SAN MARCOS, Calif., May 15 /PRNewswire/ -- Natural Alternatives International (NAI), Inc. (Nasdaq: NAII), a leading formulator and manufacturer of customized nutritional supplements, announced today the results of its fiscal 2001 third quarter and nine months ended March 31, 2001.

The Company reported net sales of $10.3 million in the third quarter of fiscal 2001, compared to $9.5 million in the third quarter of fiscal 2000, an increase of $0.8 million. In the third quarter of fiscal 2001, net loss was $234,000 (or $0.04 per diluted share) compared to the net loss of $1.8 million (or $0.31 per diluted share) in the third quarter of fiscal 2000.

The Company reported net sales of $31.8 million for the nine months ended March 31, 2001, compared to $36.9 million for the nine months ended March 31, 2000, a decrease of $5.1 million, or 14%. For the nine months ended March 31, 2001, net earnings were $414,000 (or $0.07 per diluted share) compared to the net loss of $4.1 million (or $0.71 per diluted share) for the nine months ended March 31, 2000.

"The U.S. marketplace for vitamins, minerals and supplements remains depressed and very competitive," said Mark A. LeDoux, Chief Executive Officer and President. "However, we believe the long-term demographics are very promising for the companies in the industry that demonstrate innovative, effective and high quality products. We are encouraged by the early results from our direct-to-consumer initiatives and we intend to dedicate additional resources to grow this important source of new revenue while continuing to emphasize our commitment to our core contract manufacturing clientele."

NAI also reported notable operating improvements during the nine months ended March 31, 2001 resulting from its profit restoration plan, including:

    -- a decrease in total debt of $3.0 million, or 36%, since the fiscal year
       ended June 30, 2000
    -- net cash flow from operations increased to $3.6 million, compared to
       $79,000 for the same period fiscal 2000
    -- an increase in gross margin to 22% of net sales compared to a 8% gross
       margin for the same period of fiscal 2000
    -- sales in excess of $3.9 million, 12% of net sales, in its direct-to-
       consumer physicians branded product line and
    -- sales of approximately $5.6 million, 18% of net sales, from its Swiss
       manufacturing facility.

Additionally, NAI reported that for the third quarter of fiscal 2001 that loss from operations of $574,000 was impacted by approximately $600,000 in expenses relating to both a non-cash provision for allowance for doubtful accounts and on-going litigation costs. Secondly, during the fiscal third quarter 2001, the Company reported that sales from its direct-to-consumer physicians branded product line increased to approximately $1.7 million, or 16% of net sales, as it launched two new condition specific nutritional supplement products during the quarter.

"The third quarter of fiscal year 2001 demonstrates the volatility in the marketplace, as one of our newest customers in the mass market business under performed forcing us to provide for a collection impairment, as well as, the loss in anticipated sales," said Peter C. Wulff, Chief Financial Officer and Treasurer. "On a pro forma basis for the third quarter of fiscal 2001, if the total cost for the litigation fees and the collection impairment were excluded, NAI would have reported a modest income from operations. We believe that we are positioned to endure the trough in the US marketplace by following our long-term strategy to diversify both our geographic and distribution channels and sales mix, while maintaining stringent cost controls."

About NAI

Natural Alternatives International, Inc., headquartered in San Marcos, California, is a leading formulator and manufacturer of nutritional supplements providing strategic partnering services to its customers. The Company's comprehensive partnership approach offers a wide range of innovative nutritional products to the client including: scientific research, clinical studies demonstrating product efficacy, 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 Natural Alternatives International, please see our Web site at 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 the Company's intentions, expectations and beliefs concerning future events, including, among other things, expectations and beliefs with respect to future financial and operating results; the ability to sustain profitability, diversify both sales channels and sales mix, contain costs, initiate new direct-to-consumer marketing programs, and implement its strategic plan. The Company wishes to caution and advise 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. The Company'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 the Company with the Securities and Exchange Commission, including the Company's most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K.

For further information, please contact Peter C. Wulff, Chief Financial Officer and Treasurer, Natural Alternatives International, Inc., 760-744-7340, or info@nai-online.com.

                     NATURAL ALTERNATIVES INTERNATIONAL, INC.

                  CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                        (In thousands, except share data)

                               Three Months Ended       Nine Months Ended
                                    March 31,               March 31,
                                2001         2000        2001        2000
                                   (Unaudited)             (Unaudited)

    Net sales                 $10,341       $9,538      $31,804     $36,866
    Cost of goods sold          8,051        8,942       24,658      31,912
    Inventory write-off            --           --           --       2,000
      Total cost of
       goods sold               8,051        8,942       24,658      33,912
      Gross profit              2,290          596        7,146       2,954
    Selling, general
     and administrative
     expenses                   2,864        2,102        6,771       7,224
    Loss on abandonment
     of leased facility            --        1,039           --       1,662
      Income/(loss) from
       operations                (574)      (2,545)         375      (5,932)
    Other income (expense)         53         (139)        (261)       (255)
      Income/(loss) before
       taxes                     (521)      (2,684)         114      (6,187)
    Tax (benefit)                (287)        (921)        (300)     (2,100)
        Net earnings/
         (loss)                 $(234)     $(1,763)        $414     $(4,087)

        Basic net income/
         (loss) per
         common share          $(0.04)      $(0.31)       $0.07      $(0.71)
        Diluted net income/
         (loss) per common
         share                 $(0.04)      $(0.31)       $0.07      $(0.71)
        Shares used in
         calculation of
         net income/(loss)
         per share:
          Basic             5,777,289    5,739,875    5,767,016   5,758,061
          Diluted           5,777,289    5,739,875    5,805,784   5,758,061


                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (In thousands)

                              March 31,    June 30,
                                2001         2000
    Assets                   (unaudited)   (audited)
      Cash and cash
       equivalents               $485         $815
      Accounts receivable,
       net                      3,735        4,097
      Inventories, net          6,643        7,627
      Other current assets      2,920        4,917
        Total current
         assets                13,783       17,456
      Property and
       equipment, net          14,100       15,037
      Other assets              3,840        2,382
    Total assets              $31,723      $34,875


    Liabilities and Stockholders' Equity

      Current liabilities      $6,075       $9,861
      Long-term debt            3,739        3,345
      Other long-term
       liabilities                989        1,183
      Stockholders' equity     20,920       20,486
    Total liabilities and
     stockholders' equity     $31,723      $34,875

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SOURCE Natural Alternatives International, Inc.
Web site: http: //www.nai-online.com
Company News On-Call: http: //www.prnewswire.com/comp/607813.html or fax, 800-758-5804, ext. 607813
CONTACT: Peter C. Wulff, Chief Financial Officer and Treasurer of Natural Alternatives International, Inc., 760-744-7340, info@nai-online.com