Natrol, Inc. (Nasdaq:NTOL), a premier manufacturer and distributor
of nationally branded nutritional products, today reported its
fiscal fourth quarter and full-year results for the period ended
December 31, 2006. For the fourth quarter, the company reported
that net sales increased 10.3% to $16.4 million versus $14.9
million a year ago; diluted earnings per share for the fourth
quarter were $0.02 versus a loss of $0.12 in the fourth quarter of
last year. For the full year, the Company reported net sales of
$65.6 million, a 2.9% decrease versus the fiscal 2005 level of
$67.5 million, and diluted earnings per share of $0.03, a
significant improvement versus the year-ago loss of $0.20 per
diluted share. Wayne Bos, Natrol�s President and Chief Executive
Officer, commented: �Over the course of the past year, we have
successfully returned our business to profitability. We have
controlled our costs and improved our margins and positioned our
business to resume meaningful long-term growth. We are making
careful, thoughtful investments in our brands, our market presence,
and our operating infrastructure to ensure that we take advantage
of the significant opportunities that exist for our business.� The
Company noted that its 2006 full-year gross profit margin improved
to 43.4% from 34.7% in the prior year. This improvement was driven
by improved pricing in raw material costs, more efficient
production, a reduction in the mix of low-margin sales, and better
inventory controls. Fiscal 2006 operating expenses increased only
slightly, with savings in sales and marketing expenses offset by
increases in general and administrative costs. The Company noted
that it had made significant progress over the course of the year
in a variety of areas. These included the hiring of a new Chief
Executive Officer and a new Chief Operating Officer, the
establishment of a $10 million, three-year line of credit, the
establishment of a U.K.-based subsidiary to further penetrate the
European market, the acquisition of the NuHair� and Shen Min�
brands of hair thinning and re-growth products, and the acquisition
of the exclusive U.S. intellectual property rights related to the
Promensil� and Trinovin� brands, leading dietary supplements
specifically marketed to the fast-growing demographic of aging
adult consumers. Mr. Bos continued: �We remain committed to both
continuing to expand our existing suite of products and brands as
well as to exploring new opportunities. We believe that there are
additional opportunities in this highly fragmented market and
intend to use the strength of our balance sheet and, over time, our
ability to generate significant, positive operating cash flow to
take advantage of additional growth opportunities.� Mr. Bos
concluded: �As we enter fiscal 2007, we believe that we are well
positioned to continue to execute on our strategy to improve our
operations, grow sales in our core and newly acquired brands across
each tier of distribution, and to leverage our financial position
to continue to make compelling acquisitions in a variety of
categories. We look forward to demonstrating the power of our
operating model and in flowing tangible increases in value to our
shareholders.� About Natrol � Nourishing the Potential of Mind and
Body� Natrol, Inc. (Nasdaq: NTOL), headquartered in Chatsworth, CA,
has a portfolio of health and wellness brands representing the
highest quality nutritional supplements, functional herbal teas,
and sports nutrition products. Natrol�s business consists of
ownership, management, marketing, and distribution of premium
brands and products, as well as nutraceutical manufacturing for its
own brands and on behalf of third parties. The Company�s brands
include Natrol�, Prolab�, Laci Le Beau�, Promensil�, Trinovin�, Nu
Hair�, and Shen Min�. Natrol distributes products nationally
through more than 54,000 retailers, as well as internationally in
40 countries through distribution partners and a wholly owned
subsidiary in the U.K. Natrol�s dedication to quality is evidenced
by its commitment to high manufacturing standards, earning the
Company an �A� rating from the Natural Products Association�s GMP
Certification Program � a designation achieved by less than ten
percent of U.S. nutrition companies. 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 and Section 21E of the Securities
Exchange Act of 1934. As a result of a number of factors, our
actual results could differ materially from those set forth in the
forward-looking statements. Certain factors that might cause our
actual results to differ materially from those in the
forward-looking statements include, without limitation: (i) our
ability to develop and execute our business plans, (ii) our ability
to respond to competitive challenges and changing consumer
preferences, (iii) our ability to consummate and integrate
acquisitions, (iv) increased competition, (v) unfavorable publicity
about dietary supplements in general or regarding our products or
similar products sold by others, (vi) our exposure to product
liability claims, (vii) our dependence upon certain large
customers, and (viii) our ability to retain and attract talented
management and other key employees, as well as those factors set
forth under the heading �Risk Factors� in our annual report on Form
10-K for the year ended December 31, 2006, and in our other filings
with the Securities and Exchange Commission. (Images/Interviews
Available) Natrol,�Inc. and Subsidiaries Consolidated Balance
Sheets (in thousands, except share and per share data) � December
31, 2006� 2005� Assets Current assets: Cash and cash equivalents $
1,003� $ 3,097� Accounts receivable, net of allowances of $181 and
$247 at December 31, 2006 and 2005, respectively 6,485� 6,723�
Inventory 11,788� 11,797� Income taxes receivable 375� 439�
Deferred income taxes 1,630� 2,021� Prepaid expenses and other
current assets � 1,743� � 726� Total current assets 23,024� 24,803�
Property and equipment: Building and improvements 14,953� 14,930�
Machinery and equipment 5,757� 5,754� Furniture and office
equipment � 3,013� � 2,900� 23,723� 23,584� Accumulated
depreciation and amortization � (9,912) � (8,684) Property and
equipment, net 13,811� 14,900� Property held for sale, net �� 761�
Restricted cash 5,000� 5,000� Deferred income taxes 4,265� 3,905�
Goodwill, net of accumulated amortization and impairment charge of
$37,381 2,026� 2,026� Trademarks 5,730� �� Other assets � 744� �
67� Total assets $ 54,600� $ 51,462� Liabilities and stockholders�
equity Current liabilities: Line of credit $ 3,694� $ �� Accounts
payable 3,058� 4,647� Accrued expenses 2,558� 2,888� Accrued
payroll and related liabilities 1,185� 826� Current portion of
long-term debt � 414� � 532� Total current liabilities 10,909�
8,893� Long-term debt, less current portion 6,301� 7,165�
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�14,116,148 and 13,535,837 at December 31, 2006
and 2005, respectively 141� 135� Additional paid-in capital 61,638�
60,113� Accumulated deficit (24,409) (24,844) Accumulated other
comprehensive income � 20� � �� Total stockholders� equity �
37,390� � 35,404� Total liabilities and stockholders� equity $
54,600� $ 51,462� Natrol,�Inc. and Subsidiaries Consolidated
Statements of Operations (in thousands, except share and per share
data) � Quarter Ended Year Ended December 31, December 31, 2006�
2005� 2006� 2005� Net sales $ 16,393� $ 14,867� $ 65,564� $ 67,530�
Cost of goods sold � 8,736� � 10,742� � 37,131� � 44,107� Gross
profit � 7,657� � 4,125� � 28,433� � 23,423� Selling and marketing
expenses 4,624� 4,595� 16,655� 18,000� General and administrative
expenses � 2,727� � 2,296� � 11,065� � 9,525� Total operating
expenses � 7,351� � 6,891� � 27,720� � 27,525� Operating income
(loss) 306� (2,766) 713� (4,102) Gain on sale of property �� ��
230� �� Interest income 42� 49� 229� 189� Interest expense � 234� �
158� � (690) � (638) Income (loss) before income taxes 114� (2,875)
482� (4,551) Income tax provision (benefit) � (108) � (1,285) � 47�
� (1,918) Net income (loss) $ 222� $ (1,590) $ 435� $ (2,633) Basic
income (loss) per share: Income (loss) per share $ 0.02� $ (0.12) $
0.03� $ (0.20) Diluted income (loss) per share: Income (loss) per
share $ 0.02� $ (0.12) $ 0.03� $ (0.20) Weighted-average shares
outstanding: Basic 13,758,285� 13,535,526� 13,619,783� 13,473,647�
Diluted 13,923,296� 12,355,526� 13,746,670� 13,473,647�
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