Natrol, Inc. (NASDAQ:NTOL), a leading manufacturer and distributor
of nationally branded nutritional products, today announced
financial results for its fourth quarter and fiscal year periods
ending December 31, 2005. The net loss for the three months ending
December 31, 2005 was $1.6 million, or $0.12 per diluted share.
This compares to net income of $265,000 or $0.02 per diluted share
for the three months ended December 31, 2004. For the three months
ending December 31, 2005, net sales decreased 14.0%, or $2.4
million, to $14.9 million, from $17.3 million for the same quarter
in 2004. For the year ended December 31, 2005, the Company reported
a net loss of $2.6 million, or $0.20 per share, versus net income
of $1.9 million or $0.13 per diluted share for the prior year. Net
sales in 2005 decreased 14.8%, or $11.7 million, to $67.5 million,
from $79.2 million in 2004. Wayne Bos, Natrol's President and CEO,
stated, "In 2005 we saw a $9.2 million decline in sales of our Carb
Intercept(R) product after the low-carbohydrate diet sales trend
peaked in 2004. Sales of our contract manufacturing business
declined $1.8 million as a result of our emphasis on profitability
over volume in that segment. Due to the merger of two of our major
customers, we also incurred product returns of approximately
$900,000. However, the remainder of our core branded product lines
generated sales at levels similar to 2004; this business forms the
base from which we plan to build going forward." Natrol's
profitability in 2005 was affected not only by lower revenues but
also by tighter gross margins due to increases in raw material
prices. In particular, the Company lost $2.5 million of gross
profit margin because of increases in the cost of coQ10 and whey,
important components in the manufacture of selected products. "As
Natrol moves into 2006," added Mr. Bos, "our core business is
intact, with many areas showing promise. Our key customer
relationships across all retail channels are strong. Our margins
are already improving. Our balance sheet is solid. We have new
Board representation joining Executive Chairman and Founder Elliott
Balbert, a new team of senior executives, and other seasoned
managers in place in critical positions within the Company. With
this foundation as support for our defined strategic focus, we are
confident about growth prospects in new and existing markets
worldwide." About Natrol Founded in 1980, Natrol, Inc.
(NASDAQ:NTOL) is a diversified nutrition company that manufactures
and markets premium-branded nutritional products, functional teas
and sports fitness products under the Natrol(R), Laci Le Beau(R)
Tea and Prolab(R) Sports Nutrition labels. Natrol markets more than
200 nutritional products designed to meet a wide range of consumer
needs. The products are available at more than 54,000 food, drug,
mass market and independent health food stores, catalogs and
Internet sites, gyms and specialty stores nationally and in select
foreign countries. For more information, visit www.natrol.com. The
statements made in this press release which are not historical
facts including statements regarding expectations for future growth
of revenue and profits and trends concerning net sales, are
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. As a result of a
number of factors, the Company's actual results could differ
materially from those set forth in the forward-looking statements.
Certain factors that might cause Natrol's actual results to differ
materially from those set forth in the forward-looking statements
include adverse trends in the dietary supplements industry, intense
competition, adverse effects of unfavorable publicity regarding
particular products or the Company's industry generally, the
Company's dependence on the introduction of successful new
products, the Company's ability to gain market share and shelf
space in each of its distribution channels, the Company
experiencing high rates of product returns, and adverse government
regulation, as well as those factors set forth under the heading
"Risk Factors" in the Company's Annual Report on Form 10-K for the
year ended December 31, 2005 and in the Company's other filings
with Securities and Exchange Commission. -0- *T Natrol, Inc. and
Subsidiaries Consolidated Statements of Operations (in thousands,
except share and per share data) Years Ended December 31,
----------------------- 2005 2004 ---------- ---------- Net sales
$67,530 $79,269 Cost of goods sold 44,107 46,820 ----------
---------- Gross profit 23,423 32,449 ---------- ---------- Selling
and marketing expenses 18,000 19,560 General and administrative
expenses 9,525 9,348 ---------- ---------- Total operating expenses
27,525 28,908 ---------- ---------- Operating income (loss) (4,102)
3,541 Interest income 189 101 Interest expense (638) (630)
---------- ---------- Income (loss) before income taxes (4,551)
3,012 Income tax provision (benefit) (1,918) 1,144 ----------
---------- Net income (loss) $(2,633) $ 1,868 ========== ==========
Basic income (loss) per share: Income per share from continuing
operations $ (0.20) $ 0.14 Loss per share from discontinued
operations -- -- ---------- ---------- Income (loss) per share $
(0.20) $ 0.14 ========== ========== Diluted income (loss) per
share: Income per share from continuing operations $ (0.20) $ 0.13
Loss per share from discontinued operations -- -- ----------
---------- Income (loss) per share $ (0.20) $ 0.13 ==========
========== Weighted-average shares outstanding: Basic 13,473,647
13,276,618 Diluted 13,473,647 14,112,965 Natrol, Inc. and
Subsidiaries Consolidated Balance Sheets (in thousands, except
share and per share data) December 31, ---------------- 2005 2004
------- ------- Assets Current assets: Cash $ 3,097 $ 6,022
Accounts receivable, net of allowances of $247 and $421 at December
31, 2005 and 2004, respectively 6,723 7,431 Inventory 11,797 9,723
Income taxes receivable 439 956 Deferred income taxes 2,021 814
Prepaid expenses and other current assets 726 793 ------- -------
Total current assets 24,803 25,739 ------- ------- Property and
equipment: Building and improvements 14,930 15,891 Machinery and
equipment 5,754 5,332 Furniture and office equipment 2,900 3,112
------- ------- 23,584 24,335 Accumulated depreciation and
amortization (8,684) (8,022) ------- ------- Property and
equipment, net 14,900 16,313 Property held for sale, net 761 --
Restricted cash 5,000 5,000 Deferred income taxes 3,905 3,628
Goodwill, net of accumulated amortization and impairment charge of
$37,381 2,026 2,026 Other assets 67 218 ------- ------- Total
assets $51,462 $52,924 ======= ======= Liabilities and
stockholders' equity Current liabilities: Accounts payable $ 4,647
$ 2,904 Accrued expenses 2,888 2,483 Accrued payroll and related
liabilities 826 1,589 Current portion of long-term debt 532 503
------- ------- Total current liabilities 8,893 7,479 -------
------- Long-term debt, less current portion 7,165 7,685
Commitments and contingencies Stockholders' equity: Preferred
stock, par value of $0.01 per share: Authorized shares --
2,000,000; Issued and outstanding shares-none Common stock, par
value of $0.01 per share: Authorized shares -- 50,000,000 Issued
and outstanding shares -- 14,457,737 and 14,281,928 at December 31,
2005 and 2004, respectively 145 143 Additional paid-in capital
62,984 62,709 Accumulated deficit (24,844) (22,211) ------- -------
38,285 40,641 Shares held in treasury, at cost -- 921,900 shares at
December 31, 2005 and 2004 (2,881) (2,881) ------- ------- Total
stockholders' equity 35,404 37,760 ------- ------- Total
liabilities and stockholders' equity $51,462 $52,924 =======
======= *T
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