Exhibit 99.1
Leiner Health Products Reports Third Quarter 2007 Results
- Sales Increase 9.3% from Q3 Fiscal 2006; Net Income Rises to
$8.9 Million -
CARSON, Calif.--(BUSINESS WIRE)--Feb. 7, 2007--Leiner Health
Products Inc. today announced its financial results for the third
quarter ended December 30, 2006.
Net sales for the quarter were $198.1 million compared to $181.2
million for the same period in fiscal 2006, a 9.3% increase. Net US
sales increased $18.3 million or 11.0% in the third quarter of fiscal
2007 compared to the same period in fiscal 2006, while net Canadian
sales decreased by $1.5 million or 10.2% in the same periods. The net
US sales increase resulted from growth in consumer demand for Leiner
products in certain key targeted categories, such as multivitamins and
heart health, as well as growth in the Company's contract
manufacturing segment.
Leiner reported net income of $8.9 million for the quarter,
compared to net income of $1.5 million for the same period in fiscal
2006. Gross margin improved in the third quarter of fiscal 2007 to
25.9% versus 23.1% in the third quarter of fiscal 2006 primarily due
to continued stabilization of certain raw material costs and improved
fixed cost absorption from higher plant utilization.
For the first nine months of fiscal 2007, net sales totaled $560.0
million compared to $495.8 million in the first nine months of fiscal
2006, a 13% increase. Net sales in the nine 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
return reserves related to certain branded products and inventory
reductions carried out by the Company's biggest customers. For the
first nine months of fiscal 2007, Leiner realized net income of $16.9
million, compared to a net loss of $4.1 million in the first nine
months of fiscal 2006.
Credit Agreement EBITDA for the quarter was $26.7 million,
compared to $22.6 million for the same period in fiscal 2006. For the
first nine months of fiscal 2007, Credit Agreement EBITDA was $70.9
million, compared to $54.0 million during the first nine months of
fiscal 2006.
Leiner was in compliance with all of its financial covenants as of
December 31, 2006.
Robert Kaminski, Chief Executive Officer, commented, "We are
pleased with the strong sales and improved margins that we experienced
this past quarter. We are grateful to our customers, vendors and
employee partners for their support and commitment to continuing to
understand consumer preferences for high quality, low cost self care
products."
Conference Call Information
The Company will hold a conference call to discuss its
third-quarter results on Thursday, February 8, 2007, at 11:00 a.m.
Eastern Time. The public is invited to attend. The dial-in number for
the conference 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
February 8, 2007, at 2:00 p.m. Eastern Time through February 15, 2007,
and can be accessed by dialing 706-645-9291, conference ID #5699132.
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,
February 13, 2007. 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, as
amended, 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 in the Credit Agreement Amendment. 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" in this release 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. In 2006,
Leiner distributed more than 31 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," "could," "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
Unaudited
(in thousands)
Three months ended Nine months ended
-------------------------- -------------------------
December 24, December 30, December 24, December 30,
2005 2006 2005 2006
------------ ------------ ------------ ------------
Net sales $ 181,243 $ 198,121 $ 495,765 $ 559,997
Cost of sales 139,282 146,782 402,004 417,740
------------ ------------ ------------ ------------
Gross profit 41,961 51,339 93,761 142,257
Marketing, selling
and distribution
expenses 15,355 16,627 43,390 49,115
General and
administrative
expenses 9,334 10,546 25,591 31,006
Research and
development
expenses 855 1,711 3,299 3,888
Amortization of
other intangibles 10 295 29 877
Restructuring
Charges 1,305 - 1,305 -
Other operating
expense (income) 434 656 1,041 1,768
------------ ------------ ------------ ------------
Operating income 14,668 21,504 19,106 55,603
Interest expense,
net 9,645 10,089 27,186 30,244
------------ ------------ ------------ ------------
Income (loss)
before income
taxes 5,023 11,415 (8,080) 25,359
Provision for
(benefit from)
income taxes 3,526 2,558 (3,949) 8,449
------------ ------------ ------------ ------------
Net income (loss) $ 1,497 $ 8,857 $ (4,131) $ 16,910
============ ============ ============ ============
Leiner Health Products Inc.
Consolidated Balance Sheets
(dollars in thousands, except share data)
ASSETS March 25, December 30,
2006 2006
------------ ------------
Unaudited
Current assets:
Cash and cash equivalents $ 7,731 $ 10,668
Accounts receivable, net of allowances of
$3,545 and $2,792 at March 25, 2006 and
December 30, 2006, respectively 73,211 92,982
Inventories 165,714 158,741
Prepaid expenses and other current assets 16,540 16,746
------------ ------------
Total current assets 263,196 279,137
Property, plant and equipment, net 72,618 74,103
Goodwill 58,245 58,252
Other noncurrent assets 22,039 20,619
------------ ------------
Total assets $ 416,098 $ 432,111
============ ============
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Accounts payable $ 77,648 $ 89,639
Accrued compensation and benefits 9,994 10,645
Customer allowances payable 10,522 13,989
Accrued interest 10,436 1,517
Other accrued expenses 14,418 14,078
Current portion of long-term debt 5,498 4,994
------------ ------------
Total current liabilities 128,516 134,862
Long-term debt 397,119 389,845
Other noncurrent liabilities 5,545 5,679
------------ ------------
Total liabilities 531,180 530,386
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 December
30, 2006 - -
Capital in excess of par value 13,489 13,468
Accumulated deficit (130,125) (113,215)
Accumulated other comprehensive income 1,554 1,472
------------ ------------
Total shareholder's deficit (115,082) (98,275)
------------ ------------
Total liabilities and shareholder's
deficit $ 416,098 $ 432,111
============ ============
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 Nine months ended
------------------------- -------------------------
December 24, December 30, December 24, December 30,
2005 2006 2005 2006
------------ ------------ ------------ ------------
Net income (loss) $1,497 $8,857 $(4,131) $16,910
Provision for
(benefit from)
income taxes 3,526 2,558 (3,949) 8,449
Interest expense,
net 9,645 10,089 27,186 30,244
Depreciation and
amortization 3,706 4,480 11,662 13,255
Asset write-
down(1) - - 5,659 -
Non-cash stock
compensation
expense 5 6 15 18
Expenses related
to permitted
acquisition(2) 1,117 - 1,439 -
Restructuring
charges(3) 1,305 - 1,305 -
Price difference
between PFI's
purchased
inventory and
Leiner's
manufacturing
cost(4) 536 - 536 -
Expenses related
to supplies to
customers of
PFI(5) 891 - 891 -
Expenses related
to joint care and
other products(6) - - 12,400 -
Management fees(7) 409 680 1,013 2,034
------------ ------------ ------------ ------------
Credit Agreement
EBITDA (8) $22,637 $26,670 $54,026 $70,910
============ ============ ============ ============
(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 December 24, 2005.
(2) Represents internal expenses incurred in connection with the
agreement to purchase substantially all of the OTC assets of PFI.
These expenses are included in the general and administrative
expenses in the condensed consolidated statement of operations and
in operating activities in the condensed consolidated statement of
cash flows.
(3) Represents severance and other related costs incurred in
connection with the elimination of approximately 86 positions in
the third quarter of fiscal 2006. These expenses were included as
a separate item in the condensed statement of operations and in
operating activities in the condensed consolidated statement of
cash flows.
(4) Represents the value of inventory purchased solely in connection
with the PFI acquisition for prices above our manufacturing cost.
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
for the three and nine month periods ended December 24, 2005.
(5) Represents expenses incurred in connection with operating
facilities that prior to the PFI acquisition were operated by the
PFI business and to provide adequate inventory and to ensure
continuous supplies to customers of PFI business. 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 for the
three and nine month periods ended December 24, 2005.
(6) Represents add back of expense incurred in connection with the
joint care customer in-stock investments, inventory reduction
impact and other expenses as stipulated in the Credit Agreement
Amendment. These expenses resulted in a reduction to gross profit
in the condensed consolidated statement of operations for the nine
months ended December 24, 2005.
(7) 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.
(8) Credit Agreement EBITDA is calculated in accordance with the
definitions contained in our Credit Agreement Amendment described
earlier in this release.
CONTACT: Leiner Health Products Inc.
Kevin McDonnell, 310-952-1357
Chief Financial Officer
or
Lippert/Heilshorn & Assoc.
Jody Burfening / Harriet Fried, 212-838-3777