Exhibit 99.1
Leiner Health Products Reports Fourth Quarter 2007 Results
CARSON, Calif.--(BUSINESS WIRE)--June 27, 2007--Leiner Health
Products Inc. today announced its financial results for the fourth
quarter and full year ended March 31, 2007.
Net sales for the fourth quarter of fiscal 2007 were $175.2
million compared to $173.8 million for the same period in fiscal 2006,
a 0.8% increase. U.S. net sales were $162.4 million in the fourth
quarter of fiscal 2007, an increase of $0.8 million, or 0.5%, from the
same period in fiscal 2006. Canadian net sales were $12.8 million in
the fourth quarter of fiscal 2007, an increase of $0.6 million, or
4.9%, from the same period in fiscal 2006. U.S. net sales increased
marginally due to an increase in our contract manufacturing net sales,
which was largely offset by the previously announced voluntary
suspension of our U.S. based OTC manufacturing and distribution during
the latter part of March 2007. U.S. net sales in the fourth quarter of
fiscal 2007 were also adversely impacted by the recall reserves
established as a result of certain voluntary OTC product recalls.
Gross margin in the fourth quarter of fiscal 2007 declined to 9.2%
versus 24.5% in the fourth quarter of fiscal 2006. Fourth quarter
gross margins were negatively affected by the previously announced OTC
product shipment suspension, which resulted in a $27.4 million
non-cash inventory reserve as well as the recall reserve mentioned
above.
The Company reported a net loss of $39.2 million for the fourth
quarter of fiscal 2007, compared to net income of $0.4 million for the
same period in fiscal 2006. The aforementioned OTC suspension and the
Fort Mill consolidation had a significant negative impact to gross
margins and net income. In addition to the $27.4 million OTC non-cash
inventory reserve, the Company incurred a non-cash charge of $16.5
million in the fourth quarter of fiscal 2007 for impairment of assets
related to the restructuring of the Company's operations at its Fort
Mill, South Carolina facility and increased its valuation allowance
against its U.S. deferred tax assets by approximately $14.5 million.
For fiscal 2007, net sales totaled $735.2 million compared to
$669.6 million in fiscal 2006, a 9.8% increase. Fiscal year 2007
included an additional week compared to the prior fiscal year. Net
sales increased by approximately $13.0 million due to this additional
week. In addition, fiscal 2006 net sales were negatively impacted by
the establishment of return reserves related to certain branded
products and inventory reductions carried out by the Company's biggest
customers. U.S. net sales were $683.9 million in fiscal 2007, an
increase of $69.2 million, or 11.3%, from fiscal 2006. U.S. net sales
increased by approximately $12.0 million in fiscal 2007 as compared to
fiscal 2006 due to the extra week. Canadian net sales were $51.3
million in fiscal 2007, a decrease of $3.6 million, or 6.5%, from
fiscal 2006. Canadian net sales increased by approximately $1.0
million in fiscal 2007 as compared to fiscal 2006 due to the extra
week. For fiscal 2007, the Company recorded a net loss of $22.3
million for the aforementioned reasons compared to a net loss of $3.8
million in fiscal 2006.
Credit Agreement EBITDA for the fourth quarter of fiscal 2007 was
$18.1 million, compared to $20.8 million for the same period in fiscal
2006. For fiscal 2007, Credit Agreement EBITDA was $89.0 million,
compared to $74.8 million for fiscal 2006. Leiner was in compliance
with all of its financial covenants as of March 31, 2007. As
previously announced, the Company's financial covenants were amended
through approval of its secured lenders, effective June 22, 2007.
Robert Kaminski, Chief Executive Officer, commented, "An otherwise
excellent year was negatively impacted by our OTC issues. Our fiscal
2007 sales were strong, with robust demand for our VMS products,
specifically multivitamins, CoQ10 and fish oil products. The Company
has challenged itself to react to the OTC situation in a way that
enables us to preserve our core franchise while emerging as a
best-in-class, highest quality OTC and VMS supplier of store brand
products. We believe our recent actions position Leiner for long-term
leadership in the markets we serve."
Conference Call Information
Leiner Health Products will hold a conference call to discuss its
fourth quarter results on Thursday, June 28, 2007, at 11:00 a.m.
Eastern Time. 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 June 28, 2007 at
2:00 p.m. Eastern Time through July 5, 2007, and can be accessed by
dialing 706-645-9291, conference ID #2966852. An archived webcast will
also be available on Leiner's website.
Additional information regarding Leiner's fiscal 2007 performance
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, on June 29,
2007. Alternatively, the Annual Report on Form 10-K 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 use and 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 a leading 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 U.S. 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) an FDA investigation
into our OTC operations that has materially and adversely affected our
operations; (ii) product recalls; (iii) failure to implement our
consolidation plans on favorable terms, if at all; (iv) higher than
expected consolidation expenses; (v) a delay in the implementation of
the consolidation; (vi) slow or negative growth in the vitamin,
mineral, supplement or over-the-counter pharmaceutical industry; (vii)
adverse publicity regarding the consumption of vitamins, minerals,
supplements or over-the-counter pharmaceuticals; (viii) increased
competition; (ix) increased costs; (x) increases in the cost of
borrowings and/or unavailability of additional debt or equity capital;
(xi) changes in general worldwide economic and political conditions in
the markets in which the Company may compete from time to time; (xii)
the inability of the Company to gain and/or hold market share of its
customers; (xiii) exposure to and expenses of defending and resolving
product liability claims and other litigation; (xiv) the ability of
the Company to successfully implement its business strategy; (xv) the
inability of the Company to manage its operations efficiently; (xvi)
consumer acceptance of the Company's products; (xvii) introduction of
new federal, state, local or foreign legislation or regulation or
adverse determinations by regulators; (xviii) the mix of the Company's
products and the profit margins thereon; and (xix) 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.
Condensed Consolidated Statements of Operations
(in thousands)
Three months ended Twelve months ended
---------------------- ---------------------
March 25, March 31, March 25, March 31,
2006 2007 2006 2007
---------- ---------- ---------- ----------
Unaudited
Net sales $ 173,796 $ 175,239 $ 669,561 $ 735,236
Cost of sales 131,211 159,054 533,215 576,794
---------- ---------- ---------- ----------
Gross profit 42,585 16,185 136,346 158,442
Marketing, selling and
distribution expenses 15,054 15,516 58,444 64,631
General and administrative
expenses 10,134 13,811 35,725 44,817
Research and development
expenses 1,252 1,235 4,551 5,123
Amortization of other
intangibles 609 292 638 1,169
Asset impairment - 16,507 - 16,507
Restructuring charges 2,531 - 3,836 -
Other operating expense 72 387 1,113 2,155
---------- ---------- ---------- ----------
Operating income (loss) 12,933 (31,563) 32,039 24,040
Interest expense, net 9,683 9,745 36,869 39,989
---------- ---------- ---------- ----------
Income (loss) before
income taxes 3,250 (41,308) (4,830) (15,949)
Provision for (benefit
from) income taxes 2,887 (2,109) (1,062) 6,340
---------- ---------- ---------- ----------
Net income (loss) 363 (39,199) (3,768) (22,289)
========== ========== ========== ==========
Leiner Health Products Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands, except share data)
March 25, March 31,
ASSETS 2006 2007
---------- ----------
Current assets:
Cash and cash equivalents $ 7,731 $ 22,717
Accounts receivable, net of allowances of
$3,545 and $1,714 at March 25, 2006 and March
31, 2007, respectively 73,211 66,600
Inventories 165,714 134,639
Income tax receivable 56 2,565
Prepaid expenses and other current assets 16,484 7,982
---------- ----------
Total current assets 263,196 234,503
Property, plant and equipment, net 72,618 66,113
Goodwill 58,245 58,284
Other noncurrent assets 22,039 19,718
---------- ----------
Total assets $ 416,098 $ 378,618
========== ==========
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Accounts payable $ 77,648 $ 85,875
Accrued compensation and benefits 9,994 8,271
Customer allowances payable 10,522 7,153
Accrued interest 10,436 5,662
Other accrued expenses 14,418 9,139
Current portion of long-term debt 5,498 5,905
---------- ----------
Total current liabilities 128,516 122,005
Long-term debt 397,119 390,539
Other noncurrent liabilities 5,545 3,145
---------- ----------
Total liabilities 531,180 515,689
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 March 31,
2007 - -
Capital in excess of par value 13,489 13,474
Accumulated deficit (130,125) (152,414)
Accumulated other comprehensive income 1,554 1,869
---------- ----------
Total shareholder's deficit (115,082) (137,071)
---------- ----------
Total liabilities and shareholder's deficit $ 416,098 $ 378,618
========== ==========
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 Twelve months ended
------------------- -------------------
March 25, March 31, March 25, March 31,
2006 2007 2006 2007
--------- --------- --------- ---------
(Unaudited)
Net income (loss) $ 363 $(39,200) $ (3,768) $(22,289)
Interest expense, net 9,683 9,745 36,869 39,989
Provision for (benefit from)
income taxes 2,887 (2,109) (1,062) 6,340
Depreciation and amortization 4,972 5,038 16,634 18,293
Asset write-down (1) - - 5,659 -
Non-cash stock compensation
expense (2) 5 7 20 25
Expenses related to permitted
acquisition (3) 498 - 1,937 -
Expenses related to joint care
and other products (4) - - 12,400 -
Restructuring charges (5) 1,695 - 3,000 -
Price difference between PFI's
purchased inventory and
Leiner's manufacturing cost
(6) 36 - 572 -
Expenses related to supplies
to customers of PFI (7) 388 - 1,279 -
Management fees (8) 249 737 1,262 2,771
Non-cash OTC related charges
and reserves (9) - 43,869 - 43,869
--------- --------- --------- ---------
Credit Agreement EBITDA $ 20,776 $ 18,087 $ 74,802 $ 88,998
========= ========= ========= =========
(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) 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.
(3) Represents internal expenses incurred in connection with the
PFI Acquisition. These 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) 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 Amendment. These expenses
resulted in a reduction to gross profit in the consolidated statement
of operations for the year ended March 25, 2006.
(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 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
consolidated statement of operations and in operating activities in
the consolidated statement of cash flows.
(7) 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 consolidated statement of operations
and in operating activities in the consolidated statement of cash
flows.
(8) Management fees, which primarily include professional fees
incurred in connection with the Amendment, are included in other
operating expenses in the consolidated statement of operations and in
operating activities in the consolidated statement of cash flows.
(9) Represents non-cash items including impairment charge and the
inventory write-down related to the Company's OTC events. Excludes
add-backs of $6.3 million available for Credit Agreement EBITDA after
March 31, 2007.
CONTACT: Leiner Health Products Inc.
Kevin McDonnell, 310-952-1357
Chief Financial Officer
or
Lippert/Heilshorn & Assoc.
Jody Burfening/Harriet Fried
212-838-3777