NAI(NAII) - 2023 Q1 - Quarterly Report

Financial Performance - For the first three months of fiscal 2023, net sales increased by 12% to $43.1 million compared to $38.3 million in the same period of fiscal 2022[89]. - Private-label contract manufacturing sales rose by 24% to $41.8 million, primarily driven by higher sales to the two largest customers[100]. - Patent and trademark licensing revenue decreased by 72% to $1.4 million, down from $4.8 million in the prior year, due to reduced orders and market factors[90]. - Gross profit margin declined to 12.5%, down from 21.6% in the prior year, reflecting increased manufacturing costs and unfavorable foreign exchange rates[100]. - Operating income fell by 64% to $1.5 million, with a corresponding decrease in operating income margin to 3.6% from 11.0%[100]. - Net income decreased by 68% to $1.1 million, representing 2.4% of net sales compared to 8.5% in the previous year[100]. - The company anticipates slight growth in consolidated net sales for fiscal 2023 compared to fiscal 2022, despite expected negative impacts on operating income from inflation and foreign exchange rates[93]. Investments and Development - The company is investing in research and development for the SR CarnoSyn® sustained release delivery system, targeting growth in the Wellness and Healthy Aging markets[91]. - A new high-volume powder blending and packaging facility is expected to be operational by mid-to-late fiscal year 2023, aimed at enhancing production capabilities[97]. Cash Flow and Financing - Days sales outstanding improved to 34 days in the first three months of fiscal 2023, down from 46 days in the prior year, indicating better cash flow management[108]. - Changes in inventory used $7.5 million in cash during the three months ended September 30, 2022, compared to $4.7 million in the prior year period[109]. - Cash used in investing activities was $7.8 million for the three months ended September 30, 2022, down from $18.3 million in the comparable prior year period[110]. - Cash provided by financing activities was $2.8 million for the three months ended September 30, 2022, compared to $10.0 million in the prior year period[111]. - As of September 30, 2022, the company had $3.4 million outstanding on its credit facility and $16.6 million available for borrowing[112]. - The company had $12.3 million in cash and cash equivalents as of September 30, 2022, sufficient to fund current working capital needs and capital expenditures for the next 12 months[114]. - There was no off-balance sheet debt or significant obligations that could materially affect the company's financial condition as of September 30, 2022[115]. - The company was in compliance with all financial and other covenants required under the Credit Agreement as of September 30, 2022[112]. - The decrease in borrowings was partially offset by an increase in the repurchase of treasury stock for the three months ended September 30, 2022[111]. - The primary reason for the decrease in cash used in investing activities was the purchase of a new manufacturing and warehouse facility in Carlsbad, CA[110]. Internal Controls - There were no changes in internal control over financial reporting that materially affected the company during the quarterly period ended September 30, 2022[119].