IdeaSphere Eyes Assets Of Twinlab

September 12, 2003
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GRAND RAPIDS — Ephedra, once a common supplement in sports nutrition products, was linked to the death earlier this year of 23-year-old baseball pitcher Steve Bechler.

Now ephedra is also being linked to the financial collapse of what once was a leading maker of sports nutrition products, and a local company has proposed to purchase that firm’s assets.

IdeaSphere, a local firm in the natural products industry founded by David Van Andel and Bill Nicholson, revealed plans to buy the assets of Twinlab Corp. of Hauppauge, N.Y. In addition to sports nutrition products, Twinlab also makes and markets vitamins, minerals, nutraceuticals and herbs.

Although a public company traded over the counter as TWLBE, the Blechman family still owns nearly a third of the firm after having founded Twinlab in 1968. The firm’s board of directors chose IdeaSphere as its potential purchaser less than two weeks ago because of the local company’s commitment to continuing operations, its financial strength and its success in the global marketplace.

“Having grown up in a family business that has experienced more than four decades of continuous growth and has revenues today of nearly $5 billion, I understand the importance of preserving and enhancing the brand leadership that Twinlab has deservedly enjoyed,” said Van Andel, chairman and CEO of IdeaSphere and a board member of Alticor, formerly the Amway Corp. that was started by his father, Jay Van Andel, and Richard DeVos.

Besides the Twinlab brand, the company sells products under Nature’s Herbs, Alvita and Ironman Triathlon lines. Twinlab also makes the Spring Valley line of herbal products sold at Wal-Mart. The purchase is contingent on Twinlab successfully filing for Chapter 11 bankruptcy protection.

Ross Anderson, chief marketing officer for IdeaSphere, told the Business Journal last week that the firm was interested in Twinlab because it has a lengthy history of producing quality products, which were named the top retail brand by an independent testing group.

ConsumerLab gave Twinlab its Consumer Satisfaction Award in January as the firm received the highest rating among retail brands in the group’s Users Survey. The results revealed that 83 percent of users of Twinlab products rated their overall satisfaction of the firm’s goods as excellent or very high.

The average rating for competing retail brands was 72 percent. The results were based on responses from 3,226 consumers who subscribe to the ConsumerLab newsletter.

Despite the high rating the company received from its customers, Twinlab had a net loss of $3.7 million, or 13 cents per share, for the first quarter that ended on March 31. The loss included a $1 million restructuring charge and a gain of $800,000 from selling the assets of Bronson Laboratories Inc. First quarter net sales for Twinlab were $37.7 million, compared to $45.5 million for the first quarter of 2002.

“Year over year net sales reflect the negative impact of our previously announced decision to discontinue the sales of products containing ephedra, the sale of Health Factors International Inc. and the effect of product rationalizations initiated during 2002,” said Ross Blechman, chairman and president of Twinlab and son of company founders David and Jean Blechman, in a press release.

In April of last year, Twinlab sold Health Factors to Anabolic Laboratories of Irvine, Calif., for $2 million. The following July the company released a restructuring plan estimated to save the firm $6 million in 2003. In 2001, Twinlab settled a class action suit brought by shareholders for $26 million and denied any wrongdoing.

Twinlab did not file second quarter results, which were due on June 30. Instead the firm filed with the Securities and Exchange Commission in August to delay releasing that report. Preliminary data showed the company had net sales of $37.2 million for the second quarter this year, a drop from $40.2 million for the same period last year.

The company reportedly had sales of $146 million last year, down from $198 million in 2001, $242 million in 2000, and $315 million in 1999. Sales fell by 27 percent in 2002 from 2001, while net income was down by $32 million last year. The firm reduced its workforce by 46 percent last year and ended 2002 with 486 employees.

Twinlab shares were moved from the NASDAQ National to the SmallCap market last September. NASDAQ deleted Twinlab from its smallcap listing in December. Early last month, Twinlab officials said the firm’s debt load had reached $74 million, and that they were willing to sell the company for less than that amount.

The firm blamed its poor financial condition on declining sales and increased allowances for sales returns and discounts, which included $5.2 million for products containing ephedra, along with higher operating costs and increases in insurance and litigation expenses. Twinlab has cut staff, stopped selling products that contain ephedra, and has actively sought a buyer.

Sales for products containing ephedra accounted for roughly 20 percent of the company’s total sales revenue.

Van Andel and Nicholson started IdeaSphere two years ago. Nicholson is vice chairman of the company. The firm produces more than 200 natural and organic nutritional products, which include powdered drink mixes and snacks along with a line of vitamins. The company also is an equity owner in Rebus Publishing. Based in New York, Rebus publishes a full line of consumer health newsletters and books on nutrition and preventative health care.

Other members of the IdeaSphere senior management team are Anthony Robbins, vice chairman of sales and marketing; Mark Fox, president and COO; Steven Heacock, chief financial and legal officer; Tony Hoyt, publisher and president of Rebus; and Peter Lusk, independent director. Their mission is to bring better health choices to consumers through advanced science and education.

“We studied the industry and recognized the opportunity to integrate industry leaders like Anthony Robbins, Rebus Publishing and now Twinlab to educate and inspire consumers to take active roles in their health,” said Fox.

Anderson said the purchase of Twinlab’s assets was the first significant acquisition that IdeaSphere has made since being formed a little over two years ago, and that the deal would close once the Twinlab bankruptcy application is approved.

“We are certainly hoping that a closing would occur before year’s end,” said Anderson. “That’s our desired goal. But it’s subject to court approval.”           

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