Twinlab braces for Bankruptcy
- 08-16-2003, 12:01 PM
Twinlab braces for Bankruptcy
Twinlab Braces for Chapter 11
Vitamin maker cites declining sales
August 16, 2003
Twinlab Corp., the Hauppauge-based maker of vitamins and diet supplements, said yesterday it plans to sell all of its businesses and that it may file for Chapter 11 bankruptcy protection because of declining sales and its worsening financial condition.
Twinlab, one of Long Island's largest corporations with annual revenue of about $138 million, said in a filing with the Securities and Exchange Commission that it is in negotiations with potential purchasers for its businesses. It said a sale was possible in the near future and would likely be part of a Chapter 11 filing.
Twinlab, which did not identify possible buyers, said the sale price would likely fall well below its total debt of $74 million. Company spokesman Bill Rizzardi declined to comment further.
The company said a bankruptcy filing might be necessary because of a continued declined in sales, nagging losses and the uncertainty of potential litigation over ephedra, a herbal stimulant used to induce weight loss and boost athletic performance that has been linked to scores of deaths.
Twinlab stock has dropped by about 90 percent from its 52-week high a year ago. At yesterday's close the shares were down 9 1/2 cents to 6 cents in over-the-counter trading. The stock had dropped as low as 4 cents earlier yesterday.
The company said it was in non-compliance with financial covenants on a mortgage for a plant in American Fork, Utah, and faced a possible default of its senior subordinated notes. Twinlab said its lenders won't extend a waiver beyond Aug. 27. The company also said that negotiations with the mortgage lender had been suspended and that the chances of obtaining additional funds were remote.
A possible default, the company filing said, "raises substantial doubt about the ability of the company to continue as a going concern."
In the last 18 months, Twinlab has cut staff, shed some assets and consolidated manufacturing and distribution facilities to stay in business, the company said. It now has about 500 employees, including 110 at its headquarters. Last year, the company moved its manufacturing operations to Utah.
Twinlab estimated in its filing that its second-quarter loss would increase to about $10.4 million, or 36 cents a share, from $3.6 million, or 13 cents, a year earlier. It said that sales for the quarter will fall 7.5 percent to about $37.2 million.
The husband-and-wife team of David and Jean Blechman founded Twinlab in 1968, naming it for their two sets of twin sons. Only one of their sons, Ross, is still active with the company; he is the chief executive.
Twinlab's sales have been declining since November, when it stopped selling supplements containing ephedra. Ephedra products accounted for about 20 percent of sales.
In February, a jury awarded $1 million to the family of a 24-year-old Texas man after finding Twinlab partially responsible for his death. The man had taken a Twinlab product containing ephedra.
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