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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

QUARTERLY REPORT

pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2003

 

000-15701

(Commission file number)

 

 

NATURAL ALTERNATIVES INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   84-1007839
(State of incorporation)   (IRS Employer Identification No.)

1185 Linda Vista Drive

San Marcos, California 92069

   (760) 744-7340
(Address of principal executive offices)   (Registrant’s telephone number)

 

 

Indicate by check mark whether Natural Alternatives International, Inc. (NAI) (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 NAI was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x  Yes  ¨  No

 

Indicate by check mark whether NAI is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  ¨  Yes  x  No

 

As of February 6, 2004, 5,828,292 shares of NAI’s common stock were outstanding, net of 272,400 treasury shares.

 

 

TABLE OF CONTENTS

 

          Page
SPECIAL NOTE FORWARD-LOOKING STATEMENTS    1
PART I    FINANCIAL INFORMATION    2
Item 1.    Financial Statements    2
     Condensed Consolidated Balance Sheets    2
     Condensed Consolidated Statements of Operations and Comprehensive Income    3
     Condensed Consolidated Statements of Cash Flows    4
     Notes to Condensed Consolidated Financial Statements    5
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations    10
Item 3.    Quantitative and Qualitative Disclosures About Market Risk    15
Item 4.    Controls and Procedures    16
PART II    OTHER INFORMATION     
Item 1.    Legal Proceedings    16
Item 2.    Changes in Securities and Use of Proceeds    16
Item 3.    Defaults Upon Senior Securities    16
Item 4.    Submission of Matters to a Vote of Security Holders    16
Item 5.    Other Information    16
Item 6.    Exhibits and Reports on Form 8-K    16
SIGNATURES    19

 

(i)

SPECIAL NOTE—FORWARD-LOOKING STATEMENTS

 

Certain statements in this report are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect current views about future events and financial performance based on certain assumptions. They include opinions, forecasts, projections, guidance, expectations, beliefs or other statements that are not statements of historical fact. Words such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “believes,” “anticipates,” “intends,” “estimates,” “approximates,” “predicts,” or “projects,” or the negative or other variation of such words, and similar expressions may identify a statement as a forward-looking statement. Forward-looking statements in this report may include statements about:

 

  • future financial and operating results, including projections of revenues, income, earnings per share, profit margins, expenditures, liquidity and other financial items;

 

  • inventories and facilities;

 

  • sources and availability of raw materials;

 

  • personnel;

 

  • operations outside the United States;

 

  • overall industry and market performance;

 

  • competition;

 

  • current and future economic and political conditions;

 

  • product development;

 

  • growth and acquisition strategies;

 

  • the outcome of regulatory and litigation matters;

 

  • customers;

 

  • management’s goals and plans for future operations; and

 

  • other assumptions described in this report underlying or relating to any forward-looking statements.

 

The forward-looking statements in this report speak only as of the date of this report. Forward-looking statements are subject to certain events, risks, and uncertainties that may be outside of our control. When considering forward-looking statements, you should carefully review the risks, uncertainties and other cautionary statements in this report as they identify certain important factors that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. These factors include, among others, the risks described under Items 2 and 3 and elsewhere in this report, as well as in other reports and documents we file with the SEC.

 

Unless the context requires otherwise, all references in this report to the “Company,” “NAI,” “we,” “our,” and “us” refer to Natural Alternatives International, Inc. and, as applicable, Natural Alternatives International Europe S.A. (NAIE), its wholly-owned subsidiary.

 

1

PART I—FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

NATURAL ALTERNATIVES INTERNATIONAL, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 

     December 31,
2003
     June 30,
2003
  
     (Unaudited)        

Assets

                 

Current assets:

                 

Cash and cash equivalents

    $ 2,886     $ 5,482  

Accounts receivable, net of allowance for doubtful accounts of $55
at December 31, 2003 and $27 at June 30, 2003

      5,018       5,668  

Inventories, net

      12,307       7,845  

Prepaid expenses

      1,012       502  

Other current assets

      377       264  
    
 

Total current assets

      21,600       19,761  
    
 

Property and equipment, net

      10,910       10,820  

Other assets, net

      179       143  
    
 

Total assets

    $ 32,689     $ 30,724  
    
 

Liabilities and Stockholders’ Equity

                 

Current liabilities:

                 

Accounts payable

    $ 5,388     $ 5,001  

Accrued liabilities

      1,419       1,106  

Accrued compensation and employee benefits

      885       717  

Line of credit

      85       —    

Income taxes payable

      90       46  

Current portion of long-term debt

      573       570  
    
 

Total current liabilities

      8,440       7,440  
    
 

Long-term debt, less current portion

      2,099       2,386  

Long-term pension liability

      191       121  
    
 

Total liabilities

      10,730       9,947  
    
 

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 6,094,373 at December 31, 2003 and 6,087,532 at June 30, 2003

      61       61  

Additional paid-in capital

      11,465       11,426  

Retained earnings

      11,736       10,593  

Treasury stock, at cost, 272,400 shares at December 31, 2003 and June 30, 2003

      (1,303 )     (1,303 )
    
 

Total stockholders’ equity

      21,959       20,777  
    
 

Total liabilities and stockholders’ equity

    $ 32,689     $ 30,724  
    
 

 

See accompanying notes to condensed consolidated financial statements.

 

2

NATURAL ALTERNATIVES INTERNATIONAL, INC.

Condensed Consolidated Statements Of Operations And Comprehensive Income

(In thousands, except share and per share amounts)

(Unaudited)

 

    

Three months ended

December 31,

    

Six months ended

December 31,

  
     2003
     2002
     2003
     2002
  

Net sales

    $ 17,195     $ 13,010     $ 33,916     $ 26,146  

Cost of goods sold

      13,300       9,958       25,875       19,899  
    
 
 
 

Gross profit

      3,895       3,052       8,041       6,247  

Selling, general & administrative expenses

      3,346       2,797       6,862       5,589  
    
 
 
 

Income from operations

      549       255       1,179       658  
    
 
 
 

Other income (expense):

                                 

Interest income

      9       21       18       28  

Interest expense

      (51 )     (70 )     (94 )     (153 )

Foreign exchange gain (loss)

      130       (11 )     145       (17 )

Proceeds from vitamin antitrust litigation

      —         —         —         225  

Other, net

      (25 )     (39 )     (47 )     (40 )
    
 
 
 
       63       (99 )     22       43  
    
 
 
 

Income before income taxes

      612       156       1,201       701  

Provision for income taxes

      36       7       58       15  
    
 
 
 

Net income

    $ 576     $ 149     $ 1,143     $ 686  
    
 
 
 

Net income per common share:

                                 

Basic

    $ 0.10     $ 0.03     $ 0.20     $ 0.12  
    
 
 
 

Diluted

    $ 0.09     $ 0.02     $ 0.19     $ 0.11  
    
 
 
 

Weighted average common shares outstanding:

                                 

Basic shares

      5,821,973       5,804,267       5,821,341       5,803,566  

Diluted shares

      6,161,851       6,021,919       6,134,798       5,975,742  

 

See accompanying notes to condensed consolidated financial statements.

 

3

NATURAL ALTERNATIVES INTERNATIONAL, INC.

Condensed Consolidated Statements Of Cash Flows

(In thousands)

(Unaudited)

 

    

Six Months Ended

December 31,

  
     2003
     2002
  

Cash flow from operating activities

                 

Net income

    $ 1,143     $ 686  

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

                 

Provision for uncollectible accounts receivable

      28       (80 )

Depreciation and amortization

      1,338       1,222  

Non-cash compensation

      15       51  

Pension expense, net of contributions

      70       (41 )

Loss on disposal of asset

      15       4  

Changes in operating assets and liabilities:

                 

Accounts receivable

      622       (342 )

Inventories

      (4,462 )     553  

Prepaid expenses

      (510 )     (490 )

Other assets

      (149 )     24  

Accounts payable and accrued liabilities

      744       (492 )

Accrued compensation and employee benefits

      168       51  
    
 

Net cash provided by (used in) operating activities

      (978 )     1,146  
    
 

Cash flows from investing activities

                 

Proceeds from sale of property and equipment

      —         109  

Capital expenditures

      (1,443 )     (526 )

Repayment of notes receivable

      —         68  
    
 

Net cash used in investing activities

      (1,443 )     (349 )
    
 

Cash flows from financing activities

                 

Net borrowings on line of credit

      85       —    

Borrowings on long-term debt

      —         2,500  

Payments on long-term debt

      (284 )     (1,424 )

Decrease in restricted cash

      —         1,500  

Proceeds from issuance of common stock