CARSON, Calif., Jun 14, 2006 (BUSINESS WIRE) -- Leiner Health Products Inc. today announced its financial results for the fourth quarter and full year ended March 25, 2006.
Net sales for the quarter were $173.8 million compared to $174.6 million for the same period in fiscal 2005, a 0.4% decrease. Modest growth in US sales in Q4 of fiscal 2006 was offset by a $5.4 million sales decline in Canada. The US sales increase stems from the continued growth of joint care products and sales from the PFI acquisition. For the twelve months of fiscal 2006, net sales totaled $669.6 million compared to $684.9 million in the same period of fiscal 2005, a 2.2% decrease. US sales increased by nearly $4 million in fiscal 2006 but this was overshadowed by a $19.1 million decrease in Canadian sales in the period, a 25.8% decline. The decline in year to year Canadian sales resulted from the decision of a significant OTC supplier to supply certain products directly to retail customers. US sales were adversely impacted by the decline in sales of vitamin E, which is a higher margin product, and the absence of branded new product sales.
Leiner reported net income of $ .4 million for the quarter, compared to net income of $6.4 million for the same period in fiscal 2005. Gross profit improved in Q4 of fiscal 2006 to 24.5% versus 24.0% in Q4 of fiscal 2005. Despite the improvement in gross margin, net income declined in Q4 FY06 primarily from higher restructuring charges, interest expenses, and PFI integration costs.
For the twelve months of fiscal 2006, Leiner recognized a net loss of $3.8 million, compared to a net loss of $47.9 million for the same period of fiscal 2005, which included $88.0 million of recapitalization charges. Gross profit declined to $136 million for fiscal 2006 compared to $172 million in FY05, and gross margin was 20.4% for fiscal 2006, compared to 25.1% in fiscal 2005. Gross margin in FY06 was diluted by the 16.5% margins in the first six months of the fiscal year, resulting from the movement in product mix away from higher margin vitamin E to joint care products, which experienced high raw material costs due to changing market conditions. Unabsorbed fixed manufacturing costs due to customer inventory reductions and reserves for product returns also impacted gross profit in the first six months of the fiscal year.
Credit Agreement EBITDA for the quarter was $20.8 million, compared to $22.1 million for the same period in fiscal 2005. For the twelve months of fiscal 2006, Credit Agreement EBITDA was $74.8 million, compared to $88.4 million for the same period 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 March 25, 2006. As previously announced, the Company's financial covenants were amended through unanimous approval by its secured lenders, effective September 23, 2005 (Credit Agreement Amendment). 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 (loss) computed under U.S. generally accepted accounting principles (GAAP).
Robert Kaminski, Chief Executive Officer, commented, "The reengineering accomplished in fiscal 2006 will serve the company well in the future. Significant landscape changes have taken place during fiscal 2006 in numerous areas including product mix, customer inventories, global sourcing and quality initiatives, and a substantial restructuring of the Leiner team. The principal drivers of the company's return to more normal profitability include continued benefits from its scale position in high quality global joint care raw material sourcing and continued full utilization of the company's manufacturing plants." Mr. Kaminski continued, "The fact that fourth quarter gross margins have returned to 24.5% is evidence of the hard work of the men and women of Leiner and the teamwork between Leiner and its valued supplier partners."
Additional information regarding Leiner's fiscal 2006 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, by 5:00 p.m. PST, June 23, 2006. The Annual Report on Form 10-K 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 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. Last year, Leiner distributed over 28 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.