HAUPPAUGE, N.Y.--(BUSINESS WIRE)--Nov. 11, 2002--Twinlab Corporation (NASDAQ: TWLB) today announced its results for the quarter and nine months ended September 30, 2002.
The Company incurred a net loss of $(26.0) million or $(0.90) per share for the third quarter of 2002, versus a net loss of $(1.8) million or $(0.06) per share for the third quarter of last year. The net loss for the quarter ended September 30, 2002 includes restructuring and asset impairment charges of $6.0 million and $6.9 million, respectively, relating to the previously announced consolidation of the Company's manufacturing and distribution facilities and also includes an incremental charge for sales returns and allowances of $8.8 million recorded in connection with a plan to rationalize product offerings to several key customers. Including this charge, third quarter net sales were $25.2 million compared to $54.0 million in the comparable quarter last year.
For the nine months ended September 30, 2002, the Company incurred a net loss of $(25.9) million or $(0.90) per share, versus a net loss of $(24.7) million or $(0.86) per share for the comparable nine months of 2001. Net sales for the nine months ended September 30, 2002 were $116.1 million compared to $155.7 million in the comparable period last year. The net loss for the nine months ended September 30, 2002 includes restructuring and asset impairment charges totaling $12.9 million and the incremental charge for sales returns and allowances of $8.8 million discussed above, offset by a federal income tax benefit of $6.9 million representing a refund received by the Company. The net loss for the nine months ended September 30, 2001 included the loss on disposal of Changes International of $8.7 million.
The Company also announced today that it has entered into an amendment of its Revolving Credit Facility which, among other things, reduced the total facility from $60.0 million to $50.0 million, revised the financial covenant relating to EBITDA (as defined therein) and increased the commitment fee on the unused portion of the facility by 0.125%.
Ross Blechman, Twinlab's Chairman, President and Chief Executive Officer stated, "Sales and operating results have been negatively impacted by our continued restructuring efforts to enhance future profitability. We have rationalized our product offerings to several key retail customers to achieve a targeted, focused mix resulting in an $8.8 million charge for sales returns and allowances. In July, we announced a comprehensive restructuring plan to reduce costs through the consolidation of our manufacturing and distribution facilities. We now anticipate total charges relating to this consolidation will be approximately $17.0 million, of which $12.9 million was recorded during the current quarter. Although we experienced some disruption in customer service in September and early October, the facilities consolidation is on schedule and proceeding according to plan. Annualized cost reductions associated with the consolidation are still anticipated to be in excess of $6.0 million, beginning in the first quarter of 2003. I am pleased that all of our efforts have been supported by our lenders, as evidenced by the recent amendment to our Revolving Credit Facility which allows for our continued restructuring efforts."
Mr. Blechman added, "As announced earlier today, the Company has decided to discontinue the sale of products that contain ephedra effective March 31, 2003. This decision was reached as a result of increasing costs that are negatively impacting the profitability of these products, coupled with consumer demand for non-epehdra weight loss products. The Company expects to experience a reduction in net sales due to the discontinuation of these products. Based upon anticipated costs savings expected to be achieved, however, the Company does not believe that the decision to discontinue the sale of products that contain ephedra should have a material adverse effect on the profitability of the Company. The Company remains committed to the Diet and Energy category, specifically the Diet Fuel, Ripped Fuel and Metabolift brands, and has launched a line of patented and clinically tested ephedra-free products."
Twinlab Corporation, headquartered in Hauppauge, N.Y., is a leading manufacturer and marketer of high quality, science-based, nutritional supplements, including a complete line of vitamins, minerals, nutraceuticals, herbs and sports nutrition products.
Except for historical information contained herein, this release contains, within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, forward- looking statements that are based on management's beliefs and assumptions, current expectations, estimates and projections. Many of the factors that will determine the Company's financial results are beyond the ability of the Company to control or predict. These statements are subject to risks and uncertainties and therefore actual results may differ materially. The Company disclaims any obligation to update any forward-looking statements whether as a result of new information, future events, or otherwise. Important factors and risks that may affect future results include but are not limited to: (i) the impact of competitive products; (ii) changes in law and regulations; (iii) adequacy and availability of insurance coverage; (iv) limitations on future financing; (v) increases in the cost of borrowings and unavailability of debt or equity capital; (vi) the effect of adverse publicity regarding nutritional supplements; (vii) uncertainties relating to acquisitions; (viii) the inability of the Company to gain and/or hold market share; (ix) exposure to and expense of resolving and defending product liability claims and other litigation; (x) consumer acceptance of the Company's products; (xi) managing and maintaining growth; (xii) customer demands; (xiii) the inability to integrate and consolidate its manufacturing and distribution facilities and achieve cost savings and operational efficiencies; (xiv) dependence on individual products; (xv) dependence on individual customers, (xvi) market and industry conditions including pricing, demand for products, levels of trade inventories and raw materials availability, (xvii) the success of product development and new product introductions into the marketplace including the Company's line of ephedra-free products; (xviii) lack of available product liability insurance for ephedra-containing products; (xix) slow or negative growth in the nutritional supplement industry; (xx) the departure of key members of management; (xxi) the absence of clinical trials for many of the Company's products; (xxii) the ability of the Company to efficiently manufacture its products; as well as other risks and uncertainties that are described from time to time in the Company's filings with the Securities and Exchange Commission, copies of which are available upon request from the Company's investor relations department.
Additional Twinlab information is available on the World Wide Web at: http://www.twinlab.com