Natrol Announces 2004 Results

    Business Editors

    CHATSWORTH, Calif.--(BUSINESS WIRE)--March 15, 2005--Natrol, Inc. (NASDAQ:NTOL) today announced its results for the fourth quarter and year ended December 31, 2004.
    For the year ended December 31, 2004, the Company reported net income of $1.9 million or $0.13 per diluted share. This compares to income from continuing operations in 2003 of $19,000 before a loss from discontinued operations of $1.5 million. The Company's net loss for the year ended December 31, 2003 was $1.5 million or $0.11 per share.
    Net sales in 2004 increased 9.1%, or $6.6 million, to $79.3 million from $72.7 million in 2003. For the three months ending December 31, 2004, net sales decreased approximately 0.7% or $116,000 to $17.3 million from $17.4 million for the three months ended December 31, 2003.
    Income from continuing operations for the three months ended December 31, 2004 was $265,000 or $0.02 per diluted share as opposed to $12,000 for the three months ended December 31, 2003. The loss from discontinued operations was $414,000 for the three months ended December 31, 2003 with no loss from discontinued operations experienced in 2004. The Company's net loss for the three months ended December 31, 2003 was $402,000 or $0.03 per share.
    "In 2004, we focused our energies on our core brands," noted Elliott Balbert, Natrol's President and Chairman. "Our diet category proved to be particularly strong, while sales of other core items such as Natrol Ester-C remained solid. We made progress in channels such as club stores without suffering erosion with the rest of our customer base. The gains made in these areas helped offset softness in our raw material business as well as essentially flat sales in our sports nutrition business. The consolidation of our sports nutrition business into our headquarters operation, which was announced last year, helped the Company's overall performance. Last year was our best since 1999 and as such we are pleased. Many challenges remain ahead as we work to remind consumers of our continuing mission to provide high quality products that can be trusted every day."

    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.

Natrol, Inc. and Subsidiaries Consolidated Balance Sheets (In thousands, except share and per share data)

December 31, ------------------ 2004 2003 --------- --------

Assets Current assets: Cash $6,022 $2,599 Accounts receivable, net of allowances of $421 and $635 at December 31, 2004 and 2003, respectively 7,431 7,698 Inventory 9,723 9,053 Income taxes receivable 956 349 Deferred income taxes 814 1,110 Prepaid expenses and other current assets 793 914 Net assets of discontinued operations -- 35 --------- --------

Total current assets 25,739 21,758 --------- --------

Property and equipment: Building and improvements 15,891 15,612 Machinery and equipment 5,332 5,215 Furniture and office equipment 3,112 3,158 --------- -------- 24,335 23,985

Accumulated depreciation and amortization (8,022) (7,315) --------- --------

Property and equipment, net 16,313 16,670 Restricted cash 5,000 5,000 Deferred income taxes 3,628 3,902 Goodwill, net of accumulated amortization and impairment charge of $37,381 2,026 4,026 Other assets 218 83 --------- --------

Total assets $52,924 $51,439 ========= ========

Liabilities and stockholders' equity Current liabilities: Accounts payable $2,904 $5,601 Accrued expenses 2,483 1,732 Accrued payroll and related liabilities 1,589 772 Current portion of long-term debt 503 325 --------- --------

Total current liabilities 7,479 8,430 --------- --------

Long-term debt, less current portion 7,685 7,451 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--14,281,928 and 14,054,309 at December 31, 2004 and 2003, respectively 143 141 Additional paid-in capital 62,709 62,377 Accumulated deficit (22,211) (24,079) --------- -------- 40,641 38,439

Shares held in treasury, at cost--921,900 shares at December 31, 2004 and 2003 (2,881) (2,881) ---------

Total stockholders' equity 37,760 35,558 --------- --------

Total liabilities and stockholders' equity $52,924 $51,439 ========= ========

Natrol, Inc. and Subsidiaries Consolidated Statements of Operations (In thousands)

Three Months Ended Year Ended December 31, December 31, -------------------------------------------- 2004 2003 2004 2003 --------------------------------------------

Net sales $17,283 $17,399 $79,269 $72,658 Cost of goods sold 10,673 10,530 46,820 44,246 --------------------------------------------

Gross profit 6,610 6,869 32,449 28,412 -------------------------------------------- Selling and marketing expenses 3,950 4,478 19,560 17,701 General and administrative expenses 2,209 2,236 9,348 10,063 -------------------------------------------- Total operating expenses 6,159 6,714 28,908 27,764 -------------------------------------------- Operating income (loss) from continuing operations 451 155 3,541 648 Interest income 33 38 101 54 Interest expense (160) (162) (630) (649) -------------------------------------------- Income (loss) from continuing operations before income taxes 324 31 3,012 53 Income tax provision 59 19 1,144 34 -------------------------------------------- Income (loss) from continuing operations 265 12 1,868 19 -------------------------------------------- Discontinued operations: (Loss) from operations of discontinued Annasa component -- (352) -- (1,766) (Loss) from operations of discontinued Tamsol component -- (281) -- (542) Income tax benefit -- 219 -- 821 -------------------------------------------- Loss on discontinued operations -- (414) -- (1,487) -------------------------------------------- Net income (loss) $265 $(402) $1,868 $(1,468) ============================================ Basic income (loss) per share: Income per share from continuing operations $0.02 $0.00 $0.14 $0.00 Income per share from discontinued operations -- (0.03) -- (0.11) -------------------------------------------- Income (loss) per share $0.02 $(0.03) $0.14 $(0.11) ============================================

Diluted income (loss) per share Income per share from continuing operations $0.02 $0.00 $0.13 $0.00 Income per share from discontinued operations -- (0.03) -- (0.11) -------------------------------------------- Income (loss) per share $0.02 $(0.03) $0.13 $(0.11) ============================================

Weighted-average shares outstanding--basic 13,358,172 12,945,938 13,276,618 12,945,938 Weighted-average shares outstanding--diluted 14,059,062 13,924,585 14,112,965 13,451,764

--30--SM/la*

CONTACT: Natrol, Inc. Dennis Jolicoeur, 818-739-6000

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: PHARMACEUTICAL SPORTS MEDICAL EARNINGS SOURCE: Natrol, Inc.

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