Exhibit 99.1
Leiner Health Products Reports Fourth Quarter
and Full Year 2005 Results; Fourth Quarter Sales Rise 3.4% to $174.6
Million; Annual Sales Rise 3.6% to $684.9 Million
CARSON, Calif.--(BUSINESS WIRE)--June 14, 2005--Leiner Health
Products Inc. today announced its financial results for the fourth
quarter and full year ended March 26, 2005.
Net sales for the quarter were $174.6 million compared to $168.9
million for the same period in fiscal 2004, a 3.4% increase. The
increase in sales resulted from new product introductions and strong
off-shelf category promotions from the company's largest customers,
partially offset by pronounced product landscape changes in the
company's VMS category, which involve higher sales of joint care
products and lower sales of Vitamin E in light of negative media. For
the twelve months of fiscal 2005, net sales totaled $684.9 million
compared to $661.0 million in the same period of fiscal 2004, a 3.6%
increase.
Leiner reported net income of $6.4 million for the quarter,
compared to $16.3 million for the same period in fiscal 2004. The
decrease in net income reflected various factors: an increase in
interest expense of $3.2 million from the company's recapitalized debt
structure compared to the same period in fiscal 2004, an increase in
income taxes of $4.8 million, and a decrease in gross profit partially
offset by lower operating expenses. The decrease in gross profit
reflects the impact of the negative media on Vitamin E and Naproxen,
and the company's investment in the store brand natural joint care
segment, which resulted in lower margins as Leiner reaches out to
build market share.
Credit Agreement EBITDA was $22.1 million for the quarter,
compared to $24.4 million for the same period in fiscal 2004. For the
twelve months of fiscal 2005, Credit Agreement EBITDA was $88.4
million compared to $88.6 million during the same period of fiscal
2004. The Credit Agreement EBITDA reflects a correction in the
calculation of recapitalization expenses in the second quarter, see
page six for more details. Credit Agreement EBITDA is a financial
measure used in the company's Credit Agreement, which required Leiner
to have met a Consolidated Indebtedness to Credit Agreement EBITDA
Leverage Ratio of 5.25 to 1.00 and a Credit Agreement EBITDA to
Consolidated Interest Expense Ratio of 2.25 to 1.00 on the last day of
the fourth quarter. Leiner was in compliance with these financial
covenants as of March 26, 2005. Credit Agreement EBITDA is a non-GAAP
measure that should not be considered an alternative to income from
operations or net income (loss) as a measure of operating results or
cash flows as a measure of liquidity. See the "Calculation of Credit
Agreement EBITDA" on page six for a reconciliation of Credit Agreement
EBITDA to net income.
For the twelve months of fiscal 2005, Leiner recognized $88.0
million of charges related to the May 2004 recapitalization and
reported a net loss of $47.9 million. Excluding these recapitalization
charges and their income tax impact of approximately $14.6 million,
the company would have had net income of $25.5 million compared to
$39.1 million reported in the twelve months of fiscal 2004. During the
twelve months of fiscal 2005, interest expense increased by $13.4
million from the recapitalized debt level, and the company recorded
$2.0 million in charges related to a series of organizational changes
implemented primarily in the second quarter. See the Condensed
Consolidated Statements of Operations on page four for a
reconciliation of the difference between net income including and
excluding recapitalization charges and their income tax effect.
Robert Kaminski, Chief Executive Officer, commented, "FY05 was a
rewarding year. Our partnerships with America's leading mass market
retailers remain as strong as ever, and the resolve of the men and
women of Leiner has never been more focused on their role of leading
the self care revolution.
"As indicated in our last release, the company reacted well to
product landscape changes caused by media reports during the third
quarter. Sales of Vitamin E, down more than 40% for the fourth
quarter, were offset by the company's increasing share in the store
brand natural joint care segment.
"Last autumn's (September 30, 2004) scientific findings and
resulting media on Cox 2 inhibitors left millions of osteoarthritic
Americans searching for answers. The need for retailers to ensure high
quality reliable natural store brand joint care products for consumers
in need of a solution for arthritic pain has led many retailers to
turn to Leiner.
"During the fourth quarter of fiscal 2005, we developed
distribution, merchandising and marketing programs that will be
executed in the second quarter of fiscal 2006. Among them was the
introduction of Bumble Bee Fish Oil which was covered in a USA TODAY
article on May 10, 2005. We are very excited about the opportunity to
work with a brand as respected and trusted as Bumble Bee. In addition,
we are aggressively pursuing product development and marketing
programs to get passive and reactive users reengaged in the VMS
category, and have received an excellent response from retailers.
"We continue the careful management of operating expenses, which
totaled 13.3% of net sales during the fourth quarter versus 16.8% of
net sales in the prior-year period, and expect to maintain the fiscal
2005 run rate for the foreseeable future. At the same time, the
company's gross margins will continue to be impacted in fiscal 2006 by
product landscape changes and customer mix away from Vitamin E and
into an increasing share of the natural store brand joint care
category."
Conference Call Information
Leiner will conduct a conference call on Wednesday, June 15, 2005
at 11:00 a.m. Eastern time to discuss fourth-quarter-2005 results. The
public is invited to attend. The dial-in number for the call is
706-634-0167. The call is also being webcast, and can be accessed
through the "Financials" section of the company's website,
www.leiner.com. A replay of the call will also be available through
Wednesday, June 22, 2005, and can be accessed by dialing 706-645-9291
and referencing conference ID #6596137. An archived webcast will also
be available on Leiner's website for one month.
Additional information regarding Leiner's fiscal 2005 will be
contained in the company's Annual Report on Form 10-K, which will be
posted on the company's website, www.leiner.com, by Friday, June 24,
2005. The Annual Report on Form 10-K will also be available through
the SEC's website, www.sec.gov.
About Leiner Health
Founded in 1973, Leiner Health Products, headquartered in Carson,
Calif., is America's leading manufacturer of store brand vitamins,
minerals, and nutritional supplements and its second largest supplier
of over-the-counter pharmaceuticals in the food, drug, mass merchant
and warehouse club (FDMC) retail market, as measured by retail sales.
Leiner provides nearly 40 FDMC retailers with over 3,000 products to
help its customers create and market high quality store brands at low
prices. It also is the largest supplier of vitamins, minerals and
nutritional supplements to the US military. Leiner markets its own
brand of vitamins under YourLife(R) and sells over-the-counter
pharmaceuticals under the Pharmacist's Formula(R) name. Last year,
Leiner produced 22.5 billion doses that help offer consumers high
quality, affordable choices to improve their health and wellness.
Forward-looking Statement
This press release contains "forward-looking statements" that are
subject to risks and uncertainties. These statements often include
words such as "may," "will," "should," "expect," "plan," "anticipate,"
"believe," "estimate," "predict," "potential" or "continue," the
negative of such terms or similar expressions. These statements are
only predictions. In addition to risks and uncertainties noted in this
press release, there are risks and uncertainties that could cause the
company's actual operating results to differ materially from those
anticipated by some of the statements made. Such risks and
uncertainties include: (i) slow or negative growth in the vitamin,
mineral, supplement or over-the-counter pharmaceutical industry; (ii)
adverse publicity regarding the consumption of vitamins, minerals,
supplements or over-the-counter pharmaceuticals; (iii) increased
competition; (iv) increased costs; (v) increases in the cost of
borrowings and/or unavailability of additional debt or equity capital;
(vi) changes in general worldwide economic and political conditions in
the markets in which the company may compete from time to time; (vii)
the inability of the company to gain and/or hold market share of its
customers; (viii) exposure to and expenses of defending and resolving
product liability claims and other litigation; (ix) the ability of the
company to successfully implement its business strategy; (x) the
inability of the company to manage its operations efficiently; (xi)
consumer acceptance of the company's products; (xii) introduction of
new federal, state, local or foreign legislation or regulation or
adverse determinations by regulators; (xiii) the mix of the company's
products and the profit margins thereon; (xiv) the availability and
pricing of raw materials; and (xv) other factors beyond the company's
control. The company expressly disclaims any obligation to update or
revise publicly any forward-looking statements, whether as a result of
new information, future events or otherwise.
Leiner Health Products Inc.
Condensed Consolidated Statements of Operations
(in thousands)
Three Twelve
months ended months ended
-----------------------------------------
March 27, March 26, March 27, March 26,
2004 2005 2004 2005
--------- --------- --------- ---------
Unaudited
Net sales $168,861 $174,552 $661,045 $684,901
Cost of sales 120,299 132,715 486,554 512,871
--------- --------- --------- ---------
Gross profit 48,562 41,837 174,491 172,030
Marketing, selling and
distribution expenses 15,364 14,662 56,448 58,532
General and administrative
expenses 11,565 7,310 41,041 34,134
Research and development
expenses 1,469 1,318 5,670 5,299
Amortization of other
intangibles 79 10 447 250
Recapitalization expenses - 19 - 87,982
Other operating expense 381 732 1,528 2,386
--------- --------- --------- ---------
Operating income (loss) 19,704 17,786 69,357 (16,553)
Interest expense, net 4,685 7,923 18,954 32,346
--------- --------- --------- ---------
Income (loss) before income
taxes 15,019 9,863 50,403 (48,899)
Provision for (benefit from)
income taxes (1,333) 3,497 11,347 (987)
--------- --------- --------- ---------
Net income (loss) 16,352 6,366 39,056 (47,912)
Accretion on preferred stock (3,445) - (12,105) (39,212)
--------- --------- --------- ---------
Net income (loss)
attributable to common
shareholders $12,907 $6,366 $26,951 $(87,124)
========= ========= ========= =========
Pro forma Reconciliation
- -----------------------------
Net income (loss) $16,352 $6,366 $39,056 $(47,912)
Recapitalization expenses - 19 - 87,982
Income tax impact of
recapitalization expenses - - - (14,608)
--------- --------- --------- ---------
Pro forma net income $16,352 $6,385 $39,056 $25,462
======== ========= ========= =========
Leiner Health Products Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands, except share data)
ASSETS March 27, March 26,
2004 2005
---------- ----------
Current assets:
Cash and cash equivalents $33,824 $16,951
Accounts receivable, net of allowances of
$2,970 and $3,113 at March 27, 2004
and March 26, 2005, respectively 77,984 80,250
Inventories 144,479 164,910
Income tax receivable 483 2,310
Prepaid expenses and other current assets 13,174 17,492
---------- ----------
Total current assets 269,944 281,913
Property, plant and equipment, net 56,267 65,554
Goodwill 52,083 52,317
Other noncurrent assets 9,505 17,014
---------- ----------
Total assets $387,799 $416,798
========== ==========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND
SHAREHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable $91,162 $101,639
Accrued compensation and benefits 14,514 9,634
Customer allowances payable 8,896 9,576
Accrued interest 1,110 9,093
Other accrued expenses 6,185 13,304
Current portion of long-term debt 14,286 5,536
---------- ----------
Total current liabilities 136,153 148,782
Long-term debt 156,720 390,990
Other noncurrent liabilities 3,724 -
---------- ----------
Total liabilities 296,597 539,772
Commitments and contingencies
Series A redeemable preferred stock, $0.01 par
value;
Authorized, issued and outstanding shares-
200,000 at March 27, 2004 and
zero at March 26, 2005 40,188 -
Shareholder's equity (deficit):
Series B junior convertible preferred stock,
$0.01 par value;
Authorized, issued and outstanding shares-
7,500 at March 27, 2004 and
zero at March 26, 2005 6,616 -
Series C junior preferred stock, $0.01 par
value;
Authorized, issued and outstanding shares-
7,000 at March 27, 2004 and
zero at March 26, 2005 6,178 -
Common stock, $0.01 par value; 3,000,000
shares authorized, 1,139,394 issued and
outstanding at March 27, 2004 and 1,000 at
March 26, 2005 11 -
Capital in excess of par value 21,841 469
Retained earnings (accumulated deficit) 16,259 (126,357)
Accumulated other comprehensive income 109 2,914
---------- ----------
Total shareholder's equity (deficit) 51,014 (122,974)
---------- ----------
Total liabilities, redeemable preferred stock
and shareholder's equity (deficit) $387,799 $416,798
========== ==========
Leiner Health Products Inc.
Calculation of Credit Agreement EBITDA
(in thousands)
Three Twelve
months ended months ended
------------------------------------
March March March March
27, 26, 27, 26,
2004 2005 2004 2005
-------- -------- -------- ---------
Unaudited
Net income (loss) $16,352 $6,366 $39,056 $(47,912)
Provision for (benefit from)
income taxes (1,333) 3,497 11,347 (987)
Interest expense, net 4,685 7,923 18,954 32,346
Depreciation and amortization 3,605 3,513 14,668 13,722
Recapitalization expenses (1)(2) 718 19 3,014 87,982
Non-cash stock compensation
expense (3) - 5 - 5
Management fees (4) 395 750 1,578 3,258
-------- -------- -------- ---------
Credit Agreement EBITDA (5) $24,422 $22,073 $88,617 $88,414
======== ======== ======== =========
(1)Represents consulting, transaction, legal, accounting and
other associated fees with the May 2004 Recapitalization.
Recapitalization expenses for fiscal 2004 were included in the general
and administrative expenses in the consolidated statement of
operations and in operating activities in the consolidated statement
of cash flows. Recapitalization expenses incurred in fiscal 2005 were
included as a separate item in the consolidated statement of
operations and in operating activities in the consolidated statement
of cash flows.
(2)Recapitalization expenses include a correction to increase the
previously reported second quarter amount by $1,186, from $86,170 to
$87,356. For the twelve months ended March 26, 2005, the $87,982
includes this correction.
(3)Non-cash compensation expenses are included in the general and
administrative expenses in the consolidated statement of operations
and in operating activities in the consolidated statement of cash
flows.
(4)Management fees are included in other operating expenses in
the consolidated statement of operations and in operating activities
in the consolidated statement of cash flows.
(5)Credit Agreement EBITDA is calculated in accordance with the
definitions contained in our New Credit Facility as described under
"Credit Agreement EBITDA."
CONTACT: Leiner Health Products Inc.
Rob Reynolds, 310-952-1511
or
Lippert/Heilshorn & Assoc.
Jody Burfening or Harriet Fried, 212-838-3777