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Natrol, Inc. Announces First Quarter Results

CHATSWORTH, Calif., May 15, 2006 (BUSINESS WIRE) -- Natrol, Inc. (NTOL) , a leading manufacturer and marketer of nationally branded nutritional products, today announced financial results for the fiscal first quarter ending March 31, 2006.

Net sales in the quarter decreased 4.2%, to $17.0 million from $17.7 million in the same period a year ago. Gross shipments of the Natrol(R) and Laci Le Beau(R) brands were approximately $15.4 million in the first quarter, an increase of $0.80 million or 5.4%, compared to the same quarter in 2005. Overall sales declined due mainly to a reduction in shipments of Prolab(R)-branded products, and contract manufacturing of approximately $1 million.

Gross profit increased 10.0%, to $6.9 million from $6.3 million in the corresponding 2005 quarter. Results were helped by an improvement in gross margins, to 40.7% in the first quarter of 2006 versus 35.5% in the same period a year earlier. The increase in gross margin was primarily due to lower costs of certain key raw materials during the period.
The operating loss declined to $14,000 in the first quarter of 2006, compared to a loss of $837,000 in the first quarter of 2005.

Net income for the first quarter of 2006 was $73,000, compared to a loss of $592,000 in the prior year.
Earnings per share in the first quarter were $0.01, compared to a loss of $0.04 in the first quarter of 2005. Earnings for the quarter included a benefit from a gain on the sale of a building of approximately $230,000. During the first quarter, the Company adopted Financial Accounting Standard No. 123R ("FAS123R"), which requires companies to estimate the cost of all forms of stock-based compensation, including stock options, restricted stock and employee stock purchase plans, and to record a commensurate expense in their income statement. The total amount of this expense during the first quarter was $292,000. Excluding the effects of FAS123R and the gain on sale of the building, the Company's net income before taxes would have been $180,000 for the quarter ending March 31, 2006 versus the $118,000 actually recorded. The exclusion of the gain on the sale of the building and the FAS123R expense from net income represents a non-GAAP measure, and is provided by the Company to allow comparability to the same period in the prior fiscal year.

"The first quarter was a positive first step toward a return to operating profitability," said Wayne Bos, President and Chief Executive Officer. "We continue to make strides toward establishing a base of predictable revenues from our core branded product portfolio, which will serve as a platform for future growth. We are taking steps to pare overhead; general and administrative expenses were reduced approximately 13.4% in the first quarter compared to the prior year. Even as we look to grow, we continue to seek out cost efficiencies."

"As we go into the next two fiscal quarters," observed Elliott Balbert, Founder and Executive Chairman of Natrol, Inc., "the full effect of our restructuring strategies should begin to take effect. During the past few months, we hired a new President and Chief Executive Officer, a new Chief Operating Officer, and a new Vice President of Marketing. Moreover, we recently added two new Board members with outstanding credentials. Our new leadership is not only bringing fresh energy into the business, but importantly, strategies, skills and insights into that will take us to the next level."

About Natrol, Inc.
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 the Securities and Exchange Commission.

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