Exhibit 99.1
Leiner Health Products Reports Second Quarter 2007 Results
- Sales Increase 17.2% from Q2 Fiscal 2006; Net Income Rises to $6.1 Million -
CARSON, Calif.--(BUSINESS WIRE)--Nov. 13, 2006--Leiner Health Products Inc.
today announced its financial results for the second quarter ended September 30,
2006.
Net sales for the quarter were $198.0 million compared to $168.9 million
for the same period in fiscal 2006, a 17.2% increase. Net US sales increased
$29.9 million or 19.4% in the second quarter of 2007 compared to the same period
in 2006, while net Canadian sales decreased by $.9 million or 6.3% in the same
periods. The net US sales increase resulted primarily from improved consumer
demand from our enhanced product mix, including higher sales of multivitamins,
heart health and PFI acquired products. Additionally, the second quarter of
fiscal year 2007 included an additional week versus the same quarter in the
prior year.
Leiner reported net income of $6.1 million for the quarter, compared to net
loss of $1.4 million for the same period in fiscal 2006. Gross margin improved
in the second quarter of fiscal 2007 to 25.8% versus 17.5% in the second quarter
of fiscal 2006 primarily due to favorable product mix and better fixed cost
absorption from better plant throughput. Gross margin in fiscal 2006 was
negatively impacted by lower production in the plants and higher raw material
costs.
For the first six months of fiscal 2007, net sales totaled $361.9 million
compared to $314.5 million in the first half of fiscal 2006, a 15.1% increase.
Net sales in the six months of fiscal year 2007 included an additional week
versus the same period in the prior year. In addition, fiscal 2006 sales were
impacted by the establishment of reserves related to certain branded products
and a reduction of sales due to inventory reductions by the company's biggest
customers. For the first six months of fiscal 2007, Leiner recognized net income
of $8.1 million, compared to a net loss of $5.6 million in the first half of
fiscal 2006.
Credit Agreement EBITDA for the quarter was $26.1 million, compared to
$22.2 million for the same period in fiscal 2006. For the first six months of
fiscal 2007, Credit Agreement EBITDA was $44.2 million, compared to $31.4
million during the first half of fiscal 2006.
As previously announced, the Company's financial covenants were amended
through unanimous approval by its secured lenders, effective September 23, 2005
(Credit Agreement Amendment). Leiner was in compliance with these financial
covenants as of September 30, 2006.
Robert Kaminski, Chief Executive Officer, commented, "The company's
investment in product rotation and enhanced product mix is paying off as
consumers increasingly choose Leiner supplied store brands to satisfy their self
care needs."
Conference Call Information
Leiner will conduct a conference call on Tuesday, November 14, 2006 at
11:00 a.m. Eastern Time to discuss second quarter 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 "Investor Information" section of
the company's website, www.leiner.com. For those who cannot listen to the live
broadcast, a telephone replay of the call will be available from November 14, at
2:00 p.m. Eastern Time through November 21, 2006, and can be accessed by dialing
706-645-9291, conference ID #9521370. An archived webcast will also be available
on Leiner's website.
Additional information regarding Leiner's fiscal 2007 will be contained in
the company's Quarterly Report on Form 10-Q, which will be posted on the
company's website, www.leiner.com, by 5:00 p.m. PT, November 14, 2006.
Alternatively, the Quarterly Report on Form 10-Q will also be available through
the SEC's website, www.sec.gov.
Use of Non-GAAP Financial Measures
In our earnings release and conference call we may use or discuss non-GAAP
financial measures as defined by SEC Regulation G. We use Credit Agreement
EBITDA to measure our performance. Credit Agreement EBITDA is a non-GAAP measure
that should not be considered as an alternative to income from operations or net
income (loss) as a measure of operating results or cash flows as a measure of
liquidity. Credit Agreement EBITDA is the basis for the calculation of
significant financial covenants in the Company's credit facility which requires
Leiner to meet specified Consolidated Indebtedness to Credit Agreement EBITDA
Leverage Ratio and a Credit Agreement EBITDA to Consolidated Interest Expense
Ratio as such terms are defined. Management believes that availability of Credit
Agreement EBITDA will assist investors in evaluating Leiner's financial
performance and our performance relative to credit agreement covenants. See the
"Calculation of Credit Agreement EBITDA" on page six for a reconciliation of
Credit Agreement EBITDA to net income (loss) computed under U.S. generally
accepted accounting principles (GAAP).
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 50 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 distributed over 28
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; and (xiv) the availability
and pricing of raw materials. 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.
Consolidated Statement of Operations
(in thousands)
Three months ended Six months ended
--------------------------- ---------------------------
September 24, September 30, September 24, September 30,
2005 2006 2005 2006
------------- ------------- ------------- -------------
Net sales $ 168,935 $ 197,966 $ 314,522 $ 361,876
Cost of sales 139,438 146,976 262,722 270,958
------------- ------------- ------------- -------------
Gross profit 29,497 50,990 51,800 90,918
Marketing,
selling and
distribution
expenses 14,251 17,294 28,035 32,488
General and
administrative
expenses 8,276 10,796 16,257 20,460
Research and
development
expenses 1,354 1,096 2,445 2,177
Amortization of
other
intangibles 10 300 20 582
Other operating
expense
(income) (36) 1,179 605 1,112
------------- ------------- ------------- -------------
Operating
income 5,642 20,325 4,438 34,099
Interest
expense, net 8,911 10,110 17,540 20,155
------------- ------------- ------------- -------------
Income (loss)
before income
taxes (3,269) 10,215 (13,102) 13,944
Provision for
(benefit from)
income taxes (1,836) 4,149 (7,474) 5,891
------------- ------------- ------------- -------------
Net income
(loss) $ (1,433) $ 6,066 $ (5,628) $ 8,053
Leiner Health Products Inc.
Consolidated Balance Sheets
(dollars in thousands, except share data)
ASSETS March 25, September 30,
2006 2006
------------- -------------
Unaudited
Current assets:
Cash and cash equivalents $ 7,731 $ 13,431
Accounts receivable, net of allowances of
$3,545 and $3,041 March 25, 2006 and
September 30, 2006, respectively 73,211 66,788
Inventories 165,714 167,182
Prepaid expenses and other current assets 16,540 15,711
------------- -------------
Total current assets 263,196 263,112
Property, plant and equipment, net 72,618 74,246
Goodwill 58,245 58,391
Other noncurrent assets 22,039 21,645
------------- -------------
Total assets $ 416,098 $ 417,394
============= =============
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Accounts payable $ 77,648 $ 76,832
Accrued compensation and benefits 9,994 10,127
Customer allowances payable 10,522 12,796
Accrued interest 10,436 5,587
Other accrued expenses 14,418 16,717
Current portion of long-term debt 5,498 4,884
------------- -------------
Total current liabilities 128,516 126,943
Long-term debt 397,119 390,688
Other noncurrent liabilities 5,545 5,668
------------- -------------
Total liabilities 531,180 523,299
Commitments and contingencies
Shareholder's deficit:
Common stock, $0.01 par value; 3,000,000
shares authorized,
1,000 issued and outstanding at March
25, 2006 and September 30, 2006 - -
Capital in excess of par value 13,489 13,459
Accumulated deficit (130,125) (122,072)
Accumulated other comprehensive income 1,554 2,708
------------- -------------
Total shareholder's deficit (115,082) (105,905)
------------- -------------
Total liabilities and shareholder's
deficit $ 416,098 $ 417,394
============= =============
Reconciliation of Non-GAAP Financial Measures to Comparable U.S.
GAAP Measures (Unaudited)
The following table reconciles Credit Agreement EBITDA, the
non-GAAP financial measure, used in this release, to the comparable
GAAP measure for the respective periods:
Leiner Health Products Inc.
Calculation of Credit Agreement EBITDA
(in thousands)
Three months ended Six months ended
--------------------------- ---------------------------
September 24, September 30, September 24, September 30,
2005 2006 2005 2006
------------- ------------- ------------- -------------
Net income
(loss) $ (1,433) $ 6,066 $ (5,628) $ 8,053
Provision for
(benefit
from) income
taxes (1,836) 4,149 (7,474) 5,891
Interest
expense, net 8,911 10,110 17,540 20,155
Depreciation
and
amortization 3,901 4,457 7,956 8,775
Asset write-
down (1) - - 5,659 -
Non-cash stock
compensation
expense 5 5 10 12
Expenses
related to
permitted
acquisition 301 - 323 -
Expenses
related to
joint care
and other
products (2) 12,400 - 12,400 -
Management
fees (3) (68) 1,344 604 1,354
------------- ------------- ------------- -------------
Credit
Agreement
EBITDA (4) $ 22,181 $ 26,131 $ 31,390 $ 44,240
(1) Represents the establishment of a reserve for anticipated
customer returns and the reduction of the carrying value of inventory
related to certain branded products in the first quarter of fiscal
2006. This charge resulted in a reduction to gross profit in the
condensed consolidated statement of operations and in operating
activities in the condensed consolidated statement of cash flows at
September 24, 2005.
(2) Represents add back of expense incurred in connection with the
joint care customer in-stock investments, inventory reduction impact
and other expenses stipulated in the Amendment. These expenses
resulted in a reduction to gross profit in the condensed consolidated
statement of operations for the three and six month periods ended
September 24, 2005.
(3) Management fees are included in other operating expenses in the
condensed consolidated statement of operations and in operating
activities in the condensed consolidated statement of cash flows.
(4) Credit Agreement EBITDA is calculated in accordance with the
definitions contained in our Amendment described under "Credit
Agreement EBITDA."
CONTACT: Leiner Health Products Inc.
Kevin McDonnell, 310-952-1357
Chief Financial Officer
or
Lippert/Heilshorn & Assoc.
Jody Burfening / Harriet Fried, 212-838-3777