22,489			10.0	%
North American Retail / Vitamin World	54,973		58,442			(3,469		)		-5.9	%
European Retail / Holland & Barrett / GNC (UK)	152,966		139,566			13,400				9.6	%
Direct Response / Puritan’s Pride	51,570		33,023			18,547				56.2	%
Total	$	506,237	$	455,270		$	50,967			11.2	%

NBTY, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (Continued)

(Dollars and shares in thousands, except per share amounts)

Wholesale / US Nutrition

Net sales for the Wholesale / US Nutrition segment, which markets certain brands including Nature’s Bounty, Sundown and Solgar, increased primarily due to sales generated from strategic promotional advertising of the Company’s brands. The Company continues to adjust shelf space allocation between the US Nutrition brands to provide the best overall product mix and to respond to changing market conditions. These efforts have helped to strengthen US Nutrition’s position in the mass market. US Nutrition continues to leverage valuable consumer sales information obtained from the Company’s Vitamin World retail stores and Puritan’s Pride direct-response/e-commerce operations in order to provide its mass-market customers with data and analyses to drive mass market sales.

Product returns were $5,323 for the three months ended December 31, 2006 as compared to $11,445 for the prior comparable period. The product returns for the three months ended December 31, 2006 are mainly attributable to returns in the ordinary course of business. The product returns for the three months ended December 31, 2005 were comprised of the reallocation of the US Nutrition brands to provide the best overall product mix, the continued decline in the low carb related products (as a result of the decline in the market for these products) and returns arising from the ordinary course of business.

For the three months ended December 31, 2006 and 2005, two customers of the Wholesale / US Nutrition division represented, individually, more than 10% of the Wholesale / US Nutrition segment’s net sales. While no one customer represented individually more than 10% of the Company’s consolidated net sales, the loss of any one of these customers would have a material adverse effect on the Wholesale / US Nutrition segment if the Company is unable to replace such customer(s).

North American Retail / Vitamin World

Net sales for this segment decreased primarily due to a reduction of the number of stores operating during the three months ended December 31, 2006 as compared to the prior comparable period. This decrease was partially offset by an increase in U.S. Retail same store sales for stores open more than one year of 1.9% (or $905). Additionally, the number of customers in the Savings Passport Program, a customer loyalty program, increased approximately 1.1 million to 7.3 million customers at December 31, 2006, as compared to 6.2 million customers at the end of the prior comparable period. The Savings Passport Card is used to increase customer traffic and provide incentives for customers to purchase at Vitamin World. It is also an additional tool the Company utilizes to track customer preferences and purchasing trends. During the fiscal quarter ended December 31, 2006, the Company closed 4 under-performing Vitamin World stores and anticipates that approximately 19 under-performing stores will be closed during the remainder of the fiscal year.

NBTY, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (Continued)

(Dollars and shares in thousands, except per share amounts)

The following is a summary of North American Retail store activity for the three months ended December 31, 2006 and 2005:

	Three months ended December 31,
	2006			2005
North American Retail stores:
Vitamin World
Open at beginning of the period		476			542
Opened during the period		1			5
Closed during the period		(4	)		(23	)
Open at end of the period		473			524
Le Naturiste
Open at beginning of the period: company-owned stores		95			97
Open at beginning of the period: franchised stores		1			4
Opened during the period: company-owned stores		—			—
Opened during the period: franchised stores		—			—
Closed during the period: company-owned stores		(3	)		—
Closed during the period: franchised stores		—			—
Open at end of the period: company-owned stores		92			97
Open at end of the period: franchised stores		1			4

European Retail / Holland & Barrett / GNC (UK)

The increase in net sales for this segment is the result of favorable foreign currency translation. The European Retail same store sales for stores open more than one year increased 9.7% (or $13,491) as compared to the prior comparable quarter. Due, in part, to the difficult retail environment, same store sales, in local currency, essentially remained unchanged from the prior like period. The European Retail division continues to leverage its premier status, high street locations and brand awareness to achieve these results.

The following is a summary of European Retail store activity for the three months ended December 31, 2006 and 2005:

	Three months ended December 31,
	2006		2005
European Retail stores:
Open at beginning of the period		617		612
Opened during the period		2		2
Closed during the period		—		(4	)
Open at end of the period		619		610

Direct Response / Puritan’s Pride

Direct Response / Puritan’s Pride net sales, which includes both mail order and on-line net sales, increased primarily due to the increased number and type of promotions that ran during the current fiscal

NBTY, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (Continued)

(Dollars and shares in thousands, except per share amounts)

quarter as compared to the prior comparable period. As a result, Puritan’s Pride received 30% more orders than in the prior comparable period. In addition, the average order size increased approximately 29% as compared to the prior comparable period. On-line net sales comprised 36.0% of this segment’s net sales and increased 74% for the three months ended December 31, 2006 as compared to the prior comparable period. The Company remains the leader in the direct response and e-commerce sectors and continues to increase the number of products available via its catalog and websites.

Cost of sales. Cost of sales for the fiscal quarter ended December 31, 2006 as compared to the prior comparable period were as follows:

	Three months ended December 31,					Three months ended December 31,
	2006		% of net sales			2005		% of net sales
Net sales	$	506,237		100.0	%	$	455,270		100.0	%
Cost of sales	247,047			48.8	%	245,949			54.0	%
Gross profit	$	259,190		51.2	%	$	209,321		46.0	%

Gross profit as a percentage of net sales by segment for the current fiscal quarter ended December 31, 2006 as compared to the prior comparable period was as follows:

	Gross profit by segment
	Three months ended December 31,				Change
	2006		2005		2006 vs. 2005
Wholesale / US Nutrition	39.7	%	32.2	%		7.5	%
North American Retail / Vitamin World	59.7	%	57.2	%		2.5	%
European Retail / Holland & Barrett / GNC (UK)	63.2	%	60.5	%		2.7	%
Direct Response / Puritan’s Pride	61.6	%	58.0	%		3.6	%
Total	51.2	%	46.0	%		5.2	%

NBTY, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (Continued)

(Dollars and shares in thousands, except per share amounts)

The Wholesale / US Nutrition segment’s gross profit as a percentage of net sales for the current fiscal quarter increased from the prior comparable period principally as a result of changes in product mix and lower prices paid for certain raw materials. In addition, as previously mentioned in the discussion of net sales, product returns were $5,323 during the three months ended December 31, 2006 as compared to $11,445 for the prior comparable period. A portion of the returns for the three months ended December 31, 2005 were associated with the contraction in the low carb bar market, with the remaining portion due to reallocation of shelf space for the US Nutrition brands, as well as other normal business operations.

The increased gross profit across all other segments was primarily due to less aggressive discounting of products and changes in the promotional programs in effect this period as compared to the prior comparable period. In addition, lower prices for certain raw materials also contributed to improved gross profits.

Advertising, promotion and catalog. Total advertising, promotion and catalog expenses for the three months ended December 31, 2006 and 2005 were as follows:

	Three months ended December 31,				Dollar Change		Percentage Change
	2006		2005		2006 vs. 2005		2006 vs. 2005
Advertising, promotions, catalogs	$23,386		$22,555			$831		4	%
Catalog printing and mailing	3,377		2,605			772		30	%
Total	$26,763		$25,160			$1,603		6	%
Percentage of net sales	5.3	%	5.5	%

The increase in catalog printing and mailing costs is the result of an additional highly promotional catalog offered in the quarter ended December 31, 2006 as compared to the prior comparable period. NBTY creates its own advertising materials through its in-house staff of advertising associates. In the U.K. and Ireland, both Holland & Barrett and Nature’s Way advertise on television and in national newspapers and conduct sales promotions. GNC (UK) and De Tuinen also advertise in newspapers and conduct sales promotions. SISU advertises in trade journals and magazines and conducts sales promotions.

Total advertising, promotion and catalog expenses by segment during the fiscal quarter ended December 31, 2006 as compared with the prior comparable period were as follows:

	Three months ended		Dollar		Percentage
	December 31,		Change		Change
	2006	2005	2006 vs. 2005		2006 vs. 2005
Wholesale / US Nutrition	$17,072	$17,485	$(413	)		-2	%
North American Retail / Vitamin World	1,668	1,910	(242	)		-13	%
European Retail / Holland & Barrett / GNC (UK)	2,914	2,345	569			24	%
Direct Response /Puritan’s Pride	4,828	3,360	1,468			44	%
Corporate	281	60	221			368	%
Total	$26,763	$25,160	$1,603			6	%

NBTY, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (Continued)

(Dollars and shares in thousands, except per share amounts)

The Wholesale / US Nutrition segment’s advertising expenses decreased mainly due to the discontinuance of aggressive promotions for some of the Company’s leading brands. The Direct Response segment’s advertising expenses increased due to the increased number of promotions this quarter as compared to the prior comparable period. The European Retail segment’s advertising expense increase is mainly attributable to foreign exchange.

Selling, general and administrative expenses. Selling, general and administrative expenses by segment during the fiscal quarter ended December 31, 2006 as compared with the prior comparable period were as follows:

	Three months ended December 31,				Dollar Change		Percentage Change
	2006		2005		2006 vs. 2005		2006 vs. 2005
Wholesale / US Nutrition	$31,259		$30,778		$481			2	%
North American Retail / Vitamin World	30,043		34,905		(4,862	)		-14	%
European Retail / Holland & Barrett / GNC (UK)	54,992		46,366		8,626			19	%
Direct Response / Puritan’s Pride	11,320		9,166		2,154			23	%
Corporate	24,325		24,440		(115	)		0	%
Total	$151,939		$145,655		$6,284			4	%
Percentage of net sales	30.0	%	32.0	%

The decrease in the North American Retail’s selling, general and administrative expense is primarily due to a decrease of $1,772 in asset impairment charges relating to certain under-performing Vitamin World stores during the current quarter as compared to the prior comparable period. In addition, decreases in salaries, building expenses and depreciation as a result of fewer stores in operation during the quarter ended December 31, 2006 as compared to the prior like period reduced expenses by $2,345. The European Retail’s selling, general and administrative expense increased due to foreign exchange and increased building and real estate tax expenses which is the result of an increase in the number of stores in operation as compared to the prior like period. Of the total increase in the European Retail’s selling, general and administrative expenses $4,845 was attributable to foreign exchange. The increase in the Direct Response’s selling, general and administrative expenses was primarily due to freight costs in connection with the higher promotional programs during the quarter.

Interest expense. For the three months ended December 31, 2006, the interest expense was primarily related to the interest on the outstanding Senior Subordinated Notes. For the three months ended December 31, 2005, interest expense consisted of both the interest on Senior Subordinated Notes and interest on the Credit and Guarantee Agreement (“CGA”) that were in effect at that time.

NBTY, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (Continued)

(Dollars and shares in thousands, except per share amounts)

Interest expense by debt category for the fiscal quarter ended December 31, 2006 as compared with the prior comparable period was as follows:

	Three months ended December 31,						Dollar Change
	2006			2005			2006 vs. 2005
Debt Category:
85¤8% Senior subordinated notes, (“85¤8% Notes”)	$	—		$	4,860			$	(4,860	)
71¤8% Senior subordinated notes due 2015, (“71¤8% Notes”)	3,481			89				3,392
Term loan C; fully repaid in April 2006	—			2,046				(2,046		)
Term loan A; fully repaid in September 2006	—			1,092				(1,092		)
Deferred financing fees	1,238			866				372
Capitalized interest	(201		)	(438		)		237
Other	545			477				68
Total interest expense	$5,063			$	8,992			$	(3,929	)

Interest expense decreased primarily due to the elimination of interest on Term Loan A and C which were fully repaid in fiscal 2006. Included in the interest expense for the three months ended December 31, 2006 is the write off of deferred finance costs of $1,126 associated with the termination of the Company’s prior CGA. Included in the interest expense for the three months ended December 31, 2005 is the write off of deferred finance costs and bond amortization of $802 associated with the Company’s redemption of its 85¤8% Notes.

Miscellaneous, net. Miscellaneous, net during the fiscal quarter ended December 31, 2006 remained consistent as compared to the prior comparable period, the components of which were as follows:

	Three months ended				Dollar
	December 31,				Change
	2006		2005		2006 vs. 2005
Foreign exchange transaction loss	$(318	)	$(276	)		$(42	)
Rental income	184		199			(15	)
Investment income	880		733			147
Other	593		493			100
Total	$1,339		$1,149			$190

Income taxes. The Company’s income tax expense is impacted by a number of factors, including federal taxes, its international tax structure, state tax rates in the jurisdictions where the Company conducts business, and the Company’s ability to utilize state tax credits that expire primarily between 2013 and 2016. Therefore, the Company’s overall effective income tax rate could vary as a result of these factors. The effective income tax rate for the three months ended December 31, 2006 was 33.8%, compared to 25.3% in the fiscal quarter ended December 31, 2005. The increase in the rate is primarily attributable to the prior comparable periods impact of the Foreign Earnings Repatriation (“FER”) provision in the American Jobs Creation Act of 2004, which only impacted quarters in fiscal year 2006. In the prior year, the Company repatriated foreign earnings at a more beneficial tax rate under the FER provision in the American Jobs Creations Act of 2004. The effective income tax rates are generally less than the U.S. federal statutory tax

NBTY, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (Continued)

(Dollars and shares in thousands, except per share amounts)

rate primarily due to the enhanced structure of foreign subsidiaries, which could continue to impact future fiscal quarters, as well as the impact of the FER provision of the American Jobs Creation Act of 2004 noted above.

In the prior year, the Company realized a significantly lower tax cost by repatriating funds in accordance with the FER provision. The Company developed a Domestic Reinvestment Plan to reinvest the repatriated funds in the U.S. in qualifying activities, pursuant to the terms of the FER provision and subsequent guidance issued by the IRS. During the three months ended December 31, 2005, the Company had estimated and recorded an incremental benefit of $2,119 (or 6.9% benefit).

Seasonality:

Although the Company believes that its business is not seasonal in nature, historically, the Company has experienced, and expects to continue to experience, a substantial variation in its net sales and operating results from quarter to quarter. The Company believes that the factors which influence this variability of quarterly results include general economic and industry conditions that affect consumer spending, changing consumer demands and current news on nutritional supplements, the timing of the Company’s introduction of new products, promotional program incentives offered to customers, the timing of catalog promotions, the level of consumer acceptance of each new product and actions of competitors. Accordingly, a comparison of the Company’s results of operations from consecutive periods is not necessarily meaningful, and the Company’s results of operations for any period are not necessarily indicative of future performance. Additionally, the Company may experience higher net sales in a quarter depending upon when it has engaged in significant promotional activities.

Off-Balance Sheet Arrangements:

The Company has no off-balance sheet arrangements except for certain contractual cash obligations disclosed elsewhere herein.

Indemnification of Officers and Directors:

As permitted by the DGCL, the Company has provided in its certificate of incorporation for the indemnification to the full extent permitted by Section 145 of the DGCL of the persons whom may be indemnified pursuant thereto. Further, the Company has provided in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omission not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit.

NBTY, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (Continued)

(Dollars and shares in thousands, except per share amounts)

Liquidity and Capital Resources:

The Company’s primary sources of liquidity and capital resources are cash generated from operations and a $325,000 Revolving Credit Facility based on a Revolving Credit Agreement (“RCA”) entered into on November 3, 2006. The Credit Agreement provides for revolving credit loans in the aggregate principal amount of up to $325,000 to be used for (a) the repayment of all obligations outstanding under the Company’s prior credit agreement (which consisted solely of commitment fees since the Company had previously repaid all amounts borrowed under the prior credit agreement), (b) working capital and other general corporate purposes, and (c) acquisitions. In connection with the RCA, the Company’s prior credit agreement (CGA) was terminated. The Company’s principal uses of cash have been to finance working capital, facility expansions, acquisitions, capital expenditures and debt service requirements. The Company anticipates these uses will continue to be its principal uses of cash in the future.

The following table sets forth, for the periods indicated, the Company’s period-end cash and cash equivalents, cash and cash equivalents held by its foreign subsidiaries, working capital and other operating measures:

	As of December 31, 2006
Cash and cash equivalents at end of the period		$	49,996
Cash and cash equivalents held by foreign subsidiaries		$	47,021
Working capital		$	422,045
Working capital increase		$	30,332
Inventory turnover		2.7
Days sales outstanding in accounts receivable		37

The Company monitors current and anticipated future levels of cash and cash equivalents in relation to anticipated operating, financing and investing requirements. Cash and cash equivalents held by the Company’s foreign subsidiaries are subject to U.S. income taxation on repatriation to the U.S. The Company currently repatriates all earnings from its foreign subsidiaries where permitted under local law.

The increase in working capital of $30,332 as compared to September 30, 2006 was primarily due to increases in current assets including investments, inventories, and accounts receivable and a decrease in the current portion of long-term debt. The annualized inventory turnover rate was approximately 2.7 times during the current period ended December 31, 2006. This increased turnover rate, as compared to 2.2 during the prior like period, is primarily due to increased sales and decreased inventory levels as compared to the prior comparable period. Accounts receivable increased due to increased sales in the turnover period. The annualized number of average days sales outstanding (on wholesale net sales) at December 31, 2006, was 37 days. The days sales outstanding remained consistent with the prior comparable period.

NBTY, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (Continued)

(Dollars and shares in thousands, except per share amounts)

The following table sets forth, for the period indicated, the Company’s net cash flows provided by (used in) operating, investing and financing activities:

	For the three months ended December 31,
	2006
Cash flow provided by operating activities		$	82,906
Cash flow used in investing activities		$	(122,665	)
Cash flow used in financing activities		$	(1,813	)

Cash provided by operating activities during the three month period ended December 31, 2006 was mainly attributable to net income and changes in operating assets and liabilities.

The following table sets forth, for the period indicated, cash used in investing activities:

	For the three months ended December 31,
	2006
Purchase of property, plant and equipment		$	(6,212	)
Purchase of available-for-sale investments		(214,718		)
Proceeds from sale of available-for-sale investments		154,844
Cash paid for acquisitions, net of cash acquired		(38,219		)
Restricted cash		(18,360		)
Net cash used in investing activities		$	(122,665	)

During the three month period ended December 31, 2006, cash flows used in investing activities consisted primarily of purchases of property, plant and equipment, purchase of auction rate securities, cash paid in connection with the acquisition of Ester-C and an increase in restricted cash.

The following table sets forth, for the period indicated, cash used in financing activities:

	For the three months ended December 31,
	2006
Principal payments under long-term debt agreements		$	(196	)
Payments for financing fees		(1,649		)
Tax benefit from exercise of stock options		20
Proceeds from stock options exercised		12
Net cash used in financing activities		$	(1,813	)

For the three month period ended December 31, 2006 cash flows used in financing activities related to payments for financing fees in connection with the Company’s new RCA, principal payments under long-term debt agreements of $118 and principal payments under capital lease obligations $78, offset by the proceeds and tax benefit from the exercise of stock options.

NBTY, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (Continued)

(Dollars and shares in thousands, except per share amounts)

The Company believes its sources of cash will be sufficient to fund its operations and meet its cash requirements to satisfy its working capital needs, capital expenditure needs, outstanding commitments, and other liquidity requirements associated with its existing operations over the next 18 to 24 months. The Company’s ability to fund these requirements and comply with financial covenants under its debt agreements will depend on its future operations, performance and cash flow and is subject to prevailing economic conditions and financial, business and other factors, some of which are beyond the Company’s control. In addition, as part of the Company’s strategy, it may pursue acquisitions and investments that are complementary to its business. Any material future acquisitions or investments will likely require additional capital and therefore, the Company cannot predict or assure that additional funds from existing sources will be sufficient for such future events.

Debt Agreements:

At December 31, 2006, the Company maintained a Revolving Credit Facility, in connection with its Revolving Credit Agreement (“RCA”) entered into on November 3, 2006, which consisted of a Revolving Credit Facility of up to $325,000 to be used for (a) the repayment of all obligations outstanding under the Company’s prior credit agreement (which consisted solely of commitment fees since the Company had previously repaid all amounts borrowed under the prior credit agreement), (b) working capital and other general corporate purposes, and (c) acquisitions. In connection with the Credit Agreement, the Company’s prior credit agreement was terminated. At December 31, 2006, there were no borrowings outstanding under the RCA.

In September 2005, the Company issued 10-year 71¤8% Senior Subordinated Notes due 2015 in the aggregate principal amount of $200,000 (the “71¤8% Notes”). The 71¤8% Notes are uncollaterized and subordinated in right of payment for all existing and future indebtedness of the Company. The 71¤8% Notes are subject to redemption, at the option of the Company, in whole or in part, at any time on or after October 1, 2010, and prior to maturity at certain fixed redemption prices plus accrued interest. In addition, on or prior to October 1, 2008, the Company may redeem in the aggregate up to 35% of the 71¤8% Notes with the net cash proceeds received by the Company from certain types of equity offerings, at a redemption value equal to 107.125% of the principal amount plus accrued interest, provided that at least 65% of the aggregate principal amount of notes remain outstanding immediately after any such redemption. The notes do not have any sinking fund requirements. Interest is paid semi-annually on every April 1st and October 1st at the rate of 7 1/8% per annum. Interest payments relating to such debt approximates $13,538 per annum, after the recent extinguishment of $10,000 face value of these notes.

NBTY, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (Continued)

(Dollars and shares in thousands, except per share amounts)

During fiscal 2006, the Company purchased, on the open market, $10,000 face value of the 71¤8% Notes for $9,575. The Company recorded a gain on extinguishment of debt of $425 and wrote-off $264 of the related unamortized deferred financing fees in the nine months ended December 31, 2006 as a result of this transaction.

Virtually all of the Company’s assets are collateralized under the RCA. Under the RCA, the Company is obligated to maintain various financial ratios and covenants must be met, including, but not limited to, a minimum consolidated interest coverage ratio and a maximum leverage ratio. The specific covenants and related definitions can be found in the RCA, which has been previously filed with the Securities and Exchange Commission. Adjusted EBITDA, which is a factor utilized in calculating covenant ratios, is defined as net income, excluding the aggregate amount of all non-cash losses reducing net income (excluding any non-cash losses that results in an accrual of a reserve for cash charges in any future period and the reversal thereof), plus interest, taxes, depreciation and amortization. The Company is required to pay a commitment fee on the unused portion of the Revolving Credit Facility, which varies between .20% and .375% per annum, depending on the Company’s ratio of consolidated indebtedness to consolidated Adjusted EBITDA, on any unused portion of the revolving credit facility.

SINCE ADJUSTED EBITDA IS NOT A MEASURE OF PERFORMANCE CALCULATED IN ACCORDANCE WITH U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (“GAAP”), IT SHOULD NOT BE CONSIDERED IN ISOLATION OF, OR AS A SUBSTITUTE FOR OR SUPERIOR TO, OTHER MEASURES OF FINANCIAL PERFORMANCE PREPARED IN ACCORDANCE WITH GAAP, SUCH AS OPERATING INCOME, NET INCOME AND CASH FLOWS FROM OPERATING ACTIVITIES. IN ADDITION, THE COMPANY’S DEFINITION OF ADJUSTED EBITDA IS NOT NECESSARILY COMPARABLE TO SIMILARLY TITLED MEASURES REPORTED BY OTHER COMPANIES.

The Company’s credit arrangements, generally the indenture governing the 71¤8% Notes (“Indenture”) and the RCA, impose certain restrictions on the Company regarding capital expenditures and limit the Company’s ability to do any of the following: incur additional indebtedness, dispose of assets, make repayments of indebtedness or amendments of debt instruments, pay dividends or distributions, create liens on assets and enter into sale and leaseback transactions, investments, loans or advances and acquisitions. Such restrictions are subject to certain limitations and exclusions.

In addition, a default under certain covenants in the Indenture and the RCA, respectively, could result in the acceleration of the Company’s payment obligations under the RCA and the Indenture, as the case may be, and, under certain circumstances, in cross-defaults under other debt obligations. These defaults may have a negative effect on the Company’s liquidity.

NBTY, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (Continued)

(Dollars and shares in thousands, except per share amounts)

A summary of contractual cash obligations as of December 31, 2006 is as follows:

	Payments Due By Period
			Less Than		1-3		4-5		After 5
	Total		1 Year		Years		Years		Years
Long-term debt, excluding interest	$	210,468	$	797	$	20,309	$	888	$	188,474
Interest	124,215		14,676		28,264		27,125		54,150
Operating leases	517,254		91,631		151,421		103,353		170,849
Purchase commitments	86,092		86,092
Capital commitments	1,857		1,857
Employment and consulting agreements	2,988		2,988
Total contractual cash obligations	$	942,874	$	198,041	$	199,994	$	131,366	$	413,473

The Company conducts retail operations under operating leases, which expire at various dates through 2031. Some of the leases contain escalation clauses, as well as renewal options, and provide for contingent rent based upon sales plus certain tax and maintenance costs. Future minimum rental payments (excluding real estate tax and maintenance costs) for retail locations and other leases that have initial or noncancelable lease terms in excess of one year are noted in the above table.

In August 2005, the Company entered into a real estate tax incentive transaction pursuant to which it sold certain manufacturing assets and its manufacturing facility located in Augusta, Georgia for a total purchase price of $14,973. The arrangement is structured so that the Company’s lease payments to the County equal and offset the County’s bond payments to the Company. The Bond is non-recourse to the County, the Company’s lease payments are pledged to secure repayment of the Bond, and the lease and bond provide for the legal right of offset. Consequently, in accordance with Financial Interpretation No. 39, ‘‘Offsetting of Amounts Related to Certain Contracts,’’ the investment and lease obligation related to this arrangement have been offset in the Company’s Consolidated Balance Sheets. The purchase price consisted of $14,973 in cash which was simultaneously invested and is subject to an Industrial Revenue Bonds (IRB’s) financing agreement. This agreement is intended to permit counties to attract business investment by offering property tax incentives. In accordance with Georgia law, the Company entered into this agreement with Richmond County (the “County”) and acquired an Industrial Development Revenue Bond. The agreement has a maximum expiration date of 2025. Under the terms of the agreement, the Company must annually submit information regarding the value of the machinery and equipment in service in the County. If the Company had not entered into this transaction, property tax payments for this facility would have been higher. The Company can reacquire such property and terminate the agreement at a nominal price of $1 and, accordingly, the subject property is included in property, plant, and equipment in the consolidated balance sheet. If the Company elects to reacquire the subject property prior to the expiration of the arrangement, the Company may also be required to make certain additional property tax payments.

The Company was committed to make future purchases for inventory related items, such as raw materials and finished goods, under various purchase arrangements with fixed price provisions aggregating approximately $86,092 at December 31, 2006. Such purchase orders are generally cancelable at the discretion of the Company until the order has been shipped, but require repayment of all expenses incurred through the date of cancellation. During the three months ended December 31, 2006 no one supplier individually represented greater than 10% of the Company’s raw material purchases. The

NBTY, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (Continued)

(Dollars and shares in thousands, except per share amounts)

Company does not believe that the loss of any single supplier would have a material adverse effect on the Company’s consolidated financial condition or results of operations.

The Company had approximately $1,857 in open capital commitments at December 31, 2006, primarily related to manufacturing equipment as well as to computer hardware and software.

The Company has employment agreements with two of its executive officers. The agreements, entered into in October 2002, each have a term of five years and are automatically renewed each year thereafter unless either party notifies the other to the contrary. These agreements provide for minimum salary levels and contain provisions regarding severance and change in control of the Company. The remaining commitment for salaries to these two officers as of December 31, 2006 was approximately $971. In addition, five members of Holland & Barrett’s senior executive staff have service contracts terminable by the Company upon twelve months notice. The annual aggregate commitment for such H&B executive staff as of December 31, 2006 was approximately $1,567.

The Company has grown through acquisitions, and expects to continue seeking to acquire entities in similar or complementary businesses. Such acquisitions are likely to require the incurrence and/or assumption of indebtedness and/or obligations, the issuance of equity securities or some combination thereof. In addition, the Company may from time to time determine to sell or otherwise dispose of certain of its existing assets or businesses; the Company cannot predict if any such transactions will be consummated, nor the terms or forms of consideration which might be required in any such transactions.

Inflation:

Inflation affects the cost of raw materials, goods and services used by the Company. In recent years, inflation has been modest. However, high oil costs can affect the cost of all raw materials and components. The competitive environment somewhat limits the ability of the Company to recover higher costs resulting from inflation by raising prices. Although the Company cannot precisely determine the effects of inflation on its business, it is management’s belief that the effects on revenues and operating results have not been significant. The Company seeks to mitigate the adverse effects of inflation primarily through improved productivity and strategic buying initiatives. The Company does not believe that inflation has had a material impact on its results of operations for the periods presented, except with respect to payroll-related costs, insurance premiums, and other costs arising from or related to government imposed regulations.

Financial Covenants and Credit Rating:

The Company’s credit arrangements impose certain restrictions on the Company regarding capital expenditures and limit the Company’s ability to: incur additional indebtedness, dispose of assets, make repayments of indebtedness or amendments of debt instruments, pay distributions, create liens on assets and enter into sale and leaseback transactions, investments, loans or advances and acquisitions. Such restrictions could limit the Company’s ability to respond to market conditions, to provide for unanticipated capital investments or to take advantage of business or acquisition opportunities. The Company is in compliance with all covenants under its credit arrangements at December 31, 2006.

NBTY, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (Continued)

(Dollars and shares in thousands, except per share amounts)

At December 31, 2006, credit ratings were as follows:

Credit Rating Agency	7 1/8 Notes		Overall
Standard and Poors		B+		BB
Moody’s		Ba3		Ba2

At December 31, 2006, the Company’s new RCA has not yet been rated.

Recent accounting developments:

NBTY, INC. AND SUBSIDIARIES

QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK

(In thousands)

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is subject to currency fluctuations, primarily with respect to the British Pound, the Euro and the Canadian dollar, and interest rate risks that arise from normal business operations. The Company regularly assesses these risks. As of December 31, 2006, the Company had not entered into any hedging transactions.

The Company has subsidiaries whose operations are denominated in foreign currencies (primarily the British Pound, the Euro and the Canadian dollar). The Company consolidates the earnings of its international subsidiaries by translating them into U.S. dollars in accordance with Statement of Financial Accounting Standards No. 52 “Foreign Currency Translation” (SFAS 52). The statements of income of the Company’s international operations are translated into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar weakens against foreign currencies, the remeasurement of these foreign currencies denominated transactions results in increased net sales, operating expenses and net income. Similarly, the Company’s net sales, operating expenses and net income will decrease when the U.S. dollar strengthens against foreign currencies.

The U.S. dollar volume of net sales denominated in foreign currencies was approximately $175,442, or 34.7% of total net sales, for the three months ended December 31, 2006. During the three months ended December 31, 2006, the U.S. dollar weakened approximately 10% against the foreign currencies, as compared to the prior year comparable period, resulting in an increase in net sales of approximately $14,464 and an increase in operating income of approximately $3,076 for the three months ended December 31, 2006. The related impact on basic and diluted earnings per share was approximately $0.03 for the same period.

To manage the potential loss arising from changing interest rates and its impact on long-term debt, the Company’s policy is to manage interest rate risks by maintaining a combination of fixed and variable rate financial instruments. Since the Company had no significant variable rate debt outstanding at December 31, 2006, management believes that a significant fluctuation in interest rates in the near future will not have a material impact on the Company’s consolidated financial statements. With the exception of the 71¤8% Senior Subordinated Notes, the carrying value of the Company’s financial instruments approximates fair value due to their short maturities and variable interest rates. The fair value of the 71¤8% Senior Subordinated Notes at December 31, 2006, based on then quoted market prices, was $187,625.

The Company is exposed to changes in interest rates on its floating rate Credit Agreement and fixed rate Notes. At December 31, 2006, based on a hypothetical 10% decrease in interest rates related to the Company’s fixed rate Notes, the Company estimates that the fair value of its fixed rate debt would have increased by approximately $6,252. Conversely, based on a hypothetical 10% increase in interest rates related to the Company’s fixed rate Notes at December 31, 2006, the Company estimates that the fair value of its fixed rate debt would have decreased by approximately $5,867. At December 31, 2006 the Company had no borrowings outstanding under its RCA. A hypothetical 10% change in interest rates would not have a material effect on the Company’s consolidated pretax income or cash flow.

NBTY, INC. AND SUBSIDIARIES
CONTROLS AND PROCEDURES

ITEM 4. Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have concluded, based on their respective evaluations as of the end of the period covered by this Report, that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective for recording, processing, summarizing and reporting, within the time periods specified in the SEC’s rules and forms, the information required to be disclosed in the reports filed by the Company under the Exchange Act. There were no changes in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company’s management, including the Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s disclosure controls or internal control over financial reporting will prevent all errors or all instances of fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Because of the inherent limitation of a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

NBTY, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION

Item 1. Legal Proceedings

Prohormone products

New York Action

On July 25, 2002, a putative class-action lawsuit was filed against Vitamin World, Inc., alleging that Vitamin World engaged in deceptive trade practices and false advertising with respect to the sale of certain prohormone supplements and that the plaintiffs were therefore entitled to equitable and monetary relief under the New York General Business Law. Similar complaints were filed against other companies in the vitamin and nutritional supplement industry. By Decision and Order filed July 18, 2006, the Court granted Vitamin World’s motion for summary judgment and dismissed all claims. The plaintiffs have appealed.

California Action

New Jersey Action

Florida Action

Nutrition Bars

Rexall and certain of its subsidiaries are defendants in a class-action lawsuit brought in 2002 on behalf of all California consumers who bought various nutrition bars. Plaintiffs allege misbranding of nutrition bars and violations of California unfair competition statutes, misleading advertising and other similar causes of action. Plaintiffs seek restitution, legal fees and injunctive relief. The Company has defended this action vigorously. In December 2006, while Rexall’s and the other defendants’ renewed motion for judgment on the pleadings was pending, the Court again stayed the case for all purposes, pending rulings on relevant cases before the California Supreme Court. Because it is unclear when the Supreme Court will issue rulings in these cases, Rexall cannot estimate how long the case will be stayed. Based upon the information available at this time, the Company believes that its accrual is adequate for the exposure in the nutrition bar litigation. However, no determination can be made at this time as to the final outcome of this case, nor can its materiality be accurately ascertained.

Shareholder Litigation

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the risk factors disclosed under part 1 - “Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended September 30, 2006, which could materially adversely affect our business, financial condition, operating results and cash flows. Additionally, risks and uncertainties not currently known to us or that we currently deem immaterial also may materially adversely affect our business, financial condition operating results or cash flows. Since September 30, 2006, there have been no significant changes relating to risk factors.

Item 6. Exhibits

a. Exhibits

3.1		Restated Certificate of Incorporation of NBTY, Inc.(1)
3.2		Amended and Restated By-Laws of NBTY, Inc.(2)
4.1		Indenture, dated as of September 23, 2005, among NBTY, Inc., the Guarantors (as defined therein), and The Bank of New York, as Trustee(3)
4.2		Registration Rights Agreement, dated as of September 23, 2005, among NBTY, Inc., the Guarantors (as defined therein) and J.P. Morgan Securities, Inc., Adams Harness, Inc., BNP Paribas Securities Corp., HSBC Securities (USA), Inc., and RBC Capital Markets Corporation(3)
10.1		Employment Agreement, effective October 1, 2002, by and between NBTY, Inc. and Scott Rudolph(4)
10.2		Employment Agreement, effective October 1, 2002, by and between NBTY, Inc. and Harvey Kamil(4)
10.3		Executive Consulting Agreement, effective January 1, 2002, by and between NBTY, Inc. and Rudolph Management Associates, Inc.(4)
10.4		First Amendment to Executive Consulting Agreement, effective January 1, 2003, by and between NBTY, Inc. and Rudolph Management Associates, Inc.(5)
10.5		Second Amendment to Executive Consulting Agreement, effective January 1, 2004, by and between NBTY, Inc. and Rudolph Management Associates, Inc.(6)
10.6		Third Amendment to Executive Consulting Agreement, effective January 1, 2005, by and between NBTY, Inc. and Rudolph Management Associates, Inc.(10)
10.7		Fourth Amendment to Executive Consulting Agreement, effective January 1, 2006, by and between NBTY, Inc., and Rudolph Management Associates, Inc.(11)
10.8		Fifth Amendment to Executive Consulting Agreement, effective January 1, 2007, by and between NBTY, Inc., and Rudolph Management Associates, Inc.(2)
10.9		NBTY, Inc. Retirement Savings and Employees’ Stock Ownership Plan. (1)
10.10		NBTY, Inc. Year 2000 Incentive Stock Option Plan. (7)
10.11		NBTY, Inc. Year 2002 Stock Option Plan. (8)
10.12		Revolving Credit Agreement, dated as of November 3, 2006, among NBTY, Inc., as Borrower, The Several Lenders from Time to Time Parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, Bank of America, N.A., BNP Paribas, Citibank, N.A., and HSBC Bank USA, National Association, as Co-Syndication Agents.(9)
10.13		Guarantee and Collateral Agreement, by NBTY, Inc., the Guarantors party thereto in favor of JPMorgan Chase Bank, N.A., as Administrative Agent, dated as of November 3, 2006(10)
10.14		Facility Agreement, dated September 20, 2006 for Good ‘N’ Natural Limited with JPMorgan Chase Bank, N.A., London Branch (2)
10.15		Stock Purchase Agreement by and between NBTY, Inc. and ZILA Inc., dated as of August 13, 2006 (the “Zila Purchase Agreement”)(2)
10.16		Amendment to Zila Purchase Agreement, dated as of September 28, 2006(2)
31.1		Rule 13a-14(a) Certification of Chief Executive Officer*
31.2		Rule 13a-14(a) Certification of Chief Financial Officer*
32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

* Filed herewith

(1) Incorporated by reference to NBTY, Inc.’s Form 10-K for the fiscal year ended September 30, 2005 filed on December 22, 2005 (File #001-31788).

(2) Incorporated by reference to NBTY, Inc.’s Form 10-K for the fiscal year ended September 30, 2006 filed on December 11, 2006 (File #001-31788).

(3) Incorporated by reference to NBTY, Inc.’s Form 8-K filed on September 27, 2005 (File #001-31788).

(4) Incorporated by reference to NBTY, Inc.’s Form 10-K for the fiscal year ended September 30, 2002 filed on December 20, 2002 (File #0-10666).

(5) Incorporated by reference to NBTY, Inc.’s Form 10-K for the fiscal year ended September 30, 2003 filed on December 16, 2003 (File #001-31788).

(6) Incorporated by reference to NBTY, Inc.’s Form 10-K for the fiscal year ended September 30, 2004 filed on December 14, 2004 (File #001-31788).

(7) Incorporated by reference to NBTY, Inc.’s Form S-8, filed on September 20, 2000 (File #333-46188).

(8) Incorporated by reference to NBTY, Inc.’s Proxy Statement, dated March 25, 2002 (File #0-10666).

(9) Incorporated by reference to NBTY, Inc.’s Form 8-K, filed on November 8, 2006 (File #001-31788).

(10)Incorporated by reference to NBTY, Inc.’s Form 10-Q, filed on May 9, 2005 (File #001-31788).

(11)Incorporated by reference to NBTY, Inc.’s Form 10-Q, filed on February 2, 2006 (File #001-31788).

NBTY, INC. AND SUBSIDIARIES
SIGNATURES

Pursuant to the requirements 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.

	NBTY, INC.
	(Registrant)
Date: February 6, 2007	By:	/s/ SCOTT RUDOLPH
		Scott Rudolph
		Chairman and Chief Executive Officer
		(Principal Executive Officer)
Date: February 6, 2007	By:	/s/ HARVEY KAMIL
		Harvey Kamil
		President and Chief Financial Officer
		(Principal Financial and Accounting Officer)