Warns of Loss in Fourth Quarter of 2001 on Lower Sales Volume
CHATSWORTH, Calif--Feb. 8, 2002--Natrol, Inc. (NASDAQ:NTOL), a Chatsworth, California-based manufacturer of vitamins, minerals and herbs, today advised that it would take a $20 million impairment charge during the year ended December 31, 2001, writing down the value of goodwill associated with its acquisition of Prolab Nutrition, Inc. in 1999.
The Company also warned that net sales for the fourth quarter of 2001 are expected to fall approximately 13.3%, or $2.4 million, to approximately $15.6 million from $18.0 million in the fourth quarter of 2000. Net sales for the year ended December 31, 2001, are expected to be approximately $76.2 million, 12.5% less than in the year ended December 31, 2000, when net sales were $87.1 million.
Although final figures are not yet available, the Company said it expects to generate marginal pre-tax income for the year ended December 31, 2001, prior to the one-time $20 million charge. The Company's fourth-quarter pre-tax loss, without the one-time $20 million impairment charge, is estimated to be approximately $4.0 million. For the year ended December 31, 2000, Natrol experienced a pre-tax loss of $7.6 million. The Company's pre-tax loss for the fourth quarter of 2000 was $4.2 million.
"Prolab has not yet met our expectations," said Dennis Jolicoeur, Natrol's Chief Financial Officer, when addressing the goodwill write down. "A number of factors have contributed to Prolab's lack of performance. But, regardless of the reasons, as a Company, we needed to face the reality of Prolab's financial performance. We remain bullish about this business unit, but Prolab is worth less than its purchase price, and accounting rules dictate that a $20 million impairment write down is appropriate."
With respect to the year's performance prior to the goodwill write down, Elliott Balbert, Natrol's President, noted, "The fourth quarter was disappointing. The drug channel of trade is continuing to contract, which adversely affected shipments and caused higher returns than in prior periods due to planogram cutbacks. These dynamics affected Natrol and other vendors to the drug store class of trade during the fourth quarter. Even so, the board of directors, myself and the remaining executives of Natrol are proud of the efforts made by the loyal employees of Natrol who, in effect, orchestrated a better than $7 million increase in the Company's pre-tax income for the year 2001 when compared to 2000 despite reduced sales volume."
The statements made in this press release that are not historical facts, including statements regarding expectations for future growth of revenue and profits, trends concerning net sales, industry trends and statements concerning demand for the Company's products, future returns, inventory levels, sales incentives and related expenditures, 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, including the factors described above and factors that Natrol may not currently foresee, Natrol'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 continuing 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, the need and expense of providing sales incentives to the Company's customers, 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, 2000, and in the Company's other filings with Securities and Exchange Commission.