Natrol Reports First Quarter Earnings

CHATSWORTH, Calif.--(BUSINESS WIRE)--May 15, 2003--Natrol, Inc. (Nasdaq:NTOL) today announced financial results for the quarter ended March 31, 2003.

The Company recorded a net loss of $124,000 or $(0.01) per share for the quarter ended March 31, 2003, as compared to net income before cumulative effect of change in accounting principle of $121,000 or $0.01 per share in the quarter ended March 31, 2002. During the first quarter of 2002, the Company implemented Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," which resulted in a one-time expense of $6.8 million net of income tax benefits of $4.1 million.

Revenue increased 9.3%, or $1.6 million, to $19.1 million for the three months ended March 31, 2003, from $17.5 million for the three months ended March 31, 2002.

"The absolute bottom line does not tell the entire story," said Elliott Balbert, Natrol's Chairman and Chief Executive Officer, when making the earnings announcement. "On a segment basis, Natrol invested in the launch of Annasa, our multi-level marketing business. This investment reduced overall operating earnings by $509,000 and consolidated net income by $312,000 after accounting for tax benefits caused by the loss. Another positive sign for our business is a reduction in the amount of returns received. During the first quarter of 2003, returns as a percentage of gross sales were 3.7% as compared to 14.5% in the first quarter of 2002. From a macro-level, while we are not yet able to point ahead to desired rates of profitability, we are seeing positive indicators that we hope will result in stable and improving financial performance."

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, including the factors described above 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 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, 2002, and in the Company's other filings with Securities and Exchange Commission.

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