<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, 2000
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)
<TABLE>
<S> <C>
DELAWARE 84-1007839
--------
(State of other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
</TABLE>
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 [ ]
5,761,880
(Number of shares of common stock of the registrant outstanding, net of treasury
shares held, as of November 11, 2000)
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NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I -- FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, June 30,
(Amounts in thousands except share data) 2000 2000
------------- --------
(unaudited) (audited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 803 $ 815
Accounts receivable - less allowance for doubtful
accounts of $328 at September 30, 2000 and
$330 at June 30, 2000 4,682 4,097
Inventories (Note 2) 7,902 7,627
Income tax refund receivable 1,500 1,500
Deferred income taxes 1,467 1,467
Related parties notes receivable - current portion 840 815
Prepaid expenses 637 635
Deposits 502 390
Other current assets 252 110
------- -------
Total Current Assets 18,585 17,456
------- -------
Property and equipment, net 14,593 15,037
------- -------
Other Assets:
Deferred income taxes 1,662 1,592
Investments 212 232
Related parties notes receivable, less current portion 442 444
Other noncurrent assets, net 114 114
------- -------
Total Other Assets 2,430 2,382
------- -------
TOTAL ASSETS $35,608 $34,875
======= =======
</TABLE>
See accompanying notes to unaudited financial statements.
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NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I -- FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, June 30,
(Amounts in thousands except share data) 2000 2000
------------- --------
(unaudited) (audited)
<S> <C> <C>
Current Liabilities:
Accounts payable $ 5,375 $ 4,422
Lines of credit and notes payable (Note 5) 4,423 4,544
Current installments of long-term debt (Note 5) 502 490
Accrual for loss on lease obligation -- 50
Accrued compensation and employee benefits 483 355
-------- --------
Total Current Liabilities 10,783 9,861
Deferred income taxes 766 766
Long-term debt, less current installments (Note 5) 3,148 3,345
Long-term pension liability 220 417
-------- --------
Total Liabilities 14,917 14,389
-------- --------
Stockholders' Equity (Note 6):
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 6,024,380 60 60
Additional paid-in capital 11,272 11,272
Retained earnings 10,703 10,498
Treasury stock, at cost, 262,500 shares (1,283) (1,283)
Accumulated other comprehensive loss (61) (61)
-------- --------
Total Stockholders' Equity 20,691 20,486
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 35,608 $ 34,875
======== ========
</TABLE>
See accompanying notes to unaudited financial statements.
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NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
(Dollars in thousands except September 30,
share data) 2000 1999
----------- -----------
<S> <C> <C>
Net sales $ 10,223 $ 15,264
Cost of goods sold 8,212 12,075
----------- -----------
GROSS PROFIT 2,011 3,189
Selling, general &
administrative expenses 1,736 2,527
Loss on abandonment of leased facility -- 308
----------- -----------
INCOME FROM OPERATIONS 275 354
----------- -----------
Other income (expense):
Interest income 31 28
Interest expense (184) (30)
Equity in loss of unconsolidated joint
venture (20) --
Foreign exchange gain 39 --
Other, net (6) (8)
----------- -----------
(140) (10)
----------- -----------
EARNINGS BEFORE INCOME TAXES 135 344
Provision for income taxes (benefit) (70) 257
----------- -----------
NET EARNINGS AND COMPREHENSIVE
INCOME $ 205 $ 87
=========== ===========
NET EARNINGS PER COMMON SHARE:
Basic $ 0.04 $ 0.02
=========== ===========
Diluted $ 0.04 $ 0.02
=========== ===========
Weighted average common shares outstanding:
Basic shares 5,761,880 5,776,427
Diluted shares 5,763,890 5,776,978
</TABLE>
See accompanying notes to unaudited financial statements.
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NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I -- FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
September 30,
(Dollars in thousands) 2000 1999
------- -------
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net earnings $ 205 $ 87
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Bad debt provision -- 90
Write-off of notes receivable -- 72
Depreciation and amortization 634 422
Deferred income taxes (70) --
Pension expense, net of contributions (197) --
Loss on unconsolidated joint venture 20 --
Accrued interest - notes receivable (23)
Foreign exchange gains (51) --
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (585) (706)
Inventories (275) 646
Tax refund receivable -- 301
Prepaid expenses (2) (151)
Deposits (112) (201)
Other current assets (142) 832
(Decrease) increase in:
Accounts payable 953 91
Accrued compensation and employee benefits 128 (82)
Accrual for loss on lease obligation (50) --
------- -------
Net Cash Provided by Operating Activities $ 433 $ 1,401
------- -------
</TABLE>
(continued)
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NATURAL ALTERNATIVES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE QUARTERS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures $( 190) $(1,786)
Repayment of notes receivable -- 10
------ -------
Net Cash Used in Investing Activities (190) (1,776)
------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on lines of credit and notes payable 293 395
Payments on lines of credit and notes payable (548) (17)
Treasury stock acquisitions -- (111)
------ -------
Net Cash (Used in) Provided by Financing Activities (255) 267
------ -------
Net Decrease in Cash and Cash Equivalents (12) (108)
Cash and Cash Equivalents at Beginning of Period 815 1,063
------ -------
Cash and Cash Equivalents at End of Period $ 803 $ 955
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 172 $ 28
======= =======
</TABLE>
See accompanying notes to unaudited financial statements.
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NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I -- FINANCIAL INFORMATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
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 and for the three months ended September 30, 2000 and 1999.
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, 2000 and 1999 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, 2000.
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 ended September 30,
2000.
NOTE 2 - Inventories
Inventories are comprised of the following:
<TABLE>
<CAPTION>
September 30 June 30
(Dollars in thousands) 2000 2000
------------ -------
<S> <C> <C>
Raw materials $4,248 $4,187
Work in progress 2,721 2,409
Finished goods 933 1,031
------ ------
$7,902 $7,627
====== ======
</TABLE>
NOTE 3 -- Net Earnings Per Share
Basic net earnings per share is computed by dividing net earnings by the
weighted average number of common shares outstanding during the period. Diluted
net earnings 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 earnings per share does not
assume exercise or conversion of securities that would have an anti-dilutive
effect on net earnings per share.
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<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
NUMERATOR:
Net earnings - Numerator for
basic and diluted earnings per
share - earnings available to
common shareholders (In thousands) $ 205 $ 87
========== ==========
DENOMINATOR:
Denominator for basic earnings
per share - weighted
average shares 5,761,880 5,776,427
Effect of dilutive securities -
employee stock options 2,010 551
---------- ----------
Denominator for diluted earnings
per share - adjusted weighted
average shares with assumed
conversions 5,763,890 5,776,978
========== ==========
Basic earnings per share $ 0.04 $ 0.02
Diluted earnings per share $ 0.04 $ 0.02
</TABLE>
For the three months ended September 30, 2000 and 1999, there were outstanding
options to purchase 301,000 and 274,500, respectively, shares of common stock,
that were not included in the computation of diluted net earnings per share as
their effect would have been anti-dilutive.
NOTE 4 -- 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 a material adverse impact on the Company's revenues and earnings.
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,
-----------------------------------------------------------------
(Dollars in
thousands) 2000 1999
----------------------------- ----------------------------
Sales by Sales by
Customer Customer %(a) Customer %(a)
------------ ----------- ------- ---------- ------
<S> <C> <C> <C> <C>
Customer 1 $ 5,226 51% $ 4,975 33%
Customer 2 1,259 12% (b)
Customer 3 (b) 3,095 20%
Customer 4 (b) 2,643 17%
------- ------- ------- -------
$ 6,485 63% $10,713 70%
======= ======= ======= =======
</TABLE>
(a) Percent of total sales
(b) Sales for the year were less than 10% of total sales.
Accounts receivable from these customers totaled $2,285 and $1,248 at September
30, 2000 and June 30, 2000, respectively.
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NOTE 5 -- Debt
On October 4, 1999, the Company replaced an existing $3.0 million working
capital line of credit with $9.0 million in new financing. The new financing
consists of a $5.0 million working capital line of credit at an annual interest
rate of prime and a $4.0 million term note at an annual interest rate of prime
plus 0.25%, for an effective interest rate of 9.50% and 9.75%, respectively, at
September 30, 2000. Borrowings under the working capital line of credit are
collateralized by eligible accounts receivable and inventory, as defined in the
agreement; proceeds are to be used to support ongoing operating requirements. As
of June 30, 2000, the Company was not in compliance with certain financial
covenant provisions of the credit agreement. The credit agreement was amended to
provide new debt covenant restrictions under which the Company was compliant at
September 30, 2000. (See Note 8 -- Subsequent Events)
The line of credit expires on December 1, 2000. The term note expired on
November 1, 2000. As of September 30, 2000, amounts outstanding under the line
of credit and term note were $2.4 million and $1.59 million, respectively. The
Company expects this line to be renewed in the normal course of business and the
Company is negotiating with various lenders to establish new working capital
credit facility arrangements. (See Note 8 -- Subsequent Events)
The Company also has a term note secured by a building due June 2011 with the
same lender that provides the working capital credit facility. As of September
30, 2000 the outstanding amount is $913,000.
The Company's wholly owned subsidiary in Switzerland has a line of credit
agreement permitting borrowings up to CHF 2.0 million, or approximately $1.1
million at September 30, 2000 at an annual interest rate of 5.5%. The line of
credit requires minimum annual principal payments of CHF 250,000, or $140,000,
due annually on December 31; management expects this line to be renewed in the
normal course of business. The agreement contains no financial covenants. As of
September 30, 2000, the Company has converted borrowings under the line of
credit of approximately $577,000 into various unsecured term notes with
maturities from six to twelve months at interest rates ranging from 5.5% to
6.0%. The amount outstanding under the line of credit is approximately $432,000.
On November 9, 1999, the Company entered into a term note agreement for $2.5
million, secured by equipment, at an annual interest rate of 9.2%. The note has
a five-year term that provides for principal and interest payable in monthly
installments of $52,000; proceeds have been used to support working capital
requirements. As of September 30, 2000 the outstanding amount is $2.16 million.
As of September 30, 2000, the composite interest rate on all outstanding debt
was 8.7%.
Note 6 -- Stockholders' Equity
On August 28, 2000, under the 1999 Omnibus Equity Incentive Plan, the Company
granted to various officers and employees stock options to purchase 130,200
shares of the Company's common stock at $1.81 per share.
Note 7 -- Custom Nutrition Joint Venture
In March 1999, the Company entered into a letter of intent to form a joint
venture with FitnessAge Incorporated, a privately held development stage company
based in San Diego, CA ("FitnessAge"). In connection therewith, on March 30,
1999 the Company purchased 300,000 shares of FitnessAge common stock for
$150,000. On or about the same date, the family limited partnership of the Chief
Executive Officer and the Secretary and Chairperson of the Board of Directors
purchased 200,000 shares of the Common Stock of FitnessAge for $100,000.
During December 1999, the Company and FitnessAge formalized the joint venture by
forming a new company named Custom Nutrition, LLC, a Delaware limited liability
company ("Custom Nutrition") in which the Company has a 40% ownership. Custom
Nutrition was formed for the purpose of developing, merchandising, selling and
distributing customized nutritional and related products to health and fitness
clubs, as well as over the internet. Under terms of a 10-year Exclusive
Manufacturing Agreement, the Company is the exclusive manufacturer of all
nutritional supplements for Custom Nutrition. In addition, Custom Nutrition
obtained an exclusive royalty free license to FitnessAge's proprietary software
technology, including their physical fitness assessments known as the FitnessAge
System, as well as,
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software under development designed to provide customized nutritional
assessments. In accordance with its Operating Agreement, the Company was
required to make an initial capital contribution of $100,000, which was funded
during the fourth quarter of fiscal 2000. Income and losses are to be allocated
and any additional capital contribution requirements of Custom Nutrition are to
be made 60% to FitnessAge and 40% to the Company.
In addition, in November and December 1999, the Company loaned FitnessAge a
total of $750,000 as part of a convertible secured promissory note (the "Loan").
The Loan is secured by all rights, title, and interest in Custom Nutrition and
FitnessAge's allocable share of gross revenues received by Custom Nutrition from
a major customer and includes interest accruing at an annual rate of 12%. The
principal together with all accrued and unpaid interest was due November 10,
2000. The Company has the right at any time to convert all or any portion of the
amount due on the Loan into the common stock of FitnessAge at a conversion price
of $0.75 per share. As of September 30, 2000, the balance of the Loan, including
all accrued and unpaid interest, was $830,000, and the Company's direct
aggregate investment in FitnessAge was approximately $980,000. The Company is
currently accounting for this investment under the cost method of accounting.
(See Note 8 -- Subsequent Events)
In conjunction with the Loan, the Company received a three-year Warrant (the
"Warrant") to purchase up to 150,000 shares of Common Stock of FitnessAge for
$0.75 per share. The Company may exercise the Warrant at any time up to and
including November 1, 2002. The Company was issued two additional warrants to
purchase common stock as additional consideration for providing a short-term
loan to FitnessAge which was repaid prior to June 30, 2000. One warrant provides
for the purchase of 80,000 shares of FitnessAge common stock for $1.25 per share
and the other warrant provides for the purchase of 80,000 shares of FitnessAge
common stock for $2.00 per share. The Company may exercise these two Warrants at
any time up to and including June 12, 2003. As of September 30, 2000, the
Company had not exercised any portion of these Warrants. The Company also
obtained the right to designate one representative of the Company to be a member
of FitnessAge's Board of Directors, which consists of five board members, and
registration rights and certain other rights as defined by the loan documents
and by an Investor Rights Agreement. If the Company converted the Loan and
exercised the Warrants, the Company would own less than five percent, on an as
converted basis, of FitnessAge common stock.
NOTE 8 -- Subsequent Events
NEW CREDIT FACILITY
On November 13, 2000 the Company received a firm financing commitment letter to
enter into a working capital line of credit and equipment term financing (the
"new credit facility") with a new lender. The new credit facility allows up to a
maximum of $9.35 million of borrowing capacity, subject to certain eligibility
requirements of collateral balances of accounts receivable, inventory and fixed
assets as defined in the new credit facility. The proposed new credit facility
will also contain debt covenant restrictions for the Company including, but not
limited to, certain coverage ratios, minimum net stockholders' equity and
earnings amounts. The initial proceeds of this new credit facility will be used
to pay-off the Company's outstanding indebtedness due during the second quarter
of fiscal 2001 under the existing working capital and equipment term note of
$2.4 million and $1.59 million, respectively.
FITNESSAGE LOAN EXTENSION
Effective November 13, 2000 the Company and FitnessAge entered into an agreement
to revise the due date of the outstanding convertible secured loan (the "Loan")
due from FitnessAge on November 11, 2000. The Company agreed to extend the due
date of the Loan with a debt repayment schedule which requires payments of
$150,000 in February 2001, $150,000 in March 2001, $225,000 in June 2001 and
complete pay-off of any outstanding principal and accrued interest by September
2001. In the event that FitnessAge does not perform under the new settlement
terms, the Company may place a notice of default of the Loan, convert the Loan
to FitnessAge common stock or further amend the terms of the Loan.
In consideration for the Loan extension, FitnessAge agreed to provide the
company additional collateral to secure FitnessAge's obligation to repay the
Loan. The additional collateral consists of a non-exclusive, perpetual, royalty
free, worldwide license of the FitnessAge assessment software, including but not
limited to, all upgrades of its assessment technology and all rights of licenses
in and to or from such technology.
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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
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 but
not limited to those set forth herein and in the Company's most recent Form
10-K.
RESULTS OF OPERATIONS
FIRST QUARTER OF FISCAL 2001 AND 2000
Net sales for the first quarter of fiscal 2001 of $10.2 million decreased $5.1
million, or 33%, compared to net sales of $15.3 million for the first quarter of
fiscal 2000. The decrease was primarily due to the loss of a major customer,
NuSkin Enterprises, Inc., which accounted for sales of approximately $3.0
million, or 20% for the first quarter of fiscal 2000, with no sales in the first
quarter of fiscal 2001. NuSkin informed the Company in December 1999 that its
production needs had been transitioned to other vendors. The sales decrease from
the first quarter of fiscal 2000 also included loss of sales to two other
customers which had combined sales of approximately $1.8 million int the first
quarter of fiscal 2000 and no sales in fiscal 2001. Also contributing to the
sales decrease was a reduction in sales to our third largest customer of $1.7
million. Sales to this customer amounted to $2.6 million and $900,000 for the
first quarters of fiscal 2000 and 2001, respectively. Fiscal 2000 sales volumes
were bolstered as this customer acquired large quantities of product to support
an inventory build for a major product introduction, while fiscal 2001 sales
volume have stabilized. These losses were partially offset by increased sales to
existing and new customers, including our largest customer with a sales increase
of approximately $250,000. During the latter part of the third quarter of fiscal
year 2000, the Company also commenced the initial marketing and sale of unique
herbal health and natural supplement products under the Dr. Cherry label. The
Company has a 10-year Exclusive Licensing and Manufacturing Agreement for the
manufacture and distribution of these products. Sales of this product exceeded
$1.0 million during the first quarter of fiscal 2001.
During the first quarter of fiscal 2001, the Company experienced an increase in
cost of goods sold, as a percentage of net sales, to 80.3% compared to 79.1%,
for the first quarter of fiscal 2000, resulting in an approximate reduction to
gross margin of 1% of sales or $100,000. Material costs as a percentage of sales
is comparable between the first quarter of fiscal 2001 and 2000. The decrease in
gross margin, for the first quarter of fiscal 2000, was due primarily to a
change in sales mix as a result of the decline in market share during the first
quarter of fiscal 2000, and continuing competitive pressure, coupled with
additional start-up costs of our Swiss operation ($450,000). Continuation of the
cost containment program during the first quarter of fiscal 2001, produced
savings in overhead costs of approximately $100,000, and costs of approximately
$200,000 associated with excess manufacturing capacity were reclassified to
selling, general and administrative expenses.
Selling, general and administrative expenses were as a percentage of net sales
17% for the quarters ended September 30, 2000 and 1999. In absolute dollars the
expenses decreased by $791,000 to $1.7 million. The reduction was primarily the
result of the
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<PAGE> 12
continuing combined benefits of the cost containment program and the
non-recurring nature of certain costs incurred in the first quarter of fiscal
2000 associated with the start-up of our Swiss manufacturing subsidiary and the
training and implementation of a fully integrated manufacturing and accounting
computer software system.
INCOME TAXES
Our effective tax rate was a benefit of 52% compared to an expense of 75% for
the first quarters of fiscal 2001 and 2000, respectively. The decrease in
expense relates to a tax holiday, which applies a zero tax rate to pretax
earnings of our Swiss subsidiary which was profitable in the first quarter of
fiscal 2001. U.S. operations recorded a net loss which generated the current
period tax benefit.
COST CONTAINMENT PROGRAM
In January 2000, the Company announced a cost containment program designed to
reduce future operating expenses. The program initiated expense control measures
intended to counteract the loss of a major customer and streamline business
processes to improve future operating performance. The program included an
immediate reduction of approximately 27% in the Company workforce, consisting of
both permanent and temporary personnel.
In May 2000, the Company took additional steps, which were completed by the end
of June 2000, as follows:
(i) Substantial reduction of outside packaging services, as a result of the
capital expansion initiative to invest in the integration of in-house
finished goods packaging capabilities and to substantially eliminate
future outside packaging services.
(ii) An additional reduction in force of 25% effective May 2000, including
reductions in executive compensation and benefits.
(iii) Successfully terminating the long-term lease obligation related to the
Carlsbad facility in June 2000. Initially the Company entered into two
sublease agreements for the entire premises for approximately five
years. Shortly thereafter, the Company completed a buyout of the
fifteen-year lease obligation from the landlord. The buyout agreement
provided for the sale of the Company's leasehold interests and
obligations to the landlord for essentially the same cost of performing
its obligations pursuant to the sublease agreements, resulting in the
Company paying a $3.0 million settlement fee to the landlord.
Management is committed to the restoration of net profits by maintaining its
operating cost structures with current operating levels.
The Company will continue to concentrate its efforts on improving operational
efficiencies, resource requirements, and core business processes to improve
operating performance. In addition, the Company will continue to focus on
existing customers and realizing the returns from the strategies implemented to
diversify and expand geographical and distribution channels through its Swiss
manufacturing operations, Custom Nutrition joint venture and Dr. Cherry
physician branding direct to consumer initiatives.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations through cash flow from
operations, its working capital credit facility and equipment financing
arrangements.
At September 30, 2000, the Company had cash of approximately $803,000, versus
$815,000 at June 30, 2000. Net cash provided by operations during the first
quarter of fiscal 2001 amounted to $433,000, which was used primarily to fund
acquisition of capital equipment and to reduce outstanding debt.
Capital expenditures for the three months ended September 30, 2000 amounted to
$190,000. These expenditures relate primarily to the acquisition of production
equipment in both our U.S. and Swiss manufacturing facilities.
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At September 30, 2000 the Company had working capital of $7.8 million,
comparable to working capital at June 30, 2000. Current assets increased by
approximately $1.1 million while current liabilities increased $900,000.
Accounts receivable, inventory, deposits, and other current assets increased
$585,000, $275,000, $112,000, and $142,000, respectively. The increase to
accounts receivable was primarily caused by shipments occurring toward the end
of the quarter. Increases to accounts payable and accrued compensation were
coupled with decreases to current debt and the accrual for loss on lease
obligation. The increase in accounts payable was $953,000, while the reduction
to current debt was $109,000. The increase to accounts payable resulted from
increased purchases offset by the increase in accounts receivable.
For the three months ended September 30, 2000, the Company's consolidated
outstanding debt decreased approximately $300,000 to $8.1 million from
approximately $8.4 million at June 30, 2000. The net decrease of $300,000
reflects borrowings of $300,000 offset by payments of $550,000 and $51,000 of
foreign exchange gains realized on the Swiss Franc borrowings made by the
Company's wholly owned subsidiary. The composite interest rate on all
outstanding debt was approximately 8.7%.
The Company has access to approximately $6.1 million of funds from existing
working capital credit facilities to support future operating requirements, net
of borrowings outstanding under these facilities as of September 30, 2000 of
approximately $3.4 million. The working capital line of credit facilities are
subject to eligibility requirements for current accounts receivable and
inventory balances. As of September 30, 2000 total excess borrowing capacity
based on eligible working capital balances was approximately $1.1 million. One
or more of the Company's loan agreements contain a number of covenants that
restrict the operations of the Company. Such restrictions include requiring the
Company to comply with specified financial ratios and tests, including minimum
tangible net worth requirements, maximum leverage ratios, debt coverage ratios,
and minimum Earnings before Interest, Depreciation and Amortization ("EBITDA")
to cash interest expense ratios. The Company was not in compliance with certain
of these ratios as of June 30, 2000, which the lender had agreed to waive
through June 30, 2000. Effective July 1, 2000 the Company and the lender have
amended the credit agreement to provide new debt covenant restrictions under
which the Company is compliant. The Company is negotiating with various lenders
to establish new loan arrangements. (See Note 8 -- Subsequent Events)
The Company believes that its available cash and existing credit facilities
should be sufficient to fund near-term operating activities. However, the
Company's ability to fund future operations and meet capital requirements will
depend on many factors, including but not limited to: the ability to seek
additional capital; the effectiveness of the Company's diversified growth
strategy; the effectiveness of the cost containment program; vertical
integration of packaging operations; the expansion of Switzerland manufacturing
operations; and the ability to establish additional customers or changes to
existing customer's business.
RISK FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
In addition to the other information included in this Report, the following
factors should be considered in evaluating the Company's business and future
prospects. The Company's business and results of operations could be seriously
harmed by any of the following risks. In addition, the market price of our
common stock could decline due to any of these risks.
RECENT LOSSES; DECLINING SALES
The net earnings and net sales for the first quarter of fiscal 2001 were
$205,000 and $10.2 million, respectively, as compared with $87,000 and $15.3
million for the same period of fiscal 2000. The Company has implemented a cost
containment program and a return to profitability program in an effort to reduce
expenses to be consistent with current operating levels. While the current
results of operations are encouraging, there can be no assurance these programs
will be effective, or if they are, the Company cannot predict the level of
profitability or whether the Company will be able to maintain profitability. The
Company expects that operating results will fluctuate from period to period as a
result of differences in when it incurs expenses and recognizes revenues from
product sales. Some of these fluctuations may be significant.
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DECLINE IN STOCK PRICE
The Company's stock price has experienced significant volatility at times during
the past few years and has recently been near historic lows. In view of the
Company's recent losses, there can be no assurance that the stock price will not
continue to languish at the current level or decline. Market conditions in the
vitamin and nutritional supplement industry, such as increased price
competition, consolidation, oversupply of vitamin and supplement products,
operating results of competitors, adverse publicity and other factors such as
customer and product announcements by the Company and operating results which
are lower than the expectations of analysts and our investors, may also have a
continuing adverse affect on the price of the Company's stock.
RELIANCE ON LIMITED NUMBER OF CUSTOMERS FOR MAJORITY OF REVENUE
For the first quarter of fiscal 2001, the Company had 2 major customers, which
together accounted for approximately 63% of the Company's net sales. The loss of
either of these major customers, or any substantial reduction of their purchases
from the Company, would have a material adverse impact on the business,
operations and financial condition of the Company.
LOSS OF MAJOR CUSTOMER
During the quarter ended December 31,1999, one of the Company's major customers,
NuSkin Enterprises, Inc. ("NuSkin"), advised the Company it would stop
purchasing products from the Company, and no longer purchases any Company
products. For the fiscal year ended June 30, 1999, NuSkin accounted for
approximately $18.4 million or approximately 32% of the Company's net sales. For
the year ended June 30, 2000, NuSkin accounted for approximately $4.3 million or
9% of the Company's net sales. The loss of NuSkin as a customer has had a
material adverse impact on the revenues and operating results of the Company.
There can be no assurance the Company will be able to generate revenue from any
source in an amount sufficient to offset the loss of NuSkin as a customer.
RESTRICTIVE FINANCING COVENANTS.
One or more of the Company's loan agreements contain a number of covenants that
restrict the operations of the Company. Such restrictions include requiring the
Company to comply with specified financial ratios and tests, including minimum
tangible net worth requirements, maximum leverage ratios, debt coverage ratios,
and minimum Earnings before Interest, Depreciation and Amortization ("EBITDA")
to cash interest expense ratios. As of June 30, 2000, the Company was not in
compliance with certain financial covenant provisions of the credit agreement.
The credit agreement was amended to provide new debt covenant restrictions under
which the Company was compliant at September 30, 2000. The Company is
negotiating with various lenders to establish new loan arrangements. There can
be no assurance the Company will successfully enter into new loan agreements and
will be able to comply with the covenants or restrictions contained therein
during future quarters. The Company's ability to obtain new credit arrangements,
and comply with present or future covenants and other restrictions may be
affected by events beyond its control, including prevailing economic, financial
and industry conditions. The breach of any such covenants or restrictions could
result in a default under the various loan agreements that would permit the
lenders to declare all amounts outstanding thereunder to be immediately due and
payable, together with accrued and unpaid interest, and to terminate their
commitments to make further extensions of credit. Any such action could have a
material adverse impact upon the business operations and financial condition of
the Company.
SECURED PROMISSORY NOTE RECEIVABLE
The Company has loaned approximately $750,000 to its joint venture partner in a
limited liability company. The debt is convertible into the private company's
common stock and will become due and payable in the second fiscal quarter of
2001. The borrower is a development stage company and there can be no assurance
it will have the funds to repay the debt when it becomes due. In the event it
does not, the Company may elect to renegotiate the terms or grant an extension
or convert the debt into the stock of the borrower on the same or revised terms
as exist in the current loan agreements. (See Note 8 of Notes to unaudited
financial statements)
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LAWSUIT BY FORMER PRESIDENT, DIRECTOR AND CHIEF FINANCIAL OFFICER
The Company is a party to a lawsuit filed by its former President, Director and
Chief Financial Officer, William P. Spencer. Mr. Spencer was terminated by the
Company for cause in January 1999. The lawsuit includes various claims, and
alleges damages in excess of six million dollars. The Company has responded to
the lawsuit and has denied it has any liability associated with the claim.
Management believes the claims against the Company are without merit. The
Company filed a cross-complaint in the lawsuit against Mr. Spencer and
Imagenetix, Inc., (a corporation in which Mr. Spencer is a director, principal
shareholder and chief executive), and three other individuals, two of whom are
former employees of the Company and the other a former consultant to the
Company. Both the Company's and the other parties' complaints have been amended,
and additional parties have been added. Management believes the Company will not
be found liable on any claim, and will prevail in its cross-complaint against
each cross-defendant. In the event a judgment is obtained against the Company in
the amount of the damages alleged in the lawsuit or any significant portion
thereof, it would have a material adverse impact upon the financial condition of
the Company.
POTENTIAL FOR INCREASED COMPETITION
The market for the Company's products is highly competitive. The Company
competes with other dietary supplement products and over-the-counter
pharmaceutical manufacturers. Among other factors, competition among these
manufacturers is based upon price. If one or more manufacturers significantly
reduce their prices in an effort to gain market share, the Company's business,
operations and financial condition could be adversely affected. Many of the
Company's competitors, particularly manufacturers of nationally advertised brand
name products, are larger and have resources substantially greater than those of
the Company. There has been speculation about the potential for increased
participation in these markets by major international pharmaceutical companies.
In the future, if not already, one or more of these companies could seek to
compete more directly with the Company by manufacturing and distributing their
own or others' products, or by significantly lowering the prices of existing
national brand products. The Company sells substantially all of its supplement
products to customers who re-sell and distribute the products. Although the
Company does not currently participate significantly in other channels such as
health food stores, direct mail, internet sales and direct sales, the Company is
expanding its operations and its products, and will likely face increased
competition in such distribution and sales channels as more vendors and
customers utilize them.
RELIANCE ON LIMITED NUMBER OF SUPPLIERS; AVAILABILITY AND COST OF PURCHASED
MATERIALS
The Company purchases certain products it does not manufacture from a limited
number of raw material suppliers. Although the Company currently has supply
arrangements with several suppliers of these raw materials, and such materials
are generally available from numerous sources, the termination of the supply
relationship by any material supplier or an unexpected interruption of supply
could materially adversely affect the Company's business, operations and
financial condition.
The Company relies on a single supplier to process certain raw materials for a
product line of the Company's largest customer. An unexpected interruption of
supply of this service would materially adversely affect the Company's business,
operations and financial condition.
EFFECT OF ADVERSE PUBLICITY
The Company's products consist primarily of dietary supplements (vitamins,
minerals, herbs and other ingredients). The Company regards these products as
safe when taken as suggested by the Company. In addition, various scientific
studies have suggested the ingredients in some of the Company's products may
involve health benefits. The Company believes the growth in the dietary
supplements business of the last several years may, in part, be based on
significant media attention and various scientific research suggesting potential
health benefits from the consumption of certain vitamin products. The Company is
indirectly dependent upon its customers' perception of the overall integrity of
its business, as well as the safety and quality of its products and similar
products distributed by other companies which may not adhere to the same quality
standards as the Company. The business, operations, and financial condition of
the Company could be adversely affected if any of the Company's products or any
similar products distributed by other companies should prove or be asserted to
be harmful to consumers, or should scientific studies
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provide unfavorable findings regarding the effect of products similar to those
produced by the Company.
EXPOSURE TO PRODUCT LIABILITY CLAIMS
The Company, like other retailers, distributors and manufacturers of products
that are ingested, faces a risk of exposure to product liability claims in the
event that, among other things, the use of its products results in injury. The
Company maintains product liability insurance coverage, including primary
product liability and excess liability coverage. There can be no assurance that
product liability insurance will continue to be available at an economically
reasonable cost or that the Company's insurance will be adequate to cover any
liability the Company incurs in respect to all possible product liability
claims. In addition, some of the ingredients included in one or more of the
products manufactured by the Company are subject to controversy involving
potential negative side effects or questionable health benefits. Some insurers
have recently excluded certain of these ingredients from their product liability
coverage. Although the Company's product liability insurance does not presently
have any such limitations, the Company's insurer could require such exclusions
or limitations on coverage in the future. In such event, the Company may have to
cease utilizing the ingredients or may have to rely on indemnification or
similar arrangements with its customers who wish to continue to include such
ingredients in their products. In such an event, the consequential increase in
product liability risk or the loss of customers or product lines could have a
material adverse impact on the Company's business, operations, and financial
condition.
RISKS ASSOCIATED WITH INTERNATIONAL MARKETS
The Company's growth may be dependent in part upon its ability to expand its
operations and those of its customers into new markets, including international
markets. The Company has a manufacturing facility in Switzerland, which is
intended to facilitate an increase in sales of the Company's products overseas.
The Company may experience difficulty entering new international markets due to
regulatory barriers, the necessity of adapting to new regulatory systems, and
problems related to entering new markets with different cultural bases and
political systems. Operating in international markets exposes the Company to
certain risks, including, among other things, (1) changes in or interpretations
of foreign import, currency transfer and other restrictions and regulations that
among other things may limit the Company's ability to sell certain products or
repatriate profits to the United States, (2) exposure to currency fluctuations,
(3) the potential imposition of trade or foreign exchange restrictions or
increased tariffs, and (4) economic and political instability. As the Company
continues to expand its international operations, these and other risks
associated with international operations are likely to increase.
GOVERNMENT REGULATION
The manufacturing, processing, formulation, packaging, labeling and advertising
of the Company's products are subject to regulation by one or more federal
agencies, including the United States Food and Drug Administration ("FDA"), the
Federal Trade Commission ("FTC"), the Consumer Product Safety Commission, the
United States Department of Agriculture, the United States Postal Service, the
United States Environmental Protection Agency, and the Occupational Safety and
Health Administration. The Company's activities are also regulated by various
agencies of the states and localities in which the Company's products are sold.
In particular, the FDA regulates the safety, labeling and distribution of
dietary supplements, including vitamins, minerals, herbs, food, and
over-the-counter and prescription drugs and cosmetics. In addition, the FTC has
overlapping jurisdiction with the FDA to regulate the labeling, promotion and
advertising of vitamins, over-the-counter drugs, cosmetics and foods.
The Dietary Supplement Health and Education Act of 1994 ("DSHEA") was enacted on
October 25, 1994. DSHEA amends the Federal Food, Drug and Cosmetic Act by
defining dietary supplements, which include vitamins, minerals, nutritional
supplements and herbs as a new category of food separate from conventional food.
DSHEA provides a regulatory framework to ensure safe, quality dietary
supplements and the dissemination of accurate information about such products.
Under DSHEA, the FDA is generally prohibited from regulating the active
ingredients in dietary supplements as drugs unless product claims, such as
claims that a product may heal, mitigate, cure or prevent an illness, disease or
malady, trigger drug status.
DSHEA provides for specific nutritional labeling requirements for dietary
supplements. DSHEA permits substantiated, truthful and non-misleading statements
of nutritional support to be made in labeling, such as statements describing
general well being resulting from consumption of a dietary ingredient or the
role of a
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nutrient or dietary ingredient in affecting or maintaining a structure or
function of the body. The Company anticipates the FDA will finalize
manufacturing process regulations that are specific to dietary supplements and
require at least some of the quality control provisions applicable to drugs. The
Company currently manufactures its vitamins and nutritional supplement products
in compliance with the food good manufacturing processes.
The FDA is developing additional regulations to implement DSHEA. Labeling
regulations may require expanded or different labeling for the Company's vitamin
and nutritional products. The Company cannot determine what effect such
regulations, when fully implemented, will have on its business in the future.
Such regulations could, among other things, require the recall, reformulation or
discontinuance of certain products, additional record keeping, warnings,
notification procedures and expanded documentation of the properties of certain
products or scientific substantiation regarding ingredients, product claims,
safety or efficacy. Failure to comply with applicable FDA requirements could
result in sanctions being imposed on the Company or the manufacturers of its
products, including warning letters, fines, product recalls and seizures.
Governmental regulations in foreign countries where the Company plans to
commence or expand sales may prevent or delay entry into a market or prevent or
delay the introduction, or require the reformulation of, certain of the
Company's products. In addition, the Company cannot predict whether new domestic
or foreign legislation regulating its activities will be enacted. Such new
legislation could have a material adverse effect on the business, operations and
financial condition of the Company.
DISTRIBUTION AND MANAGEMENT OF OPERATIONS
In fiscal 1999, the Company leased and commenced operating three additional
facilities. Two adjacent facilities, comprising 74,000 square feet in Vista,
California, are used as a receiving, warehousing, weighing, blending, finished
goods packaging, and distribution facility. The third new facility is an 18,000
square foot manufacturing facility in Lugano, Switzerland. All of these
facilities were completed and became fully operational during fiscal 2000.
During fiscal 1999, the Company also implemented an entirely new software system
to manage its materials, manufacturing and accounting operations, and use of
this system has continued to be refined. While the Company believes new
facilities and operating systems will increase the Company's manufacturing and
distribution capabilities, there can be no assurance that they will result in
improved sales, profit margins or earnings. A significant, unexpected disruption
of these systems and facilities could have a material adverse effect on the
Company's results of operations.
FAILURE TO ATTRACT AND RETAIN MANAGEMENT COULD HARM OUR ABILITY TO ACHIEVE
PROFITABILITY AND GAIN
The Company's success is dependent in large part upon its continued ability to
identify, hire, retain, and motivate highly skilled management employees. These
types of qualified individuals are currently in great demand in the marketplace.
Competition for these employees is intense, and the Company may not be able to
hire additional qualified personnel in a timely manner and on reasonable terms.
The majority of the Company's current corporate officers began their employment
with the Company in fiscal years 1999 and 2000. The inability of the Company to
retain competent professional management could adversely effect our ability to
execute our business strategy.
CENTRALIZED LOCATION OF MANUFACTURING OPERATIONS
The Company currently manufactures the vast majority of its products at its
manufacturing facilities in San Marcos, California. Accordingly, any event
resulting in the slowdown or stoppage of the Company's manufacturing operations
or distribution facilities in San Marcos could have a material adverse affect on
the Company. The Company maintains business interruption insurance. There can be
no assurance, however, that such insurance will continue to be available at a
reasonable cost or, if available, will be adequate to cover any losses that may
be incurred from an interruption in the Company's manufacturing and distribution
operations.
CONCENTRATION OF OWNERSHIP; CERTAIN ANTI-TAKEOVER CONSIDERATIONS
The Company's directors and executive officers beneficially own in excess of
24.9% of the outstanding Common Stock as of September 30, 2000. Accordingly,
these shareholders will continue to have the ability to substantially influence
the management, policies, and business operations of the Company. The
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Company's Board of Directors has the authority to approve the issuance of
500,000 shares of preferred stock and to fix the rights, preferences, privileges
and restrictions, including voting rights, of those shares without any further
vote or action by the Company's shareholders. The rights of the holders of
Common Stock will be subject to, and may be adversely affected by, the rights of
holders of any preferred stock that may be issued in the future. Certain
provisions of Delaware law, as well as the issuance of preferred stock, and
other "anti-takeover" provisions in the Company's Articles and Bylaws, could
delay or inhibit the removal of incumbent directors and could delay, defer, make
more difficult or prevent a merger, tender offer or proxy content, or any change
in control involving the Company, as well as the removal of management, even if
such events would be beneficial to the interests of the Company's shareholders,
and may limit the price certain investors may be willing to pay in the future
for shares of Common Stock.
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.NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to a variety of risks, including changes in interest rates
affecting the return on our investments and the cost of our debt.
At September 30, 2000, the Company's cash equivalents consisted of financial
instruments with original maturities of three months or less.
The Company's debt totaled $8.1 million as of September 30, 2000 and was
comprised principally of term notes and lines of credit. The Company's debt
obligations bear a composite rate of 8.7%. An immediate change of one hundred
basis points in interest rates would not have a material effect on our financial
condition or results of operations due to the fixed rate nature of the majority
of the debt.
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NATURAL ALTERNATIVES INTERNATIONAL, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to a lawsuit filed by its former President, Director and
Chief Financial Officer, William P. Spencer. The lawsuit was filed in January
2000, and was served upon the Company in March 2000. Mr. Spencer was terminated
by the Company for cause in January 1999. The lawsuit alleges damages for
wrongful termination, breach of option contract, conversion, breach of
employment contract, discriminatory and retaliatory discharge, workplace
harassment and slander. The lawsuit seeks damages in an amount to be proved at
trial, and alleges damages in excess of six million dollars. The Company has
responded to the lawsuit and has denied it has any liability. Management
believes the claims against the Company are without merit. The Company has filed
a cross-complaint in the lawsuit against Mr. Spencer and Imagenetix, Inc., (a
corporation in which Mr. Spencer is a director, principal shareholder and chief
executive), and three other individuals, two of whom are former employees of the
Company and the other a former consultant to the Company. The cross-complaint
seeks damages and injunctive relief for breach of fiduciary duty;
fraud-concealment of material facts; intentional interference with prospective
economic advantage; negligent interference with prospective economic advantage;
civil conspiracy; intentional interference with contract; trade libel; slander
per se; breach of contract; conversion; misappropriation of trade secrets;
breach of duty of loyalty; unlawful, unfair and/or fraudulent business acts or
practices and an accounting. The additional defendants in NAI's cross-complaint
subsequently filed cross-actions against NAI, alleging similar claims to those
alleged by Mr. Spencer. The complaint against NAI was also amended to add
Imagenetix, Inc. as a claimant. Management believes the additional claims are
without merit, and the Company will prevail in its cross-complaint against each
cross-defendant. The Company subsequently amended its complaint, adding
additional claims against certain parties. The Company also filed motions to
disqualify the Plaintiff's and Cross Complainant's attorneys on conflict of
interest grounds as the same law firm also represented the Company. The
Company's motions to disqualify the other parties attorneys was approved, the
law firm been removed from the case, and those parties are presently seeking new
counsel. In the event a judgment is obtained against the Company in the amount
of the damages alleged in the lawsuit or any significant portion thereof, it
would have a material adverse impact upon the financial condition of the
Company.
The Company is a plaintiff in an anti-trust lawsuit against several
manufacturers of vitamins and other raw materials purchased by the Company.
Other similarly situated companies have filed a number of similar lawsuits
against some or all of the same manufacturers. The Company's lawsuit has been
consolidated with some of the others and is captioned In re: Vitamin Antitrust
Litigation, and is pending in U.S. District Court in Washington D.C. One or more
consumer class actions have also been filed against some or all of the same
defendants, and at least one of these is presently in a settlement process. The
Company brought its own action to insure it understood what actually occurred.
There can be no assurance the claims will be resolved, or, if they are, that it
will result in a material benefit to the Company.
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, after consultation
with its legal counsel, the ultimate disposition of these matters will not have
a material adverse effect on the Company's consolidated financial position,
results of operations or liquidity.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS BY THE COMPANY ON ITS SENIOR SECURITIES
None.
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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.
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/ PETER C. WULFF Date: November 14, 2000
------------------------
Peter C. Wulff
Chief Financial Officer
and Treasurer
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