Natrol Reports Third Quarter Results

CHATSWORTH, Calif., Nov 14, 2007 (BUSINESS WIRE) -- Natrol, Inc. (NTOL) , a leading manufacturer and marketer of nationally branded nutritional products, today announced operating results for the period ended September 30, 2007. Net sales in the third quarter were $19.2 million, up 22.3% versus $15.7 million a year ago. Due to several uncommon costs and special charges, the company reported a net loss per share of $0.22 for the third quarter.

The company noted that during the third quarter it took approximately $3.3 million of charges that affected the gross margin. The charges were primarily associated with a strategic decision to reduce exposure to the H57 Hoodia product line and to adjust reserves in connection with a major customer. As reported, the company's third quarter gross margin was 31.5%; excluding the charges, gross margin would have been reported as 44.4%, compared to 42.7% last year.

The company also incurred unusual SG&A expenses during the third quarter, including $750,000 in legal costs related to a settlement of the company's last unresolved suit for Ephedrine-related products as well as some costs incurred due to ongoing strategic transactions. Additionally, the discontinuation of its H57 Hoodia business carried a special SG&A impact of $620,000. SG&A expenses amounted to $11.0 million in the quarter versus $6.5 million in the third quarter of 2006. Approximately $2.3 million of the increase was due to the Company's NuHair, Shen Min, Promensil and MRI acquisitions and $0.8 million was due to increased sales and marketing of the Company's core Natrol brand with the remainder being due to the charges above.

Wayne Bos, Chairman and Chief Executive Officer of Natrol, Inc., commented, "Our strategic and operational turnaround of this business remains intact and in progress. While the decisions we made this past quarter have an obvious impact on our third quarter financials, we believe that this kind of housekeeping activity is an essential part of repositioning our business.

"What is not readily apparent in our reported numbers is that our gross shipments in the third quarter increased 47%, year on year. This kind of performance is one reason why we remain confident about the future. Our NuHair, Shen Min, Promensil and MRI brands are all performing well. Natrol too, once we adjust for the Ester-C issue, continues to improve and Laci LeBeau is stable and profitable. Finally, it is great to see Prolab also showing growth prospects. Our brands remain strong, our growth opportunities continue to be compelling and we are optimistic about our market position and the strategic opportunities that are available to us."

Mr. Bos continued, "Over the past two years, we have successfully diversified our business, strengthened our market position, and streamlined our operations. We will continue to push for growth, both organically, and through additional acquisitions. The combination of a strong trend toward health and wellness and a highly fragmented industry to serve that trend places us in an excellent strategic position to develop our business and drive value to our shareholders."

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