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Natural Alternatives International, Inc. Announces Fiscal 2009 Q2 Results
Date:2/17/2009

SAN MARCOS, Calif., Feb. 17 /PRNewswire-FirstCall/ -- Natural Alternatives International, Inc. ("NAI") (Nasdaq: NAII), a leading formulator, manufacturer and marketer of customized nutritional supplements, today announced a net loss of $3.3 million or $0.47 per share on net sales from continuing operations of $17.6 million for the second quarter ended December 31, 2008. The second quarter results include a net loss from discontinued operations of $756,000 or $0.11 per share and restructuring costs totaling $558,000 or $0.08 per share.

The second quarter net sales from continuing operations represented a decrease of $800,000 or 4.3% from $18.4 million in the comparable prior year quarter. For the quarter ended December 31, 2008, contract manufacturing sales declined $409,000 or 2.3% from the comparable quarter last year due to lower sales volumes to our largest two customers. These sales decreases were partially offset by increased sales volumes from other existing customers and new customer sales. Net sales from our branded products declined $377,000 or 37.1% in the second quarter of fiscal 2009 compared to the comparable period in fiscal 2008 due primarily to the continued softening of our Pathway to Healing(R) product line.

The net loss from continuing operations in the second quarter of fiscal 2009 was $2.6 million or $0.36 per share compared to net income of $142,000 or $0.02 per diluted share in the second quarter of fiscal 2008. The net loss from continuing operations was attributable to higher raw material costs, a shift in sales mix to lower margin products, increased repairs and maintenance expenses, unfavorable foreign currency exchange rates and restructuring costs. The second quarter loss from continuing operations also reflects a deferred tax asset valuation allowance totaling $308,000. We also incurred a net loss from discontinued operations of $756,000 or $0.11 per share in the second quarter of fiscal 2009 compared to a loss of $322,000 or $0.05 per share in the second quarter of fiscal 2008. The increase in the net loss from discontinued operations was primarily attributable to a deferred tax asset valuation allowance totaling $621,000, which was recorded during the second quarter of fiscal 2009. Overall, the second quarter loss was $3.3 million or $0.47 per share compared to a net loss of $180,000 or $0.03 per share in the comparable quarter last year.

As of December 31, 2008, NAI had cash and certificates of deposit of $4.0 million and working capital of $12.7 million compared to $3.5 million and $18.4 million, respectively, as of June 30, 2008. As of December 31, 2008, we had $3.4 million available under our working capital line of credit.

Chairman and Chief Executive Officer Mark LeDoux stated, "Current economic conditions continue to hamper our operations and our customers' businesses. During this past quarter, we implemented a cost reduction program including the elimination of certain personnel and business activities. This program resulted in a charge to our continuing operations of $558,000 and is expected to reduce our operating overhead costs by approximately $3.6 million annually. With a lower go forward operating cost structure we believe we have positioned the company for profitable performance for the remainder of fiscal 2009. We remain optimistic about our future growth opportunities and intend to continue to leverage our certified manufacturing facilities and excellent customer service reputation to expand our distribution and customer base."

NAI also reported today that it had recently received recertification of its Swissmedic Authority pharmaceutical license for its Manno, Switzerland manufacturing facility and its Therapeutic Goods Administration (TGA) of Australia certification for its Vista, California manufacturing facilities.

NAI, headquartered in San Marcos, California, is a leading formulator, manufacturer and marketer of nutritional supplements and provides strategic partnering services to its customers. Our comprehensive partnership approach offers a wide range of innovative nutritional products and services to our clients including: scientific research, clinical studies, proprietary ingredients, customer-specific nutritional product formulation, product testing and evaluation, marketing management and support, packaging and delivery system design, regulatory review and international product registration assistance. For more information about NAI, please see our website at http://www.nai-online.com.

This press release contains 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 our intentions, expectations and beliefs concerning future events, including, among other things, our expectations and beliefs with respect to our future financial and operating results, including the amount of our future revenue and profits and our future financial condition, and our ability to reduce operating costs, expand our contract manufacturing business, and develop, maintain or increase sales to new and existing customers, as well as future economic conditions and the impact of such conditions on our business. We wish to caution readers these statements involve 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. NAI'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 us with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q.

CONTACT - Kenneth Wolf, Chief Financial Officer, Natural Alternatives International, Inc., at 760-736-7700 or investor@nai-online.com.

Web site: http://www.nai-online.com

                   NATURAL ALTERNATIVES INTERNATIONAL, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME
                    (In thousands, except per share data)
                                 (Unaudited)

                                             Three Months Ended
                                                December 31,
                                                ------------
                                            2008            2007
                                          -------          ------

    NET SALES                             $17,616  100.0% $18,402  100.0%
    Cost of goods sold                     16,844   95.6%  15,226   82.7%
                                          -------  -----   ------  -----
    Gross profit                              772    4.4%   3,176   17.3%

    Selling, general & administrative
     expenses                               2,838   16.1%   3,075   16.7%
                                          -------          ------

    OPERATING (LOSS) INCOME FROM
     CONTINUING OPERATIONS                 (2,066) -11.7%     101    0.5%

    Other expense, net                       (120)  -0.7%      (8)   0.0%
                                          -------  -----   ------  -----
    (LOSS) INCOME FROM CONTINUING
     OPERATIONS BEFORE TAXES               (2,186) -12.4%      93    0.5%

    Provision (Benefit) for income taxes      362             (49)
                                          -------          ------
    (LOSS) INCOME FROM CONTINUING
     OPERATIONS                            (2,548) -14.5%     142    0.8%

    LOSS FROM DISCONTINUED OPERATIONS,
     NET OF TAX                              (756)  -4.3%    (322)  -1.7%
                                          -------          ------

    NET (LOSS) INCOME                     $(3,304)          $(180)
                                          =======           =====


    NET (LOSS) INCOME PER COMMON SHARE:
    Basic:
    Continuing Operations                  ($0.36)          $0.02
    Discontinued Operations                ($0.11)         ($0.05)
                                          -------          ------
    Net (Loss) Income                      ($0.47)         ($0.03)
                                          =======          ======

    Diluted:
    Continuing Operations                  ($0.36)          $0.02
    Discontinued Operations                ($0.11)         ($0.05)
                                          -------          ------
    Net (Loss) Income                      ($0.47)         ($0.03)
                                          =======          ======

    WEIGHTED AVERAGE COMMON SHARES
     OUTSTANDING:
    Basic                                   7,058           6,980
                                          =======          ======
    Diluted                                 7,058           7,067
                                          =======          ======



                                              Six Months Ended
                                                December 31,
                                                ------------
                                            2008            2007
                                          -------          ------

    NET SALES                             $37,142  100.0% $41,287  100.0%
    Cost of goods sold                     33,970   91.5%  34,171   82.8%
                                          -------  -----   ------  -----
    Gross profit                            3,172    8.5%   7,116   17.2%

    Selling, general & administrative
     expenses                               5,456   14.7%   5,967   14.5%
                                          -------          ------

    OPERATING (LOSS) INCOME FROM
     CONTINUING OPERATIONS                 (2,284)  -6.1%   1,149    2.8%

    Other expense, net                       (433)  -1.2%     (19)   0.0%
                                          -------  -----   ------  -----
    (LOSS) INCOME FROM CONTINUING
     OPERATIONS BEFORE TAXES               (2,717)  -7.3%   1,130    2.7%

    Provision for income taxes                180             237
                                          -------          ------
    (LOSS) INCOME FROM CONTINUING
     OPERATIONS                            (2,897)  -7.8%     893    2.2%

    LOSS FROM DISCONTINUED OPERATIONS,
     NET OF TAX                            (1,804)  -4.9%    (650)  -1.6%
                                          -------          ------

    NET (LOSS) INCOME                     $(4,701)           $243
                                          =======          ======


    NET (LOSS) INCOME PER COMMON SHARE:
    Basic:
    Continuing Operations                  ($0.41)          $0.13
    Discontinued Operations                ($0.26)         ($0.09)
                                          =======          ======
    Net (Loss) Income                      ($0.67)          $0.03
                                          =======          ======

    Diluted:
    Continuing Operations                  ($0.41)          $0.12
    Discontinued Operations                ($0.26)         ($0.09)
                                          =======          ======
    Net (Loss) Income                      ($0.67)          $0.03
                                          =======          ======

    WEIGHTED AVERAGE COMMON SHARES
     OUTSTANDING:
    Basic                                   7,045           6,947
                                          =======          ======
    Diluted                                 7,045           7,044
                                          =======          ======



                  NATURAL ALTERNATIVES INTERNATIONAL, INC.
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                               (In thousands)
                                 (Unaudited)

                                                     December 31,  June 30,
                                                         2008        2008
                                                        -------    -------

    ASSETS
    Cash and cash equivalents                            $3,337     $3,518
    Certificate of deposit                                 $699          -
    Accounts receivable, net                              4,638      6,401
    Inventories, net                                     13,613     14,135
    Income tax receivable                                 1,270      1,354
    Current Assets of discontinued operations             3,316      6,299
    Other current assets                                    974      1,223
                                                        -------    -------
        Total current assets                             27,847     32,930
    Property and equipment, net                          14,039     12,823
    Other noncurrent assets, net                            159        160
                                                        -------    -------
        Total Assets                                    $42,045    $45,913
                                                        =======    =======

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Accounts payable and accrued liabilities             $8,787    $10,034
    Line of credit                                        3,538          -
    Current portion of long-term debt                     1,994      2,730
    Current liabilities of discontinued operations          833      1,724
    Deferred income taxes                                     -         61
    Deferred rent                                         1,114      1,164
    Long-term pension liability                             223        198
                                                        -------    -------
        Total Liabilities                                16,489     15,911
                                                        -------    -------
    Stockholders' Equity                                 25,556     30,002
                                                        -------    -------
        Total Liabilities and Stockholders' Equity      $42,045    $45,913
                                                        =======    =======



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SOURCE Natural Alternatives International
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