Exhibit 99.1
Leiner Health Products Reports Second Quarter 2008 Results
CARSON, Calif.--(BUSINESS WIRE)--November 8, 2007 --Leiner Health
Products Inc. today announced its financial results for the second
quarter of fiscal year 2008.
The Company reported a net loss of $26.3 million for the second
quarter of fiscal 2008, compared to net income of $6.1 million for the
same period in fiscal 2007.
Net sales for the second quarter of fiscal 2008 totaled $125.6
million compared to $198.0 million for the same period in fiscal 2007,
a decrease of $72.4 million or 36.6%. U.S. net sales were $111.4
million in the second quarter of fiscal 2008, a decrease of $73.1
million, or 39.6%, from the same period in fiscal 2007. Canadian net
sales were $14.2 million in the second quarter of fiscal 2008, an
increase of $0.8 million, or 6.0%, from the same period in fiscal
2007. Net U.S. sales decreased principally 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. Additionally, the second quarter of fiscal 2008
included one less week than the second quarter of the prior year.
Gross profit was $17.6 million, 14.0% of net sales, in the second
quarter of fiscal 2008, a decrease of $33.4 million, or 65.5%, from
$51.0 million, or 25.8% of net sales in the same period in fiscal
2007. Second quarter gross margins were negatively affected by costs
related to our response to the previously announced FDA inspection
observations and an additional $8.9 million non-cash inventory reserve
related to the write down of un-saleable OTC inventory, which was
required due to the length of the product requalification process.
Robert Kaminski, Chief Executive Officer, commented, "We are
pleased with the progress we have made toward re-entering the OTC
category, including FDA's recent decision to allow us to begin to ship
qualified inventory of previously manufactured OTC product and the
potential we see in our recently announced OTC alliance with
Wockhardt. We look forward to addressing the remaining challenges as
we work to regain customer distribution and complete our manufacturing
consolidation."
Credit Agreement EBITDA for the second quarter of fiscal 2008 was
$26.6 million, compared to $26.1 million for the same period in fiscal
2007. Leiner was in compliance with all of its financial covenants as
of September 29, 2007.
For the first six months of fiscal 2008, net sales totaled $233.0
million compared to $361.9 million in the first six months of fiscal
2007, a 35.6% decrease. The voluntary OTC suspension had a significant
negative impact on gross margins and net income. For the first six
months of fiscal 2008, Leiner realized a net loss of $53.8 million,
compared to a net income of $8.1 million in the first six months of
fiscal 2007.
Quarter End Conference Call Information
Leiner Health Products will hold a conference call to discuss its
second-quarter results on Friday, November 9, 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 November 9, 2007
at 2:00 p.m. Eastern Time through November 16, 2007, and can be
accessed by dialing 706-645-9291, conference ID #20516779. An archived
webcast will also be available on Leiner's website.
Additional information regarding Leiner's second 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. Pacific Time, November 13, 2007. 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 and headquartered in Carson, Calif., Leiner Health
Products is America's leading manufacturer of store brand vitamins,
minerals, and nutritional supplements, as measured by retail sales,
and supplies over-the-counter pharmaceuticals in the food, drug, mass
merchant and warehouse club (FDMC) retail market. Leiner provides the
leading FDMC retailers with over 3,000 products to help its customers
create and market high-quality store brands at low prices. It is also
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 on terms favorable to the Company or at all; (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) failure to
comply with new federal, state, local or foreign legislation or
regulation (including the new supplements cGMPs) 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
UNAUDITED
(dollars in thousands)
Three months ended Six months ended
----------------------------------------
September September September September
29, 2007 30, 2006 29, 2007 30, 2006
--------- --------- --------- ---------
Net sales $ 125,592 $197,966 $ 233,036 $361,876
Cost of sales 107,990 146,976 194,290 270,958
--------- --------- --------- ---------
Gross profit 17,602 50,990 38,746 90,918
Marketing, selling and
distribution expenses 12,457 17,294 25,410 32,488
General and administrative
expenses 15,850 10,796 31,594 20,460
Research and development
expenses 1,072 1,096 2,530 2,177
Amortization of other
intangibles 91 300 182 582
Restructuring charges 2,712 - 10,027 -
Other operating expense 320 1,179 320 1,112
--------- --------- --------- ---------
Operating income (loss) (14,900) 20,325 (31,317) 34,099
Interest expense, net 11,066 10,110 20,705 20,155
--------- --------- --------- ---------
Income (loss) before income
taxes (25,966) 10,215 (52,022) 13,944
Provision for income taxes 379 4,149 1,810 5,891
--------- --------- --------- ---------
Net income (loss) $(26,345) $ 6,066 $(53,832) $ 8,053
========= ========= ========= =========
LEINER HEALTH PRODUCTS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
ASSETS September 29, 2007 March 31, 2007
------------------ --------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 8,352 $ 22,717
Accounts receivable, net of
allowances of $2,686 and $2,014
at September 29, 2007 and March
31, 2007, respectively 48,209 66,600
Inventories 157,873 134,639
Income tax receivable 1,069 2,565
Prepaid expenses and other current
assets 8,637 7,982
------------------ --------------
Total current assets 224,140 234,503
Property, plant and equipment, net 62,154 66,113
Goodwill 58,810 58,284
Other noncurrent assets 20,759 19,718
------------------ --------------
Total assets $ 365,863 $ 378,618
================== ==============
LIABILITIES AND SHAREHOLDER'S
DEFICIT
Current liabilities:
Accounts payable $ 94,502 $ 85,875
Accrued compensation and benefits 8,162 8,271
Customer allowances payable 5,800 7,153
Accrued interest 5,887 5,662
Other accrued expenses 10,555 9,139
Current portion of long-term debt 6,178 5,905
------------------ --------------
Total current liabilities 131,084 122,005
Long-term debt 411,582 390,539
Other noncurrent liabilities 9,050 3,145
------------------ --------------
Total liabilities 551,716 515,689
Commitments and contingencies
Shareholder's deficit:
Common stock, $0.01 par value;
3,000,000 shares authorized,
1,000 issued and outstanding at
September 29, 2007 and March 31,
2007 - -
Capital in excess of par value 13,532 13,520
Treasury stock, 19,568 shares at
cost at September 29, 2007 and
March 31, 2007 (46) (46)
Accumulated deficit (206,666) (152,414)
Accumulated other comprehensive
income 7,327 1,869
------------------ --------------
Total shareholder's deficit (185,853) (137,071)
------------------ --------------
Total liabilities and
shareholder's deficit $ 365,863 $ 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
(dollars in thousands)
Three months ended Six months ended
------------------- -------------------
September September September September
29, 2007 30, 2006 29, 2007 30, 2006
--------- --------- --------- ---------
Net income (loss) $(26,345) $ 6,066 $(53,832) $ 8,053
Provision for income taxes 379 4,149 1,810 5,891
Interest expense, net 11,066 10,110 20,705 20,155
Depreciation and amortization 3,938 4,457 7,930 8,775
Non-cash stock compensation
expense (1) 6 5 12 12
Management fees (2) 75 1,344 75 1,354
Expenses related to permitted
acquisition (3) (8) - (25) -
Proceeds from business
interruption insurance (4) (385) - (385) -
Restructuring charges (5) 2,712 - 10,027 -
Non-cash OTC related charges,
reserves and addbacks (6) 8,888 - 8,888 -
Permitted add-backs (7) 26,290 - 48,905 -
--------- --------- --------- ---------
Credit Agreement EBITDA $ 26,616 $26,131 $ 44,110 $44,240
========= ========= ========= =========
(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) Management fees, which primarily include professional fees
incurred in connection with the 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.
(4) Represents insurance proceeds resulting from business
interruption.
(5) Represents expenses incurred in connection with the Company's
plans to consolidate its manufacturing and packaging operations in
the U.S. These expenses are included in the restructuring charges in
the consolidated statement of operations for the three and six months
ended September 29, 2007.
(6) Represents inventory write-down related to OTC events.
(7) The Credit Agreement, and Amendments thereto, provided certain
add-backs for the Company's OTC events.
CONTACT: Kevin McDonnell, 310-952-1357
Chief Financial Officer
or
Lippert/Heilshorn & Assoc.
Jody Burfening / Harriet Fried, 212-838-3777