Exhibit 99.1
Leiner Health Products Reports First Quarter
2008 Results
- Quality and Consolidation Initiatives on Track -
CARSON, Calif.--(BUSINESS WIRE)--Aug. 13, 2007--Leiner Health
Products Inc. today announced its financial results for the first
quarter of fiscal year 2008.
Net sales for the first quarter of fiscal 2008 totaled $107.4
million compared to $163.9 million for the same period in fiscal 2007,
a decrease of $56.5 million or 34.4%. U.S. net sales were $95.4
million in the first quarter of fiscal 2008, a decrease of $56.6
million, or 37.2%, from the same period in fiscal 2007. Canadian net
sales were $12.0 million in the first quarter of fiscal 2008, an
increase of $0.1 million, or 0.1%, from the same period in fiscal
2007. Net U.S. sales decreased due to the previously announced
voluntary suspension of our U.S.-based over-the-counter
pharmaceuticals (OTC) manufacturing and distribution during the latter
part of March 2007 and due to timing of promotional events, which had
the effect of decreasing our Vitamin, Mineral and Supplement (VMS)
sales.
Gross profit was $21.1 million, 19.7% of net sales, in the first
quarter of fiscal 2008, a decrease of $18.8 million, or 47.0%, from
$39.9 million, or 24.4% of net sales in the same period in fiscal
2007. First quarter gross profits were negatively affected by lower
revenue and idle plant capacity due to the previously announced OTC
product shipment suspension and Fort Mill consolidation.
The Company recorded total charges of $13.0 million in connection
with the previously announced quality initiatives and the
consolidation of its manufacturing and packaging operations. The
charges consisted of restructuring expenses of $7.3 million, which
reflects severance and other related costs related to the
consolidation as well as operating expense of $5.7 million, included
in general and administrative expenses, for consulting and legal costs
relating to the FDA observations remediation.
The Company reported a net loss of $27.5 million for the first
quarter of fiscal 2008, compared to net income of $2.0 million for the
same period in fiscal 2007. Credit Agreement EBITDA for the first
quarter of fiscal 2008 was $17.5 million, compared to $18.1 million
for the same period in fiscal 2007. Leiner was in compliance with all
of its financial covenants as of June 30, 2007.
Robert Kaminski, Chief Executive Officer, commented, "This has
been a challenging, but productive quarter as we initiated our Fort
Mill consolidation to align our cost structure with our revenue
expectations. As a result, we expect total costs to be reduced by a
targeted $50 million on an annualized basis. Our consolidation and OTC
remediation plans continue to show progress, and we expect to emerge
as a best-in-class, high quality OTC and VMS supplier of store brand
products. As part of our efforts in this area, we recently recruited
John M. Johnson to join Leiner's team as Senior Vice President,
Quality and Compliance. John, who was most recently the senior quality
executive for Mayne Pharma a global pharmaceutical company, has more
than 30 years' experience and a demonstrated track record in
successfully driving quality initiatives."
Quarter End Conference Call Information
Leiner Health Products will hold a conference call to discuss its
first-quarter results on Tuesday, August 14, 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 August 14, 2007 at
11:00 a.m. PT through August 21, 2007, and can be accessed by dialing
706-645-9291, conference ID #12062822. An archived webcast will also
be available on Leiner's website.
Additional information regarding Leiner's first quarter fiscal
2008 performance 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, August 14, 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 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 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 Statements
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) obtaining an unfavorable result
in significant litigation; (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.
Consolidated Statement of Operations
(in thousands)
Three months ended
----------------------------
June 30, 2007 June 24, 2006
------------- -------------
(Unaudited)
Net sales $ 107,444 $ 163,910
Cost of sales 86,300 123,982
------------- -------------
Gross profit 21,144 39,928
Marketing, selling and distribution
expenses 12,953 15,194
General and administrative expenses 15,744 9,665
Research and development expenses 1,458 1,081
Amortization of other intangibles 91 282
Restructuring charges 7,315 -
Other operating expense - (67)
------------- -------------
Operating income (loss) (16,417) 13,773
Interest expense, net 9,639 10,045
------------- -------------
Income (loss) before income taxes (26,056) 3,728
Provision for income taxes 1,431 1,741
------------- -------------
Net income (loss) (27,487) 1,987
============= =============
Leiner Health Products Inc.
Consolidated Balance Sheets
(dollars in thousands, except share data)
June 30, 2007 March 31, 2007
-------------- --------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 8,333 $ 22,717
Accounts receivable, net of allowances
of $1,505 and $2,014 at June 30, 2007
and March 31, 2007, respectively 46,473 66,600
Inventories 150,806 134,639
Income tax receivable 2,109 2,565
Prepaid expenses and other current
assets 8,215 7,982
-------------- --------------
Total current assets 215,936 234,503
Property, plant and equipment, net 63,735 66,113
Goodwill 58,557 58,284
Other noncurrent assets 21,474 19,718
-------------- --------------
Total assets $ 359,702 $ 378,618
============== ==============
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Accounts payable $ 80,732 $ 85,875
Accrued compensation and benefits 9,396 8,271
Customer allowances payable 5,680 7,153
Accrued interest 1,492 5,662
Other accrued expenses 10,886 9,139
Current portion of long-term debt 5,996 5,905
-------------- --------------
Total current liabilities 114,182 122,005
Long-term debt 398,726 390,539
Other noncurrent liabilities 8,892 3,145
-------------- --------------
Total liabilities 521,800 515,689
Commitments and contingencies
Shareholder's deficit
Common stock, $0.01 par value;
3,000,000 shares authorized, 1,000
issued and outstanding at June 30,
2007 and March 31, 2007 - -
Capital in excess of par value 13,480 13,474
Accumulated deficit (180,321) (152,414)
Accumulated other comprehensive income 4,743 1,869
-------------- --------------
Total shareholder's deficit (162,098) (137,071)
-------------- --------------
Total liabilities and shareholder's
deficit $ 359,702 $ 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
---------------------------
June 30, 2007 June 24, 2006
------------- -------------
(Unaudited)
Net income (loss) $ (27,487) $ 1,987
Interest expense, net 9,639 10,045
Provision for income taxes 1,431 1,741
Depreciation and amortization 3,991 4,318
Non-cash stock compensation expense (1) 6 7
Expenses related to permitted
acquisition (2) (17) -
Restructuring charges (3) 7,315 -
Management fees (4) - 9
Permitted add-back (5) 22,615 -
------------- -------------
Credit Agreement EBITDA $ 17,493 $ 18,107
(1) 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.
(2) Represents cost adjustments in connection with potential
acquisitions. 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.
(3) Represents expenses incurred in connection with the Company's
plan to consolidate its manufacturing and packaging operations. These
expenses are included in restructuring charges in the consolidated
statement of operations for the three months ended June 30, 2007.
(4) Management fees, which primarily include professional fees
incurred in connection with the first amendment to the Company's
Credit Agreement, are included in other operating expenses in the
consolidated statement of operations and in operating activities in
the consolidated statement of cash flows.
(5) The second amendment to the Company's Credit Agreement
provided add-backs for certain items related to the voluntary
suspension of the Company's OTC shipments and plant consolidation
plan.
CONTACT: Leiner Health Products Inc.
Kevin McDonnell, 310-952-1357
Chief Financial Officer
or
Lippert/Heilshorn & Assoc.
Jody Burfening / Harriet Fried, 212-838-3777