Natrol Trims Business Amid Sinking Earnings Report

CHATSWORTH, Calif.--Natrol (NASDAQ:NTOL) followed a Jan 8. announcement of preliminary fourth quarter and fiscal year 2000 results with a notice that it had planned or already begun numerous initiatives that would serve to secure the company's return to profitability. Revenues are expected to be up by 5 to 10 percent for the fiscal year, but quarter revenues are expected to fall short of comparable 1999 figures by 25 to 30 percent. NTOL also expects to log its first loss ever. Due to these results, as well as an industry-wide revenues slowdown, the company made plans to cut costs and streamline operations. Among the steps planned are no year 2000 bonuses for senior executives, a reduction in the fiscal 2001 budget, a 12-percent workforce cutback (begun in the last 30 days), distribution of 1,000 stock options to each salaried employee, a 150-SKU elimination and a halt on the chief executive officer's (CEO's) salary.

As part of the budget cuts, NTOL will put off a major computer upgrade originally planned for this year, reduce capital expenditures, scale back trade show participation and hone the sales and marketing budgets. The labor cut is seemingly complete, with the workforce pared down to 285 from 324 over the last 30 days. For remaining workers, 1,000 stock options per salaried employee were doled out in an effort to "align the interests" of employees and shareholders.

As for products, the company has targeted about 150 SKUs for deletion over the next year, but they expect the reduction will have only a minor impact on revenues. In addition, the marketing department will focus on specific product areas--functional foods, joint health and women's health--in their development of new products. Furthermore, the sales department has been meeting with top national accounts and health food retailers on laying out what management calls Natrol's most aggressive support campaign in company history. The idea is to use every weapon in its sales and marketing arsenal including pricing, advertising, new product introductions, better placement, point-of-purchase material and sampling.

Punctuating Natrol's commitment to future profitability, CEO Elliott Balbert has decided to work without salary until the company returns to profitability. "As the company's founder and president, I believe it is important to lead by example," Balbert said. "Our cost-cutting is a serious endeavor. Natrol has blessed my family for 20-plus years. It is now time for me to give something back." Filings with the Securities and Exchange Commission (SEC) show that Balbert made about $1 million in salary and bonuses for each of 1999 and 1998. For the senior executives, the average bonus in 1999 was around $120,000, with the average 1998 bonus almost $100,000.

For more information, visit www.natrol.com.