Natrol Announces $20 Million Impairment Charge for Prolab Division 40048

Natrol Announces $20 Million Impairment Charge for Prolab Division

CHATSWORTH, Calif.--Natrol Inc. (NASDAQ:NTOL) statedon Feb. 8 that it will report a $20 million impairment charge for ProlabNutrition, which it acquired in the third quarter of fiscal 1999. Natrolpurchased Prolab, a sports nutrition products marketing company, for $29 millioncash and 124,270 shares.

"Prolab has not yet met our expectations," reported DennisJolicoeur, Natrol's chief financial officer. He said that a number of factorscontribute to Prolab's lack of performance. "We remain bullish about thisbusiness unit, but prolab is worth less than its purchase price, and accountingrules dictate that a $20 million impairment write-down is appropriate."

Natrol also warned that net sales for the fourth quarter of fiscal 2001 areexpected to fall approximately 13.3 percent to $15.6 million from $18.0 millionexperienced in the fourth quarter of fiscal 2000. Net sales for the year endedDecember 31, 2001, are expected to be around $76.2 million, 12.5 percent lessthan in fiscal 2000, when net sales were $87.1 million.

Not only will Natrol's fewer sales affect its bottom line for fiscal 2001,but so will Prolab's performance. "We had a difficult time with theintegration of Prolab into Natrol because we did not have the right managementteam in place to coordinate a smooth transition," stated Elliott Balbert,president chief executive president of Natrol, adding that this was thecompany's first venture into the sports nutrition market. "That was a verykey factor. But we're very excited about our future prospects with thisasset."

Natrol has already taken steps to turn around Prolab's profitability. Prolabis planning to sneak preview a few new products at the Arnold Classic nextmonth, and earlier this month, Natrol appointed Vincent Andrich to vicepresident of sales for Prolab. Andrich has fifteen years of experience in thesports nutrition industry, and has held the posts of vice president of sportsnutrition at Weider Nutrition International, senior director of sports nutritionat EAS and senior director of marketing at MET-RX USA.

"As with what happens when negative news is released, the first reactionof folks is to focus on the negative instead of the positive," Balbertsaid. "In fiscal 2000, we lost $7 million. In 2001, we showed a smallprofit on $11 million fewer revenues. The company is debt-free with cash in thebank and continues to have a positive cash flow. So we really had a hugeturnaround if you think about it. We didn't drive the top line this year, buthow many companies did?" Balbert estimated that Natrol will release itsaudited fiscal 2001 results by the end of February.