Twinlab restructuring takes its toll
significant losses and low sales in the third quarter and
nine-month period of 2002, attributing the results to its recently
announced restructuring measures. The company is also to
discontinue sales of ephedra products because of the current
climate of rising insurance costs and regulatory uncertainties, a
move which will not help boost its sales.
Leading supplement and vitamins manufacturer Twinlab reported significant losses in the third quarter and nine months ended September 30, 2002 this week. The company incurred a net loss of $26 million for the quarter, and a $25.9 million loss for the nine-month period. The company said its losses were impacted by charges from its restructuring, announced in the summer.
The company also announced that it will discontinue the sale of products containing ephedra from 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-ephedra weight loss products," explained CEO Ross Blechman.
He added that the decision had been necessary due to the current climate of escalating insurance costs, and regulatory uncertainties, and that although he expected to see a reduction in net sales with the discontinuation of ephedra products, the anticipated cost savings would compensate for lower profits.
The company will instead focus on its recently launched patented ephedra-free products, Ripped Fuel, Diet Fuel and Metabolift.
"We were recently granted a US patent on one of our weight loss formulations which puts us in a unique position to respond to the growing consumer demand for efficacious ephedra-free products," said Blechman.
He added that there would be aggressive marketing for the ephedra-free diet and energy products.
Sales in the current year have however dropped considerably, from $54 million in last year's third quarter to $25.2 million this year. Again, Twinlab blamed consolidation of the company's manufacturing and distribution facilities. For the nine months period to end of September, net sales were $116.1 million compared to $155.7 million in the comparable period last year.
Blechman said that total charges relating to the cost-cutting measure - consolidation of Twinlab's manufacturing and distribution facilities - were expected to reach approximately $17 million, of which $12.9 million was recorded during the current quarter. Consolidation is on schedule and proceeding according to plan, according to the company.
