Quarterly Financial Information (Unaudited)

12 Months Ended

Jun. 30, 2012

Quarterly Financial Information (Unaudited)

Quarterly Financial Information (Unaudited)

Note 23. Quarterly Financial Information (Unaudited)

Lannett’s quarterly consolidated results of operations are shown below:

	Fourth			Third			Second			First
(In thousands)	Quarter			Quarter			Quarter			Quarter
Fiscal 2012
Net Sales	$	35,690		$	30,688		$	27,734		$	28,878
Cost of Goods Sold	23,677			19,797			20,307			20,262
Gross Profit	12,013			10,891			7,427			8,616
Other Operating Expenses	9,407			8,527			6,932			7,171
Operating Income	2,606			2,364			495			1,445
Other Income (Expense)	(362		)	427			654			(1,011		)
Income Tax Expense	812			1,057			519			212
Less net income attributable to noncontrolling interest	(17		)	(16		)	(21		)	(16		)
Net Income — Lannett Company, Inc.	$	1,415		$	1,718		$	609		$	206
Earnings Per Share — Lannett Company, Inc.
Basic	$	0.05		$	0.06		$	0.02		$	0.01
Diluted	$	0.05		$	0.06		$	0.02		$	0.01

	Fourth			Third			Second			First
(In thousands)	Quarter			Quarter			Quarter			Quarter
Fiscal 2011
Net Sales	$	25,507		$	25,893		$	30,039		$	25,396
Cost of Goods Sold	21,752			20,589			21,682			19,492
Gross Profit	3,755			5,304			8,357			5,904
Other Operating Expenses	7,186			6,134			4,536			6,643
Operating Income (Loss)	(3,431		)	(830		)	3,821			(739		)
Other Income (Expense)	568			22			(67		)	(45		)
Income Tax Expense (Benefit)	(1,015		)	(450		)	1,394			(390		)
Less net income attributable to noncontrolling interest	(16		)	(4		)	(7		)	(10		)
Net Income (loss) — Lannett Company, Inc.	$	(1,864	)	$	(362	)	$	2,353		$	(404	)
Earnings (loss) Per Share — Lannett Company, Inc.
Basic	$	(0.07	)	$	(0.01	)	$	0.09		$	(0.02	)
Diluted	$	(0.07	)	$	(0.01	)	$	0.09		$	(0.02	)

	Fourth			Third			Second			First
(In thousands)	Quarter			Quarter			Quarter			Quarter
Fiscal 2010
Net Sales	$	33,760		$	31,266		$	28,717		$	31,435
Cost of Goods Sold	22,428			20,869			20,640			19,901
Gross Profit	11,332			10,397			8,077			11,534
Other Operating Expenses	7,312			7,745			6,779			6,791
Operating Income	4,020			2,652			1,298			4,743
Other Income (Expense)	240			(23		)	(62		)	(47		)
Income Tax Expense	1,288			527			1,170			1,828
Less net income attributable to noncontrolling interest	(156		)	(9		)	(11		)	(11		)
Net Income — Lannett Company, Inc.	$	2,816		$	2,093		$	55		$	2,857
Earnings Per Share — Lannett Company, Inc.
Basic	$	0.11		$	0.08		$	0.00		$	0.12
Diluted	$	0.11		$	0.08		$	0.00		$	0.11

In the fourth quarter of Fiscal 2011, gross margins were 15%.  Gross margins in the fourth quarter of Fiscal 2011 were primarily impacted by product mix as well as under utilization of labor resources in our manufacturing process as compared to the previous quarters in Fiscal 2011.

In the second quarter of Fiscal 2010 gross profit margins were 28%.  The gross profit percentage decreased due to the decline in sales of prescription vitamins and two months of idle capacity costs at our Cody Labs subsidiary being directly expensed to the income statement.  In March 2009, the FDA issued a warning letter to seven companies including Lannett to remove Morphine Sulfate Oral Solution from the market until someone could submit an application and receive approval on such application.  In April 2009, due to shortages of this fairly necessary drug in the marketplace, the FDA reversed their position and allowed all seven companies to continue manufacturing and/or marketing Morphine Sulfate up until 180 days after someone received approval on a Morphine Sulfate application.  These actions by the FDA caused the DEA to withhold purchasing and manufacturing quota from some or all of these seven companies, including Lannett.  Although the Company had quota at that time, and quota issues were resolved by December 2009, the Cody Labs facility was left idle for the months of October and November 2009 due to the lack of Morphine Sulfate quota.

The effective tax rate in the second quarter of Fiscal 2010 was 95% due primarily to a change in Pennsylvania tax law which lowered the Company’s apportionment factor within the state.  The impact of this change caused the Company to reduce its deferred tax assets by approximately $650, and therefore increased the effective tax rate by 11% for the six months ended December 31, 2009, which in turn, had a significant impact on the second quarter of Fiscal 2010.

The Company recorded income tax expense of $527 in the third quarter of Fiscal 2010 resulting in an effective tax rate of 20% due primarily to the settlement reached with the IRS related to its review of the federal income tax return for Fiscal 2008.  As a result of the settlement, the Company recorded a refund receivable totaling approximately $421.  The Company also reduced its liability for unrecognized tax benefits by approximately $216 as a result of the IRS settlement.