<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-15701
NATURAL ALTERNATIVES INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 84-1007839
(State or other jurisdiction of incorporation or (IRS Employer
organization) Identification No.)
1185 Linda Vista Drive, San Marcos, California 92069
(Address of principal executive offices)
(Zip Code)
(619) 744-7340
(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
------ ------
5,279,875
(Number of shares of common stock of the registrant outstanding as of October
31, 1995)
</PAGE>
<PAGE>
<TABLE>
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS - ASSETS
<CAPTION>
September 30, June 30,
1995 1995
------------- ------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,375,840 $ 2,526,839
Accounts receivable - less allowance
for doubtful accounts of $199,000 at
September 30, 1995 and $215,000 at
June 30, 1995 5,272,805 5,590,165
Inventory 6,638,559 5,229,585
Notes receivable - current portion 154,301 183,255
Deferred income taxes 141,000 326,000
Other current assets 893,984 867,085
----------- -----------
Total Current Assets 14,476,489 14,722,929
Property and equipment, at cost, less
accumulated depreciation and
amortization of $3,864,000 at
September 30, 1995 and $3,698,000
at June 30, 1995 5,715,843 5,774,732
----------- -----------
Other Assets:
Investments 58,768 50,254
Notes receivable, less current portion 336,108 365,871
Other non-current assets 269,341 279,994
----------- -----------
Total Other Assets 664,217 696,119
----------- -----------
TOTAL ASSETS $20,856,549 $21,193,780
=========== ===========
</TABLE>
(continued)
<\page>
<PAGE>
NATURAL ALTERNATIVES INTERNATIONAL, INC
PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS (continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
------------- -----------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Accounts payable $ 4,897,537 $ 4,974,845
Current installments of long-term debt 200,567 213,812
Current installments of capital lease
obligations 21,450 20,786
Accrued compensation and employee benefits 136,795 528,704
Income taxes payable 204,575 738,075
Other current liabilities 37,378 39,475
----------- -----------
Total Current Liabilities 5,498,302 6,515,697
Deferred income taxes 283,000 285,000
Long-term debt, less current installments 977,840 1,043,179
Capital lease obligations, less current
installments 65,998 71,649
----------- -----------
Total Liabilities 6,825,140 7,915,525
----------- -----------
Stockholders' Equity:
Preferred stock; $.01 par value; 500,000
shares authorized; none issued or outstanding --- ---
Common stock; $.01 par value; 8,000,000 shares
authorized; issued and outstanding 5,279,875
at September 30, 1995 and 5,257,875 at June 30,
1995 52,799 52,579
Additional paid-in capital 5,742,289 5,586,759
Retained earnings 8,267,666 7,678,776
Net unrealized losses on investments (31,345) (39,859)
----------- -----------
Total Stockholders' Equity 14,031,409 13,278,255
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $20,856,549 $21,193,780
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
<\PAGE>
<PAGE>
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
For the Three Months Ended
September 30
--------------------------
(Unaudited)
<CAPTION> 1995 1994
---- ----
<S> <C> <C>
Net sales $10,353,801 $ 5,873,747
Cost of goods sold 7,659,586 4,169,537
----------- -----------
GROSS PROFIT 2,694,215 1,704,210
Selling, general &
administrative expenses 1,717,545 1,501,234
----------- -----------
OPERATING INCOME 976,670 202,976
----------- -----------
Other income (expense):
Interest income 26,789 17,813
Interest expense (28,279) (24,938)
Other, net 2,710 (678)
----------- -----------
1,220 (7,803)
----------- -----------
EARNINGS BEFORE INCOME TAXES 977,890 195,173
Income taxes 389,000 85,000
----------- -----------
NET EARNINGS $ 588,890 $ 110,173
=========== ===========
NET EARNINGS PER COMMON SHARE:
Primary $.11 $.02
==== ====
Fully Diluted $.11 $.02
==== ====
</TABLE>
See accompanying notes to consolidated financial statements
<\PAGE>
<PAGE>
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)
<TABLE>
<CAPTION>
Additional Net
Common Stock Paid-in Retained Unrealized
Shares Amount Capital Earnings Losses Total
------ ------ ------- -------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Balance at
June 30, 1995 5,257,875 $ 52,579 $5,586,759 $7,678,776 $ (39,859) $13,278,255
Issuance of common
stock for employee
stock options 22,000 220 107,740 --- --- 107,250
Income tax benefit from
employee stock options --- --- 48,500 --- --- 48,500
Net unrealized
gains on
investments --- --- --- --- 8,514 8,514
Net earnings --- --- --- 588,890 --- 588,890
--------- -------- ---------- ---------- --------- -----------
Balance at
September 30, 1995 5,279,875 $ 52,799 $5,742,289 $8,267,666 $ (31,345) $14,031,409
</TABLE>
See accompanying notes to consolidated financial statements
<\PAGE>
<PAGE>
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
For the Three Months
Ended September 30
--------------------
(Unaudited)
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 588,890 $ 110,173
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities:
Bad debt expense 47,000 40,802
Tax benefit on option exercise 48,500 1,000
Depreciation and amortization 249,157 245,592
Deferred income taxes 183,000 133,000
Gain on disposal of assets (2,497) ---
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 333,150 3,283,254
Inventory (1,408,974) (1,432,458)
Prepaid taxes --- (49,000)
Other assets (25,660) 191,682
(Decrease) increase in:
Accounts payable (77,308) (1,357,482)
Accrued compensation and employee
benefits (391,909) (116,173)
Income taxes payable (533,500) ---
Other current liabilities (2,097) 5,956
---------- ----------
Net Cash Provided by (Used in) Operating
Activities: (992,248) 1,056,346
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investments 17,000 ---
Investments (11,000) ---
Proceeds from sale of property and
equipment 53,837 ---
Capital expenditures (246,194) (956,360)
Issuance of notes receivable (21,502) (13,550)
Repayment of notes receivable 25,429 14,219
--------- ---------
Net Cash Used in Investing Activities (182,430) (955,691)
(continued)
</TABLE>
<\PAGE>
<PAGE>
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
<TABLE>
<CAPTION>
For the Three Months
Ended September 30
--------------------
(Unaudited)
1995 1994
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on line of credit $ --- $ (350,000)
Payments on long-term debt and
capital leases (83,571) (38,306)
Proceeds from issuance of common stock 107,250 2,440
--------- ---------
Net Cash Used in Financing Activities 23,679 (385,866)
Net Decrease in Cash and Cash
Equivalents (1,150,999) (285,211)
Cash and Cash Equivalents at Beginning
of Period 2,526,839 813,754
---------- --------
Cash and Cash Equivalents at End of Period $1,375,840 $ 528,543
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
</PAGE>
<PAGE>
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments, consisting of a normal recurring nature considered
necessary for a fair presentation, have been included. It is suggested that
these consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's annual
report on Form 10-K for the year ended June 30, 1995. The results of
operations for the periods ended September, 1995 and 1994 are not necessarily
indicative of the operating results for the full year.
Certain amounts in prior period financial statements have been reclassified
to conform to the current period financial statements.
NOTE 2 - PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Pro-Lean, Inc. (formerly Sonergy, Inc.),
CellLife International, Inc. and CellLife Pharmaceuticals International, Inc.
All significant intercompany accounts and transactions have been eliminated.
NOTE 3 - INVENTORIES
Inventories are comprised of:
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
----------- -----------
<S> <C> <C>
Raw materials $ 3,207,512 $ 2,419,083
Work in process 2,828,276 2,240,173
Finished goods 602,771 570,329
----------- -----------
$ 6,638,559 $ 5,229,585
=========== ===========
</TABLE>
</PAGE>
<PAGE>
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - NET EARNINGS PER SHARE
Primary earnings per share is computed based upon the weighted average number
of shares outstanding during the period plus (in periods in which they have a
dilutive effect) the effect of common shares contingently issuable from stock
options. Fully diluted earnings per share reflect additional dilution
related to common stock equivalents due to the use of the market price at the
end of the period, when higher than the average price for the period.
The weighted average number of shares outstanding and common stock
equivalents are as follows:
For the Three Months
Ended September 30,
1995 1994
--------- ---------
Primary 5,539,187 5,257,837
Fully Diluted 5,593,334 n/a
NOTE 5 - MAJOR CUSTOMERS
The Company had substantial sales to four customers for the three months
ended September 30, 1995 and 1994, respectively. The loss of any of these
customers would have an adverse impact on the Company's revenues and earnings
in the short-term. Sales to these customers were as follows:
Three Months Ended September 30,
1995 1994
--------------------- --------------------
Total % of Total Total % of Total
Industry Segment Revenue Revenue Revenue Revenue
Weight Loss & Nutrition $1,078,030 10% $ 774,552 13%
Multi-level Distribution 6,328,131 61% 4,125,941 70%
---------- ---- ---------- ----
Totals $7,406,161 71% $4,900,493 83%
========== ==== ========== ====
</PAGE>
<PAGE>
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FIRST QUARTER OF FISCAL 1995 AND 1994
The Company's consolidated revenues for the quarter ending September 30,
1995, amounted to $10.4 million, an increase of $4.5 million from the $5.9
million generated during the quarter ending September 30, 1994. The 76%
increase in revenue is directly attributable to increases in sales from new
and existing customers, with 65% of the entire increase being attributable
to new customers acquired during the fourth quarter of fiscal 1995.
On an unconsolidated basis, Natural Alternatives reported revenues of $9.9
million for the quarter ending September 30, 1995, compared to $5.3 million
for the quarter period ending September 30, 1994, an 87% increase. The
Company's wholly-owned subsidiaries Pro-Lean, Inc. (Pro-Lean) and CellLife
International, Inc. (CellLife) generated sales of $.5 million and $.4
million, respectively, for the quarter ending September 30, 1995, compared to
$.4 million and $.3 million for the quarter ending September 30, 1994.
The Company's gross margins decreased to 26.0%, a historically normal margin,
for the quarter ending September 30, 1995, compared to a relatively high
level of 29.0% for the quarter ending September 30, 1994. The decrease in
margins was due to a normal sales mix for the quarter ending September 30,
1995, as compared to an unusually high profit sales mix for the quarter
ending September 30, 1994. Gross profits increased in real dollars by
$990,000, or 58.1% as a result of the 76% increase in sales. Consolidated
selling, general and administrative expenses as a percentage of revenues were
16.7% during the quarter ending September 30, 1995, compared to 25.6% for the
quarter ending September 30, 1994, with the decrease being attributable to
both sales growth and more effective means of controlling costs.
Net earnings for the quarter ending September 30, 1995, amounted to $.6
million, a $.5 million increase from the $.1 million in net income produced
for the quarter ending September 30, 1994. The increase in net earnings was
due primarily to the 58.1% increase in gross profit, noted above, while
selling, general and administrative expenses increased by just 14.4%.
Primary earnings per share for the quarter ending September 30, 1995, was
$.11 compared to $.02 for the quarter ending September 30, 1994. The increase
was due to the reasons discussed above and was only slightly impacted by the
increase in the Company's weighted average number of shares outstanding and
the dilutive effect of common stock equivalents on the current quarter.
On an unconsolidated basis for the quarter ending September 30, 1995, Natural
Alternatives reported net earnings of $.6 million compared to $.2 million for
the quarter ending September 30, 1994. Pro-Lean reported a net loss of $.1
million for each of the quarters ending September 30, 1995 and 1994. CellLife
reported a break even position for each of the quarters ending September 30,
1995 and 1994.
</PAGE>
<PAGE>
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1995, the Company had working capital of $8,978,187 compared
to $8,207,232 as of June 30, 1995. The working capital item which represented
the most significant increase was inventory with a partially offsetting
decrease in cash. Inventory levels at September 30, 1995, compared to sales,
increased moderately relative to historical levels, due principally to
broader stocking requirements to cover additional products for new and
existing customers.
The Company has purchase commitments approximating $400,000 for additional
production equipment which is expected to be placed in service in the third
quarter. The Company will also be expending approximately $125,000 in the
second quarter for leasehold improvements to expand office facilities. These
expenditures are expected to be funded from a combination of cash flow from
operating activities and draws on the Company's lines of credit.
The company has entered into an agreement with its two principal stockholders,
Marie A. LeDoux and Mark A. LeDoux, to acquire for $545,000 the offices and
production facilities which the Company is presently leasing from them. The
properties have been independently appraised at $580,000. The company expects
to fund the acquisition through conventional mortgage financing and to
consummate the transaction during the third quarter.
The Company believes it has sufficient sources of funds to finance its
ongoing operations and meet its capital asset purchases, as well as future
growth through a combination of internally generated cash flow, revolving
lines of credit and equipment financing. The Company has revolving line of
credit agreements permitting borrowings up to $3,000,000, which are secured
by business assets and bear interest at rates ranging from the bank's prime
rate to 1/2 percent over the bank's prime rate. The bank's prime rate at
September 30, 1995 was 9.0%. The lines of credit expire on December 1, 1995;
management expects such lines to be renewed in the normal course of business.
As of September 30, 1995 and June 30, 1995, there were no borrowings under
these credit lines.
</PAGE>
<PAGE>
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, based in part on
the advice of counsel, the ultimate disposition of these matters will not
have a material adverse impact on the Company's consolidated financial
position, operations or cash flows.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS BY THE COMPANY ON ITS SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: The following exhibits are filed herewith:
11.1. Computation of per share earnings for the quarter ended
September 30, 1995.
11.2. Computation of per share earnings for the quarter ended
September 30, 1994.
(b) No reports on Form 8-K were filed during the quarter ended September 30,
1995.
</PAGE>
<PAGE>
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.
NATURAL ALTERNATIVES INTERNATIONAL, INC.
:/s MARK A. LE DOUX Date: November 7, 1995
----------------------- --------------------
President
:/s WILLIAM P. SPENCER Date: November 7, 1995
----------------------- --------------------
Executive Vice President
</PAGE>
EXHIBIT 11.1
NATURAL ALTERNATIVES INTERNATIONAL, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(unaudited)
For the Three Months Ended September 30, 1995
<TABLE>
<CAPTION>
Primary Fully Diluted
Days Weighted Weighted
Out- Average Average
Outstanding stand- Shares Shares
From To ing Shares Outstanding Outstanding
---- -- --- ------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Beginning shares 07/01/95 09/30/95 92 5,257,875 5,257,875 5,257,875
Dilutive effect of common
stock equivalents:
At average price per share 278,209
At closing price per share 332,356
Exercise of employee stock
options 08/21/95 09/30/95 40 1,500 652 652
Exercise of employee stock
options 09/19/95 09/30/95 11 20,500 2,451 2,451
--------- --------- ---------
Ending shares 5,279,875 5,539,187 5,593,334
Net Earnings $ 588,890 $ 588,890
========= =========
Net Earnings Per Share $ .11 $ .11
===== =====
</TABLE>
</page>
</document)
EXHIBIT 11.2
NATURAL ALTERNATIVES INTERNATIONAL, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (continued)
(unaudited)
For the Three Months Ended September 30, 1994
<TABLE>
<CAPTION>
Outstanding Days Out- Weighted Average
----------- stand- Shares
From To ing Shares Outstanding
---- -- --- ------ -----------
<S> <C> <C> <C> <C> <C>
Beginning shares 07/01/94 09/30/94 92 5,257,375 5,257,375
Exercise of employee stock
options 07/07/94 09/30/94 85 500 462
--------- ---------
Ending shares 5,257,875 5,257,837
Net Earnings $ 110,173
=========
Net Earnings Per Share $ .02
=====
</TABLE>
