CARLSBAD, Calif., Feb. 13, 2018 /PRNewswire/ — Natural Alternatives International, Inc. (“NAI”) (Nasdaq: NAII), a leading formulator, manufacturer and marketer of customized nutritional supplements, today announced a net loss of $1.3 million, or $0.20 per diluted share, on net sales of $33.3 million for the quarter ended December 31, 2017.  Quarterly results were unfavorably impacted by one-time tax expense amounts recorded in connection with the Tax Cuts and Jobs Act (the “Act”) that was enacted on December 22, 2017.  These one-time charges totaled $3.3 million, or approximately $0.49 per diluted share.  Excluding these one-time tax items, our adjusted net income during the second quarter of fiscal 2018 was $1.9 million, or $0.29 per diluted share.

Net sales during the three months ended December 31, 2017 increased $2.8 million, or 9.1%, from $30.6 million recorded in the comparable prior year period.  For the quarter ended December 31, 2017, private label contract manufacturing sales increased $5.5 million, or 23.0%, from the comparable quarter last year.  Our second quarter fiscal 2018 contract manufacturing sales increased primarily due to an increase in sales to our largest customer to historical levels and shipment of new products under our previously announced expanded relationship with the same customer.  Additionally, we experienced increased sales of current products to other existing customers partially offset by the timing and shipment of orders of current products to existing customers and discontinued customer relationships.

CarnoSyn® beta-alanine royalty, licensing and raw material sales revenue decreased 40.6% to $4.0 million during the second quarter of fiscal 2018 as compared to $6.7 million for the second quarter of fiscal 2017.  The decrease in beta-alanine revenue was primarily due to decreased material shipments as a result of market and seasonal factors and lower average material sales prices.  During the quarter ended December 31, 2017, the sports nutrition retail market conditions declined most notably in the standard “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.  To date in our third quarter ending March 31, 2018, our re-order rates have improved for many of our customer brands suggesting improved sports nutrition retail market conditions. Additionally, our SR CarnoSyn® raw material sales have continued to increase during the current quarter as more brands adopted product offerings using this effective delivery system. There can be no assurance our sales and marketing efforts or the recent apparent improvement in retail market conditions will reverse or decelerate potential future declines of our CarnoSyn® beta-alanine sales.

Net sales during the six months ended December 31, 2017 decreased $3.2 million to $61.4 million, or 5.0%, from $64.6 million recorded in the comparable prior year period.  For the six months ended December 31, 2017, private label contract manufacturing sales increased $0.3 million, or 1.0%, from the comparable period last year.  The increase in private label contract manufacturing sales included an 18.8% decrease during our first quarter, primarily from reduced orders from our largest customer for specific products associated with an inventory reduction program, that was offset by a 23.0% increase in sales during our second quarter primarily due to the increase in sales to our largest customer to historical levels and shipment of new products under our previously announced expanded relationship.

CarnoSyn® beta-alanine royalty, licensing and raw material sales revenue decreased 26.5% to $9.8 million during the first half of fiscal 2018 as compared to $13.4 million for the comparable prior year period.  The decrease in CarnoSyn® beta-alanine revenue was primarily due to decreased material shipments as a result of market and seasonal factors, and lower average material sales prices.

Net income for the first six months of fiscal 2018 was $0.1 million, or $0.02 per diluted share, compared to net income of $5.0 million, or $0.74 per diluted share, in the comparable prior year period.  Our year-to-date fiscal 2018 results were unfavorably impacted by one-time tax expense amounts recorded in connection with the Act.  These one-time charges totaled $3.3 million, or approximately $0.48 per diluted share.  Excluding these one-time tax items, our adjusted net income during the first half of fiscal 2018 was $3.4 million, or $0.50 per diluted share.  This decrease was primarily attributable to decreased sales from our patent and trademark licensing segment.

As of December 31, 2017, NAI had cash of $28.8 million and working capital of $43.5 million compared to $27.8 million and $41.4 million, respectively, as of June 30, 2017.  As of December 31, 2017, we had $10.0 million available under our line of credit agreements.

Mark A. Le Doux, Chairman and Chief Executive Officer stated, “While our net income for our second fiscal quarter of 2018 was negatively impacted by one-time expenses as a result of the implementation of the new tax legislation, I am pleased with our pre-tax earnings results and our sequential quarterly profit trend. We believe the decline in our global effective tax rate will have a positive impact on our profitability and cash flow in the future.  Our second quarter of fiscal 2018 also reflected the positive impact of increased and new deliveries from our expanded relationship with our largest customer.

“While brick and mortar locations have suffered significant disruptions due to internet sales co-opting in-person transactions, we are seeing re-order rates of CarnoSyn® trending towards historical levels along with more market adoption of SR CarnoSyn®.  Furthermore, our contract manufacturing expansion in the second quarter bodes well for the balance of this fiscal year.”

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 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