CHATSWORTH, Calif., Mar 31, 2004 (BUSINESS WIRE) -- Natrol, Inc. (Nasdaq:NTOL) today announced its results for the fourth quarter and year ended December 31, 2003.
For the year ended December 31, 2003, the Company reported income from continuing operations of $19,000. Losses from discontinued operations and the net loss for the year were $1.5 million. This compares to income from continuing operations in 2002 of $1.4 million before the loss from discontinued operations of $688,000 and before the effect of a charge from a cumulative change in accounting principle. During 2002, the Company adopted SFAS No. 142, which addresses 'Goodwill and Other Intangible Assets.'In adopting SFAS 142, the Company wrote off $11.0 million of its goodwill from prior acquisitions, which, net of income tax effects, resulted in a $6.8 million charge to earnings and a net loss of $6.1 million.
Net sales in 2003 increased 3.4%, or $2.4 million, to $72.7 million from $70.3 million in 2002.
For the three months ending December 31, 2003, net sales increased approximately 3.2% or $.5 million to $17.4 million from $16.9 million for the three months ended December 31, 2002. Income from continuing operations for the three months ended December 31, 2003 was $12,000 as opposed to $957,000 for the three months ended December 31, 2002. The loss from discontinued operations was $414,000 for the three months ended December 31, 2003 as compared to a loss from discontinued operations of $327,000 for the three months ended December 31, 2002. The Company's net loss for the three months ended December 31, 2003 was $402,000 as compared to net income of $630,000 for the three months ended December 31, 2002.
'The 2003 year was a transition year for us,'noted Elliott Balbert, Natrol's President and Chairman. 'We focused our energies on new concepts initiated in 2002 which did not deliver expected results. By year's end, we made the right decisions that were necessary to regain our focus and hopefully establish new momentum. We discontinued our multi-level marketing business, Annasa, as well as our direct marketing business, Tamsol. We also completed the consolidation of administrative and brand support functions for our Prolab subsidiary into the main Natrol facility in order to reduce overhead and make our Prolab brand a stronger contributor to our overall growth strategy and bottom line. These were hard decisions but we are confident these decisions solidify our business. Fortunately, our core Natrol, Laci Le Beau and Prolab brands are well regarded. We are now focused on these brands and are determined to make meaningful progress in 2004. Our balance sheet remains strong. Our debt at year-end was limited to mortgage debt on our headquarters and our main shipping facility. Our debt to equity ratio at year-end was favorable. Our current cash position weakened in 2003 primarily due to losses from our discontinued operations and the reclassification of $5 million of our cash as a restricted cash asset as part of an insurance program that effectively reduces our insurance cost by more than $1 million on an annualized basis when compared to the prior program. Within the last few days, we received $2 million as part of a legal settlement which will be reflected on the financial statements for the quarter ending March 31, 2004 as a reduction in goodwill. The cash improves our working capital and gives us increased confidence that we have the resources to help our business grow. We remain positive about our industry and optimistic about our future prospects.'
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, 2002 and in the Company's other filings with Securities and Exchange Commission.