<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 September 30, 1999
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 incorporation (I.R.S. Employer
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 [ ]
5,759,875
(Number of shares of common stock of the registrant outstanding,
net of treasury shares held, as of October 31,1999)
1
<PAGE> 2
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
September 30 June 30
1999 1999
---------- ---------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 955 $ 1,063
Accounts receivable - less allowance for doubtful accounts of
$474 at September 30, 1999 and $472 at June 30, 1999 8,131 7,515
Inventories, net 9,230 9,876
Income tax refund receivable 1,928 2,229
Notes receivable - current portion 127 127
Prepaid expenses 522 371
Deposits 1,466 1,265
Other current assets 356 794
-------- --------
Total current assets 22,715 23,240
-------- --------
Property and equipment, net 13,610 12,274
Deferred income taxes 1,979 1,979
Investments 192 195
Notes receivable, less current portion 319 401
Other noncurrent assets, net 113 507
-------- --------
Total assets 38,928 38,596
======== ========
Current Liabilities:
Accounts payable 8,396 8,305
Current installments of long-term debt 51 50
Accrued compensation and employee benefits 704 786
-------- --------
Total current liabilities 9,151 9,141
Deferred income taxes 593 593
Long-term debt, less current installments 1,304 927
Accrual for loss on lease obligation 2,434 2,434
Long-term pension liability 410 410
-------- --------
Total liabilities 13,892 13,505
-------- --------
Commitments and contingencies
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 6,002,375 at September 30, 1999 and
6,002,375 at June 30, 1999 60 60
Additional paid-in capital 11,237 11,237
Retained earnings 15,057 14,970
Treasury stock, at cost, 242,500 shares at September
30, 1999 and 212,500 shares at June 30, 1999 (1,227) (1,116)
Accumulated other comprehensive loss (91) (60)
-------- --------
Total stockholders' equity 25,036 25,091
-------- --------
Total liabilities and stockholders' equity $ 38,928 $ 38,596
======== ========
</TABLE>
See accompanying notes to unaudited financial statements.
2
<PAGE> 3
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
STATEMENTS OF OPERATIONS
(In thousands, except per-share information)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
September 30
--------------------------
1999 1998
-------- --------
<S> <C> <C>
Net sales $ 15,264 $ 16,986
Cost of goods sold 12,075 12,332
-------- --------
Gross profit 3,189 4,654
Selling, general &
administrative expenses 2,835 2,173
-------- --------
Income from operations 354 2,481
-------- --------
Other income (expense):
Interest income 28 60
Interest expense (30) (22)
Other, net (8) --
-------- --------
(10) 38
-------- --------
Income before taxes 344 2,519
Provision for income taxes 257 999
-------- --------
Net income $ 87 $ 1,520
======== ========
Net income per common share:
Basic $ 0.02 $ 0.26
======== ========
Diluted $ 0.02 $ 0.25
======== ========
</TABLE>
See accompanying notes to unaudited financial statements.
3
<PAGE> 4
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended September 30
1999 1998
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 87 $ 1,520
Adjustments to reconcile net income to net
cash provided by operating activities:
Bad debt provision 90 65
Write-off of notes receivable 72 --
Tax benefit on option exercise -- 399
Depreciation and amortization 422 475
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (706) 4,806
Inventories 646 (451)
Tax refund receivable 301 --
Prepaid expenses (151) (441)
Deposits (201) 70
Other assets 832 --
(Decrease) increase in liabilities:
Accounts payable 91 (4,979)
Income taxes payable -- 430
Accrued compensation and employee benefits (82) (126)
------- -------
Net cash provided by operating activities 1,401 1,768
------- -------
Cash flows from investing activities:
Capital expenditures (1,786) (1,398)
Issuance of notes receivable -- (22)
Repayment of notes receivable 10 5
Other assets -- (342)
------- -------
Net cash used in investing activities (1,776) (1,757)
------- -------
Cash flows from financing activities:
Borrowings on lines of credit 395 --
Payments on long-term debt and capital leases (17) (18)
Issuance of common stock -- 576
Payments to acquire treasury stock (111) --
------- -------
Net cash provided by financing activities 267 558
------- -------
Net decrease in cash and cash equivalents (108) (1,199)
Cash and cash equivalents at beginning of period 1,063 4,714
------- -------
Cash and cash equivalents at end of period
$ 955 $ 3,515
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the three months for:
Interest $ 28 $ 22
Income Taxes -- 493
======= =======
Disclosure of non-cash activities:
Fixed asset purchases in accounts payable $ -- $ 186
======= =======
</TABLE>
See accompanying notes to unaudited financial statements.
4
<PAGE> 5
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 1 - Interim Financial Information
The unaudited consolidated financial statements of Natural Alternatives
International, Inc. and subsidiaries (the "Company") have been prepared in
accordance with generally accepted accounting principles and with Article 10 of
the Securities and Exchange Commission's Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete consolidated financial statements. In the
opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments, consisting of normal recurring adjustments,
considered necessary for a fair presentation of the Company's financial
information as of September 30, 1999 and 1998.
In preparing consolidated financial statements in conformity with generally
accepted accounting principles, management is required to make certain estimates
and assumptions that may affect the reported amounts of assets, liabilities,
revenues and expenses during the reporting periods. Actual results may differ
from such estimates. The consolidated results of operations for the interim
periods ended September 30, 1999 and 1998 are not necessarily indicative of the
consolidated operating results for the full year. 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, 1999.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
Reclassifications
Certain amounts in prior periods' consolidated financial statements have been
reclassified to conform to the presentation for the quarter ending September 30,
1999.
NOTE 2 - Inventories
Inventories are comprised of the following:
<TABLE>
<CAPTION>
September 30 June 30
1999 1999
------------ -------
<S> <C> <C>
Raw materials $5,944 $6,722
Work in progress 95 270
Finished goods 3,191 2,884
------ ------
$9,230 $9,876
====== ======
</TABLE>
5
<PAGE> 6
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 3 - Comprehensive Net Income
Comprehensive net income is comprised of the following:
<TABLE>
<CAPTION>
For the three months ended September 30
---------------------------------------
1999 1998
------- -------
<S> <C> <C>
Net income $ 87 $ 1,520
Foreign currency translation adjustments (28) --
Unrealized loss on investments (3) (8)
------- -------
Comprehensive income $ 56 $ 1,512
======= =======
</TABLE>
NOTE 4 - Net Income Per Share
Basic net income per share is computed by dividing net income by the weighted
average number of common shares outstanding during the period. Diluted net
income per share reflects the potential dilution that could occur if stock
options or other contracts to issue common stock were exercised or converted
into common stock. The computation of diluted net income per share does not
assume exercise or conversion of securities that would have an anti-dilutive
effect on net income per share. Basic and diluted net income per share have been
calculated as follows:
<TABLE>
<CAPTION>
For the three months ended September 30
---------------------------------------
1999 1998
---------- ----------
<S> <C> <C>
NUMERATOR:
Net income - Numerator for
basic and diluted income per
share - income available
to common shareholders $ 87 $ 1,520
========== ==========
DENOMINATOR:
Denominator for basic
income per share - weighted
average shares 5,776,427 5,831,891
Effect of dilutive securities -
employee stock options 551 347,217
---------- ----------
Denominator for diluted income
per share - adjusted weighted
average shares and assumed
conversions 5,776,978 6,179,108
========== ==========
Basic income per share $ 0.02 $ 0.26
Diluted income per share $ 0.02 $ 0.25
</TABLE>
For the three months ended September 30, 1999, there were outstanding options to
purchase 274,500 shares of common stock that were not included in the
computation of diluted net income per share as their effect would have been
anti-dilutive.
6
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NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per-share data)
NOTE 5 - 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 income in the
short-term. Sales by customer, representing 10% or more of the respective
period's total net sales, are shown below.
<TABLE>
<CAPTION>
Three Months Ended
September 30, 1999 September 30, 1998
--------------------------- -----------------------------
Sales by Sales by
Customer Customer %(a) Customer %(a)
-------- -------- ------- -------- -------
<S> <C> <C> <C> <C>
Customer 1 $ 4,975 33% $ 3,463 20%
Customer 2 3,095 20% 4,967 29%
Customer 3 (b) 2,923 17%
Customer 4 2,643 17% (b)
------- ------- ------- -------
$10,713 70% $11,353 67%(c)
======= ======= ======= =======
</TABLE>
(a) Percent of total net sales.
(b) Net sales for the period were less than 10% of total net sales.
(c) Total does not foot due to rounding.
NOTE 6- Related Party Transactions
The Company entered into an agreement with the father-in-law and mother-in-law
of the Chief Executive Officer of the Company in December 1991, which provides
commissions on sales to a particular customer. The agreement will expire in
December 2001. The commission equals 5% of sales, and is capped at $25,000 per
calendar quarter, effective January 1, 1993. Amounts paid under this agreement
were $25,000 for each of the quarters ended September 30, 1999 and 1998. There
were no amounts owed under the agreement at September 30, 1999 or 1998.
During the quarters ended September 30, 1999 and 1998, the Company had sales of
$13,000 and $203,000, respectively, to a customer in which directors, officers
and employees previously had direct or indirect equity ownership. At September
30, and June 30, 1999, the net accounts receivable from this customer were $0
and $83,000, respectively. The Company recovered accounts receivable of $35,000
during the quarter ended September 30, 1999 and $39,000 was written off. In
addition, at September 30, 1999 and June 30, 1999, the Company had notes
receivable, net, of $0 and $50,000, respectively. As of November 11, 1999 no
remaining directors, officers or employees of the Company had any direct or
indirect equity ownership in the customer.
7
<PAGE> 8
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain Forward-Looking Information
Information provided in this Quarterly Report on Form 10-Q may contain
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934 that are not historical facts and information. These
statements represent the Company's expectations or beliefs, including, but not
limited to, statements concerning future financial and operating results,
statements concerning industry performance, the Company's operations, economic
performance, financial condition, margins and growth in sales of the Company's
products, capital expenditures, financing needs, as well as assumptions related
to the foregoing. For this purpose, any statements contained in this Quarterly
Report that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may", "will", "expect", "believe", "anticipate", "intend",
"could", "estimate" or "continue" or the negative or other variations thereof or
comparable terminology are intended to identify forward-looking statements.
These forward-looking statements are based on current expectations and involve
various risks and uncertainties that could cause actual results and outcomes for
future periods to differ materially from any forward-looking statement or views
expressed herein. The Company's financial performance and the forward-looking
statements contained herein are further qualified by other risks including those
set forth from time to time in the documents filed by the Company with the
Securities and Exchange Commission, including the Company's most recent Form
10-K.
RESULTS OF OPERATIONS
FIRST QUARTER OF FISCAL 2000 AND 1999
Net sales decreased 10.1%, or $1.7 million, to approximately $15.3 million for
the quarter ended September 30, 1999, from approximately $17.0 million for the
quarter ended September 30, 1998. The decrease was due to a decrease in sales of
products to domestic markets of approximately $2.6 million and was partially
offset by an increase in sales to our customers into international markets of
approximately $0.9 million. Sales into international markets increased 26.7% to
approximately $5.7 million for the quarter ended September 30, 1999 from
approximately $4.5 million for the quarter ended September 30, 1998. This
increase is primarily the result of existing customers continued expansion into
Asian and European markets. NAIE Natural Alternatives International Europe, SA,
a subsidiary established in fiscal 1999 in Switzerland, began production and
recorded its initial sales during the quarter ended September 30, 1999.
Management believes that the expansion into international markets should
continue as part of the new strategic focus to diversify and expand geographic
distribution channels. In addition, management believes the decrease in total
net sales is attributable to increased product and price competition in the
domestic nutritional supplement market as well as increased competition for new
distributors. Domestic sales growth was also negatively impacted by the loss of
customer sales for several herbal products due to the overall reduction of
industry market demand. Industry competition could adversely affect the
Company's results of operations in any given quarter and such adverse affects
often cannot be anticipated.
For the quarter ended September 30, 1999, the Company experienced an increase in
cost of goods sold, as a percentage of sales, to 79.1% compared to 72.6% for the
quarter ended September 30, 1998. The increase reflects depressed market prices
due to reduced industry demand; increased costs related to implementation of
stringent quality control procedures to ensure continued product compliance with
established GMP specifications and standards; and increased manufacturing
overhead costs. The increase in cost of goods sold resulted in a reduction of
gross profit margins to 20.9% for the quarter ended September 30, 1999 compared
to 27.4% for the quarter ended September 30, 1998.
Selling, general and administrative expenses increased as a percentage of net
sales to 18.6% for the quarter ended September 30, 1999 from 12.8% for the
quarter ended September 30, 1998. In absolute
8
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NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
dollars, the expenses increased to approximately $2.8 million for the quarter
ended September 30, 1999 from approximately $2.2 million for the quarter ended
September 30, 1998. The percentage increase was due primarily to the fixed
nature of selling, general and administrative expenses and the decrease in net
sales as noted above. The increase in absolute dollars was due to: the continued
investment in upgrading management infrastructure and IT technology; unfavorable
lease arrangements; and increased legal fees.
The Company's income from operations was $0.4 million for the quarter ended
September 30, 1999, compared to $2.5 million for the quarter ended September 30,
1998. This decrease was due to a $1.5 million decrease in gross profit and $0.6
million increase in selling, general and administrative expenses.
The Company recorded net income for the quarter ended September 30, 1999 of
approximately $87,000 compared to net income of approximately $1.5 million for
the quarter ended September 30, 1998. This decrease was due to the reasons
described above. The higher provision for income taxes of 74.7% from 39.6% for
the quarter ended September 30, 1999 and 1998, respectively, is the result of
the consolidation of foreign entities. Diluted income per common share was $.02
for the quarter ended September 30, 1999 compared to diluted income per common
share of $0.25 for the quarter ended September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, the Company had working capital of approximately $13.6
million and borrowings available under revolving lines of credit of
approximately $4.3 million. As of September 30, 1999, there were approximately
$0.4 million of borrowings under these lines.
For the three months ended September 30, 1999, net cash provided by operating
activities was approximately $1.4 million compared to approximately $1.8 million
for the three months ended September 30, 1998. This decrease of approximately
$.4 million was due primarily to a decrease in net income and an increase in
accounts receivable, partially offset by decreases in inventories and other
assets and the timing of payments on accounts payable. Current maturities of
long-term debt at September 30, 1999 amounted to approximately $51,000, which
the Company expects to pay out of working capital.
At September 30, 1999, the Company had revolving line of credit agreements
permitting borrowings up to $4.3 million, secured by the Company's receivables,
inventory, equipment, and vehicles and bear interest at the bank's prime rate.
The loan agreements with the banks contain financial covenants concerning
limitations on maintenance of debt, certain financial ratio's and other matters,
for all of which the Company is in full compliance as of September 30, 1999.
On October 4, 1999, the Company replaced an existing $3.0 million revolving line
of credit with $9.0 million in new financing, consisting of a $5.0 million
revolving line of credit and a $4.0 million term note. Borrowings under the
revolving line of credit are collateralized by eligible accounts receivable and
inventory, as defined in the agreement; proceeds will be used to support working
capital requirements. The line of credit expires on December 1, 2000; management
expects this line to be renewed in the normal course of business. Borrowings
under the term note will be used for new equipment purchases, as defined. The
term note expires on April 1, 2000; the loan will be converted to a five-year
term loan provided that the Company is in compliance with all terms and
conditions, as defined.
On November 9, 1999, the Company entered into a term note agreement for $2.5
million, secured by equipment. The note has a five-year term that provides for
principal and interest payable in monthly installments of $52,000; proceeds will
be used to support working capital requirements.
9
<PAGE> 10
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
Capital expenditures for the three months ended September 30, 1999 amounted to
approximately $1.8 million. These expenditures relate primarily to manufacturing
facility improvements for expanding and upgrading the Company's warehouse,
blending and encapsulation production operations. The Company also purchased
packaging equipment in its vertical integration initiative in final product
packaging and labeling operations, which is currently outsourced. The Company
anticipates capital expenditures of approximately $4.0 million during FY 2000
primarily to complete the manufacturing quality improvements and vertical
integration initiatives. These expenditures are expected to be paid from
borrowings under the Company's term commitment described above. If these
financing alternatives become unavailable, the Company may be required to defer
or restrict certain commercial activities or delay or eliminate expenditures for
certain of its potential products and/or markets.
YEAR 2000 ISSUES
The year 2000 issue ("Year 2000 Issue") is the result of computer programs being
written using two digits rather than four digits to represent the year and
affects both information technology (IT) and non-IT systems. Thus, computer
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in system failures or miscalculations causing
disruptions of operations, including among others, a temporary inability to
process certain data or engage in similar normal business activities.
STATUS: The Company's plan to resolve the Year 2000 Issue involved four phases:
assessment, remediation, testing and implementation. The Company completed its
assessment of its IT systems and implemented its new computer software system
during the fourth quarter of its 1999 fiscal year. The manufacturer represents
this system as Year 2000 compliant. The Company also completed its assessment of
non-IT systems, most of which are equipment used in production. Systems
identified as not being Year 2000 compliant were brought into compliance by
upgrading either the software or hardware. The Company fully implemented these
upgrades by the end of its 1999 fiscal year. The Company has determined that its
production equipment and alarm, heating, and air-conditioning systems will not
be affected by the Year 2000 issue.
The Company has queried its significant suppliers, vendors and other outside
parties and none of the responses received thus far have indicated any
significant deficiencies. The Company will continue to monitor their Year 2000
compliance status, but has no means of ensuring that these third-party service
providers will be Year 2000 ready. These services include, but are not limited
to, providers that supply electricity, telephone, banking, shipping and raw
materials for the Company's manufacturing operations. Any disruption of these
critical services could adversely affect the Company's ability to receive,
process, ship and collect on customer orders in a timely fashion. In the event
of a temporary disruption in the supply of raw materials, the Company believes
it currently maintains adequate supplies to sustain manufacturing of finished
product until alternative sources become available. In the past, the Company has
been able to locate alternative sources, but there can be no assurance the
Company will be successful in locating such sources in the future. In addition,
the Company believes that a disruption of communication services could seriously
impact the Company's ability to receive and process orders. The Company has
manual processes in place which it believes would provide temporary replacement
for such services.
COSTS: The Company incurred approximately $1 million in costs in fiscal year
1999 to replace its financial and manufacturing software systems and to
remediate or replace embedded microprocessors in its production equipment; the
Company incurred and expensed additional costs of $136,000 during the first
quarter and anticipates additional costs of $150,000 during fiscal year 2000.
If, however, additional unanticipated costs are incurred, this could have a
material adverse effect on the Company's business, results of operations and
financial condition.
10
<PAGE> 11
NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
RISKS: While management of the Company believes it effectively implemented its
program to resolve the Year 2000 Issue in a timely manner, as noted above,
disruptions in the economy generally resulting from Year 2000 Issues could also
materially adversely effect the Company. The Company is unable to estimate if it
has any potential liability or potential lost revenue at this time. There can be
no assurance that the Company will not discover Year 2000 compliance issues that
will have a material adverse effect on the Company's business, results of
operations and financial condition.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The Statement
establishes accounting and reporting standards requiring that derivative
instruments be recorded in the balance sheet as either an asset or liability
measured at its fair value and that changes in the derivative's fair value be
recognized currently in income unless specific hedge accounting criteria are
met. SFAS No. 133, as amended, is effective for fiscal years beginning after
June 15, 2000. The adoption of this Statement will not have a material effect on
the Company's consolidated financial statements as the Company does not
currently hold any derivative or hedging instruments.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks which arise in the normal course of
business from changes in interest rates, foreign currency exchange rates and
stock market fluctuations. At September 30, 1999, the Company maintains a
portion of its cash and cash equivalents in financial instruments with original
maturities of three months or less. These financial instruments, principally
comprised of government backed money market funds, are subject to interest rate
risk and will decline in value if interest rates increase. The Company also
maintains a short-term investment portfolio containing common stocks that are
subject to market risk. The Company has not used derivative financial
instruments in its investment portfolio and believes that its investment in
market-risk-sensitive instruments is not material. Based upon our overall
currency rate exposure at September 30, 1999, we do not believe that our
exposure to currency rate fluctuations will have a material impact on our
consolidated financial position or consolidated results of operations.
Market rate risk related to Long Term Debt is diminimus due to the fixed
interest rate and fixed payment structure of the debt.
11
<PAGE> 12
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 ending September 30, 1999, 30,000 common shares were
repurchased pursuant to the Board of Directors approved repurchase program of up
to 500,000 shares of the Company's common stock. As of September 30, 1999,
229,500 shares had been repurchased under this repurchase program.
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:
27.0. Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which this report
is filed.
12
<PAGE> 13
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.
PETER C. WULFF Date: November 15 , 1999
- -------------
Peter C. Wulff
Chief Financial Officer
and Treasurer
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF INCOME OF NATURAL
ALTERNATIVES INTERNATIONAL, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 955
<SECURITIES> 192
<RECEIVABLES> 8,131
<ALLOWANCES> 474
<INVENTORY> 9,230
<CURRENT-ASSETS> 22,715
<PP&E> 13,610
<DEPRECIATION> 422
<TOTAL-ASSETS> 38,928
<CURRENT-LIABILITIES> 9,151
<BONDS> 1,304
0
0
<COMMON> 60
<OTHER-SE> 24,976
<TOTAL-LIABILITY-AND-EQUITY> 38,928
<SALES> 15,264
<TOTAL-REVENUES> 15,264
<CGS> 12,075
<TOTAL-COSTS> 14,910
<OTHER-EXPENSES> 10
<LOSS-PROVISION> 90
<INTEREST-EXPENSE> 30
<INCOME-PRETAX> 344
<INCOME-TAX> 257
<INCOME-CONTINUING> 87
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02
</TABLE>
