Natrol Announces Third Quarter Earnings
14/Nov/2005
Natrol, Inc. (NASDAQ: NTOL - news), a manufacturer and distributor of nationally branded dietary supplements, today reported results for the third quarter ended September 30, 2005, announcing a net loss of $742,000 or $0.05 per share on net sales of $15.4 million.
CHATSWORTH, Calif.--(BUSINESS WIRE)—November 14, 2005—Natrol, Inc. (NASDAQ: NTOL - news), a manufacturer and distributor of nationally branded dietary supplements, today reported results for the third quarter ended September 30, 2005, announcing a net loss of $742,000 or $0.05 per share on net sales of $15.4 million. For the nine months ended September 30, 2004, the Company recorded a net loss of $1.0 million or $0.08 per share on net sales of $52.7 million.
Net sales decreased 26.3% or $5.5 million when compared to the third quarter of 2004 when the Company posted $20.9 million in net sales. During the third quarter of 2004, the Company recorded net income of $384,000 or $0.03 per share.
Net sales for the nine months ended September 30, 2005 decreased 15.0% or $9.3 million compared to the nine months ended September 30, 2004 when the Company posted $62.0 million in net sales. The Company recorded net income for the nine months ended September 30, 2004 of $1.6 million or $0.11 per fully diluted share.
“The disintegration of the low-carb lifestyle phenomenon, the halo effect of poor publicity surrounding Vitamin E and issues of inventory rationalization within the mass-market class of trade has made 2005 a tough year,” noted Elliott Balbert, Natrol’s Chairman and CEO, when making the announcement.
“The decline in year-over-year Carb Intercept sales is a major factor when analyzing this year’s performance. Sales of Carb Intercept are $8.0 million less in 2005 than in 2004 and they were down $3.0 million in the quarter just ended. Even so, it would be unfair to say the category has evaporated completely. Sales at some of Natrol’s best customers have stabilized and recent month-over-month performance is positive. We sold more Carb Intercept during the third quarter of 2005 than during the second quarter of 2005.
“But, as I have already noted,” continued Balbert, “there are many issues surrounding this quarter’s performance. A significant factor is that the mass-market drug class of trade has been cutting back inventory levels. This slowed sales at some accounts and caused us to accept returns from others.
“With so many negative issues, it is sometimes difficult to reflect upon the positive trends within our business. Our core product offerings remaining vital. Omega-3, Melatonin, COQ10, ALA are among many growth items. Our new brainSpeed™ product is now on select retailer shelves and new customer take-away continues to grow each month. There have been recent positive news articles about the Omegas, Melatonin and COQ10. The bottom line is that supplements are important to the nutritional well being of us all. While we have admitted challenges, we also have opportunities. It is these opportunities we hope to benefit from as we move forward.”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, 2004 and in the Company’s other filings with Securities and Exchange Commission.
Contact:
Natrol Inc., Chatsworth
Dennis Jolicoeur, (818) 739-6000
| Natrol, Inc. and Subsidiaries Consolidated Balance Sheets (In thousands, except share and per share data) (Unaudited) | |||
|---|---|---|---|
| September 30, 2005 | December 31, 2004 | ||
| (Unaudited) | |||
| Assets | |||
| Current assets: | |||
| Cash and cash equivalents.............................. | $ 3,998 | $6,022 | |
| Accounts receivable, net of allowances of $203 and $421 at September 30, 2005 and December 31, 2004, respectively.............................. | 7,365 | 7,431 | |
| Inventory.................................................................. | 12,101 | 9,723 | |
| Income taxes receivable........................... | 1,225 | 956 | |
| Deferred income taxes................................ | 814 | 814 | |
| Prepaid expenses and other current assets................... | 970 | 793 | |
| Total current assets................................................ | 26,473 | 25,739 | |
| Property and equipment: | |||
| Land, building and improvements..................... | 15,891 | 15,891 | |
| Machinery and equipment......................... | 5,880 | 5,332 | |
| Furniture and office equipment....................... | 3,207 | 3,112 | |
| 24,978 | 24,335 | ||
| Accumulated depreciation................................... | (9,002) | (8,022) | |
| Property and equipment, net | 15,976 | 16,313 | |
| Restricted cash | 5,000 | 5,000 | |
| Deferred income taxes.............................. | 3,628 | 3,628 | |
| Goodwill, net of accumulated amortization and impairment charge of $37,381.. | 2,026 | 2,026 | |
| Other assets.............................................................. | 170 | 218 | |
| Total assets ................................................................ | $ 53,273 | $52,924 | |
| Liabilities and stockholders' equity | |||
| Current liabilities: | |||
| Accounts payable ........................................... | $ 3,473 | $2,904 | |
| Accrued expenses ......................................... | 3,823 | 2,483 | |
| Accrued payroll and related liabilities.................................. | 1,158 | 1,589 | |
| Current portion of long term debt..................................... | 525 | 503 | |
| Total current liabilities.................................................... | 8,979 | 7,479 | |
| Long-term debt, less current portion.................................. | 7,302 | 7,685 | |
| Commitments and contingencies | |||
| Stockholders' equity: | |||
| Preferred stock, par value of $0.01 per share: | |||
| Authorized shares—2,000,000; Issued and outstanding shares-none | |||
| Common stock, par value of $0.01 per share: | |||
| Authorized shares—50,000,000 | |||
| Issued and outstanding shares- 14,456,137 and 14,281,928 at September 30, 2005 and December 31, 2004, respectively....................................... | 144 | 143 | |
| Additional paid-in capital........................................ | 62,982 | 62,709 | |
| Accumulated deficit................................................ | (23,253) | (22,211) | |
| 39,873 | 40,641 | ||
| Shares held in treasury, at cost-921,900 shares at September 30, 2005 and December 31, 2004.... | (2,881) | (2,881) | |
| Total stockholders’ equity................................... | 36,992 | 37,760 | |
| Total liabilities and stockholders’ equity.......................... | 53,273 | $52,924 | |
| Natrol, Inc. and Subsidiaries Consolidated Statements of Operations (In thousands) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Three months ended September 30, | Nine months ended September 30, | |||||||
| | 2005 | 2004 | 2005 | 2004 | ||||
| Net sales...................................... | $ 15,390 | $ 20,879 | $ 52,663 | $ 61,986 | ||||
| Cost of goods sold............ | 9,884 | 12,214 | 33,365 | 36,147 | ||||
| Gross profit................................ | 5,506 | 8,665 | 19,298 | 25,839 | ||||
| Selling and marketing expenses........... | 4,360 | 5,349 | 13,405 | 15,610 | ||||
| General and administrative expenses... | 2,226 | 2,539 | 7,228 | 7,139 | ||||
| Total operating expenses.............. | 6,586 | 7,888 | 20,633 | 22,749 | ||||
| Operating income (loss)............. | (1,080) | 777 | (1,335) | 3,090 | ||||
| Interest income.......................... | 49 | 25 | 140 | 69 | ||||
| Interest expense......................... | (159) | (156) | (480) | (470) | ||||
| Income (loss) before taxes | (1,190) | 646 | (1,675) | 2,689 | ||||
| Income tax provision (benefit)............. | 448 | 262 | (632) | 1,086 | ||||
| Net Income (loss) | $ 742 | $ 384 | $(1,043) | $ 1,603 | ||||
| Income (loss) per share | ||||||||
| Basic............................... | $.(05) | $. 03 | $(. 08 ) | $.12 | ||||
| Diluted.............................. | $. 05 | $. 03 | $(.08) | $.11 | ||||
| Weighted-average shares outstanding—basic and diluted | ||||||||
| Basic ............. | 13,519,317 | 13,343,954 | 13,452,794 | 13,248,797 | ||||
| Diluted............ | 13,519,317 | 14,059,462 | 13,452,794 | 14,063,781 | ||||