NATURAL ALTERNATIVES INTERNATIONAL INC - 10-Q Quarterly Report

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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 MARCH 31, 2004

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 May 17, 2004, 5,889,992 shares of NAI’s common stock were outstanding, net of 61,000 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	11

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20

Item 4.	Controls and Procedures	21

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	21

Item 2.	Changes in Securities and Use of Proceeds	21

Item 3.	Defaults Upon Senior Securities	21

Item 4.	Submission of Matters to a Vote of Security Holders	22

Item 5.	Other Information	22

Item 6.	Exhibits and Reports on Form 8-K	22

SIGNATURES		24

(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;

•

distribution channels and product sales and performance;

•

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.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NATURAL ALTERNATIVES INTERNATIONAL, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)


	March 31, 2004			June 30, 2003
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	3,162		$	5,482
Accounts receivable, net of allowance for doubtful accounts of $89 at March 31, 2004 and $27 at June 30, 2003		6,329			5,668
Inventories, net		12,270			7,845
Prepaid expenses		787			502
Other current assets		379			264

Total current assets		22,927			19,761

Property and equipment, net		10,804			10,820
Other assets, net		201			143

Total assets	$	33,932		$	30,724

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,634		$	5,001
Accrued liabilities		1,862			1,106
Accrued compensation and employee benefits		1,657			717
Line of credit		900			—
Income taxes payable		103			46
Current portion of long-term debt		575			570

Total current liabilities		8,731			7,440

Long-term debt, less current portion		1,955			2,386
Long-term pension liability		200			121

Total liabilities		10,886			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 5,920,992 at March 31, 2004 and 6,087,532 at June 30, 2003		59			61
Additional paid-in capital		10,689			11,426
Retained earnings		12,591			10,593
Treasury stock, at cost, 61,000 shares at March 31, 2004 and 272,400 shares at June 30, 2003		(293	)		(1,303	)

Total stockholders’ equity		23,046			20,777

Total liabilities and stockholders’ equity	$	33,932		$	30,724

See accompanying notes to condensed consolidated financial statements.

NATURAL ALTERNATIVES INTERNATIONAL, INC.

Condensed Consolidated Statements Of Operations And Comprehensive Income

(In thousands, except share and per share amounts)

(Unaudited)


	Three months ended March 31,						Nine months ended March 31,
	2004			2003			2004			2003
Net sales	$	21,268		$	13,755		$	55,184		$	39,901
Cost of goods sold		16,215			10,468			42,090			30,367

Gross profit		5,053			3,287			13,094			9,534

Selling, general & administrative expenses		4,047			3,076			10,909			8,665

Income from operations		1,006			211			2,185			869

Other income (expense):
Interest income		3			25			21			53
Interest expense		(69	)		(56	)		(163	)		(208	)
Foreign exchange gain (loss)		(50	)		13			95			(4	)
Proceeds from vitamin antitrust litigation		—			—			—			225
Other, net		(22	)		(15	)		(69	)		(56	)

		(138	)		(33	)		(116	)		10

Income before income taxes		868			178			2,069			879
Provision for income taxes		13			6			71			21

Net income	$	855		$	172		$	1,998		$	858

Net income per common share:
Basic	$	0.15		$	0.03		$	0.34		$	0.15

Diluted	$	0.13		$	0.03		$	0.32		$	0.14

Weighted average common shares outstanding:
Basic shares		5,848,841			5,814,258			5,830,508			5,807,143
Diluted shares		6,335,462			6,061,391			6,201,686			6,004,304

See accompanying notes to condensed consolidated financial statements.

NATURAL ALTERNATIVES INTERNATIONAL, INC.

Condensed Consolidated Statements Of Cash Flows

(In thousands)

(Unaudited)


	Nine Months Ended March 31,
	2004			2003
Cash flow from operating activities
Net income	$	1,998		$	858
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for uncollectible accounts receivable		62			(75	)
Depreciation and amortization		2,029			1,830
Non-cash compensation		100			56
Pension expense, net of contributions		79			(64	)
Loss on disposal of asset		15			4
Changes in operating assets and liabilities:
Accounts receivable		(723	)		(897	)
Inventories		(4,425	)		(603	)
Prepaid expenses		(285	)		(593	)
Other assets		(177	)		682
Accounts payable and accrued liabilities		(574	)		293
Accrued compensation and employee benefits		940			194

Net cash provided by (used in) operating activities		(961	)		1,685

Cash flows from investing activities
Proceeds from sale of property and equipment		—			109
Capital expenditures		(2,028	)		(752	)
Repayment of notes receivable		4			71

Net cash used in investing activities		(2,024	)		(572	)

Cash flows from financing activities
Net borrowings on line of credit		900			—
Borrowings on long-term debt		—			2,500
Payments on long-term debt		(426	)

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