Natrol Announces Fourth Quarter, Full Year 2005 Results

CHATSWORTH, Calif., Mar 30, 2006 (BUSINESS WIRE) -- Natrol, Inc. (NTOL) , a leading manufacturer and distributor of nationally branded nutritional products, today announced financial results for its fourth quarter and fiscal year periods ending December 31, 2005.

The net loss for the three months ending December 31, 2005 was $1.6 million, or $0.12 per diluted share. This compares to net income of $265,000 or $0.02 per diluted share for the three months ended December 31, 2004. For the three months ending December 31, 2005, net sales decreased 14.0%, or $2.4 million, to $14.9 million, from $17.3 million for the same quarter in 2004.

For the year ended December 31, 2005, the Company reported a net loss of $2.6 million, or $0.20 per share, versus net income of $1.9 million or $0.13 per diluted share for the prior year. Net sales in 2005 decreased 14.8%, or $11.7 million, to $67.5 million, from $79.2 million in 2004.

Wayne Bos, Natrol's President and CEO, stated, "In 2005 we saw a $9.2 million decline in sales of our Carb Intercept(R) product after the low-carbohydrate diet sales trend peaked in 2004. Sales of our contract manufacturing business declined $1.8 million as a result of our emphasis on profitability over volume in that segment. Due to the merger of two of our major customers, we also incurred product returns of approximately $900,000. However, the remainder of our core branded product lines generated sales at levels similar to 2004; this business forms the base from which we plan to build going forward."

Natrol's profitability in 2005 was affected not only by lower revenues but also by tighter gross margins due to increases in raw material prices. In particular, the Company lost $2.5 million of gross profit margin because of increases in the cost of coQ10 and whey, important components in the manufacture of selected products.
"As Natrol moves into 2006," added Mr. Bos, "our core business is intact, with many areas showing promise. Our key customer relationships across all retail channels are strong. Our margins are already improving. Our balance sheet is solid. We have new Board representation joining Executive Chairman and Founder Elliott Balbert, a new team of senior executives, and other seasoned managers in place in critical positions within the Company. With this foundation as support for our defined strategic focus, we are confident about growth prospects in new and existing markets worldwide."

About Natrol
Founded in 1980, Natrol, Inc. (NTOL) is a diversified nutrition company that manufactures and markets premium-branded nutritional products, functional teas and sports fitness products under the Natrol(R), Laci Le Beau(R) Tea and Prolab(R) Sports Nutrition labels. Natrol markets more than 200 nutritional products designed to meet a wide range of consumer needs. The products are available at more than 54,000 food, drug, mass market and independent health food stores, catalogs and Internet sites, gyms and specialty stores nationally and in select foreign countries. For more information, visit

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, 2005 and in the Company's other filings with Securities and Exchange Commission.

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