NAI Slips on Impairment Charge

SAN MARCOS, Calif.Delayed due to ongoing goodwill impairment testing, fourth quarter (4Q) and fiscal year 2007 (FY07) results from Natural Alternatives International (NASDAQ:NAII) were depressed due to slowed sales and a $7 million, non-cash impairment charge taken in 4Q. Sales were down almost 30 percent in 4Q and slid 2.5 percent to $97.1 million for FY07. The company attributed the sales declines to significant initial shipments at the end of FY06 of a single product to a new customer, which continued in fiscal 2007 at a lower volume. The impairment charge and slowed sales contributed to net losses of $6.6 million or $0.96 per share in 4Q and $5.3 million or $0.77 per share in FY07, compared to net profit gains in the respective comparable 2006 periods.

While not pleased with the goodwill impairment charge related to our branded products business, we believe our position in the market will provide many opportunities for growth, said Randell Weaver, president of NAI, who noted the company is exploring new options for distribution and working to extend its reach in the retail market. In our contract manufacturing business, we are exploring international opportunities for delivery of products into Australia, New Zealand, Malaysia and other Asian countries by potential, new U.S. contract manufacturing customers.

As of June 30, 2007, the company (www.NAI-online.com) had cash and working capital of $4.9 million and $16.2 million, respectively, up significantly from $2.2 million and $13.2 million, respectively, in the prior year. As of June 30, 2007, it had $7.5 million available under a working capital line of credit and no outstanding borrowings under its credit line.

We believe our balance sheet is strong and positions us well for future growth, said Mark LeDoux, CEO with NAI. We have invested heavily in our business and our facilities and intend to continue our efforts to maintain world-class standards of excellence, building solid and enduring partnerships, and enriching the world through the best of nutrition.