CARSON, Calif., Jan 31, 2006 (BUSINESS WIRE) -- Leiner Health Products Inc. today announced its financial results for the third quarter ended December 24, 2005.
Net sales for the quarter were $181.2 million compared to $189.3 million for the same period in fiscal 2005, a 4.3% decrease. For the first nine months of fiscal 2006, net sales totaled $495.8 million compared to $510.3 million in the first nine months of fiscal 2005, a 2.9% decrease.
Leiner reported net income of $1.5 million for the quarter and a net loss of $4.1 million for the first nine months of FY06, compared to net income of $8.1 million and net loss of $54.3 million for the corresponding periods in fiscal 2005. Leiner recognized $88 million in recapitalization expenses in the first nine months of FY05 and reversing the impact of these costs, net income would have been $19.1 million for the first nine months of FY05. Net income for the quarter was negatively impacted by $2.8 million from higher interest expenses and operating expenses resulting from the integration of the PFI acquisition, by $1.3 million from organizational restructuring, and by $3.7 million from lower sales levels and lower gross margins from product mix changes. Sales declined $6.1 million in Canada due to the decision by a significant OTC supplier in Canada to supply retail customers directly on selected items, and $1.9 million in the U.S. primarily due to changes in the timing of promotions in the company's warehouse club customers.
Gross profit decreased $3.7 million in Q3 and $36.4 million for the first nine months compared to the prior year periods. However, consolidated gross margin was 23.0% in the third quarter, compared to 16.5% in the first two quarters of FY06. The improvement over the first two quarters resulted from stabilization of joint care margins on lower raw material costs and better fixed cost absorption from better plant throughput, which was more closely balanced with sales run rates.
Credit Agreement EBITDA for the quarter was $22.6 million, compared to $25.3 million for the same period in fiscal 2005. For the first nine months of fiscal 2006, Credit Agreement EBITDA was $54.0 million, compared to $66.3 million during the first nine months of fiscal 2005. Credit Agreement EBITDA is a financial measure used in the company's Credit Agreement, which required Leiner to have met a Consolidated Indebtedness to Credit Agreement EBITDA Leverage Ratio and a Credit Agreement EBITDA to Consolidated Interest Expense Ratio. Leiner was in compliance with these financial covenants as of December 24, 2005. 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 a reconciliation of Credit Agreement EBITDA to net income computed under U.S. generally accepted accounting principles (GAAP).
Robert Kaminski, Chief Executive Officer, commented, "As expected, our third quarter results mark the beginning of a return to profitability as a result of overcoming the challenges of the first two quarters. The PFI acquisition has been fully assimilated into the operations of Leiner, and we are working hard to improve margins and service levels of the acquired customers.
"Category publicity has been somewhat positive with recent articles in U.S. News (12/26), Time (1/16), and an 18-page story in Newsweek (1/16). Additionally, although initial positive publicity from the NIH GAIT study was not what we had hoped for, the follow on media has been quite positive. Post-GAIT POS is up 3-5% versus pre-GAIT (November) levels. The most recent IRI data for January showed a total category increase of 8%, the highest we've seen in months. We remain excited about the potential in this product category and the position we have established for Leiner in the marketplace."
Additional information regarding Leiner's fiscal 2006 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. PST, February 8, 2006. The Quarterly Report on Form 10-Q will also be available through the SEC's website, www.sec.gov.
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 27 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; 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.