LEINER HEALTH PRODUCTS INC - 10-Q Quarterly Report

FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended September 25, 2004

		OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 333-118532

LEINER HEALTH PRODUCTS INC.

(Exact name of registrant as specified in its charter)

DELAWARE		94-3431709
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

901 East 233rd Street, Carson, California		90745
(Address of principal executive offices)		(Zip Code)

(310) 835-8400

Registrant’s telephone number, including area code

N/A

(Former name or former address, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No ý

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES o NO ý

APPLICABLE ONLY TO ISSUERS INVOVLED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by the court. YES o NO o

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

Common Stock, $0.01 par value, 1,000 shares outstanding as of September 25, 2004

Leiner Health Products Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share data)

	March 27, 2004		September 25, 2004
	Note 1		Unaudited
ASSETS
Current assets:
Cash and cash equivalents	$	33,824	$	6,724
Accounts receivable, net of allowances of $2,970 and $3,159 at March 27, 2004 and September 25, 2004, respectively	77,984		70,682
Inventories	144,479		173,689
Income tax receivable	411		11,778
Prepaid expenses and other current assets	13,174		11,268
Total current assets	269,872		274,141
Property, plant and equipment, net	56,267		57,633
Goodwill	52,083		52,181
Other noncurrent assets	9,505		20,051
Total assets	$	387,727	$	404,006
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	91,162	$	87,654
Accrued compensation and benefits	14,514		11,226
Customer allowances payable	8,896		11,390
Accrued interest	1,110		9,176
Other accrued expenses	6,113		6,337
Current portion of long-term debt	14,286		5,488
Total current liabilities	136,081		131,271
Long-term debt	156,720		408,778
Other noncurrent liabilities	3,724		3,724
Total liabilities	296,525		543,773
Commitments and contingencies
Series A redeemable preferred stock, $0.01 par value;
Authorized, issued and outstanding shares-200,000 at March 27, 2004 and zero at September 25, 2004	40,188		—
Shareholders’ equity (deficit):
Series B junior convertible preferred stock, $0.01 par value;
Authorized, issued and outstanding shares-7,500 at March 27, 2004 and zero at September 25, 2004	6,616		—
Series C junior preferred stock, $0.01 par value;
Authorized, issued and outstanding shares-7,000 at March 27, 2004 and zero at September 25, 2004	6,178		—
Common stock, $0.01 par value; 3,000,000 shares authorized, 1,139,394 issued and outstanding at March 27, 2004 and 1,000 at September 25, 2004	11		—
Capital in excess of par value	21,841		—
Retained earnings (accumulated deficit)	16,259		(141,315		)
Accumulated other comprehensive income	109		1,548
Total shareholders’ equity (deficit)	51,014		(139,767		)
Total liabilities, redeemable preferred s tock and shareholders’ equity (deficit)	$	387,727	$	404,006

See accompanying notes to condensed consolidated financial statements.

Leiner Health Products Inc.

Condensed Consolidated Statements of Operations

Unaudited

(in thousands)

	Three months ended				Six months ended
	September 27, 2003		September 25, 2004		September 27, 2003		September 25, 2004
Net sales	$	176,557	$	165,043	$	315,474	$	321,046
Cost of sales	132,447		121,401		234,461		236,528
Gross profit	44,110		43,642		81,013		84,518
Marketing, selling and distribution expenses	14,728		14,993		27,556		29,672
General and administrative expenses	8,935		10,680		19,078		19,930
Research and development expenses	1,325		1,148		2,843		2,431
Amortization of other intangibles	134		80		287		160
Recapitalization expenses	—		794		—		86,170
Other operating expense	346		498		707		928
Operating income (loss)	18,642		15,449		30,542		(54,773		)
Interest expense, net	4,821		8,037</

PART I. Financial Information

ITEM 1. Financial Statements

Condensed Consolidated Balance Sheets - As of March 27, 2004 and September 25, 2004 (Unaudited)

Condensed Consolidated Statements of Operations (Unaudited) - For the three and six months ended September 27, 2003 and September 25, 2004

Condensed Consolidated Statements of Cash Flows (Unaudited) - For the six months ended September 27, 2003 and September 25, 2004

Notes to Condensed Consolidated Financial Statements (Unaudited)

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

ITEM 4. Controls and Procedures

PART II. Other Information

SIGNATURES