Natrol Reports Second Quarter Results

  
    
  
  
    
      Natrol, Inc. (Nasdaq:NTOL), a leading manufacturer and marketer of 
      nationally branded nutritional products, today announced operating 
      results for the period ended June 30, 2007.
    
    
      Sales during the quarter rose 17.8% to $19.5 million compared to $16.6 
      million in the year-ago quarter. The Company attributed the sales 
      increase to a strong performance from new products which more than 
      offset a $0.9 million decline that results from the planned 
      discontinuation of Ester-C. At the same time, the Company saw 
      significant improvement in gross margin, which rose 410 basis points to 
      47.5% versus 43.4% in the year-ago quarter. The Company noted that while 
      core expenses showed leverage as costs were controlled, it also invested 
      in building platforms for growth in both the United Kingdom and in the 
      Far East. Even with this investment spending, the company saw a sharp 
      increase in operating income, which rose 172.9% to $737,000 versus 
      $270,000 in the second quarter of 2006.
    
    
      Earnings per share for the second quarter were $0.25 per diluted share 
      versus $0.01 per diluted share in the year-ago quarter. The Company 
      noted that during the quarter, it booked a $6.1 million one-time gain on 
      the sale of its corporate facilities which had the effect of increasing 
      reported earnings by $0.22 per share.
    
    
      Wayne Bos, President and CEO of Natrol, commented, “We 
      are very pleased by the progress we made this past quarter. In addition 
      to good financial results, we made excellent strategic progress with our 
      business. The acquisition of MRI closed late in the quarter and further 
      diversified our business. MRI provides not only a premium brand but 
      contributes a strong, science-based pipeline for further penetration and 
      market development of higher-growth areas of the nutraceutical business. 
      The sale and lease back transaction we completed has given us ready 
      access to capital and the ability to continue to enter into strategic 
      transactions to leverage the considerable platform we are building with 
      a balance sheet that is essentially debt free.”
    
    
      Mr. Bos concluded, “We are confident of our 
      solid and sustainable turnaround in the business of Natrol. Our brand 
      portfolio, which targets several important tiers of distribution, is 
      reliable and growing. We are positioned well to enter the international 
      marketplace. The enhancement of our strategic vision by MRI positions 
      Natrol to again be a company with genuine growth. We believe that we are 
      well positioned to continue our growth trajectory and drive significant 
      value to our shareholders.”
    
    
      
        
          
            Natrol, Inc. and Subsidiaries
          
        
        
        
      
      
        
          
            Consolidated Condensed Balance Sheets
          
        
        
        
      
      
        
          
            (In thousands, except share and per share data)
          
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
          June 30
        
        
        
        
          December 31
        
        
        
      
      
        
        
        
        
        
          2007
        
        
        
        
          2006
        
        
        
      
      
        
        
        
        
        
          (unaudited)
        
        
        
        
        
        
        
      
      
        
          Assets
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Current assets:
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Cash and cash equivalents
        
        
        
        
          $
        
        
          8,640
        
        
        
        
          $
        
        
          1,003
        
        
        
      
      
        
          Accounts receivable, net of allowances of $241 and $181 at June 30, 
          2007 and December 31, 2006, respectively
        
        
        
        
        
        
          11,274
        
        
        
        
        
        
          6,485
        
        
        
      
      
        
          Inventory
        
        
        
        
        
        
          20,057
        
        
        
        
        
        
          11,788
        
        
        
      
      
        
          Income taxes receivable
        
        
        
        
        
        
          —
        
        
        
        
        
        
          375
        
        
        
      
      
        
          Deferred income taxes
        
        
        
        
        
        
          1,635
        
        
        
        
        
        
          1,630
        
        
        
      
      
        
          Prepaid expenses and other current assets
        
        
        
        
           
        
        
          1,164
        
        
        
        
           
        
        
          1,743
        
        
        
      
      
        
          Total current assets
        
        
        
        
        
        
          42,770
        
        
        
        
        
        
          23,024
        
        
        
      
      
        
          Property and equipment:
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Building and improvements
        
        
        
        
        
        
          —
        
        
        
        
        
        
          14,953
        
        
        
      
      
        
          Machinery and equipment
        
        
        
        
        
        
          6,122
        
        
        
        
        
        
          5,757
        
        
        
      
      
        
          Furniture and office equipment
        
        
        
        
           
        
        
          3,038
        
        
        
        
           
        
        
          3,013
        
        
        
      
      
        
        
        
        
        
        
        
          9,160
        
        
        
        
        
        
          23,723
        
        
        
      
      
        
          Accumulated depreciation and amortization
        
        
        
        
           
        
        
          (7,343
        
        
          )
        
        
           
        
        
          (9,912
        
        
          )
        
      
      
        
          Property and equipment, net
        
        
        
        
        
        
          1,817
        
        
        
        
        
        
          13,811
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Restricted cash
        
        
        
        
        
        
          5,250
        
        
        
        
        
        
          5,000
        
        
        
      
      
        
          Deferred income taxes
        
        
        
        
        
        
          4,265
        
        
        
        
        
        
          4,265
        
        
        
      
      
        
          Goodwill, net of accumulated amortization and impairment charge
        
        
        
        
        
        
          2,026
        
        
        
        
        
        
          2,026
        
        
        
      
      
        
          Trademarks
        
        
        
        
        
        
          5,730
        
        
        
        
        
        
          5,730
        
        
        
      
      
        
          Other assets
        
        
        
        
           
        
        
          1,047
        
        
        
        
           
        
        
          744
        
        
        
      
      
        
          Total assets
        
        
        
        
          $
        
        
          62,905
        
        
        
        
          $
        
        
          54,600
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Liabilities and stockholders’ equity
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Current liabilities:
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Line of credit
        
        
        
        
          $
        
        
          —
        
        
        
        
          $
        
        
          3,694
        
        
        
      
      
        
          Accounts payable
        
        
        
        
        
        
          8,039
        
        
        
        
        
        
          3,058
        
        
        
      
      
        
          Accrued expenses
        
        
        
        
        
        
          3,081
        
        
        
        
        
        
          2,558
        
        
        
      
      
        
          Accrued payroll and related liabilities
        
        
        
        
        
        
          1,364
        
        
        
        
        
        
          1,185
        
        
        
      
      
        
          Income taxes payable
        
        
        
        
        
        
          2,850
        
        
        
        
        
        
          —
        
        
        
      
      
        
          Current portion of long-term debt
        
        
        
        
           
        
        
          12
        
        
        
        
           
        
        
          414
        
        
        
      
      
        
          Total current liabilities
        
        
        
        
        
        
          15,346
        
        
        
        
        
        
          10,909
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Long-term debt, less current portion
        
        
        
        
        
        
          31
        
        
        
        
        
        
          6,301
        
        
        
      
      
        
          Deferred benefit from sale leaseback
        
        
        
        
        
        
          5,280
        
        
        
        
        
        
          —
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          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—14,155,544 
            and 14,116,148 at June 30, 2007 and December 31, 2006, respectively
          
        
        
        
        
        
        
          142
        
        
        
        
        
        
          141
        
        
        
      
      
        
          Additional paid-in capital
        
        
        
        
        
        
          61,965
        
        
        
        
        
        
          61,638
        
        
        
      
      
        
          Accumulated deficit
        
        
        
        
        
        
          (19,896
        
        
          )
        
        
        
        
          (24,409
        
        
          )
        
      
      
        
          Accumulated other comprehensive income
        
        
        
        
           
        
        
          37
        
        
        
        
           
        
        
          20
        
        
        
      
      
        
          Total stockholders’ equity
        
        
        
        
           
        
        
          42,248
        
        
        
        
           
        
        
          37,390
        
        
        
      
      
        
          Total liabilities and stockholders’ equity
        
        
        
        
          $
        
        
          62,905
        
        
        
        
          $
        
        
          54,600
        
        
        
      
    
    
      
        
          
            Natrol, Inc. and Subsidiaries
          
          
             
          
        
      
      
        
          
            Consolidated Condensed Statements of Income
          
        
      
      
        
          
            (In thousands, except share and per share data)
          
        
      
      
        
          
            (unaudited)
          
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
          Three months ended
        
        
        
        
          Six months ended
        
      
      
        
          June 30,
        
        
          June 30,
        
      
      
        
        
        
        
        
          2007
        
        
        
        
          2006
        
        
        
        
          2007
        
        
        
        
          2006
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net sales
        
        
        
        
          $
        
        
          19,547
        
        
        
        
          $
        
        
          16,587
        
        
        
        
          $
        
        
          38,254
        
        
        
        
          $
        
        
          33,511
        
      
      
        
          Cost of goods sold
        
        
        
        
          10,263
        
        
        
        
          9,394
        
        
        
        
          20,184
        
        
        
        
          19,423
        
      
      
        
          Gross profit
        
        
        
        
          9,284
        
        
        
        
          7,193
        
        
        
        
          18,070
        
        
        
        
          14,088
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Selling and marketing expenses
        
        
        
        
          5,549
        
        
        
        
          4,092
        
        
        
        
          10,575
        
        
        
        
          8,183
        
      
      
        
          General and administrative expenses
        
        
        
        
          2,998
        
        
        
        
          2,831
        
        
        
        
          6,015
        
        
        
        
          5,649
        
      
      
        
          Total operating expenses
        
        
        
        
          8,547
        
        
        
        
          6,923
        
        
        
        
          16,590
        
        
        
        
          13,832
        
      
      
        
          Operating income
        
        
        
        
          737
        
        
        
        
          270
        
        
        
        
          1,480
        
        
        
        
          256
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Interest income
        
        
        
        
          151
        
        
        
        
          60
        
        
        
        
          184
        
        
        
        
          116
        
      
      
        
          Interest expense
        
        
        
        
          (70)
        
        
        
        
          (153)
        
        
        
        
          (291)
        
        
        
        
          (307)
        
      
      
        
          Other (Loss)
        
        
        
        
          (35)
        
        
        
        
          —
        
        
        
        
          (35)
        
        
        
        
          —
        
      
      
        
          Gain on sale of property
        
        
        
        
          6,062
        
        
        
        
          —
        
        
        
        
          6,062
        
        
        
        
          230
        
      
      
        
          Income before taxes
        
        
        
        
          6,845
        
        
        
        
          177
        
        
        
        
          7,400
        
        
        
        
          295
        
      
      
        
          Income tax provision
        
        
        
        
          2,672
        
        
        
        
          77
        
        
        
        
          2,887
        
        
        
        
          122
        
      
      
        
          Net income
        
        
        
        
          $
        
        
          4,173
        
        
        
        
          $
        
        
          100
        
        
        
        
          $
        
        
          4,513
        
        
        
        
          $
        
        
          173
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income per share:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Basic
        
        
        
        
          $
        
        
          0.29
        
        
        
        
          $
        
        
          0.01
        
        
        
        
          $
        
        
          0.32
        
        
        
        
          $
        
        
          0.01
        
      
      
        
          Diluted
        
        
        
        
          $
        
        
          0.25
        
        
        
        
          $
        
        
          0.01
        
        
        
        
          $
        
        
          0.28
        
        
        
        
          $
        
        
          0.01
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Weighted-average shares outstanding—basic 
          and diluted
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Basic
        
        
        
        
          14,153,601
        
        
        
        
          13,563,747
        
        
        
        
          14,149,355
        
        
        
        
          13,557,115
        
      
      
        
          Diluted
        
        
        
        
          16,763,440
        
        
        
        
          13,914,763
        
        
        
        
          16,093,514
        
        
        
        
          13,865,531
        
      
    
    
      About Natrol – Nourishing the Potential 
      of Mind and Body SM
    
    
      Natrol, Inc. (Nasdaq: NTOL), headquartered in Chatsworth, CA, has a 
      portfolio of health and wellness brands representing quality nutritional 
      supplements, functional herbal teas, and sports nutrition products. 
      Established in 1980, Natrol’s portfolio of 
      brands includes: Natrol®, 
      Prolab®, Laci Le Beau®, 
      Promensil®, Trinovin®, 
      Nu Hair®,Shen Min® 
      ,and MRI®. The 
      company also manufactures supplements for its own brands and on behalf 
      of third parties.
    
    
      Natrol distributes products nationally through more than 54,000 
      retailers, as well as internationally in over 40 other countries through 
      distribution partners and subsidiaries in the UK and Hong Kong. For more 
      information, visit www.Natrol.com.
    
    
      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 and Section 21E of the Securities Exchange Act of 1934. As a result 
      of a number of factors, our actual results could differ materially from 
      those set forth in the forward-looking statements. Certain factors that 
      might cause our actual results to differ materially from those in the 
      forward-looking statements include, without limitation: (i) our ability 
      to develop and execute our business plans, (ii) our ability to respond 
      to competitive challenges and changing consumer preferences, (iii) our 
      ability to consummate and integrate acquisitions, (iv) increased 
      competition, (v) unfavorable publicity about dietary supplements in 
      general or regarding our products or similar products sold by others, 
      (vi) our exposure to product liability claims, our dependence upon 
      certain large customers, and (vii) our ability to retain and attract 
      talented management and other key employees, as well as those factors 
      set forth under the heading "Risk Factors" in our annual report on Form 
      10-K for the year ended December 31, 2006, and in our other filings with 
      the Securities and Exchange Commission.