CARSON, Calif., Nov 3, 2004 (BUSINESS WIRE) -- Five-year Manufacturing and Distribution Agreement Signed
Leiner Health Products Inc. today announced its financial results for the second quarter ended September 25, 2004.
Net sales for the quarter were $165.0 million compared to $176.6 million for the same period in fiscal 2004. A soft retail market, retailer marketing and inventory adjustments, and the timing of new product launches caused the negative sales comparison. For the first six months of fiscal 2005, net sales totaled $321.0 million compared to $315.5 million in the first half of fiscal 2004.
Leiner reported net income of $5.4 million for the quarter, compared to $8.4 million for the same period in fiscal 2004. The decrease in net income resulted from the combination of the sales decline, increased interest expense of $8.0 million from the company's recapitalized debt structure compared to $4.8 million for the same period in fiscal 2004, and $2.0 million in one-time charges related to a series of organizational changes implemented in the quarter.
For the first six months of fiscal 2005, Leiner recognized $86.2 million of recapitalization charges and reported a net loss of $62.4 million. Excluding these recapitalization charges and their income tax impact, the company would have had net income of $9.6 million compared to $12.5 million reported in the first half of fiscal 2005. The decrease in net income resulted from the combination of increased interest expense of $16.5 million compared to $9.6 million for the first half of fiscal 2004, and $2.5 million in one-time charges related to a series of organizational changes implemented in the fiscal 2005 six month period. See the Condensed Consolidated Statements of Operations on page four for a reconciliation of the difference between net income including and excluding recapitalization charges and their income tax effect.
Credit Agreement EBITDA was $20.2 million for the quarter, compared to $22.9 million for the same period in fiscal 2004. For the first six months of fiscal 2005, Credit Agreement EBITDA was $39.9 million compared to $40.4 million during the first half of fiscal 2004. Credit Agreement EBITDA is a financial measure used in our Credit Agreement, which required Leiner to have met a Consolidated Indebtedness to Credit Agreement EBITDA Leverage Ratio of 5.25 to 1.00 and a Credit Agreement EBITDA to Consolidated Interest and Expense Ratio of 2.25 to 1.00 on the last day of the second quarter. Leiner is in compliance with these financial covenants as of September 25, 2004. Credit Agreement EBITDA is a non-GAAP measure that should not be considered an alternative to income from operations or net income (loss) as a measure of operating results or cash flows as a measure of liquidity. See the "Calculation of Credit Agreement EBITDA" on page six for reconciliation between net income and Credit Agreement EBITDA.
Robert Kaminski, Chief Executive Officer, commented, "The progress made during the second quarter against the Company's annual and long-term goals was significant. However, the second quarter results were adversely affected by a soft retail market, as well as retailer marketing and inventory adjustments.
"In addition, our comparables for the second quarter of 2005 were challenging given Leiner's exceptional performance in last year's second quarter - our highest revenue growth quarter on record due to an early new product introduction program, including the Company's introduction of Loratadine. Leiner's new product launches for fiscal 2005 are more heavily weighted toward the second half of the year.
"The second quarter of fiscal 2005 included a number of important long-term developments for Leiner, including the signing of an exclusive five-year vitamin manufacturing and distribution agreement with a major consumer products company. This agreement represents our second significant contract manufacturing assignment and builds momentum toward the long-term manufacturing goals we have established to diversify Leiner's customer and product portfolio.
"In addition, we have received strong support from our retail customers behind several new mass market products to be launched in the second half of fiscal 2005. Combined with proven sales from products we introduced last year, our Class of FY04, we believe these products will provide the basis for a strong second half of fiscal 2005, and favorable fiscal year performance.
"Our continuing initiative to improve operating efficiencies and increase operating profits identified a number of opportunities. During the first six months of fiscal 2005, we completed a series of organizational changes designed to increase speed to market, improve our operations, and reduce costs. Over the longer term we also expect these changes to save more than $2.0 million annually and to help us fulfill our vision of providing the highest quality products at the lowest possible prices."
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 40 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 produced 22 billion doses that help offer consumers high quality, affordable choices to improve their health and wellness.
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; (xiv) the availability and pricing of raw materials; and (xv) other factors beyond the company's control. 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.