SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 30, 1998
Twinlab Corporation
-------------------
Delaware 0-21003 11-3317986
- --------------------------- ------------------ ------------------
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
150 Motor Parkway, Hauppauge, New York 11788
-------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 467-3140
--------------
2120 Smithtown Avenue, Ronkonkoma, New York 11779
-------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of The Nutritional Business (a business unit of Jones
Medical Industries, Inc.)
(i) Report of Ernst & Young LLP, Independent Auditors
(ii) Combined Balance Sheet as of December 31, 1997
(iii)Combined Statement of Income and Business Unit Equity For the Year
Ended December 31, 1997
(iv) Combined Statement of Cash Flows For the Year Ended December 31, 1997
(v) Notes To Combined Financial Statements for the Year Ended December 31,
1997
(vi) Unaudited Combined Balance Sheet as of March 31, 1998
(vii) Unaudited Combined Statement of Income and Business Unit Equity For
the Three Months Ended March 31, 1998
(viii) Unaudited Combined Statement of Cash Flows For the Three Months
Ended March 31, 1998
(ix) Notes To Unaudited Combined Financial Statements For the Three Months
Ended March 31, 1998
(b) Pro Forma Financial Information
(i) Introduction To Unaudited Pro Forma Condensed Combined Financial
Information
(ii) Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31,
1998
(iii) Unaudited Pro Forma Condensed Combined Statement of Income For the
Three Months Ended March 31, 1998
(iv) Unaudited Pro Forma Condensed Combined Statement of Income For the
Year Ended December 31, 1997
(v) Notes To Unaudited Pro Forma Condensed Combined Financial Information
(c) Exhibits
2.1 Asset Purchase Agreement, dated as of March 17, 1998 by and among Jones
Medical Industries, Inc., JMI-Phoenix Laboratories, Inc., Bronson
Laboratories Inc., and Twin Laboratories Inc.*
23.1 Consent of Ernst & Young LLP, Independent Auditors.
*Previously filed
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders
Jones Medical Industries, Inc.
We have audited the accompanying combined balance sheet of The Nutritional
Business (a business unit of Jones Medical Industries, Inc.) as of December 31,
1997, and the related combined statements of income and business unit equity and
cash flows for the year ended December 31, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, based on our audit, the combined financial statements referred
to above present fairly, in all material respects, the combined financial
position of The Nutritional Business (a business unit of Jones Medical
Industries, Inc.) at December 31, 1997, and the combined results of its
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
March 13, 1998, except
for Note 7, as to which the
date is March 17, 1998
<PAGE>
The Nutritional Business
(a business unit of Jones Medical Industries, Inc.)
Combined Balance Sheet
(In thousands of dollars)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------
<S> <C>
ASSETS
Current assets:
Cash $ --
Accounts receivable, less allowance of $93 2,713
Inventories 7,437
Prepaid expenses and other assets 259
-----------
Total current assets 10,409
Intangible assets:
Customer lists 6,085
Distribution systems, trademarks, and trade names 2,425
Restrictive covenants and other intangibles 455
Goodwill 2,651
-----------
11,616
Less accumulated amortization 2,792
-----------
Net intangible assets 8,824
Property, plant, and equipment:
Land 352
Buildings and improvements 1,865
Equipment and furniture 3,755
Automobiles 24
-----------
5,996
Less accumulated depreciation 1,979
-----------
Net property, plant, and equipment 4,017
-----------
Total assets $ 23,250
===========
LIABILITIES AND BUSINESS UNIT EQUITY
CURRENT LIABILITIES:
Accounts payable $ 354
Accrued liabilities 107
-----------
Total current liabilities 461
Business unit equity 22,789
-----------
$ 23,250
===========
See accompanying notes.
<PAGE>
The Nutritional Business
(a business unit of Jones Medical Industries, Inc.)
Combined Statement of Income and Business Unit Equity
(In thousands of dollars)
YEAR ENDED DECEMBER
31, 1997
----------------------
Sales $ 32,105
Cost of sales 16,715
-----------
Gross profit on sales 15,390
Selling, general, and administrative expenses:
Selling 4,431
General and administrative 848
Amortization 606
-----------
5,885
Income before income taxes 9,505
Provision for income taxes 3,612
-----------
Net income $ 5,893
===========
Business unit equity, January 1, 1997 $ 20,089
Net income 5,893
Net transactions with Jones Medical Industries, Inc.
and affiliates (3,193)
-----------
Business unit equity, December 31, 1997 $ 22,789
===========
See accompanying notes.
<PAGE>
The Nutritional Business
(a business unit of Jones Medical Industries, Inc.)
Combined Statement of Cash Flows
(In thousands of dollars)
YEAR ENDED DECEMBER
31, 1997
----------------------
OPERATING ACTIVITIES
Net income $ 5,893
Noncash adjustments:
Depreciation 376
Amortization 606
Change in assets and liabilities:
Accounts receivable (1,522)
Inventories (1,430)
Prepaids and other assets (151)
Accounts payable 112
Accrued liabilities (14)
------------
Cash provided by operating activities 3,870
Cash flows used for capital expenditures (677)
Cash flows used by net transactions with Jones
Medical Industries, Inc. and affiliates (3,193)
------------
Net change in cash $ --
============
</TABLE>
See accompanying notes.
<PAGE>
The Nutritional Business
(a business unit of Jones Medical Industries, Inc.)
Notes to Combined Financial Statements
(Dollar amounts in thousands)
December 31, 1997
1. BASIS OF PRESENTATION
The accompanying combined financial statements include the assets, liabilities,
revenues, and expenses of the following business units (collectively referred to
as The Nutritional Business or the Company) of Jones Medical Industries, Inc.
(JMED):
JMI-Phoenix, Inc.
Bronson Pharmaceutical mail order division
MD Pharmaceutical division
All significant interdivisional transactions have been eliminated in
combination. The Nutritional Business is engaged in the manufacturing,
marketing, and sale of vitamins and nutritional supplements, and its principal
customers include consumers, vitamin and health food distributors, and the
United States government. Sales to the United States government totaled
approximately $1,991 in 1997. In addition, one customer accounted for
approximately 14 percent of The Nutritional Business's sales in 1997.
The Nutritional Business is allocated amounts from JMED for corporate overhead
charges and income taxes. Corporate charges, which are allocated to The
Nutritional Business on specific identification, headcount, square footage, or
other formulas, totaled $683 in 1997. Corporate charges are included in general
and administrative expenses in the accompanying financial statements.
In the opinion of management, these allocations of expenses were made on a
reasonable basis. However, these allocations are not necessarily indicative of
the level of expenses which may have been incurred had The Nutritional Business
operated as a separate entity.
Business unit equity includes JMED's investment in The Nutritional Business, net
cash transfers between The Nutritional Business and JMED or other JMED
affiliates for cash generated from operations, cash transfers for working
capital and asset purchases, corporate charges, and cumulative earnings of The
Nutritional Business. Additionally, current or deferred tax assets and
liabilities are included in business unit equity.
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH
JMED utilizes a centralized cash management system to provide financing to its
operations, including those of The Nutritional Business. Cash requirements of
The Nutritional Business are satisfied by transactions with JMED. These
transactions are included in business unit equity in the accompanying financial
statements. JMED does not charge The Nutritional Business interest on these
transactions. At December 31, 1997, there were no cash balances specifically
attributable to The Nutritional Business.
INVENTORIES
Inventories are valued at the lower of cost or market with cost determined on
the first-in, first-out basis.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are recorded at cost. Depreciation is computed by
the straight-line method over the useful lives of the assets as follows:
ASSET CATEGORY ESTIMATED USEFUL LIFE
- ------------------------------------------- ------------------------------------
Buildings and improvements 15-40 years
Equipment and furniture 5-15 years
Automobiles 5 years
INTANGIBLE ASSETS
The cost of product line or business acquisitions accounted for using the
purchase method of accounting is allocated first to the identifiable assets and
liabilities based on the estimated fair values. The excess of cost over the
identifiable assets and liabilities is recorded as goodwill. Amortization is
provided by the straight-line method over the estimated useful lives of assets
as follows:
ASSET CATEGORY ESTIMATED USEFUL LIFE
- ------------------------------------------------------- -----------------------
Customer lists 20 years
Distribution systems, trademarks, and trade names 10-20 years
Restrictive covenants and other intangibles 5-10 years
Goodwill 40 years
The Company continually reevaluates the propriety of the carrying amount of
goodwill and other intangibles as well as the related amortization period to
determine whether current events and circumstances warrant adjustments to the
carrying values and/or revised estimates of useful lives. This evaluation is
based on the Company's projection of the undiscounted operating income before
depreciation, amortization, and interest over the remaining amortization periods
<PAGE>
INTANGIBLE ASSETS (CONTINUED)
of related goodwill and intangible assets. The projections are based on the
historical trend line of actual results since the date of acquisition of the
respective assets and adjusted for expected changes in operating results.
To the extent such projections indicate that the undiscounted operating income
(as defined above) is not expected to be adequate to recover the carrying
amounts of related intangibles, such carrying amounts are written down by
charges to expense in amounts equal to the excess of the carrying amount of
intangible assets over the respective fair values. At this time, the Company
believes that no reduction of the estimated useful lives is warranted.
REVENUE RECOGNITION
Sales are reported, net of returns, during the period in which the product is
shipped to the customer. Product returns are permitted pursuant to a limited
money-back refund policy applicable to mail order and other sales of nutritional
products. At December 31, 1997, the Company maintained a reserve of $30 for
product returns.
DIRECT-RESPONSE ADVERTISING
Costs associated with the production of the Company's direct-response mail order
catalog are capitalized and amortized over the period of future benefit, which
typically does not extend beyond six months. At December 31, 1997, approximately
$212 of capitalized catalog costs are included in the accompanying balance
sheet. Total expenses associated with the catalog in 1997 totaled $1,155.
INCOME TAXES
The results of operations of The Nutritional Business are included in JMED's
consolidated U.S. federal and applicable state income tax returns. Income taxes
recorded in the accompanying financial statements represent management's
estimate of the taxes The Nutritional Business would have incurred had it filed
on a separate return basis.
EARNINGS PER SHARE
Since there is no separate capitalization, nor are any shares of stock
specifically attributable to The Nutritional Business upon which a per share
calculation can be based, earnings per share data is not provided in the
accompanying financial statements.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
<PAGE>
3. INVENTORIES
Inventories at December 31, 1997, are comprised of the following:
Raw materials $4,366
Work-in-process 722
Finished goods 2,349
=============
$7,437
=============
4. RELATED PARTY TRANSACTIONS
The Nutritional Business had purchases and sales of various products to/from
other JMED affiliates in 1997 as follows:
Sales to JMED affiliates $ 206
Purchases from JMED affiliates $ 68
Sales and purchases among JMED affiliates are transacted at the cost to produce
the product.
During 1997, The Nutritional Business had sales totaling $566 to Jones Products
International, Inc. (JPI). JPI is owned by the son of JMED's significant
shareholders. At December 31, 1997, approximately $246 was receivable from JPI,
for which the payment terms were one-third due in 30 days, one-third due in 60
days, and the balance due in 90 days.
5. EMPLOYEE BENEFIT PLAN
Employees of The Nutritional Business participate in the JMED sponsored 401(k)
defined contribution plan. The plan provides the Company may match 100 percent
of the employee voluntary contributions up to a maximum matching contribution of
6 percent of the employee's compensation. Company contributions in 1997 were
approximately $90.
6. CONTINGENCIES AND COMMITMENTS
The Nutritional Business is included in JMED's product liability coverage of
$20,000 per occurrence, $20,000 in the aggregate, plus a $5,000 umbrella policy
on a "claims-made" basis. There is no assurance that this insurance will cover
any potential claims that may be asserted in the future. In addition, The
Nutritional Business is subject to legal claims which arise in the ordinary
course of its business.
<PAGE>
CONTINGENCIES AND COMMITMENTS (CONTINUED)
The Nutritional Business leases warehouse space under a noncancelable operating
lease agreement expiring August 31, 1999. Future minimum lease payments at
December 31, 1997, are $20 in 1998 and $14 in 1999.
7. SUBSEQUENT EVENT
On March 17, 1998, JMED entered into an agreement with Twin Laboratories, Inc.
for the sale of The Nutritional Business for $55,000, subject to certain
preclosing conditions.
<PAGE>
The Nutritional Business
(a business unit of Jones Medical Industries, Inc.)
Combined Balance Sheet
(In thousands of dollars)
<TABLE>
<CAPTION>
(Unaudited)
March 31, 1998
<S> <C>
ASSETS
Current assets:
Cash $ --
Accounts receivable, less allowance of $93 1,907
Inventories 6,934
Prepaid expenses and other assets 127
-----------
Total current assets 8,968
Intangible assets:
Customer lists 6,085
Distribution systems, trademarks, and trade names 2,425
Restrictive covenants and other intangibles 455
Goodwill 2,651
-----------
11,616
Less accumulated amortization 2,933
-----------
Net intangible assets 8,683
Property, plant, and equipment:
Land 352
Buildings and improvements 1,865
Equipment and furniture 3,755
Automobiles 24
-----------
5,996
Less accumulated depreciation 2,144
-----------
Net property, plant, and equipment 3,852
-----------
Total assets $ 21,503
===========
LIABILITIES AND BUSINESS UNIT EQUITY
CURRENT LIABILITIES:
Accounts payable $ 573
Accrued liabilities 139
-----------
Total current liabilities 712
Business unit equity 20,791
-----------
$ 21,503
===========
See accompanying notes.
<PAGE>
The Nutritional Business
(a business unit of Jones Medical Industries, Inc.)
Combined Statement of Income and Business Unit Equity
(In thousands of dollars)
(Unaudited)
Three months Ended
March 31, 1998
Sales $ 7,725
Cost of sales 4,306
----------
Gross profit on sales 3,419
Selling, general, and administrative expenses:
Selling 1,171
General and administrative 269
Amortization 152
----------
1,592
----------
Income before income taxes 1,827
Provision for income taxes 694
----------
Net income $ 1,133
==========
Business unit equity, January 1, 1998 $ 22,789
Net income 1,133
Net transactions with Jones Medical Industries, Inc.
and affiliates (3,131)
----------
Business unit equity, March 31, 1998 $ 20,791
==========
See accompanying notes.
<PAGE>
The Nutritional Business
(a business unit of Jones Medical Industries, Inc.)
Combined Statement of Cash Flows
(In thousands of dollars)
(Unaudited)
Three months Ended
March 31, 1998
OPERATING ACTIVITIES
Net income $ 1,133
Noncash adjustments:
Depreciation 154
Amortization 152
Change in assets and liabilities:
Accounts receivable 806
Inventories 503
Prepaids and other assets 132
Accounts payable and accrued liabilities 251
----------
Cash provided by operating activities 3,131
Cash flows used by net transactions with Jones
Medical Industries, Inc. and affiliates (3,131)
-----------
Net change in cash $ --
===========
</TABLE>
See accompanying notes.
<PAGE>
The Nutritional Business
(a business unit of Jones Medical Industries, Inc.)
Notes to Combined Financial Statements
(Dollar amounts in thousands)
March 31, 1998
(Unaudited)
1. GENERAL
The unaudited interim financial information reflects all adjustments (consisting
only of normal recurring accruals) which management considers necessary for a
fair presentation of the results of operations for such periods and is subject
to year-end adjustments. Certain footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from the unaudited interim financial
information as permitted by rules and regulations of the Securities and Exchange
Commission. Management believes that the disclosures made are adequate to make
the information presented not misleading. The results for the interim period are
not necessarily indicative of results for the full year. It is suggested that
these financial statements be read in conjunction with The Nutritional Business
audited financial statements and notes thereto for the year ended December 31,
1997.
2. BASIS OF PRESENTATION
The accompanying combined financial statements include the assets, liabilities,
revenues, and expenses of the following business units (collectively referred to
as The Nutritional Business or the Company) of Jones Medical Industries, Inc.
(JMED):
JMI-Phoenix, Inc.
Bronson Pharmaceutical mail order division
MD Pharmaceutical division
All significant interdivisional transactions have been eliminated in
combination. The Nutritional Business is engaged in the manufacturing,
marketing, and sale of vitamins and nutritional supplements, and its principal
customers include consumers, vitamin and health food distributors, and the
United States government. Sales to the United States government totaled
approximately $456 for the three months ended March 31, 1998. In addition, one
customer accounted for approximately 11 percent of The Nutritional Business's
sales during the three months ended March 31, 1998.
The Nutritional Business is allocated amounts from JMED for corporate overhead
charges and income taxes. Corporate charges, which are allocated to The
Nutritional Business on specific identification, headcount, square footage, or
other formulas, totaled $184 for the three months ended March 31, 1998.
<PAGE>
2. BASIS OF PRESENTATION (CONTINUED)
Corporate charges are included in general and administrative expenses in the
accompanying financial statements.
In the opinion of management, these allocations of expenses were made on a
reasonable basis. However, these allocations are not necessarily indicative of
the level of expenses which may have been incurred had The Nutritional Business
operated as a separate entity.
Business unit equity includes JMED's investment in The Nutritional Business, net
cash transfers between The Nutritional Business and JMED or other JMED
affiliates for cash generated from operations, cash transfers for working
capital and asset purchases, corporate charges, and cumulative earnings of The
Nutritional Business. Additionally, current or deferred tax assets and
liabilities are included in business unit equity.
3. INVENTORIES
Inventories are valued at the lower of cost or market with cost determined on
the first-in, first-out basis.
Inventories at March 31, 1998, are comprised of the following:
Raw materials $ 4,040
Work-in-process 676
Finished goods 2,218
----------
$ 6,934
==========
4. INCOME TAXES
The results of operations of The Nutritional Business are included in JMED's
consolidated U.S. federal and applicable state income tax returns. Income taxes
recorded in the accompanying financial statements represent management's
estimate of the taxes The Nutritional Business would have incurred had it filed
on a separate return basis.
5. EARNINGS PER SHARE
Since there is no separate capitalization, nor are any shares of stock
specifically attributable to The Nutritional Business upon which a per share
calculation can be based, earnings per share data is not provided in the
accompanying financial statements.
6. RELATED PARTY TRANSACTIONS
The Nutritional Business had purchases and sales of various products to/from
other JMED affiliates during the three months ended March 31, 1998 as follows:
Sales to JMED affiliates $ 67
Purchases from JMED affiliates $ 17
<PAGE>
6. RELATED PARTY TRANSACTIONS (CONTINUED)
Sales and purchases among JMED affiliates are transacted at the cost to produce
the product.
During the three months ended March 31, 1998, The Nutritional Business had sales
totaling $284 to Jones Products International, Inc.(JPI). JPI is owned by the
son of JMED's significant shareholders. At March 31, 1998, approximately $178
was receivable from JPI, for which the payment terms were one-third due in 30
days, one-third due in 60 days, and the balance due in 90 days.
7. CONTINGENCIES AND COMMITMENTS
The Nutritional Business is included in JMED's product liability coverage of
$20,000 per occurrence, $20,000 in the aggregate, plus a $5,000 umbrella policy
on a "claims-made" basis. There is no assurance that this insurance will cover
any potential claims that may be asserted in the future. In addition, The
Nutritional Business is subject to legal claims which arise in the ordinary
course of its business.
The Nutritional Business leases warehouse space under a noncancelable operating
lease agreement expiring August 31, 1999. Future minimum lease payments at March
31, 1998, are $20 in 1998 and $9 in 1999.
8. SUBSEQUENT EVENT
On April 30, 1998, JMED sold to Twin Laboratories, Inc. the Nutritional Business
for $55,000, subject to post-closing working capital adjustments.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information gives
pro forma effect to: (i) the completion of the acquisition of substantially all
of the assets and assumption of certain liabilities of the Bronson division
(consisting of the following business units: JMI-Phoenix, Inc., Bronson
Pharmaceutical mail order division and MD Pharmaceutical division) ("Bronson")
of Jones Medical Industries, Inc. (the "Acquisition"); and (ii) the completion
of a public offering of 9,200,000 shares of common stock, of which 4,971,251
were sold by certain of the Company's stockholders (the "Offering") and the
application of estimated net proceeds therefrom, as if they had occurred at
January 1, 1997 with respect to the unaudited pro forma condensed combined
statements of operations and as if they had occurred March 31, 1998 with respect
to the unaudited pro forma condensed combined balance sheet. This pro forma
information should be read in conjunction with the historical financial
statements of Twinlab Corporation ("Twinlab" or the "Company") included in its
Annual Report on Form 10-K for the year ended December 31, 1997 and in its
Quarterly Report on Form 10-Q for the three months ended March 31, 1998, and the
historical financial statements of Bronson appearing elsewhere herein.
The pro forma adjustments reflecting the consummation of the Acquisition on the
purchase method of accounting are based on available financial information and
certain estimates and assumptions set forth in the notes to the Unaudited Pro
Forma Condensed Combined Financial Information.
The following unaudited pro forma condensed combined information is presented
for illustration purposes only and is not necessarily indicative of the future
financial position or results of operations of the combined businesses or the
financial position or results of operations of the combined businesses had the
Acquisition and the Offering occurred on the dates discussed above. The
Unaudited Pro Forma Condensed Combined Financial Information reflects Twinlab's
best estimates of the allocation of the purchase price to Bronson's assets and
liabilities; however, the actual financial position and results of operations
may differ from the pro forma amounts.
<PAGE>
TWINLAB CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1998
(In thousands)
<TABLE>
<CAPTION>
ACQUISITION
TWINLAB BRONSON AND OFFERING PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ---------- ----------- -----------
ASSETS
CURRENT ASSETS:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 7,449 $ -- $ 146,775 (a) $ 48,429
(56,156)(b)
(39,670)(c)
(9,969)(d)
Accounts receivable 41,606 1,907 -- 43,513
Inventories 47,734 6,934 52 (b) 54,720
Deferred tax assets 1,196 -- -- 1,196
Prepaid expenses and other current assets 1,617 127 -- 1,744
---------- ----------- ----------- -----------
Total current assets 99,602 8,968 41,032 149,602
PROPERTY, PLANT AND EQUIPMENT, Net 14,050 3,852 - 17,902
DEFERRED TAX ASSETS 47,740 - 1,787 (c) 49,527
OTHER ASSETS 22,384 8,683 45,496 (b) 66,502
(8,683)(b)
(1,378)(c)
---------- ----------- ----------- -----------
TOTAL $ 183,776 $ 21,503 $ 78,254 $ 283,533
========== =========== ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 9,954 $ -- $ (9,750)(d) 204
Accounts payable 20,034 573 -- 20,607
Accrued expenses and other current liabilities 15,182 139 1,500 (b) 15,257
(1,345)(c)
(219)(d)
---------- ----------- ----------- -----------
Total current liabilities 45,170 712 (9,814) 36,068
LONG-TERM DEBT, less current portion 100,241 -- (35,000)(c) 65,241
---------- ----------- ---------- -----------
Total liabilities 145,411 712 (44,814) 101,309
SHAREHOLDERS' EQUITY 38,365 20,791 146,775 (a) 182,224
(20,791)(b)
(2,916)(c)
---------- ----------- ----------- -----------
TOTAL $ 183,776 $ 21,503 $ 78,254 $ 283,533
========== =========== ========== ===========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
<PAGE>
TWINLAB CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TWINLAB BRONSON ACQUISITION FOR OFFERING AS
HISTORICAL HISTORICAL ADJUSTMENTS ACQUISITION ADJUSTMENTS ADJUSTED
---------- ---------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
NET SALES $ 73,451 $ 7,725 $ - $ 81,176 $ - $ 81,176
COST OF SALES 37,232 4,306 - 41,538 - 41,538
--------- -------- ------ -------- ------- --------
GROSS PROFIT 36,219 3,419 - 39,638 39,638
OPERATING EXPENSES 20,039 1,592 572 (e) 22,051 - 22,051
(152)(f) -
--------- -------- ------ ------- ------- -------
INCOME FROM OPERATIONS 16,180 1,827 (420) 17,587 - 17,587
--------- -------- ------ ------- ------- -------
OTHER (EXPENSE) INCOME:
Interest income 98 - - 98 - 98
Interest expense (3,103) - - (3,103) 385 (g) (1,779)
897 (h)
42 (i)
Other (81) - - (81) - (81)
--------- -------- ------ -------- ------- --------
(3,086) - - (3,086) 1,324 (1,762)
--------- -------- ------ -------- ------- --------
INCOME BEFORE PROVISION FOR
INCOME TAXES 13,094 1,827 (420) 14,501 1,324 15,825
PROVISION FOR INCOME TAXES 5,107 694 (146)(j) 5,655 516(j) 6,171
--------- -------- ------ ---------- ------- --------
NET INCOME $ 7,987 $ 1,133 $ (274) $ 8,846 $ 808 $ 9,654
========= ======== ====== ======== ======= ========
BASIC AND DILUTED INCOME PER SHARE:
Net income $ 0.29 $ 0.31
========= ========
Basic weighted average shares outstanding 27,321 31,550
========= ========
Diluted weighted average shares outstanding 27,373 31,602
========= ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
<PAGE>
TWINLAB CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands except per share amounts)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
TWINLAB BRONSON ACQUISITION FOR OFFERING AS
HISTORICAL HISTORICAL ADJUSTMENTS ACQUISITION ADJUSTMENTS ADJUSTED
---------- ---------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
NET SALES $ 213,229 $ 32,105 $ - $ 245,334 $ - $ 245,334
COST OF SALES 120,947 16,715 - 137,662 - 137,662
--------- --------- --------- --------- --------- ----------
GROSS PROFIT 92,282 15,390 - 107,672 - 107,672
OPERATING EXPENSES 43,433 5,885 2,288 (e) 51,000 - 51,000
(606)(f) -
--------- --------- --------- --------- --------- ---------
INCOME FROM OPERATIONS 48,849 9,505 (1,682) 56,672 - 56,672
--------- --------- --------- ---------- --------- ---------
OTHER (EXPENSE) INCOME:
Interest income 204 - - 204 - 204
Interest expense (12,315) - - (12,315) 1,453 (g) (7,106)
3,588 (h)
168 (i)
Other 27 - - 27 - 27
--------- --------- --------- --------- --------- ----------
(12,084) - - (12,084) 5,209 (6,875)
--------- --------- --------- --------- --------- ----------
INCOME BEFORE PROVISION FOR
INCOME TAXES 36,765 9,505 (1,682) 44,588 5,209 49,797
PROVISION FOR INCOME TAXES 14,094 3,612 (639)(j) 17,067 1,979(j) 19,046
--------- --------- --------- ---------- ------- ----------
NET INCOME $ 22,671 $ 5,893 $ (1,043) $ 27,521 $ 3,230 $30,751
========= ========= ========= ============ ========= ==========
BASIC AND DILUTED INCOME PER
SHARE:
Net income $ 0.84 $ 0.98
========= ==========
Basic weighted average shares outstanding 27,042 31,271
========= ==========
Diluted weighted average shares
outstanding 27,078 31,307
========= ==========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
<PAGE>
TWINLAB CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Dollar amounts in thousands)
(a) To record the net proceeds of the Offering after deducting underwriting
discounts and commissions and estimated expenses of the Offering.
(b) To record the acquisition of Bronson and allocation of the purchase price
as follows:
<TABLE>
<S> <C>
Purchase price $ 55,000
Working capital adjustment (244)
Acquisition costs 1,400
-----------
Total estimated purchase price $ 56,156
===========
Historical net book value $ 20,791
Estimated write-up of inventories 52
Goodwill and other intangibles 45,496
Elimination of purchased goodwill and other intangibles (8,683)
Estimated liability for severance payments (400)
Estimated liability for relocation of acquired facility (1,100)
-----------
$ 56,156
===========
</TABLE>
(c) To redeem $35,000 in outstanding principal amount of senior subordinated
notes (the "Notes") at a redemption price equal to 109.5 percent of the
principal amount thereof plus accrued and unpaid interest thereon (the
"Redemption") with a portion of the net proceeds of the Offering. In
connection with the Redemption, the Company will record an extraordinary
charge relating to the payment of premiums on the Notes and the write-off
of a pro rata portion of deferred finance costs. Such amount approximated
$2,916 (net of tax benefit of approximately $1,787) as of March 31, 1998.
(d) To record the repayment of borrowings under the Company's revolving credit
facility with a portion of the net proceeds of the Offering, including
accrued and unpaid interest thereon.
(e) Represents the amortization of goodwill and other intangibles (tradenames
and customer lists) calculated as of January 1, 1997. Goodwill, tradenames,
and customer lists are being amortized over an estimated useful life of 30
years, 30 years and 8.3 years, respectively. Goodwill and other intangibles
and the related amortization expense are subject to possible adjustment
resulting from the completion of the final purchase price adjustments and
the valuation analysis.
(f) Represents the elimination of the historical amortization of goodwill and
other intangibles of Bronson.
(g) Represents the elimination of interest expense relating to borrowings under
the revolving credit facility repaid.
<PAGE>
(h) Represents the elimination of interest expense relating to Notes redeemed
in connection with the Redemption.
(i) Represents the elimination of deferred financing costs relating to the
Redemption.
(j) Represents the income tax impact of the pro forma adjustments.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
July 14, 1998 TWINLAB CORPORATION
By: /s/ Brian Blechman
------------------
Brian Blechman
Executive Vice President
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-18047) of Twinlab Corporation pertaining to the 1996 Stock Incentive
Plan of Twinlab Corporation of our report dated March 13, 1998 (except Note 7,
as to which the date is March 17, 1998), with respect to the combined financial
statements of the Nutritional Business (a business unit of Jones Medical
Industries, Inc.) included in this Current Report (Form 8-K/A) of Twinlab
Corporation.
/s/ Ernst & Young LLP
St. Louis, Missouri
July 10, 1998
