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 December 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 ý No o

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 INVOLVED 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 ý* 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 December 25, 2004

* No reports were required to be filed under Section 12, 13, or 15(d) of the Securities Exchange Act of 1934.

PART I

Item 1

Leiner Health Products Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share data)

	March 27, 2004		December 25, 2004
ASSETS	Note 1		Unaudited

Current assets:
Cash and cash equivalents	$	33,824	$	7,526
Accounts receivable, net of allowances of $2,970 and $3,362 at March 27, 2004 and December 25, 2004, respectively	77,984		90,567
Inventories	144,479		164,243
Income tax receivable	411		6,716
Prepaid expenses and other current assets	13,174		12,286
Total current assets	269,872		281,338
Property, plant and equipment, net	56,267		57,748
Goodwill	52,083		52,290
Other noncurrent assets	9,505		19,320
Total assets	$	387,727	$	410,696

LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY (DEFICIT)

Current liabilities:
Accounts payable	$	91,162	$	95,630
Accrued compensation and benefits	14,514		10,955
Customer allowances payable	8,896		12,329
Accrued interest	1,110		4,946
Other accrued expenses	6,113		6,040
Current portion of long-term debt	14,286		5,509
Total current liabilities	136,081		135,409
Long-term debt	156,720		401,758
Other noncurrent liabilities	3,724		3,724
Total liabilities	296,525		540,891
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 December 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 December 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 December 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 December 25, 2004	11		—
Capital in excess of par value	21,841		—
Retained earnings (accumulated deficit)	16,259		(132,722		)
Accumulated other comprehensive income	109		2,527
Total shareholders’ equity (deficit)	51,014		(130,195		)
Total liabilities, redeemable preferred stock and shareholders’ equity (deficit)	$	387,727	$	410,696

See accompanying notes to condensed consolidated financial statements.

Leiner Health Products Inc.

Condensed Consolidated Statements of Operations

Unaudited

(in thousands)

	Three months ended				Nine months ended
	December 27, 2003		December 25, 2004		December 27, 2003		December 25, 2004
Net sales	$	176,710	$	189,303	$	492,184	$	510,349
Cost of sales	131,794		143,628		366,255		380,156
Gross profit	44,916		45,675		125,929		130,193
Marketing, selling and distribution expenses	13,528		14,198		41,084		43,870
General and administrative expenses	10,398		8,080		29,476		28,010
Research and development expenses	1,358		1,550		4,201		3,981
Amortization of other intangibles	81		80		368		240
Recapitalization expenses	—		607		—		86,777
Other operating expense	440		726

PART I. Financial Information

ITEM 1. Financial Statements

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

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

Condensed Consolidated Statements of Cash Flows (Unaudited) - For the nine months ended December 27, 2003 and December 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