-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L1OY3EcCP07YCPbloBdQg5mAKDhIZ8LjK6gcNuCSlhCNML8vLkkW4mHLPQJJ4BrC t7+plEPGOXOnbxdNTCmBnQ== 0000950123-04-004667.txt : 20040415 0000950123-04-004667.hdr.sgml : 20040415 20040415155648 ACCESSION NUMBER: 0000950123-04-004667 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20040415 ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20040415 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TL ADMINISTRATION CORP CENTRAL INDEX KEY: 0001015868 STANDARD INDUSTRIAL CLASSIFICATION: MEDICINAL CHEMICALS & BOTANICAL PRODUCTS [2833] IRS NUMBER: 113317986 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-21003 FILM NUMBER: 04735939 BUSINESS ADDRESS: STREET 1: C/O FTI CONSULTING INC STREET 2: 622 THIRD AVENUE, 31ST FLOOR CITY: NEW YORK STATE: NY ZIP: 11201 BUSINESS PHONE: (212) 499-3600 MAIL ADDRESS: STREET 1: C/O FTI CONSULTING INC STREET 2: 622 THIRD AVENUE, 31ST FLOOR CITY: NEW YORK STATE: NY ZIP: 11201 FORMER COMPANY: FORMER CONFORMED NAME: TWINLAB CORP DATE OF NAME CHANGE: 19960710 FORMER COMPANY: FORMER CONFORMED NAME: TLG LABORATORIES HOLDING CORP DATE OF NAME CHANGE: 19960603 8-K 1 y96268e8vk.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- 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 15, 2004 TL ADMINISTRATION CORPORATION (Exact Name of Registrant as Specified in Charter) Delaware 0-21003 11-3317986 -------- ------- ---------- (State or Other Jurisdiction of (Commission (I.R.S. Employer Incorporation) File Number) Identification No.) C/O FTI CONSULTING, INC. 622 THIRD AVENUE, 31ST FLOOR NEW YORK, NY 11201 (Address of Principal Executive Offices) -------------------- (212) 499-3600 (Registrant's telephone number, including area code) -------------------- ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (c) Exhibits 99.1 TL Administration Corporation - Monthly Operating Report for the month ended March 31, 2004 99.2 TL Administration Inc. - Monthly Operating Report for the month ended March 31, 2004 99.3 TL Administration (UK) Ltd. - Monthly Operating Report for the month ended March 31, 2004 ITEM 9. REGULATION FD DISCLOSURE. As previously disclosed, on September 4, 2003, TL Administration Corporation (f/k/a Twinlab Corporation), TL Administration Inc. (f/k/a Twin Laboratories Inc.) and TL Administration (UK) Ltd. (f/k/a Twin Laboratories (UK) Ltd.) (collectively the "Companies" or the "Debtors") commenced voluntary cases under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New York (the "Court"). These chapter 11 cases are being jointly administered under chapter 11 case number 03-15564 (CB) and are pending before the Honorable Cornelius Blackshear. In addition, on September 4, 2003, the Companies entered into that certain asset purchase agreement with IdeaSphere, Inc. of Grand Rapids, Michigan, pursuant to which the Companies sold substantially all of their assets. The sale closed on December 19, 2003, effective as of December 9, 2003. In connection with the sale, the Debtors obtained an order from the Court authorizing them to change their names. Twinlab Corporation changed its name to TL Administration Corporation, Twin Laboratories Inc. changed its name to TL Administration Inc. and Twin Laboratories (UK) Ltd. changed its name to TL Administration (UK) Ltd. The Debtors continue to operate as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. On April 15, 2004, the Companies filed with the Court their required Monthly Operating Reports for the month ended March 31, 2004 in a form prescribed by the office of the United States Trustee of the Department of Justice for the Southern District of New York. A copy of the Monthly Operating Reports for each of the companies is attached hereto as Exhibits 99.1 to 99.3. This Current Report (including the Exhibits hereto) will not be deemed an admission as to the materiality of any information required to be disclosed solely to satisfy the requirements of Regulation FD. The Companies' informational filings with the Court, including these Monthly Operating Reports, are available to the public at the office of the Clerk of the Bankruptcy Court, Alexander Hamilton Custom House, One Bowling Green, New York, New York 10004-1408. The Monthly Operating Reports may be available electronically, for a fee, through the Court's Internet world wide web site, whose address is www.nysb.uscourts.gov. -2- The Companies caution investors and potential investors not to place undue reliance upon the information contained in these Monthly Operating Reports, and they were not prepared for the purpose of providing the basis for an investment decision relating to any of the securities of the Companies, or any other affiliate of the Companies. The Monthly Operating Reports were not audited or reviewed by independent accountants, are in a format prescribed by the United States Trustee of the Department of Justice for the Southern District of New York, and are subject to future adjustment and reconciliation. There can be no assurance that, from the perspective of an investor or potential investor in the Companies securities, the Monthly Operating Reports are complete. The Monthly Operating Reports also contain information for periods which are shorter or otherwise different from those required in the Companies reports pursuant to the Exchange Act. This Current Report and exhibits hereto may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Companies assume no obligations to update or revise any such forward-looking statements. Such statements could be subject to risk and uncertainty that exist in the operations of the Companies and the business environment that could render actual outcomes and results materially different from those predicted. These risks and uncertainties include, without limitation and in no particular order, the following factors as well as risks and uncertainties disclosed in TL Administration Corporation's filings with the Securities and Exchange Commission: (i) changes in law and regulations; (ii) adequacy and availability of insurance coverage; (iii) the effect of adverse publicity regarding nutritional supplements; (iv) exposure to and expense of resolving and defending product liability claims and other litigation; (v) lack of available product liability insurance for ephedra-containing products; and (vi) the impact of filing for Chapter 11 under the U.S. bankruptcy laws. 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. Date: April 15, 2004 TL ADMINISTRATION CORPORATION (registrant) By: /s/ Denis O'Connor ------------------------------ Name: Denis O'Connor Its: Vice President -3- EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - ----------- ----------- 99.1 TL Administration Corporation - Monthly Operating Report for the month ended March 31, 2004 99.2 TL Administration Inc. - Monthly Operating Report for the month ended March 31, 2004 99.3 TL Administration (UK) Ltd. - Monthly Operating Report for the month ended March 31, 2004
-4- EX-99.1 3 y96268exv99w1.txt MONTHLY OPERATING REPORT Exhibit 99.1 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK CHAPTER 11 IN RE: TL ADMINISTRATION CORPORATION CASE NO. 03-15564 (CB) (F/K/A TWINLAB CORPORATION) DEBTOR MONTHLY OPERATING STATEMENT FOR THE MONTH ENDED MARCH 31, 2004 DEBTOR'S ADDRESS c/o FTI Consulting, Inc. 622 Third Avenue, 31st Floor New York, NY 11201 DISBURSEMENTS: Month Ended March 31, 2004 (dollars in thousands): $0 (See attached schedule for disbursements by Debtor) DEBTOR'S ATTORNEY Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Michael P. Kessler, Esq. (MPK 7134) Paul M. Basta, Esq. (PMB 4434) REPORT PREPARER TL Administration Corporation NET LOSS: Month Ended March 31, 2004 (dollars in thousands): $(954) The undersigned, having reviewed the attached report and being familiar with the Debtor's financial affairs, verifies under penalty of perjury, that the information contained herein is complete, accurate and truthful to the best of my knowledge. DATE: April 15, 2004 /s/ Denis O'Connor ----------------------------------- Denis O'Connor, Vice President TL ADMINISTRATION CORPORATION (F/K/A TWINLAB CORPORATION) (DEBTOR-IN-POSSESSION) STATEMENT OF OPERATIONS (IN THOUSANDS)
FOR THE MONTH ENDED MARCH 31, 2004 -------- (unaudited) Equity Interest in Net Loss of Subsidiaries $ (937) Operating Expenses 17 -------- Net Loss $ (954) ======== Basic and Diluted Net Loss Per Share $ (0.03) ======== Basic and Diluted Weighted Average Shares Outstanding 29,316 ========
(The accompanying notes are an integral part of these financial statements.) 2 TL ADMINISTRATION CORPORATION (F/K/A TWINLAB CORPORATION) (DEBTOR-IN-POSSESSION) BALANCE SHEET (IN THOUSANDS)
MARCH 31, 2004 (unaudited) ASSETS Investment in Subsidiaries $ -- ========= LIABILITIES AND SHAREHOLDERS' DEFICIT Liabilities of Subsidiaries $ 60,151 Shareholders' Deficit: Preferred stock -- Common stock (33,042 shares issued and 29,316 shares outstanding) 33,042 Additional paid-in capital 287,123 Accumulated deficit (346,887) --------- (26,722) Treasury stock at cost (3,726 shares) (33,429) --------- Total Shareholders' Deficit (60,151) --------- Total Liabilities and Shareholders' Deficit $ -- =========
(The accompanying notes are an integral part of these financial statements.) 3 TL ADMINISTRATION CORPORATION (F/K/A TWINLAB CORPORATION) (DEBTOR-IN-POSSESSION) STATEMENT OF CASH FLOWS (IN THOUSANDS)
FOR THE MONTH ENDED MARCH 31, 2004 (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $(954) Equity Investment in Subsidiaries 954 ----- Net Cash Used in Operating Activities -- Cash and Cash Equivalents at Beginning of Period -- ----- Cash and Cash Equivalents at End of Period $ -- =====
(The accompanying notes are an integral part of these financial statements.) 4 TL ADMINISTRATION CORPORATION (F/K/A TWINLAB CORPORATION) (DEBTOR-IN-POSSESSION) NOTES TO UNAUDITED FINANCIAL STATEMENTS 1. THE COMPANY TL Administration Corporation (f/k/a Twinlab Corporation) together with its direct wholly-owned subsidiary TL Administration Inc. (f/k/a Twin Laboratories Inc.) ("TL Inc.") and its indirect wholly-owned subsidiary TL Administration (UK) Ltd. (f/k/a Twin Laboratories (UK) Ltd.) (collectively, the "Debtors" or the "Company") was a leading manufacturer and marketer of brand name nutritional supplements sold through health and natural food stores, national and regional drug store chains, supermarkets, mass merchandise retailers and military post exchanges. The Company developed, manufactured, and sold vitamins, minerals, and specialty supplements, sports nutrition products, and diet and energy products under the "Twinlab," "Fuel," and other brand names; an extensive line of herbal supplements and phytonutrients under the "Nature's Herbs" brand name; and a full line of herbal teas under the "Alvita" brand name. The Company emphasized the development and introduction of high quality, unique nutraceutical products. The Company's premium product quality, broad product line, strong history of new product introductions, and innovations have established Twinlab as a leading and widely recognized name in the industry. The Company targeted its products to consumers who utilized nutritional supplements in their daily diet and who demanded premium quality ingredients in a broad variety of dosages and delivery methods. TL Administration Corporation has no operations of its own and accordingly, has no independent means of generating revenue. As a holding company, TL Administration Corporation's internal sources of funds to meet its cash needs, including the payment of expenses, are dividends and other permitted payments from its direct and indirect subsidiaries. TL Administration Corporation does not make payments on its own behalf. To the extent that it incurs obligations to third parties, payments are made by TL Administration Inc.; therefore, any such payments would be listed on the Schedule of Cash Disbursements and Cash Receipts in the Monthly Operating Report of TL Administration Inc., case number 03-15566 (CB). 2. BACKGROUND Bankruptcy Filing On September 4, 2003 (the "Commencement Date"), the Debtors filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"). The Case Numbers for the individual Debtors are as follows: TL Administration Inc. 03-15566 (CB), TL Administration Corporation 03-15564 (CB) and TL Administration (UK) Ltd. 03-15563 (CB). These chapter 11 cases have been consolidated for procedural purposes only and are being jointly administered under Case No. 03-15564 (CB) pursuant to an order of the Bankruptcy Court. All other wholly-owned subsidiaries of TL Inc. are inactive and are not Debtors in these chapter 11 cases. The Debtors remained in possession of their assets and properties and continued to operate their businesses and manage their properties, until the APA (as defined herein) closed on December 19, 2003, as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. Currently, the Debtors remain in possession of the net sale proceeds (See below), as well as the $15 million proceeds from the draw of the Guarantors (as defined herein) letter of credit (See Note 4). The 5 Debtors continue to operate as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code and make payments for certain liabilities not assumed in accordance with the terms of the APA. Under the Bankruptcy Code, certain claims against the Debtors in existence prior to the Commencement Date are automatically stayed from collection while the Debtors continue business operations as debtors-in-possession. Those claims are reflected in the financial statements as liabilities subject to compromise. Additional liabilities subject to compromise may arise subsequent to the filing date resulting from rejection of executory contracts, including leases, and from the determination by the Bankruptcy Court (or agreed to by parties in interest) of allowed claims for contingencies and other disputed amounts. The Debtors cannot presently determine or reasonably estimate the ultimate liability that may result from the filing of claims for all contracts that may be rejected. The collection of secured claims against the Debtors assets also are stayed, although the holders of such claims have the right to move the Bankruptcy Court for relief from the automatic stay. Asset Purchase Agreement and Sale Closing On September 4, 2003, the Company also entered into an asset purchase agreement (the "APA") with IdeaSphere, Inc. of Grand Rapids, Michigan pursuant to which the Company was to sell substantially all of its assets for $65 million plus the assumption of up to $3.7 million of employee and related liabilities. The terms of the APA required a minimum level of $47 million of working capital (defined as accounts receivable and inventory) as of the closing date. The sale was conducted pursuant to section 363 of the Bankruptcy Code and was approved by the Bankruptcy Court on October 30, 2003. Effective December 5, 2003, the Bankruptcy Court approved an amendment to the APA such that (i) the purchase price was reduced to $57.5 million plus the assumption of up to $3.7 million of employee and related liabilities, (ii) the definition of working capital was amended to include prepaid inventory and prepaid advertising in addition to accounts receivable and inventory and (iii) the minimum level of working capital was reduced to $39.5 million and any working capital adjustment to the purchase price as of the effective closing date was limited to a decrease of $500,000 and an increase of $1.5 million. On December 19, 2003, the Company and IdeaSphere, Inc. agreed to a second amendment to the APA (the "Second Amendment"). The Second Amendment provided for an extension of the closing to December 19, 2003; however, for financial and accounting purposes, the transaction became effective as of December 9, 2003. The Second Amendment also provided for adjustments relating to the period between December 10, 2003 and the closing date of December 19, 2003 (the "Interim Period Adjustments"). The sale closed on December 19, 2003, effective as of December 9, 2003. The estimated loss on the sale was approximately $8.7 million. The Debtors do not expect that the holders of the Company's equity will receive any value as a result of the sale of substantially all assets of the Company. Asset Purchase Agreement Post Closing Adjustments In accordance with the terms of the APA and its amendments, IdeaSphere, Inc. has 60 days from December 19, 2003 to deliver a calculation of the closing working capital to the Company and the Company has 60 days from December 19, 2003 to deliver a calculation of the Adjustment Statement reflecting the Interim Period Adjustments to IdeaSphere, Inc. Each party has 30 days to review the respective calculation and either accept or dispute such amount. 6 Cash Proceeds from the Asset Sale On December 19, 2003, IdeaSphere, Inc. remitted net cash proceeds from the asset sale transaction to the Company totaling $49.2 million. Details of the transaction included gross proceeds of $57.5 million, less the assumption of the $5.3 million Zions Bank mortgage and reimbursements for IdeaSphere, Inc.'s inventory and advertising advances, as well as other closing costs. From the net proceeds, the Company repaid the outstanding loan balance under the DIP Facility (as defined herein) of $28.2 million, cure costs for assumed contracts, other related finance and closing costs, and administrative expenses. Proofs of Claim The bar date for filing proofs of claim for claims that arose prior to September 4, 2003 was March 2, 2004. 3. BASIS OF PRESENTATION It is likely that the Debtors will propose a Chapter 11 Plan pursuant to its liquidation of assets under the APA. Except for the related expected liquidation of substantially all of the Debtors' assets, these unaudited financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities and commitments in the normal course of business. Other than the impact of the expected liquidation discussed above, in the opinion of management, the accompanying unaudited financial statements include all necessary adjustments (consisting of normal recurring accruals but do not include any adjustments relating to the filing of voluntary petitions under Chapter 11 of the Bankruptcy Code) and present fairly the results of operations, cash flows and financial position of TL Administration Corporation for the period presented. These unaudited financial statements have also been prepared in accordance with Statement of Position ("SOP") No. 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code." SOP 90-7 provides for segregating pre-petition liabilities that are subject to compromise from post-petition liabilities, identifying all transactions and events that are directly associated with the reorganization of the Debtors and reporting them separately as reorganization items and discontinuing interest accrual on unsecured or undersecured debt. Further, SOP 90-7 envisions that entities under Chapter 11 will reorganize as going concerns. The accompanying unaudited financial statements do not include all footnotes and certain financial presentations normally required under accounting principles generally accepted in the United States of America. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in TL Administration Corporation's Annual Report to Stockholders on Form 10-K for the fiscal year ended December 31, 2002, as filed with the Securities and Exchange Commission. 4. DEBTOR-IN-POSSESSION FINANCING On September 25, 2003, the Bankruptcy Court approved a $35 million debtor-in-possession financing ("DIP Facility") among The CIT Group/Business Credit, Inc., as agent for a lender group, and TL Administration Inc. as the borrower, with TL Administration Corporation as the guarantor. The DIP Facility was collateralized by, among other things, a senior lien on substantially all of the Debtors' assets, and a junior lien on certain assets that had previously been subject to a lien by other parties as well as a letter of credit aggregating $15 million provided by certain current and former members of senior management of the Company (the "Guarantors"). The lenders under the DIP Facility had a 7 super-priority claim against the estates of the Debtors. Borrowings were subject to certain limitations based on a percentage of eligible accounts receivable and inventories, as defined in the agreement. Borrowings were also limited by a percentage of actual aggregate operating net cash flow (exclusive of reorganization expenses) measured weekly on a rolling four week period against the projected aggregate operating net cash flow (exclusive of reorganization expenses) as set forth in the consolidated cash flow projections and weekly anticipated cash receipts and disbursements delivered by the Company to the lending group (the "Budget"). The DIP Facility restricted the ability to declare or pay dividends, enter into any operating leases or contract for, purchase, make expenditures for, lease pursuant to a capital lease or otherwise incur obligations with respect to capital expenditures unless the obligations thereunder are provided for in the Budget, and certain other expenditures and or encumbrances. The DIP Facility, as amended, also required the Company to adhere to a scheduled timeline regarding the sale process of substantially all of the Debtors' assets, which among other things, required the closing of the sale to be completed by December 19, 2003. The Company was required to pay $100,000 to extend the term of the DIP Facility to December 19, 2003, of which IdeaSphere, Inc. agreed to pay half. Interest was payable monthly in arrears at the Prime Rate, plus 2.0% per annum. The Company was required to pay a commitment fee of 0.5% per annum on any unused portion of the DIP Facility. Borrowings outstanding under the DIP Facility were repaid in full on December 19, 2003 as a result of the consummation of the APA. In addition, the $15 million letter of credit was drawn, and on December 22, 2003, the proceeds were remitted into the Company's possession. An adversary proceeding was commenced by the Official Committee of Unsecured Creditors against certain former officers and directors of the Company seeking, among other things, to subordinate their claim relating to the letter of credit and for other damages. For purposes of financial reporting, the liability associated with the proceeds of the letter of credit draw is classified as a secured liability not subject to compromise on the balance sheet of TL Administration Inc. 5. REORGANIZATION EXPENSES All reorganization expenses incurred for the month ended March 31, 2004 are included in the Monthly Operating Report of TL Administration Inc., case number 03-15566 (CB). 6. INSURANCE AND TAX PAYMENTS A. INSURANCE - All insurance policy premiums due have been paid. Accordingly, all such policies remain in force. B. TAXES - All post-petition tax obligations, including but not limited to payroll, real property, income, franchise, and other taxes have been paid to the proper taxing authority when due. 8 TL ADMINISTRATION CORPORATION (F/K/A TWINLAB CORPORATION) (DEBTOR-IN-POSSESSION) MONTHLY OPERATING REPORT SCHEDULE OF CASH DISBURSEMENTS AND RECEIPTS None. See Note 1 to the accompanying financial statements. 9 TL ADMINISTRATION CORPORATION (F/K/A TWINLAB CORPORATION) (DEBTOR-IN-POSSESSION) MONTHLY OPERATING REPORT SCHEDULE OF FEDERAL, STATE AND LOCAL TAXES COLLECTED, RECEIVED, DUE OR WITHHELD
FOR THE MONTH ENDED MARCH 31, 2004 -------------- Gross Wages and Salaries Paid None Payroll Taxes Withheld None Employers Payroll Taxes Incurred None Gross Sales Subject to Taxes None Sales Tax Collected or Self-Assessed None Property Tax Payments Due None Property Taxes Paid None All Other Taxes Paid None
See Note 1 to the accompanying financial statements. 10 EX-99.2 4 y96268exv99w2.txt MONTHLY OPERATING REPORT Exhibit 99.2 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK CHAPTER 11 IN RE: TL ADMINISTRATION INC. CASE NO. 03-15566 (CB) (F/K/A TWIN LABORATORIES INC.) DEBTOR MONTHLY OPERATING STATEMENT FOR THE MONTH ENDED MARCH 31, 2004 DEBTOR'S ADDRESS c/o FTI Consulting, Inc. 622 Third Avenue, 31st Floor New York, NY 11201 DISBURSEMENTS: Month Ended March 31, 2004 (dollars in thousands): $ 714 (See attached schedule for disbursements by Debtor) DEBTOR'S ATTORNEY Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Michael P. Kessler, Esq. (MPK 7134) Paul M. Basta, Esq. (PMB 4434) REPORT PREPARER TL Administration Inc. NET LOSS: Month Ended March 31, 2004 (dollars in thousands): $ (937) The undersigned, having reviewed the attached report and being familiar with the Debtor's financial affairs, verifies under penalty of perjury, that the information contained herein is complete, accurate and truthful to the best of my knowledge. DATE: April 15, 2004 /s/ Denis O'Connor ------------------------------ Denis O'Connor, Vice President TL ADMINISTRATION INC. (F/K/A TWIN LABORATORIES INC.) (DEBTOR-IN-POSSESSION) STATEMENT OF OPERATIONS (IN THOUSANDS)
FOR THE MONTH ENDED MARCH 31, 2004 -------------- (unaudited) Net Sales $ -- Cost of Sales -- ----- Gross Profit -- Operating Expenses 126 ----- Loss from Operations (126) Interest Expense (78) Interest Income 9 ----- Loss before Reorganization Expenses (194) Reorganization Expenses 743 ----- Net Loss $(937) =====
(The accompanying notes are an integral part of these financial statements.) 2 TL ADMINISTRATION INC. (F/K/A TWIN LABORATORIES INC.) (DEBTOR-IN-POSSESSION) BALANCE SHEET (IN THOUSANDS)
MARCH 31, 2004 -------------- (unaudited) ASSETS Current Assets: Cash and cash equivalents $ 27,201 Restricted cash 1,502 Prepaid expenses and other current assets 1,489 --------- Total Current Assets 30,192 Intercompany Receivables 33,215 Other Assets 50 --------- Total Assets $ 63,457 ========= LIABILITIES AND SHAREHOLDER'S DEFICIT Current Liabilities Not Subject to Compromise: Liability to former guarantors $ 15,000 Accounts payable 1,311 Accrued expenses and other current liabilities 1,268 --------- Total Current Liabilities Not Subject to Compromise 17,579 Liabilities Subject to Compromise 72,850 --------- Total Liabilities 90,429 --------- Shareholder's Deficit: Common stock 253 Additional paid-in capital 295,552 Accumulated deficit (322,777) --------- Total Shareholder's Deficit (26,972) --------- Total Liabilities and Shareholder's Deficit $ 63,457 =========
(The accompanying notes are an integral part of these financial statements.) 3 TL ADMINISTRATION INC. (F/K/A TWIN LABORATORIES INC.) (DEBTOR-IN-POSSESSION) STATEMENT OF CASH FLOWS (IN THOUSANDS)
FOR THE MONTH ENDED MARCH 31, 2004 (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss before Reorganization Expenses $ (194) Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities (before reorganization expenses): Changes in Operating Assets and Liabilities: Prepaid expenses and other current assets 134 Intercompany receivable (123) Accounts payable, accrued expenses and other current liabilities 221 -------- Net Cash Used in Operating Activities (before reorganization expenses) 38 Reorganization Expenses (743) -------- Net Cash Used in Operating Activities (705) Cash and Cash Equivalents at Beginning of Period 29,408 -------- Cash and Cash Equivalents at End of Period $ 28,703 ========
(The accompanying notes are an integral part of these financial statements.) 4 TL ADMINISTRATION INC. (F/K/A TWIN LABORATORIES INC.) (DEBTOR-IN-POSSESSION) NOTES TO UNAUDITED FINANCIAL STATEMENTS 1. THE COMPANY TL Administration Inc. (f/k/a Twin Laboratories Inc.) ("TL Inc.") together with its parent company TL Administration Corporation (f/ka Twinlab Corporation) and its wholly-owned subsidiary TL Administration (UK) Ltd. (f/k/a Twin Laboratories (UK) Ltd.) (collectively, the "Debtors" or the "Company") was a leading manufacturer and marketer of brand name nutritional supplements sold through health and natural food stores, national and regional drug store chains, supermarkets, mass merchandise retailers and military post exchanges. The Company developed, manufactured, and sold vitamins, minerals, and specialty supplements, sports nutrition products, and diet and energy products under the "Twinlab," "Fuel," and other brand names; an extensive line of herbal supplements and phytonutrients under the "Nature's Herbs" brand name; and a full line of herbal teas under the "Alvita" brand name. The Company emphasized the development and introduction of high quality, unique nutraceutical products. The Company's premium product quality, broad product line, strong history of new product introductions, and innovations have established Twinlab as a leading and widely recognized name in the industry. The Company targeted its products to consumers who utilized nutritional supplements in their daily diet and who demanded premium quality ingredients in a broad variety of dosages and delivery methods. 2. BACKGROUND Bankruptcy Filing On September 4, 2003 (the "Commencement Date"), the Debtors filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"). The Case Numbers for the individual Debtors are as follows: TL Administration Inc. 03-15566 (CB), TL Administration Corporation 03-15564 (CB) and TL Administration (UK) Ltd. 03-15563 (CB). These chapter 11 cases have been consolidated for procedural purposes only and are being jointly administered under Case No. 03-15564 (CB) pursuant to an order of the Bankruptcy Court. All other wholly-owned subsidiaries of TL Inc. are inactive and are not Debtors in these chapter 11 cases. The Debtors remained in possession of their assets and properties and continued to operate their businesses and manage their properties, until the APA (as defined herein) closed on December 19, 2003, as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. Currently, the Debtors remain in possession of the net sale proceeds (See below), as well as the $15 million proceeds from the draw of the Guarantors (as defined herein) letter of credit (See Note 4). The Debtors continue to operate as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code and make payments for certain liabilities not assumed in accordance with the terms of the APA. Under the Bankruptcy Code, certain claims against the Debtors in existence prior to the Commencement Date are automatically stayed from collection while the Debtors continue business operations as debtors-in-possession. Those claims are reflected in the financial statements as liabilities subject to compromise. Additional liabilities subject to compromise may arise subsequent to the filing date resulting from rejection of executory contracts, including leases, and from the determination by the Bankruptcy Court (or agreed to by parties in interest) of allowed claims for contingencies and other disputed amounts. The Debtors cannot presently determine or reasonably estimate the ultimate 5 liability that may result from the filing of claims for all contracts that may be rejected. The collection of secured claims against the Debtors assets also are stayed, although the holders of such claims have the right to move the Bankruptcy Court for relief from the automatic stay. Asset Purchase Agreement and Sale Closing On September 4, 2003, the Company also entered into an asset purchase agreement (the "APA") with IdeaSphere, Inc. of Grand Rapids, Michigan pursuant to which the Company was to sell substantially all of its assets for $65 million plus the assumption of up to $3.7 million of employee and related liabilities. The terms of the APA required a minimum level of $47 million of working capital (defined as accounts receivable and inventory) as of the closing date. The sale was conducted pursuant to section 363 of the Bankruptcy Code and was approved by the Bankruptcy Court on October 30, 2003. Effective December 5, 2003, the Bankruptcy Court approved an amendment to the APA such that (i) the purchase price was reduced to $57.5 million plus the assumption of up to $3.7 million of employee and related liabilities, (ii) the definition of working capital was amended to include prepaid inventory and prepaid advertising in addition to accounts receivable and inventory and (iii) the minimum level of working capital was reduced to $39.5 million and any working capital adjustment to the purchase price as of the effective closing date was limited to a decrease of $500,000 and an increase of $1.5 million. On December 19, 2003, the Company and IdeaSphere, Inc. agreed to a second amendment to the APA (the "Second Amendment"). The Second Amendment provided for an extension of the closing to December 19, 2003; however, for financial and accounting purposes, the transaction became effective as of December 9, 2003. The Second Amendment also provided for adjustments relating to the period between December 10, 2003 and the closing date of December 19, 2003 (the "Interim Period Adjustments"). The sale closed on December 19, 2003, effective as of December 9, 2003. The estimated loss on the sale was approximately $8.7 million. The Debtors do not expect that the holders of the Company's equity will receive any value as a result of the sale of substantially all assets of the Company. Asset Purchase Agreement Post Closing Adjustments In accordance with the terms of the APA and its amendments, IdeaSphere, Inc. has 60 days from December 19, 2003 to deliver a calculation of the closing working capital to the Company and the Company has 60 days from December 19, 2003 to deliver a calculation of the Adjustment Statement reflecting the Interim Period Adjustments to IdeaSphere, Inc. Each party has 30 days to review the respective calculation and either accept or dispute such amount. Cash Proceeds from the Asset Sale On December 19, 2003, IdeaSphere, Inc. remitted net cash proceeds from the asset sale transaction to the Company totaling $49.2 million. Details of the transaction included gross proceeds of $57.5 million, less the assumption of the $5.3 million Zions Bank mortgage and reimbursements for IdeaSphere, Inc.'s inventory and advertising advances, as well as other closing costs. From the net proceeds, the Company repaid the outstanding loan balance under the DIP Facility (as defined herein) of $28.2 million, cure costs for assumed contracts, other related finance and closing costs, and administrative expenses. 6 Proofs of Claim The bar date for filing proofs of claim for claims that arose prior to September 4, 2003 was March 2, 2004. 3. BASIS OF PRESENTATION It is likely that the Debtors will propose a Chapter 11 Plan pursuant to its liquidation of assets under the APA. Except for the related expected liquidation of substantially all of the Debtors' assets, these unaudited financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities and commitments in the normal course of business. Other than the impact of the expected liquidation discussed above, in the opinion of management, the accompanying unaudited financial statements include all necessary adjustments (consisting of normal recurring accruals but do not include any adjustments relating to the filing of voluntary petitions under Chapter 11 of the Bankruptcy Code) and present fairly the results of operations, cash flows and financial position of TL Inc. for the period presented. These unaudited financial statements have also been prepared in accordance with Statement of Position ("SOP") No. 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code." SOP 90-7 provides for segregating pre-petition liabilities that are subject to compromise from post-petition liabilities, identifying all transactions and events that are directly associated with the reorganization of the Debtors and reporting them separately as reorganization items and discontinuing interest accrual on unsecured or undersecured debt. Further, SOP 90-7 envisions that entities under Chapter 11 will reorganize as going concerns. The accompanying unaudited financial statements do not include all footnotes and certain financial presentations normally required under accounting principles generally accepted in the United States of America. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in TL Administration Corporation's Annual Report to Stockholders on Form 10-K for the fiscal year ended December 31, 2002, as filed with the Securities and Exchange Commission. 4. DEBTOR-IN-POSSESSION FINANCING On September 25, 2003, the Bankruptcy Court approved a $35 million debtor-in-possession financing ("DIP Facility") among The CIT Group/Business Credit, Inc., as agent for a lender group, and TL Administration Inc. as the borrower, with TL Administration Corporation as the guarantor. The DIP Facility was collateralized by, among other things, a senior lien on substantially all of the Debtors' assets, and a junior lien on certain assets that had previously been subject to a lien by other parties as well as a letter of credit aggregating $15 million provided by certain current and former members of senior management of the Company (the "Guarantors"). The lenders under the DIP Facility had a super-priority claim against the estates of the Debtors. Borrowings were subject to certain limitations based on a percentage of eligible accounts receivable and inventories, as defined in the agreement. Borrowings were also limited by a percentage of actual aggregate operating net cash flow (exclusive of reorganization expenses) measured weekly on a rolling four week period against the projected aggregate operating net cash flow (exclusive of reorganization expenses) as set forth in the consolidated cash flow projections and weekly anticipated cash receipts and disbursements delivered by the Company to the lending group (the "Budget"). The DIP Facility restricted the ability to declare or pay dividends, enter into any operating leases or contract for, purchase, make expenditures for, lease pursuant to a capital lease or otherwise incur obligations with respect to capital expenditures unless the obligations thereunder are provided for in the Budget, and certain other expenditures and or 7 encumbrances. The DIP Facility, as amended, also required the Company to adhere to a scheduled timeline regarding the sale process of substantially all of the Debtors' assets, which among other things, required the closing of the sale to be completed by December 19, 2003. The Company was required to pay $100,000 to extend the term of the DIP Facility to December 19, 2003, of which IdeaSphere, Inc. agreed to pay half. Interest was payable monthly in arrears at the Prime Rate, plus 2.0% per annum. The Company was required to pay a commitment fee of 0.5% per annum on any unused portion of the DIP Facility. Borrowings outstanding under the DIP Facility were repaid in full on December 19, 2003 as a result of the consummation of the APA. In addition, the $15 million letter of credit was drawn, and on December 22, 2003, the proceeds were remitted into the Company's possession. An adversary proceeding was commenced by the Official Committee of Unsecured Creditors against certain former officers and directors of the Company seeking, among other things, to subordinate their claim relating to the letter of credit and for other damages. For purposes of financial reporting, the liability associated with the proceeds of the letter of credit draw is classified as a secured liability not subject to compromise in the accompanying balance sheet. 5. LIABILITES SUBJECT TO COMPROMISE Liabilities subject to compromise as of March 31, 2004 are composed of the following (in thousands):
MARCH 31, 2004 -------------- Accounts Payable Trade $19,962 10 1/4% Senior Subordinated Notes 41,142 Other Debt 85 Accrued Former Employment Costs 2,483 Accrued Litigation Costs 7,486 Other Pre-Petition Obligations 1,692 ------- Total $72,850 =======
Amounts classified as subject to compromise as of March 31, 2004 represent management's best estimate of such liabilities as of such date and are subject to change upon completion of the reconciliation of all claims as well as the finalization of the assumption (and related cure amounts) or rejection of executory contracts. 6. REORGANIZATION EXPENSES Reorganization expenses incurred for the month ended March 31, 2004 consisted of professional fees totaling approximately $742,800. 7. INSURANCE AND TAX PAYMENTS A. INSURANCE - All insurance policy premiums due have been paid. Accordingly, all such policies remain in force. B. TAXES - All post-petition tax obligations, including but not limited to payroll, real property, income, franchise, and other taxes have been paid to the proper taxing authority when due.B. 8 TL ADMINISTRATION INC. (F/K/A TWIN LABORATORIES INC.) (DEBTOR-IN-POSSESSION) MONTHLY OPERATING REPORT SCHEDULE OF CASH DISBURSEMENTS AND RECEIPTS (IN THOUSANDS)
FOR THE MONTH ENDED MARCH 31, 2004 -------------- Total Cash Receipts $ 9 ----- Cash Disbursements: Professional Fees - Restructuring 636 Professional Fess - Legal and Accounting 14 Employee Medical Claims 26 Directors' Fees 10 Taxes and Tax Filing Fees 21 Other 5 Bank Charges 2 ----- Total Cash Disbursements (714) ----- Net Cash Flow $(705) =====
9 TL ADMINISTRATION INC. (F/K/A TWIN LABORATORIES INC.) (DEBTOR-IN-POSSESSION) MONTHLY OPERATING REPORT SCHEDULE OF FEDERAL, STATE AND LOCAL TAXES COLLECTED, RECEIVED, DUE OR WITHHELD (IN THOUSANDS)
FOR THE MONTH ENDED MARCH 31, 2004 -------------- Gross Wages and Salaries Paid None Payroll Taxes Withheld None Employers Payroll Taxes Incurred None Gross Sales Subject to Taxes None Sales Tax Collected or Self-Assessed None Property Tax Payments Due None Property Taxes Paid None All Other Taxes Paid: Utah Sales and Use Tax None Franchise Tax Filings and Extension Fees 21
10 EX-99.3 5 y96268exv99w3.txt MONTHLY OPERATING REPORT Exhibit 99.3 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK CHAPTER 11 IN RE: TL ADMINISTRATION (UK) LTD. CASE NO. 03-15563 (CB) (F/K/A TWIN LABORATORIES (UK) LTD.) DEBTOR MONTHLY OPERATING STATEMENT FOR THE MONTH ENDED MARCH 31, 2004 DEBTOR'S ADDRESS c/o FTI Consulting, Inc. 622 Third Avenue, 31st Floor New York, NY 11201 DISBURSEMENTS: Month Ended March 31, 2004 (dollars in thousands): $ 0 (See attached schedule for disbursements by Debtor) DEBTOR'S ATTORNEY Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Michael P. Kessler, Esq. (MPK 7134) Paul M. Basta, Esq. (PMB 4434) REPORT PREPARER TL Administration (UK) Ltd. NET GAIN (LOSS): Month Ended March 31, 2004 (dollars in thousands): $ 105 The undersigned, having reviewed the attached report and being familiar with the Debtor's financial affairs, verifies under penalty of perjury, that the information contained herein is complete, accurate and truthful to the best of my knowledge. DATE: April 15, 2004 /s/ Denis O'Connor --------------------------- Denis O'Connor, Secretary TL ADMINISTRATION (UK) LTD. (F/K/A TWIN LABORATORIES (UK) LTD.) (DEBTOR-IN-POSSESSION) STATEMENT OF OPERATIONS (IN THOUSANDS)
FOR THE MONTH ENDED MARCH 31, 2004 -------------- (unaudited) Intercompany Sales $ -- Operating Expenses -- ---- Loss from Operations -- Other Income 105 Other Expenses -- ---- Net Income (Loss) $105 ====
(The accompanying notes are an integral part of these financial statements.) 2 TL ADMINISTRATION (UK) LTD. (F/K/A TWIN LABORATORIES (UK) LTD.) (DEBTOR-IN-POSSESSION) BALANCE SHEET (IN THOUSANDS)
MARCH 31, 2004 ------------- (unaudited) ASSETS Current Assets: Cash and cash equivalents $ 144 Intercompany receivable 380 ------- Total Assets $ 524 ======= LIABILITIES AND SHAREHOLDER'S DEFICIT Current Liabilities Not Subject to Compromise: Accounts payable $ 7 Accrued expenses and other current liabilities 3 ------- Total Current Liabilities Not Subject to Compromise 10 Liabilities Subject to Compromise 1,785 ------- Total Liabilities 1,795 Shareholder's Deficit: Accumulated deficit (1,271) ------- Total Liabilities and Shareholder's Deficit $ 524 =======
(The accompanying notes are an integral part of these financial statements.) 3 TL ADMINISTRATION (UK) LTD. (F/K/A TWIN LABORATORIES (UK) LTD.) (DEBTOR-IN-POSSESSION) STATEMENT OF CASH FLOWS (IN THOUSANDS)
FOR THE MONTH ENDED MARCH 31, 2004 -------------- (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $ 105 Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: Changes in Operating Assets and Liabilities: Accrued expenses and other current liabilities (0) ----- Net Cash Used in Operating Activities 105 ----- Effect of Exchange Rate Changes on Cash (2) ----- Net Change in Cash and Cash Equivalents 103 Cash and Cash Equivalents at Beginning of Period 41 ----- Cash and Cash Equivalents at End of Period $ 144 =====
(The accompanying notes are an integral part of these financial statements.) 4 TL ADMINISTRATION (UK) LTD. (F/K/A TWIN LABORATORIES (UK) LTD.) (DEBTOR-IN-POSSESSION) NOTES TO UNAUDITED FINANCIAL STATEMENTS 1. THE COMPANY TL Administration (UK) Ltd. (f/k/a Twin Laboratories (UK) Ltd.) ("TL UK") together with its parent company TL Administration Inc. (f/k/a Twin Laboratories Inc.) ("TL Inc.") and TL Inc.'s parent company TL Administration Corporation (f/k/a Twinlab Corporation) (collectively, the "Debtors" or the "Company") was a leading manufacturer and marketer of brand name nutritional supplements sold through health and natural food stores, national and regional drug store chains, supermarkets, mass merchandise retailers and military post exchanges. The Company developed, manufactured, and sold vitamins, minerals, and specialty supplements, sports nutrition products, and diet and energy products under the "Twinlab," "Fuel," and other brand names; an extensive line of herbal supplements and phytonutrients under the "Nature's Herbs" brand name; and a full line of herbal teas under the "Alvita" brand name. TL UK operated as a European sales office for the Company. The Company emphasized the development and introduction of high quality, unique nutraceutical products. The Company's premium product quality, broad product line, strong history of new product introductions, and innovations have established Twinlab as a leading and widely recognized name in the industry. The Company targeted its products to consumers who utilized nutritional supplements in their daily diet and who demanded premium quality ingredients in a broad variety of dosages and delivery methods. 2. BACKGROUND Bankruptcy Filing On September 4, 2003 (the "Commencement Date"), the Debtors filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"). The Case Numbers for the individual Debtors are as follows: TL Administration Inc. 03-15566 (CB), TL Administration Corporation 03-15564 (CB) and TL Administration (UK) Ltd. 03-15563 (CB). These chapter 11 cases have been consolidated for procedural purposes only and are being jointly administered under Case No. 03-15564 (CB) pursuant to an order of the Bankruptcy Court. All other wholly-owned subsidiaries of TL Inc. are inactive and are not Debtors in these chapter 11 cases. The Debtors remained in possession of their assets and properties and continued to operate their businesses and manage their properties, until the APA (as defined herein) closed on December 19, 2003, as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. Currently, the Debtors remain in possession of the net sale proceeds (See below), as well as the $15 million proceeds from the draw of the Guarantors (as defined herein) letter of credit (See Note 4). The Debtors continue to operate as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code and make payments for certain liabilities not assumed in accordance with the terms of the APA. Under the Bankruptcy Code, certain claims against the Debtors in existence prior to the Commencement Date are automatically stayed from collection while the Debtors continue business operations as debtors-in-possession. Those claims are reflected in the financial statements as liabilities subject to compromise. Additional liabilities subject to compromise may arise subsequent to the filing date resulting from rejection of executory contracts, including leases, and from the determination by the Bankruptcy Court (or agreed to by parties in interest) of allowed claims for contingencies and other disputed amounts. The Debtors cannot presently determine or reasonably estimate the ultimate 5 liability that may result from the filing of claims for all contracts that may be rejected. The collection of secured claims against the Debtors assets also are stayed, although the holders of such claims have the right to move the Bankruptcy Court for relief from the automatic stay. Asset Purchase Agreement and Sale Closing On September 4, 2003, the Company also entered into an asset purchase agreement (the "APA") with IdeaSphere, Inc. of Grand Rapids, Michigan pursuant to which the Company was to sell substantially all of its assets for $65 million plus the assumption of up to $3.7 million of employee and related liabilities. The terms of the APA required a minimum level of $47 million of working capital (defined as accounts receivable and inventory) as of the closing date. The sale was conducted pursuant to section 363 of the Bankruptcy Code and was approved by the Bankruptcy Court on October 30, 2003. Effective December 5, 2003, the Bankruptcy Court approved an amendment to the APA such that (i) the purchase price was reduced to $57.5 million plus the assumption of up to $3.7 million of employee and related liabilities, (ii) the definition of working capital was amended to include prepaid inventory and prepaid advertising in addition to accounts receivable and inventory and (iii) the minimum level of working capital was reduced to $39.5 million and any working capital adjustment to the purchase price as of the effective closing date was limited to a decrease of $500,000 and an increase of $1.5 million. On December 19, 2003, the Company and IdeaSphere, Inc. agreed to a second amendment to the APA (the "Second Amendment"). The Second Amendment provided for an extension of the closing to December 19, 2003; however, for financial and accounting purposes, the transaction became effective as of December 9, 2003. The Second Amendment also provided for adjustments relating to the period between December 10, 2003 and the closing date of December 19, 2003 (the "Interim Period Adjustments"). The sale closed on December 19, 2003, effective as of December 9, 2003. The estimated loss on the sale was approximately $8.7 million. The Debtors do not expect that the holders of the Company's equity will receive any value as a result of the sale of substantially all assets of the Company. Asset Purchase Agreement Post Closing Adjustments In accordance with the terms of the APA and its amendments, IdeaSphere, Inc. has 60 days from December 19, 2003 to deliver a calculation of the closing working capital to the Company and the Company has 60 days from December 19, 2003 to deliver a calculation of the Adjustment Statement reflecting the Interim Period Adjustments to IdeaSphere, Inc. Each party has 30 days to review the respective calculation and either accept or dispute such amount. Cash Proceeds from the Asset Sale On December 19, 2003, IdeaSphere, Inc. remitted net cash proceeds from the asset sale transaction to the Company totaling $49.2 million. Details of the transaction included gross proceeds of $57.5 million, less the assumption of the $5.3 million Zions Bank mortgage and reimbursements for IdeaSphere, Inc.'s inventory and advertising advances, as well as other closing costs. From the net proceeds, the Company repaid the outstanding loan balance under the DIP Facility (as defined herein) of $28.2 million, cure costs for assumed contracts, other related finance and closing costs, and administrative expenses. 6 Proofs of Claim The bar date for filing proofs of claim for claims that arose prior to September 4, 2003 was March 2, 2004. 3. BASIS OF PRESENTATION It is likely that the Debtors will propose a Chapter 11 Plan pursuant to its liquidation of assets under the APA. Except for the related expected liquidation of substantially all of the Debtors' assets, these unaudited financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities and commitments in the normal course of business. Other than the impact of the expected liquidation discussed above, in the opinion of management, the accompanying unaudited financial statements include all necessary adjustments (consisting of normal recurring accruals but do not include any adjustments relating to the filing of voluntary petitions under Chapter 11 of the Bankruptcy Code) and present fairly the results of operations, cash flows and financial position of TL UK for the period presented. The functional currency of TL UK is the U.S. dollar, however, its books and records are maintained in British Pounds. Therefore, assets and liabilities are remeasured using a combination of current and historical rates. Income and expenses are remeasured using the average rate in effect during the respective periods. Unrealized foreign exchange gains and losses resulting from the remeasurement are included in the results of operations. These unaudited financial statements have also been prepared in accordance with Statement of Position ("SOP") No. 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code." SOP 90-7 provides for segregating pre-petition liabilities that are subject to compromise from post-petition liabilities, identifying all transactions and events that are directly associated with the reorganization of the Debtors and reporting them separately as reorganization items and discontinuing interest accrual on unsecured or undersecured debt. Further, SOP 90-7 envisions that entities under Chapter 11 will reorganize as going concerns. The accompanying unaudited financial statements do not include all footnotes and certain financial presentations normally required under accounting principles generally accepted in the United States of America. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in TL Administration Corporation's Annual Report to Stockholders on Form 10-K for the fiscal year ended December 31, 2002, as filed with the Securities and Exchange Commission. 4. DEBTOR-IN-POSSESSION FINANCING On September 25, 2003, the Bankruptcy Court approved a $35 million debtor-in-possession financing ("DIP Facility") among The CIT Group/Business Credit, Inc., as agent for a lender group, and TL Administration Inc. as the borrower, with TL Administration Corporation as the guarantor. The DIP Facility was collateralized by, among other things, a senior lien on substantially all of the Debtors' assets, and a junior lien on certain assets that had previously been subject to a lien by other parties as well as a letter of credit aggregating $15 million provided by certain current and former members of senior management of the Company (the "Guarantors"). The lenders under the DIP Facility had a super-priority claim against the estates of the Debtors. Borrowings were subject to certain limitations based on a percentage of eligible accounts receivable and inventories, as defined in the agreement. Borrowings were also limited by a percentage of actual aggregate operating net cash flow (exclusive of reorganization expenses) measured weekly on a rolling four week period against the projected 7 aggregate operating net cash flow (exclusive of reorganization expenses) as set forth in the consolidated cash flow projections and weekly anticipated cash receipts and disbursements delivered by the Company to the lending group (the "Budget"). The DIP Facility restricted the ability to declare or pay dividends, enter into any operating leases or contract for, purchase, make expenditures for, lease pursuant to a capital lease or otherwise incur obligations with respect to capital expenditures unless the obligations thereunder are provided for in the Budget, and certain other expenditures and or encumbrances. The DIP Facility, as amended, also required the Company to adhere to a scheduled timeline regarding the sale process of substantially all of the Debtors' assets, which among other things, required the closing of the sale to be completed by December 19, 2003. The Company was required to pay $100,000 to extend the term of the DIP Facility to December 19, 2003, of which IdeaSphere, Inc. agreed to pay half. Interest was payable monthly in arrears at the Prime Rate, plus 2.0% per annum. The Company was required to pay a commitment fee of 0.5% per annum on any unused portion of the DIP Facility. Borrowings outstanding under the DIP Facility were repaid in full on December 19, 2003 as a result of the consummation of the APA. In addition, the $15 million letter of credit was drawn, and on December 22, 2003, the proceeds were remitted into the Company's possession. An adversary proceeding was commenced by the Official Committee of Unsecured Creditors against certain former officers and directors of the Company seeking, among other things, to subordinate their claim relating to the letter of credit and for other damages. For purposes of financial reporting, the liability associated with the proceeds of the letter of credit draw is classified as a secured liability not subject to compromise on the balance sheet of TL Administration Inc. 5. LIABILITIES SUBJECT TO COMPROMISE Liabilities subject to compromise as of March 31, 2004 are composed of the following (in thousands):
MARCH 31, 2004 Accounts Payable Trade $ 100 Intercompany Loans Payable 1,685 ------ Total $1,785 ======
Amounts classified as subject to compromise as of March 31, 2004 represent management's best estimate of such liabilities as of such date and are subject to change upon completion of the reconciliation of all claims as well as the finalization of the assumption (and related cure amounts) or rejection of executory contracts. 6. REORGANIZATION EXPENSES All reorganization expenses incurred for the month ended March 29, 2004 are included in the Monthly Operating Report of TL Administration Inc., case number 03-15566 (CB). 7. INSURANCE AND TAX PAYMENTS A. INSURANCE - All insurance policy premiums due have been paid. Accordingly, all such policies remain in force. B. TAXES - All post-petition tax obligations, including but not limited to payroll, real property, income, franchise, and other taxes have been paid to the proper taxing authority when due. 8 TL ADMINISTRATION (UK) LTD. (F/K/A TWIN LABORATORIES (UK) LTD.) (DEBTOR-IN-POSSESSION) MONTHLY OPERATING REPORT SCHEDULE OF CASH DISBURSEMENTS AND RECEIPTS (IN THOUSANDS)
FOR THE MONTH ENDED MARCH 31, 2004 -------------- Cash Collections $ 103 Cash Disbursements (0) ----- Net Cash Flow $ 103 =====
9 TL ADMINISTRATION (UK) LTD. (F/K/A TWIN LABORATORIES (UK) LTD.) (DEBTOR-IN-POSSESSION) MONTHLY OPERATING REPORT SCHEDULE OF TAXES COLLECTED, RECEIVED, DUE OR WITHHELD (IN THOUSANDS)
FOR THE MONTH ENDED MARCH 31, 2004 -------------- Gross Wages and Salaries Paid None Payroll Taxes Withheld None Employers Payroll Taxes Incurred None Gross Sales Subject to Taxes None Sales Tax Collected or Self-Assessed None Property Tax Payments Due None Property Taxes Paid None All Other Taxes Paid None
10 -----END PRIVACY-ENHANCED MESSAGE-----