– Fourth quarter fiscal 2018 Net Sales increase 22% compared to the fourth quarter of fiscal 2017
– Fourth quarter fiscal 2018 Net Income and EPS increase over 80% compared to the fourth quarter of fiscal 2017

CARLSBAD, Calif., Sept. 19, 2018 /PRNewswire/ — Natural Alternatives International, Inc. (“NAI”) (Nasdaq: NAII), a leading formulator, manufacturer and marketer of customized nutritional supplements, today announced net income of $2.9 million, or $0.41 per diluted share, on net sales of $39.2 million for the quarter ended June 30, 2018. This represents an increase of $0.18 per diluted share as compared to the same quarter in fiscal 2017 and was primarily attributable to increased private label contract manufacturing sales, reduced legal expenses associated with our CarnoSyn^® beta-alanine business, and favorable other income associated with our foreign currency hedging program, partially offset by lower CarnoSyn^® beta-alanine sales. Quarterly results were also favorably impacted by one-time tax amounts recorded in connection with revisions to our estimates associated with the Tax Cuts and Jobs Act (the “Act”) that was enacted on December 22, 2017. These one-time adjustments totaled $0.2 million, or approximately $0.03 per diluted share. Excluding these one-time tax items, our adjusted net income during the fourth quarter of fiscal 2018 was $2.7 million, or $0.38 per diluted share.

Net sales during the three months ended June 30, 2018 increased $7.0 million, or 21.8%, from $32.2 million recorded in the comparable prior year period. For the quarter ended June 30, 2018, private label contract manufacturing sales increased $8.5 million, or 33.8%, from the comparable quarter last year. Fourth quarter contract manufacturing sales increased primarily due to sales to Asian and European markets returning to historical levels and an increase in sales to our largest customer, including shipment of new products under our previously announced expanded relationship.

CarnoSyn^® beta-alanine royalty, licensing and raw material sales revenue decreased 21.6% to $5.4 million during the fourth quarter of fiscal 2018 as compared to $6.9 million for the fourth quarter of fiscal 2017. The decrease in CarnoSyn^® revenue was primarily due to decreased beta-alanine shipments as a result of market and seasonal factors and lower average beta-alanine sales prices.

Net sales during fiscal 2018 increased $10.5 million to $132.4 million, or 8.6%, from $121.9 million recorded in the comparable prior year period. Fiscal 2018 private label contract manufacturing net sales increased $16.0 million, or 16.8%, from the comparable period last year. The increase was primarily related to the sale of new products to existing customers and higher volumes of current products to existing customers located primarily in U.S., Asian, and European markets. These increases were partially offset by discontinued U.S. customer relationships. The increase in sales included shipment of new products and increased sales of existing products to our largest customer under our previously announced expanded relationship.

CarnoSyn^® beta-alanine royalty, licensing and raw material sales revenue decreased 20.3% to $21.4 million during fiscal 2018 as compared to $26.9 million for fiscal 2017. The decrease in CarnoSyn^® revenue was primarily due to decreased beta-alanine shipments as a result of market and seasonal factors and lower average beta-alanine sales prices. During the quarter ended December 31, 2017, sports nutrition retail market conditions declined most notably in the older “brick and mortar” sales channels as products transitioned to higher levels of internet based sales. This transition resulted in excess inventory in certain channels and delayed the re-order rates for many of our customer brands. Additionally, while we still have active patents covering instant release CarnoSyn^® beta-alanine, we experienced increased competition from companies selling generic beta-alanine beginning in the second quarter of fiscal 2018, resulting in certain customers discontinuing the use of our CarnoSyn^® beta-alanine. To offset this decline, and in addition to legal actions we have prosecuted and others we may institute, we have increased our sales and marketing activities to consumers, customers, potential customers, and brand owners on multiple platforms to promote and reinforce the features and benefits of utilizing CarnoSyn^® beta-alanine. During the second half of fiscal 2018, our re-order rates improved and reached near historical levels, suggesting to us both improved sports nutrition retail market conditions and potentially a positive impact from our marketing activities. Additionally, our SR CarnoSyn^® product and raw material sales continued to rise as more brands adopted product offerings of this sustained release delivery system. There can be no assurance our sales and marketing efforts or the recent apparent improvement in retail market conditions will continue.

Net income for fiscal 2018 was $5.1 million, or $0.73 per diluted share, compared to net income of $7.2 million, or $1.09 per diluted share, in the comparable prior year period. Our 2018 results were unfavorably impacted by one-time tax expenses recorded in connection with the revised U.S. tax code. These one-time charges totaled $3.0 million, or approximately $0.44 per diluted share. Excluding these one-time tax items, our adjusted net income during fiscal 2018 was $8.1 million, or $1.17 per diluted share. The increase in net income adjusted for one-time tax adjustments is primarily due to increased private label contract manufacturing net sales, favorable other income associated with our foreign currency hedging program, and a lower effective tax rate associated with the tax reform, partially offset by decreased CarnoSyn^® beta-alanine sales.

As of June 30, 2018, NAI had cash of $23.6 million and working capital of $50.9 million compared to $27.8 million and $41.4 million, respectively, as of June 30, 2017. As of June 30, 2018, we had $10.0 million available under our line of credit agreement.

Mark A. Le Doux, Chairman and Chief Executive Officer stated, “Fiscal Year 2018 was a record year in sales for NAI. As we enter fiscal 2019, we are planning for continued growth in our existing markets and anticipate new revenue sources as we expand our footprint in the natural products industry. We are forecasting growth with current relationships and a continued expansion of our client base with an emphasis on high-quality consumer products delivering exceptional value.”

“We continue adding talented people into our businesses, with the experience and gravitas to expand our CarnoSyn^® Brands reach into the wellness markets, the health care practitioner space, clinics and other sales channels, while continuing to find ways to innovate based on sound science and ethical business principles.”

“Our solid financial strength and ability to generate significant cash flow should provide us ample opportunities to facilitate our growth objectives in fiscal 2019 and beyond. I am deeply grateful to my team of professionals for their continued dedication and focus, helping us reach new heights in sales and profitability as we seek to enrich the world through the best of nutrition.”

NAI, headquartered in Carlsbad, 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://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 future revenue profits and financial condition, our ability to maintain our patents, generate revenues from the commercialization of our patents and trademarks, secure compliance with our intellectual property rights, 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 that 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.

CONTACT – Michael Fortin, Chief Financial Officer, Natural Alternatives International, Inc., at 760-736-7700 or [email protected].

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

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SOURCE Natural Alternatives International, Inc.