<PAGE> 1
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 December 31, 1997
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 of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1185 LINDA VISTA DRIVE, SAN MARCOS, CALIFORNIA 92069
(Address of principal executive offices)
(Zip Code)
(760) 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
------ ------
5,483,764
(Number of shares of common stock of the registrant outstanding as
of January 31, 1998)
1
<PAGE> 2
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31 June 30
1997 1997
----------- -----------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 3,285,292 $ 3,469,739
Accounts receivable - less allowance for doubtful
accounts of $1,185,000 at December 31, 1997 and
$1,006,000 at June 30, 1997 6,778,760 6,990,121
Inventories 8,185,634 5,690,850
Tax refund receivable -- 842,209
Notes receivable - current portion 220,442 235,613
Prepaid expenses 698,422 404,899
Deferred income taxes 851,000 851,000
Deposits 78,343 322,269
Other current assets 27,587 51,279
----------- -----------
Total Current Assets 20,125,480 18,857,979
----------- -----------
Property and equipment, net 9,261,122 8,259,705
----------- -----------
Other Assets:
Investments 58,862 58,862
Notes receivable, less current portion 248,360 261,697
Other noncurrent assets, net 345,442 290,932
----------- -----------
Total Other Assets 652,664 611,491
----------- -----------
TOTAL ASSETS $30,039,266 $27,729,175
=========== ===========
</TABLE>
2
<PAGE> 3
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31 June 30
1997 1997
------------ ------------
(unaudited)
<S> <C> <C>
Current Liabilities:
Accounts payable $ 7,369,433 $ 6,907,998
Current installments of long-term debt 44,819 164,266
Current installments of capital lease obligations 26,863 25,189
Accrued compensation and employee benefits 185,066 321,337
------------ ------------
Total Current Liabilities 7,626,181 7,418,790
Deferred income taxes 487,000 487,000
Long-term debt, less current installments 1,000,905 1,100,285
Capital lease obligations, less current installments 9,750 23,613
------------ ------------
Total Liabilities 9,123,836 9,029,688
------------ ------------
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 5,465,764 at
December 31, 1997 and 5,429,764 at June 30, 1997 54,658 54,298
Additional paid-in capital 6,929,566 6,675,426
Retained earnings 13,982,456 12,021,013
Net unrealized losses on investments (51,250) (51,250)
------------ ------------
Total Stockholders' Equity 20,915,430 18,699,487
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 30,039,266 $ 27,729,175
============ ============
</TABLE>
3
<PAGE> 4
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended For the Three Months Ended
December 31 December 31
----------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 28,329,917 $ 24,067,255 $ 16,297,341 $ 12,630,234
Cost of goods sold 20,726,002 17,590,661 11,854,780 9,414,280
------------ ------------ ------------ ------------
GROSS PROFIT 7,603,915 6,476,594 4,442,561 3,215,954
Selling, general &
administrative expenses 4,391,977 3,571,529 2,185,333 1,823,613
------------ ------------ ------------ ------------
INCOME FROM OPERATIONS 3,211,938 2,905,065 2,257,228 1,392,341
------------ ------------ ------------ ------------
Other income (expense):
Interest income 91,068 84,551 55,268 37,860
Interest expense (58,386) (77,102) (28,296) (34,560)
Other, net (52,177) (8,849) (52,177) (10,349)
------------ ------------ ------------ ------------
(19,495) (1,400) (25,205) (7,049)
------------ ------------ ------------ ------------
EARNINGS BEFORE
INCOME TAXES 3,192,443 2,903,665 2,232,023 1,385,292
Income taxes 1,231,000 1,154,000 869,000 536,000
------------ ------------ ------------ ------------
NET EARNINGS $ 1,961,443 $ 1,749,665 $ 1,363,023 $ 849,292
============ ============ ============ ============
NET EARNINGS PER COMMON SHARE:
Basic $ 0.36 $ 0.33 $ 0.25 $ 0.16
============ ============ ============ ============
Diluted $ 0.35 $ 0.31 $ 0.24 $ 0.15
============ ============ ============ ============
</TABLE>
4
<PAGE> 5
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Net
Unrealized
Common Stock Additional Gains
--------------------------- Paid-in Retained (Losses) on
Shares Amount Capital Earnings Investments Total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1997 5,429,764 $54,298 $6,675,426 $12,021,013 $(51,250) $18,699,487
Issuance of common
stock upon exercise of
employee stock options 36,000 360 202,640 -- -- 203,000
Income tax benefit from
stock options -- -- 51,500 -- -- 51,500
Net earnings -- -- -- 1,961,443 -- 1,961,443
------------ ------- ---------- ----------- -------- ------------
Balance at December 31, 1997 5,465,764 $54,658 $6,929,566 $13,982,456 $(51,250) $ 20,915,430
============ ======= ========== =========== ======== ============
</TABLE>
5
<PAGE> 6
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months
Ended December 31
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 1,961,443 $ 1,749,665
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Bad debt expense 180,000 126,621
Tax benefit on option exercise 51,500 60,800
Depreciation and amortization 721,536 615,323
Deferred income taxes -- (95,000)
(Gain) Loss on disposal of assets 52,177 (9,099)
Other (14,206) (14,006)
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 31,361 (64,954)
Inventories (2,494,784) (524,931)
Prepaid expenses (293,523) 66,714
Deposits 243,926 (175,651)
Tax refund receivable 842,209 --
Prepaid income taxes (51,845) (159,601)
Other assets 21,029 (18,263)
(Decrease) increase in:
Accounts payable 461,435 1,246,073
Accrued compensation and employee benefits (136,271) 47,238
Income taxes payable -- (520,246)
----------- -----------
Net Cash Provided by Operating Activities 1,575,987 2,330,683
----------- -----------
</TABLE>
6
<PAGE> 7
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment $ 65,000 $ --
Investment in affiliated company -- (200,000)
Capital expenditures (1,840,129) (1,012,823)
Issuance of notes receivable (4,625) (72,184)
Repayment of notes receivable 47,337 30,368
Other -- (2,027)
----------- -----------
Net Cash Used in Investing Activities (1,732,417) (1,256,666)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt and capital leases (231,017) (113,754)
Issuance of common stock 203,000 191,825
Borrowings on line of credit -- 443,959
----------- -----------
Net Cash Provided by (Used in) Financing Activities (28,017) 522,030
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents (184,447) 1,596,047
Cash and Cash Equivalents at Beginning of Period 3,469,739 1,887,427
----------- -----------
Cash and Cash Equivalents at End of Period $ 3,285,292 $ 3,483,474
=========== ===========
</TABLE>
7
<PAGE> 8
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The 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, 1997. The results of operations
for the periods ended December 31, 1997 and 1996 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, Millennium Health International, Inc. (formerly
Pro-Lean, Inc. and prior to that Sonergy, Inc.), CellLife International, Inc.
and CellLife Pharmaceuticals International, Inc. all of which had been
administered and operated out of the Company's facilities. During fiscal 1997,
the assets and liabilities of each of the subsidiaries were transferred to the
Company and the Company assumed their operations. All significant intercompany
accounts and transactions for the three months and six months ended December 31,
1996 have been eliminated.
NOTE 3 - INVENTORIES
Inventories are comprised of:
<TABLE>
<CAPTION>
December 31 June 30
1997 1997
---------- ----------
<S> <C> <C>
Raw materials $3,104,811 $2,747,451
Work in progress 4,357,352 2,598,430
Finished goods 723,471 344,969
---------- ----------
$8,185,634 $5,690,850
========== ==========
</TABLE>
8
<PAGE> 9
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - NET EARNINGS PER SHARE
Pursuant to Statement of Financial Accounting Standards No. 128 ("SFAS No.
128"), financial statements for periods ending after December 15, 1997 must
reflect basic earnings per share and diluted earnings per share as defined.
Accordingly, basic earnings per share has been computed based upon the weighted
average number of shares outstanding during the period and diluted earnings per
share has been computed based upon the weighted average number of shares
outstanding during the period plus the dilutive effects of common shares
contingently issuable from stock options. Prior period amounts have been
restated to conform to SFAS No. 128. Common stock options are excluded from the
computation of net earnings per share if their effect is anti-dilutive.
Basic and diluted earnings per share have been calculated as follows:
<TABLE>
<CAPTION>
For the three months ended For the six months ended
December 31, 1997 December 31, 1997
------------------------------------------- --------------------------------------
Weighted Weighted
Average Average
Earnings Shares Per-Share Earnings Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE
Net earnings $1,363,023 5,442,644 $ 0.25 $1,961,443 5,438,780 $ 0.36
EFFECT OF DILUTIVE SECURITIES
Stock options 239,781 229,374
DILUTED EARNINGS PER SHARE
Net earnings available to
common stockholders
plus assumed
---------- --------- -------- ---------- --------- --------
conversions $1,363,023 5,682,425 $ 0.24 $1,961,443 5,668,154 $ 0.35
========== ========= ======== ========== ========= ========
</TABLE>
9
<PAGE> 10
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - NET EARNINGS PER SHARE (continued)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
December 31, 1996 December 31, 1996
----------------------------------------- ------------------------------------------
Weighted Weighted
Average Average
Earnings Shares Per-Share Earnings Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE
Net earnings $ 849,292 5,388,071 $ 0.16 $1,749,665 5,381,217 $0.33
EFFECT OF DILUTIVE SECURITIES
Stock options 238,443 260,375
DILUTED EARNINGS PER SHARE
Net earnings available to
common stockholders plus
assumed conversions
========== ========= ====== ========== ========= =====
$ 849,292 5,626,514 $ 0.15 $1,749,665 5,641,592 $0.31
========== ========= ====== ========== ========= =====
</TABLE>
NOTE 5 - STOCKHOLDERS' EQUITY
Effective June 5, 1992, the Company adopted the 1992 Incentive Stock Option Plan
for which 500,000 common shares have been reserved for issuance to officers,
directors, and key employees of the Company. The plan provides that no option
may be granted at an exercise price less than the fair market value of the
common stock of the Company on the date of grant. On September 9, 1993, 200,000
options were granted at the fair market value price of $4.875 per share.
Also effective June 5, 1992, the Company adopted the 1992 Nonqualified Stock
Option Plan and reserved a total of 250,000 common shares for issuance to
officers, employees, and consultants of the Company. On September 9, 1993,
250,000 options were granted at the fair market value price of $4.875 per share.
Effective December 9, 1994, the Board of Directors approved the 1994
Nonqualified Stock Option Plan for which 500,000 common shares were reserved for
issuance to officers, employees, and consultants of the Company. On January 24,
1995, 500,000 options were granted at the fair market value price of $4.625 per
share.
All stock options under each of the plans have five-year terms and all options
became fully vested one year after their grant date.
10
<PAGE> 11
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - STOCKHOLDERS' EQUITY (continued)
Stock option activity during the periods indicated is summarized below:
<TABLE>
<CAPTION>
1992 1992 1994
Incentive Nonqualified Nonqualified
Plan Plan Plan
--------- ------------ ------------
<S> <C> <C> <C>
Outstanding and exercisable at June 30, 1997 96,169 220,942 451,500
Exercised 13,445 12,555 10,000
------- ------- -------
Outstanding and exercisable at December 31, 1997 82,724 208,387 441,500
======= ======= =======
Weighted-average exercise price,
June 30, 1997 and December 31, 1997 $ 4.875 $ 4.875 $ 4.625
Weighted-average remaining contractual life One Year One Year Three Years
Available for grant at December 31, 1997 300,000 -- --
======= ======= =======
</TABLE>
Effective January 24, 1995, 100,000 options were granted pursuant to a
consulting agreement at the fair market value price of $4.625 per share. On
September 20, 1996, 45,000 options were granted pursuant to a consulting
agreement at prices ranging from $9.00 to $15.00 per share. None of these
options had been exercised as of December 31, 1997.
NOTE 6 - PENSION PLAN
Effective January 1, 1997, the Company adopted a defined benefit pension plan
(the "Plan") covering substantially all of its employees. The benefits are based
on years of service and the employee's compensation during the five years before
retirement. The Company will make annual contributions to the Plan equal to the
maximum amount that can be deducted for income tax purposes. For the three
months and six months ended December 31, 1997, the estimated current service
cost (normal cost) and the amortized portion of the unfunded estimated accrued
liability for prior service cost, using a 30-year funding period, amounted to
$117,000 and $234,000, respectively. This amount has been accrued in the current
period.
11
<PAGE> 12
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - MAJOR CUSTOMERS
The Company had substantial sales to four separate customers during one or more
of the periods shown in the following table. The loss of any of these customers
could have an adverse impact on the Company's revenues and earnings in the
short-term. Sales by customer, representing 10% or more of the respective
period's total sales, are shown below by industry segment.
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
December 31, 1997 December 31, 1996 December 31, 1997 December 31, 1996
------------------- ---------------------- ------------------------- --------------------
Industry Segment Sales by Sales by Sales by Sales by
Customer %(a) Customer %(a) Customer %(a) Customer %(a)
- ------------------------- ----------- ----- ----------- ----- ----------- -------- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Multi-level Distribution:
Customer 1 $ 6,203,914 38% $ 4,708,187 37% $10,967,245 39% $ 7,346,017 31%
Customer 2 3,402,785 21% 2,137,216 17% 5,426,722 19% 4,878,149 20%
Customer 3 1,551,380 10% (b) 2,921,536 10% (b)
Customer 4 (b) 1,750,034 14% (b) 3,101,097 13%
----------- --- ----------- --- ----------- --- ----------- ---
$11,158,079 69% $ 8,595,437 68% $19,315,503 68% $15,325,263 64%
=========== === =========== === =========== === =========== ===
</TABLE>
(a) Percent of total sales
(b) Sales for the period were less than 10% of total
sales.
12
<PAGE> 13
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Except for the historical information contained herein, the following discussion
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those projected in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in this section and
those discussed in the Company's Annual Report on Form 10-K.
RESULTS OF OPERATIONS
SECOND QUARTER OF FISCAL 1998 AND 1997
The Company's consolidated net sales for the quarter ended December 31, 1997,
amounted to $16.3 million, an increase of $3.7 million over the $12.6 million
generated during the quarter ended December 31, 1996. The 29% increase in sales
is evenly divided between sales to existing customers and sales to new
customers. International sales for the quarter ended December 31, 1997, amounted
to $4.3 million compared to $.5 million for the quarter ended December 31, 1996.
The increase in international sales is primarily from expansion into foreign
markets by existing customers.
Gross profit margins were 27.3% for the quarter ended December 31, 1997,
compared to 25.5% for the quarter ended December 31, 1996. The increase in
margins was due to manufacturing cost efficiencies.
Selling, general and administrative expenses decreased as a percentage of net
sales to 13.4% for the quarter ended December 31, 1997 from 14.4% for the
quarter ended December 31, 1996. Selling, general and administrative expenses
increased from $1.8 million in 1996 to $2.2 million in 1997. The increase was
primarily due to expenses associated with the employee pension plan, which was
adopted on January 1, 1997, and higher depreciation and other expenses connected
with the start-up of the new tablet manufacturing facility.
Net earnings for the quarter ended December 31, 1997, amounted to $1.4 million,
a $.6 million increase from the $.8 million in net earnings produced for the
quarter ended December 31, 1996. The increase in net earnings was due primarily
to the growth in gross profit partially offset by the increase in selling,
general and administrative expenses discussed above.
Diluted earnings per share for the quarter ended December 31, 1997, was $.24
compared to $.15 for the quarter ended December 31, 1996. The increase was due
to the reasons discussed above.
SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
The Company's consolidated net sales for the six months ended December 31, 1997,
amounted to $28.3 million, an increase of $4.2 million over the $24.1 million
generated during the six months ended December 31, 1996. The 18% increase in
sales is primarily attributable to sales to new customers. International sales
for the six months ended December 31, 1997, amounted to $8.0 million compared to
$.8 million for the six months ended December 31, 1996. The increase in
international sales is primarily from expansion into foreign markets by existing
customers.
Gross profit margins were 26.8% for the six months ended December 31, 1997,
compared to 26.9% for the six months ended December 31, 1996.
13
<PAGE> 14
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (continued)
Selling, general and administrative expenses increased as a percentage of net
sales to 15.5% for the six months ended December 31, 1997 from 14.8% for the six
months ended December 31, 1996. Selling, general and administrative expenses
increased from $3.6 million in 1996 to $4.4 million in 1997. The increase was
primarily due to expenses associated with the employee pension plan, which was
adopted on January 1, 1997, and higher depreciation and other expenses connected
with the start-up of the new tablet manufacturing facility.
Net earnings for the six months ended December 31, 1997, amounted to $2.0
million, a $.2 million increase from the $1.8 million in net earnings for the
six months ended December 31, 1996. The increase in net earnings was due
primarily to the growth in gross profit margins partially offset by the increase
in selling, general and administrative expenses discussed above.
Diluted earnings per share for the six months ended December 31, 1997, was $.35
compared to $.31 for the six months ended December 31, 1996. The increase was
due to the reasons discussed above.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company had working capital of $12,499,000 compared to
$11,439,000 as of June 30, 1997. An increase in inventories was offset by
decreases in cash and cash equivalents and accounts receivable and an increase
in accounts payable and income taxes payable. Inventory levels at December 31,
1997, compared to sales, increased moderately relative to historical levels, due
principally to increased stocking for fulfillment of an increased sales order
backlog.
The Company has purchase commitments approximating $650,000 for additional
production equipment that is expected to be placed in service in the third
quarter. These expenditures are expected to be funded from cash flow from
operating activities.
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 the
Company's receivables, inventory, equipment, and vehicles and bear interest at
the bank's prime rate. The bank's prime rate at December 31, 1997 was 8.5%. The
lines of credit expire in January 1999. The company had no borrowings
outstanding at December 31, 1997, or at June 30, 1997, under these credit lines.
14
<PAGE> 15
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
During the quarter ended December 31, 1997, 34,000 common shares were issued
pursuant to employee stock option exercises.
ITEM 3. DEFAULTS BY THE COMPANY ON ITS SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held on December 12, 1997. The
following matters were voted upon at the meeting:
<TABLE>
<CAPTION>
Votes for Votes Against Abstentions
<S> <C> <C> <C>
Election of Mark A. LeDoux as director 4,833,161 27,715
Confirm KPMG Peat Marwick LLP as the Company's
Independent auditors for the fiscal year ending
June 30, 1998 4,847,299 12,398 1,179
</TABLE>
Mark A. LeDoux was elected to continue serving as a director of the Company
until the 2000 Annual Meeting of Stockholders. Others whose term of office as a
director continued after the meeting include Marie A. LeDoux, William P.
Spencer, William R. Kellas, and Lee G. Weldon.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: The following exhibits are filed herewith:
.
27.0. Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended December 31,
1997.
15
<PAGE> 16
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.
MARK A. LE DOUX Date: February 11, 1998
- -----------------
Mark A. Le Doux
Chief Executive Officer
WILLIAM P. SPENCER Date: February 11, 1998
------------------
William P. Spencer
President
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED DECEMBER 31, 1997,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,285,292
<SECURITIES> 0
<RECEIVABLES> 6,778,760
<ALLOWANCES> 1,185,000
<INVENTORY> 8,185,634
<CURRENT-ASSETS> 20,125,480
<PP&E> 15,687,686
<DEPRECIATION> 6,426,564
<TOTAL-ASSETS> 30,039,266
<CURRENT-LIABILITIES> 7,626,181
<BONDS> 1,000,905
0
0
<COMMON> 54,658
<OTHER-SE> 20,860,772
<TOTAL-LIABILITY-AND-EQUITY> 30,039,266
<SALES> 28,329,917
<TOTAL-REVENUES> 28,329,917
<CGS> 20,726,002
<TOTAL-COSTS> 25,117,979
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 180,000
<INTEREST-EXPENSE> 55,386
<INCOME-PRETAX> 3,192,443
<INCOME-TAX> 1,231,000
<INCOME-CONTINUING> 1,961,443
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,961,443
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.35
</TABLE>
