IRVINE, Calif.--(BUSINESS WIRE)--May 16, 2002--Naturade, Inc. (OTCBB: NRDC), a leading marketer of soy protein products under the brand name Naturade Total Soy(R), today reported net sales of $3,484,000 for the three months ended March 31, 2001, a decrease of 18% over the same period in 2001. The decline comes after 2 years of above market growth during which the Company added major new accounts and new product placements that were not repeatable in 2002.
Mass market sales were 20% below those of one year ago as a result of a reduction in volume attributable to first-time placement of Naturade Total Soy compared to the first quarter of 2001 and a slowdown in the introduction of new products in 2002 as the Company concentrated on its core product lines. Repeat sales or turn business from mass market customers increased 9.3% after factoring the change in new account distribution and the minor impact of a channel shift in which certain mass customers switched to direct purchases from Naturade rather than purchasing through health food distributors.
Sales to health food accounts were off 16.6% reflecting the continuing underlying weakness in the health food store channel and the company's decision to discontinue certain lower volume products. After factoring out the $97,500 of lost sales attributable to discontinued products and the minor impact of the channel shift from health food to mass market, a slightly improved picture emerges, with health food net sales down 6% compared to first quarter 2001.
The Company reported a net loss for the quarter of $666,000 ($0.02 per share) that was essentially unchanged from the loss of $637,000 ($0.09 per share) experienced during the first quarter of 2001. This loss reflects the impact of the sales decline due to non-recurring, new pipeline distribution and the minor impact of a decline in gross profit percentage from 48.3% to 46.6%. The change in gross profit percentage was primarily due to lower sales of the higher margin Naturade Total Soy line. The net loss was partially offset by the positive results of management's efforts to control spending with a $233,000 reduction in brand expenses and by a $113,000 reduction in interest expense due to the conversion of $5.3 million of Health Holdings and Botanicals convertible debt into common stock as of January 2, 2002.
The Company balance sheet was significantly strengthened as a result of several previously reported transactions that took place simultaneously on January 2nd. In addition to the Health Holdings debt conversion, the Company received a $2.5 million equity investment from Westgate Equity Partners and was successful in renegotiating its credit and security agreement with Wells Fargo Business Credit, extending the agreement through 2003 with a higher $4.5 million credit ceiling. The Westgate transaction required a non-cash accounting recognition of a $2 million "deemed dividend" expense for the quarter because of the beneficial conversion feature of the convertible preferred stock, resulting in a net loss applicable to common shares of $2,665,811 ($0.06/share).
Naturade CEO, Bill Stewart says, "Despite our sales slowdown, we remain encouraged by the strength of our repeat purchases and increasing consumer takeaway of our market-leading Naturade Total Soy line. The revenue decline is almost entirely explained by the non-recurring new distribution pipeline sales which occurred in 2001."
"We're addressing the business environment with several new initiatives," Stewart continued, "including new second-half introductions, promotions and product upgrades. In addition, we're pursuing growth through strategic alliances with other companies by capitalizing on additional resources from our new investment partner, Westgate. We are excited by the interest and support of both Health Holdings and Westgate in identifying external opportunities that can strengthen financial performance for the long-term."
Headquartered in Irvine, Calif., Naturade -- since 1926 -- has been committed to marketing innovative natural products to improve the health and well being of consumers. Well-known for its 50 years of leadership in soy protein, Naturade is the #1 brand name sold in food, drug and mass merchandise stores. Its premier product, Naturade Total Soy, is a complete line of ready-to-drink, bars and shake mix meal replacement products sold at major supermarkets and drug, health food, club and mass merchandise stores throughout the U.S. The Company's other products include Naturade NRG(TM), Naturade Veg(TM), Naturade 100% Soy(TM) and Aloe Vera 80(R) beauty care products. For more information, visit www.naturade.com or call (877) 4 Soy News.
Note: the private securities litigation reform act of 1995 provides a "safe harbor" for certain forward-looking statements. The statements contained in this news release that are not historical facts are forward-looking statements based on the company's current expectations and beliefs concerning future developments and their potential effects on the company, including, without limitation, statements concerning the company's strategies and initatives to improve business results. There can be no assurance that future developments affecting the company will be those anticipated by the company. Actual results may differ from those projected in the forward-looking statements. These forward- looking statements involve significant risks and uncertainties (some of which are beyond the control of the company) and are subject to change based upon various factors. These factors include the impact of government regulations, less stable demand in the mass market, variability of quarterly earnings, business interuption due to terrorism, ability to continue as a going concern and potential future earnings losses, dependence on key customers, dependence on current and ongoing financing, dilution due to future equity sales, technological changes, dependence on third-party manufacturers, pricing pressures and other competitive factors, dependence on qualified personnel, product liability exposure, inability to identify strategic growth partners, instability of the dietary supplement industry, impact of adverse publicity, limited success of new products, insufficient protection of intellectual property, stock price volatility and close control of company stock. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For a more detailed discussion of some of the ongoing risks and uncertainties of the company's business, see the company's filings with the securities and exchange commission.