<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission file number 0-21003
TWINLAB CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 11-3317986
(State of incorporation) (IRS Employer Identification No.)
150 Motor Parkway, Suite 210, Hauppauge, New York 11788
(Address of principal executive office) (zip code)
</TABLE>
(631) 467-3140
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------------------ -----------------
At April 30, 2000, the registrant had 28,645,687 shares of common stock
outstanding.
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
TWINLAB CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, 2000 DECEMBER 31, 1999
-------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,794 $ 3,994
Accounts receivable, net of allowance for bad debts of $820 at
March 31, 2000 and $918 at December 31, 1999 43,973 52,454
Inventories 78,478 71,826
Deferred tax assets 3,789 4,497
Prepaid taxes 6,321 8,183
Prepaid expenses and other current assets 4,142 2,941
------------ ------------
Total current assets 140,497 143,895
Property, plant and equipment, net 46,605 46,168
Deferred tax assets 39,161 40,269
Other assets 55,340 55,925
------------ ------------
TOTAL $ 281,603 $ 286,257
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 734 $ 597
Accounts payable 22,381 33,152
Accrued expenses and other current liabilities 9,793 25,780
------------ ------------
Total current liabilities 32,908 59,529
Long-term debt, less current portion 82,378 63,203
------------ ------------
Total liabilities 115,286 122,732
------------ ------------
Commitments and contingencies
Shareholders' Equity:
Preferred stock, $.01 par value; 2,000,000 shares
authorized; none issued - -
Common stock, $1.00 par value; 75,000,000 shares authorized; 32,746,587
issued and 28,645,687 outstanding as of March 31, 2000 and 32,706,233
issued and 28,605,333 outstanding as of December 31, 1999 32,747 32,706
Additional paid-in capital 289,645 289,336
Accumulated deficit (119,281) (121,723)
------------ ------------
203,111 200,319
Treasury stock at cost; 4,100,900 shares (36,794) (36,794)
------------ ------------
Total shareholders' equity 166,317 163,525
------------ ------------
TOTAL $ 281,603 $ 286,257
============ ============
</TABLE>
2
<PAGE> 3
TWINLAB CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
2000 1999
---- ----
(unaudited)
<S> <C> <C>
NET SALES $ 78,463 $ 71,463
COST OF SALES 38,385 36,493
--------- ---------
GROSS PROFIT 40,078 34,970
OPERATING EXPENSES 34,983 30,856
--------- ---------
INCOME FROM OPERATIONS 5,095 4,114
--------- ---------
OTHER (EXPENSE) INCOME:
Interest income 88 108
Interest expense (1,816) (1,436)
Other 623 6
--------- ---------
(1,105) (1,322)
--------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES 3,990 2,792
PROVISION FOR INCOME TAXES 1,548 1,110
--------- ---------
NET INCOME $ 2,442 $ 1,682
========= =========
BASIC INCOME PER SHARE $ 0.09 $ 0.05
========= =========
DILUTED INCOME PER SHARE $ 0.09 $ 0.05
========= =========
Weighted Average Common Shares Used In
Computing Basic Income Per Share 28,618 32,697
========= =========
Weighted Average Common Shares Used
In Computing Diluted Income Per Share 28,628 32,697
========= =========
</TABLE>
3
<PAGE> 4
TWINLAB CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
---- ----
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,442 $ 1,682
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,256 1,538
Bad debt expense - 31
Deferred income taxes 1,816 1,281
Other 88 -
Changes in operating assets and liabilities:
Accounts receivable 8,481 6,829
Inventories (6,652) (5,120)
Prepaid taxes 1,862 -
Prepaid expenses and other current assets (939) (404)
Accounts payable (10,316) (9,280)
Accrued expenses and other current liabilities (15,987) 708
---------- ---------
Net cash used in operating activities (16,949) (2,735)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (1,775) (6,883)
Increase in other assets (333) (1,867)
--------- ---------
Net cash used in investing activities (2,108) (8,750)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit facility 19,000 15,000
Proceeds from issuance of debt - 8,000
Payments of debt (143) (3)
Purchase of treasury stock - (1,269)
--------- ---------
Net cash provided by financing activities 18,857 21,728
--------- ---------
Net (decrease) increase in cash and cash equivalents (200) 10,243
Cash and cash equivalents at beginning of period 3,994 12,489
--------- ---------
Cash and cash equivalents at end of period $ 3,794 $ 22,732
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the periods for:
Interest, net of amounts capitalized $ 437 $ 54
========= =========
Income taxes, net of refunds $ (2,079) $ 491
========= =========
Conversion of accounts payable to capital lease obligation $ 455 $ -
========= =========
</TABLE>
4
<PAGE> 5
TWINLAB CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying consolidated unaudited
financial statements include all necessary adjustments (consisting of
normal recurring accruals) and present fairly the financial position of
Twinlab Corporation ("Twinlab") and subsidiaries (the "Company") as of
March 31, 2000, and the results of its operations and its cash flows for
the three months ended March 31, 2000 and 1999 in conformity with
generally accepted accounting principles for the interim financial
information applied on a consistent basis. The results of operations for
the three months ended March 31, 2000 are not necessarily indicative of
the results to be expected for the full year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. These financial statements
should be read in conjunction with the audited consolidated financial
statements and notes thereto included in Twinlab's Annual Report to
Stockholders on Form 10-K for the fiscal year ended December 31, 1999, as
filed with the Securities and Exchange Commission.
2. CONDENSED AND SUMMARIZED FINANCIAL INFORMATION
The Company's amended revolving credit facility and restrictive covenants
contained in the indenture governing the 10 1/4% senior subordinated
notes (the "Notes") restrict the payment of dividends and the making of
loans, advances or other distributions to Twinlab by any of its
subsidiaries, except in certain limited circumstances. The condensed
financial information of Twinlab, on a stand-alone basis, is as follows:
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS MARCH 31, 2000 DECEMBER 31, 1999
------------------------ -------------- -----------------
<S> <C> <C>
ASSETS
Cash $ - $ 338
Prepaid expenses and other current assets - 2
Investment in subsidiaries 166,317 163,185
--------- ---------
Total $ 166,317 $ 163,525
========= =========
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value; 2,000,000
shares authorized; none issued
Common stock, $1.00 par value; 75,000,000 shares authorized;
32,746,587 issued and 28,645,687 outstanding as of March 31, 2000 and
32,706,233 issued and 28,605,333
outstanding as of December 31, 1999 32,747 32,706
Additional paid-in capital 289,645 289,336
(119,281) (121,723)
--------- ---------
Accumulated deficit 203,111 200,319
Treasury stock at cost; 4,100,900 shares (36,794) (36,794)
--------- ---------
Total $ 166,317 $ 163,525
========= =========
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
---- ----
<S> <C> <C>
CONDENSED STATEMENTS OF INCOME
Equity interest in net income of subsidiaries $ 2,473 $ 1,707
Operating expenses 52 -
Interest income 1 4
--------- ---------
Income before provision for income taxes 2,422 1,711
Provision for (benefit from) income taxes (20) 29
--------- ---------
Net income $ 2,442 $ 1,682
========= =========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
---- ----
<S> <C> <C>
CONDENSED STATEMENTS OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,442 $ 1,682
Changes in operating assets and liabilities:
Prepaid expenses and other current assets 2 -
--------- ---------
Net cash provided by operating activities 2,444 1,682
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Equity investments in subsidiaries (2,782) (409)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury stock - (1,269)
--------- ---------
Net (decrease) increase in cash and cash equivalents (338) 4
Cash and cash equivalents at beginning of period 338 323
--------- ---------
Cash and cash equivalents at end of period $ - $ 327
========= =========
</TABLE>
Twin Laboratories Inc. ("Twin") is a direct wholly owned subsidiary of
Twinlab. Advanced Research Press, Inc. ("ARP"), Changes International of
Fort Walton Beach, Inc. ("Changes International"), Bronson Laboratories,
Inc., Health Factors International, Inc. ("Health Factors"), Twinlab FSC
Inc., Changes International (U.K.) Ltd. ("Changes U.K.") and
PR*Nutrition, Inc. ("PR*Nutrition"), are indirect wholly-owned
subsidiaries of Twinlab. Twinlab, ARP, Changes International, Bronson
Laboratories, Inc., Health Factors, Twinlab FSC Inc., Changes U.K., and
PR*Nutrition have provided joint and several full and unconditional
senior subordinated guarantees of the Notes.
The assets, results of operations and shareholders' equity of Twin
comprise substantially all of the assets, results of operations and
shareholders' equity of Twinlab on a consolidated basis. Twinlab has no
separate operations and has no significant assets other than Twinlab's
investment in its subsidiaries. Twin has no other stockholder other than
Twinlab. Accordingly, the Company has determined that separate financial
statements of its subsidiaries would not be material to investors and,
therefore, are not included herein.
6
<PAGE> 7
Summarized unaudited financial information as of March 31, 2000 and
December 31, 1999 and for the three months ended March 31, 2000 and 1999
is as follows:
<TABLE>
<CAPTION>
BRONSON
CHANGES LABORATORIES, HEALTH PR*
TWIN ARP INTERNATIONAL INC. FACTORS NUTRITION(a)
------------------------- --------------- ------------- -------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
AS OF MARCH 31, 2000
Current assets $ 174,026 $ 941 $11,775 $ 11,080 $7,736 $2,592
Noncurrent assets 141,106 206 11,575 39,163 5,501 145
Current liabilities 32,908 373 4,810 3,949 1,517 163
Noncurrent liabilities 82,378 - - - - -
Shareholder's equity 199,846 774 18,540 46,294 11,720 2,574
AS OF DECEMBER 31, 1999
Current assets $ 177,402 $1,079 $11,282 $ 9,953 $7,250 $2,762
Noncurrent assets 142,363 195 11,985 39,713 5,452 160
Current liabilities 59,529 431 5,000 3,620 1,006 338
Noncurrent liabilities 63,203 - - - - -
Shareholder's equity 197,033 843 18,267 46,046 11,696 2,584
THREE MONTHS ENDED
MARCH 31, 2000
Net sales $ 78,463 $ 959 $11,492 $ 3,705 $3,377 $1,028
Gross profit 40,078 198 9,788 2,385 336 788
Net income (loss) 2,473 (69) 273 248 24 (10)
THREE MONTHS ENDED
MARCH 31, 1999
Net sales $ 71,463 $1,215 $12,266 $ 4,330 $2,595 $5,278
Gross profit 34,970 341 10,417 2,275 435 3,466
Net income 1,707 21 663 148 58 314
</TABLE>
- ---------------------
(a) Effective July 1, 1999, the Ironman Triathlon bar product line was
transferred from PR*Nutrition to Twin.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31, 2000 DECEMBER 31,1999
-------------- ----------------
<S> <C> <C>
Raw Materials $ 33,476 $ 32,269
Work in Process 10,813 9,765
Finished Goods 34,189 29,792
--------- ---------
Total $ 78,478 $ 71,826
========= =========
</TABLE>
7
<PAGE> 8
4. LEGAL PROCEEDINGS
Included in other income for the three months ended March 31, 2000 is
$600 of proceeds from a litigation settlement.
5. NET INCOME PER SHARE
Basic net income per common share was calculated based upon the weighted
average number of common shares outstanding during the respective
periods. Diluted net income per common share was calculated based upon
the weighted average number of common shares outstanding and includes
potential common shares for dilutive options outstanding during the
respective periods.
The weighted average common shares outstanding for the computation of
basic net income per common share for the three months ended March 31,
2000 and 1999 were 28,618,000 and 32,697,000, respectively.
Additionally, for the diluted calculation, 10,000 of potential common
shares were included for the three months ended March 31, 2000. There
were no dilutive stock options for the three months ended March 31, 1999.
6. RECENT ACCOUNTING PRONOUNCEMENTS
Recent pronouncements of the Financial Accounting Standards Board, which
are not required to be adopted at this date include SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which was
subsequently amended by SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the effective Date of
SFAS No. 133". SFAS No. 133, as amended by SFAS No. 137, is not expected
to have a material impact on the Company's financial statements.
7. OPERATING SEGMENTS
The Company has four reportable segments: TWINLAB division; Herbal
Supplements and Teas division; Changes International division; and
Bronson division. The Company manufactures and markets nutritional
products, including a complete line of vitamins, herbs, nutraceuticals,
antioxidants, fish and marine oils, and sports nutrition supplements
through its TWINLAB division; a full line of herbs, phytonutrients, and
teas through its Herbal Supplements and Teas division; a line of
specially formulated nutritional supplements through its Changes
International division; and a line of vitamins, herbs, nutritional
supplements and health and beauty aids through its Bronson division.
Segment information for the three months ended March 31, 2000 and 1999 was as
follows:
<TABLE>
<CAPTION>
HERBAL
SUPPLEMENTS CHANGES
TWINLAB AND TEAS INTERNATIONAL BRONSON INTERCOMPANY
DIVISION DIVISION DIVISION DIVISION OTHER (1) ELIMINATION TOTAL
- ---------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31, 2000
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales from external
customers $ 50,369 $ 8,675 $ 11,492 $ 6,033 $ 1,894 $ - $ 78,463
Intersegment net sales - - - - 94 (94) -
Income from operations 2,610 1,806 422 444 (187) - 5,095
Total assets 195,059 68,958 23,350 60,434 3,884 (70,082) 281,603
THREE MONTHS ENDED
MARCH 31, 1999
Net sales from external
customers $ 36,787 $ 9,128 $ 12,266 $ 6,925 $ 6,357 $ - $ 71,463
Intersegment net sales 33 2,510 - - 136 (2,679) -
Income (loss) from operations (105) 2,286 1,056 333 544 - 4,114
Total assets 175,598 63,860 23,329 59,225 9,150 (26,306) 304,856
</TABLE>
[1] The "other" column includes corporate-related items and the results of
two divisions, PR*Nutrition and ARP, whose segment information is below
the reportable quantitative thresholds. The Company markets nutritionally
enhanced food bars and other nutritional products through PR*Nutrition
and publishes a sports fitness magazine and health and fitness-related
books, audios and newsletters through ARP.
8
<PAGE> 9
8. SUBSEQUENT EVENT
On May 9, 2000, the Board of Directors approved a share repurchase
program authorizing the Company to purchase up to five million shares of
its common stock. Under the approved share buyback plan, the Company may
purchase common stock from time to time on the open market and in
individually negotiated transactions. The amount and timing of any
purchases will be dependent upon a number of factors, including the price
and availability of the Twinlab shares and general market conditions.
This share repurchase program supercedes and terminates the unused
portion of the repurchase program announced on February 25, 1999,
pursuant to which the Company repurchased 4.1 million shares of its
common stock.
9
<PAGE> 10
ITEM 2.: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis should be read in conjunction with the
response to Part I, Item 1 of this report. The Company operates through six
primary business divisions: the TWINLAB division, the Herbal Supplements and
Teas division, the Changes International division, the Bronson division, the
PR*Nutrition division, and the Publishing division. Products sold by the TWINLAB
division include vitamins, minerals, amino acids, herbs, sports nutrition
products and special formulas primarily under the TWINLAB brand name. In
addition, effective July 1, 1999, the TWINLAB division began marketing
nutritionally enhanced food bars under the Ironman Triathlon trademark. The
Herbal Supplements and Teas division produces and markets a full line of herbal
supplements and phytonutrients marketed under the Nature's Herbs brand and a
full line of herb teas marketed under the Alvita brand. The Company's network
marketing activities are conducted through Changes International. The Bronson
division markets vitamins, herbs, nutritional supplements and health and beauty
aids through its Bronson catalog, and also manufactures through Health Factors,
private label vitamins and supplements for a number of other companies on a
contract manufacturing basis. The PR*Nutrition division markets nutritionally
enhanced food bars under the PR*Bar trademark. The Company's publishing
activities are conducted through ARP.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
(DOLLARS IN MILLIONS)
2000 1999
---- ----
<S> <C> <C> <C> <C>
Net Sales:
TWINLAB Division $50.4 64.2% $36.8 51.5%
Herbal Supplements and Teas Division 8.7 11.1 9.1 12.8
Changes Int'l Division 11.5 14.6 12.3 17.1
Bronson Division 6.0 7.7 6.9 9.7
PR*Nutrition Division 1.0 1.3 5.3 7.4
Publishing Division 0.9 1.1 1.1 1.5
---- ---- --- ---
Total Net Sales 78.5 100.0 71.5 100.0
---- ----- ---- -----
Gross Profit 40.1 51.1 35.0 48.9
Operating Expenses 35.0 44.6 30.9 43.2
---- ---- ---- ----
Income from Operations $ 5.1 6.5% $ 4.1 5.7%
==== === ==== ===
</TABLE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
NET SALES: Net sales for the three months ended March 31, 2000 were $78.5
million, an increase of $7.0 million, or 9.8%, as compared to net sales of $71.5
million for the three months ended March 31, 1999. Net sales at the TWINLAB
division contributed $50.4 million, an increase of $13.6 million, or 36.9% as
compared to $36.8 million for the three months ended March 31, 1999. The
increase in net sales was due to increased demand for vitamins, minerals and
supplements, sports nutrition and special formula products and the expansion of
established accounts. Sales of the Herbal Supplements and Teas division
contributed $8.7 million, a decrease of $0.4 million or 5.0%, as compared to
$9.1 million for the three months ended March 31, 1999. The Changes
International division contributed $11.5 million to net sales for the three
months ended March 31, 2000 as compared to $12.3 million in the three months
ended March 31, 1999. The Bronson division contributed $6.0 million to net sales
for the three months ended March 31, 2000 as compared to $6.9 million for the
three months ended March 31, 1999. The PR*Nutrition division contributed $1.0
million to net sales for the three months ended March 31, 2000, as compared to
$5.3 million for the three months ended March 31, 1999. Effective July 1, 1999,
the Ironman Triathlon bar product line was
10
<PAGE> 11
transferred from the PR*Nutrition division to the TWINLAB division and sales
attributable to such product line are reflected in the TWINLAB division
subsequent to such date. Publishing activities contributed $0.9 million as
compared to $1.1 million for the three months ended March 31, 1999.
GROSS PROFIT: Gross profit for the three months ended March 31, 2000 was $40.1
million, which represented an increase of $5.1 million, or 14.6%, as compared to
$35.0 million for the three months ended March 31, 1999. Gross profit margin was
51.1% for the three months ended March 31, 2000 as compared to 48.9% for the
three months ended March 31, 1999. The overall increase in gross profit dollars
was attributable primarily to the Company's higher sales volumes. In addition,
the Company decreased its inventory reserve due to the reinstatement of certain
previously discontinued products.
OPERATING EXPENSES: Operating expenses were $35.0 million for the three months
ended March 31, 2000, representing an increase of $4.1 million, or 13.4%, as
compared to $30.9 million for the three months ended March 31, 1999. As a
percent of net sales, operating expenses increased from 43.2% for the three
months ended March 31, 1999 to 44.6% for the three months ended March 31, 2000.
The increase in operating expenses was primarily attributable to increased
selling and marketing expenses, comprised primarily of an increase in the
Company's promotional expenses.
INCOME FROM OPERATIONS: Income from operations was $5.1 million for the three
months ended March 31, 2000, representing an increase of $1.0 million, or 23.8%,
as compared to $4.1 million for the three months ended March 31, 1999. Income
from operations margin increased from 5.8% of net sales for the three months
ended March 31, 1999, to 6.5% of net sales for the three months ended March 31,
2000. The increase in income from operations and income from operations margin
was primarily due to the Company's higher sales volume and gross margins offset
in part by the higher operating expenses.
OTHER EXPENSE: Other expense was $1.1 million for the three months ended March
31, 2000, as compared to $1.3 million for the three months ended March 31, 1999.
The net decrease of $0.2 million is primarily due to an increase in other income
of $0.6 million relating to a litigation settlement offset in part by increased
interest expense of $0.4 million, as a result of increased debt levels.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended March 31, 2000, cash used in operating activities was
$16.9 million as compared to $2.7 million for the three months ended March 31,
1999. The increase in cash used in operating activities was primarily
attributable to the payment of accounts payable and accrued liabilities.
Capital expenditures were $1.8 million and $6.9 million for the three months
ended March 31, 2000 and 1999, respectively. Capital expenditures were primarily
for the purchase of production equipment to expand capacity or improve
manufacturing efficiency. Capital expenditures are expected to be approximately
$13.0 million during fiscal 2000 of which approximately $5.0 million will be
used to purchase computer hardware and software, including related
implementation costs and the remainder of which will be used primarily to
purchase manufacturing equipment. The Company estimates that its historical
level of maintenance capital expenditures has been approximately $1.0 million
per fiscal year.
Net cash provided by financing activities was $18.9 million for the three months
ended March 31, 2000 and primarily represented borrowings under the Company's
Revolving Credit Facility.
Twinlab has no operations of its own, and accordingly, has no independent means
of generating revenue. As a holding company, Twinlab's internal sources of funds
to meet its cash needs, including payment of expenses, are dividends and other
permitted payments from its direct and indirect subsidiaries. The indenture
relating to the Notes
11
<PAGE> 12
and the Revolving Credit Facility impose upon the Company certain financial and
operating covenants, including, among others, requirements that the Company
maintain certain financial ratios and satisfy certain financial tests,
limitations on capital expenditures and restrictions on the ability of the
Company to incur debt, pay dividends or take certain other corporate actions.
Management believes that the Company has adequate capital resources and
liquidity to meet its borrowing obligations, fund all required capital
expenditures and actively pursue its business strategy for the next 18 to 24
months. The Company's capital resources and liquidity are expected to be
provided by the Company's cash flow from operations, and borrowings under the
existing $50 million Revolving Credit Facility. As of April 30, 2000, $13
million of borrowings were available under the Revolving Credit Facility for
working capital requirements and general corporate purposes.
One of the Company's business strategies is to pursue acquisition opportunities
that complement or extend its existing products or product lines, or are
compatible with its business philosophy and strategic goals. Future acquisitions
could be financed by internally generated funds, bank borrowings, public
offerings or private placements of equity or debt securities, or a combination
of the foregoing. There can be no assurance that the Company will be able to
make acquisitions on terms favorable to the Company and that funds to finance an
acquisition will be available or permitted under the Company's financing
instruments.
On May 9, 2000, the Board of Directors approved a share repurchase program
authorizing the Company to purchase up to five million shares of its common
stock. Under the approved share buyback plan, the Company may purchase common
stock from time to time on the open market and in individually negotiated
transactions. The amount and timing of any purchases will be dependent upon a
number of factors, including the price and availability of the Twinlab shares
and general market conditions.
This share repurchase program supercedes and terminates the unused portion of
the repurchase program announced on February 25, 1999, pursuant to which the
Company repurchased 4.1 million shares of its common stock.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
Information contained or incorporated by reference in this periodic report on
Form 10-Q and in other SEC filings by the Company contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 which can be identified by the use of forward-looking terminology such
as "believes," "expects," "may," "will," "should" or "anticipates" or the
negative thereof, other variations thereon or comparable terminology, or by
discussions of strategy. These forward-looking statements involve certain
significant risks and uncertainties, and actual results may differ materially
from the forward-looking statements. For further details and discussion of these
risks and uncertainties see Twinlab Corporation's SEC filings including, but not
limited to, its annual report on Form 10-K. No assurance can be given that
future results covered by the forward-looking statements will be achieved, and
other factors could also cause actual results to vary materially from the future
results covered in such forward-looking statements. The Company does not
undertake to publicly update or revise any of its forward-looking statements
even if experience or future changes show that the indicated results or events
will not be realized.
12
<PAGE> 13
PART II
OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter ended March 31,
2000.
13
<PAGE> 14
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 thereunto duly authorized.
TWINLAB CORPORATION
By: /s/ Ross Blechman
-----------------
Ross Blechman
Chairman, President and Chief Executive Officer
By: /s/ John H. Bolt
-----------------
John H. Bolt
Chief Financial Officer
DATED: May 15, 2000
------------------
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,794
<SECURITIES> 0
<RECEIVABLES> 44,793
<ALLOWANCES> 820
<INVENTORY> 78,478
<CURRENT-ASSETS> 140,497
<PP&E> 61,188
<DEPRECIATION> 14,583
<TOTAL-ASSETS> 281,603
<CURRENT-LIABILITIES> 32,908
<BONDS> 0
0
0
<COMMON> 32,747
<OTHER-SE> 133,570
<TOTAL-LIABILITY-AND-EQUITY> 281,603
<SALES> 78,463
<TOTAL-REVENUES> 78,463
<CGS> 38,385
<TOTAL-COSTS> 38,385
<OTHER-EXPENSES> 34,983
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,816
<INCOME-PRETAX> 3,990
<INCOME-TAX> 1,548
<INCOME-CONTINUING> 2,442
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,442
<EPS-BASIC> .09
<EPS-DILUTED> .09
</TABLE>
