EX-99.1 2 a19-4231_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

 

 

 

Contact:

 

Robert Jaffe

 

 

 

Robert Jaffe Co., LLC

 

 

 

(424) 288-4098

 

LANNETT ANNOUNCES RECORD NET SALES IN THE FISCAL 2019 SECOND-QUARTER FINANCIAL RESULTS; RAISES GUIDANCE FOR FISCAL 2019

 

·                  Recent 17 Product Launches Contributed $40 Million of Net Sales in Fiscal 2019 YTD

 

·                  Five New Product Launches in the Quarter

 

·                  Successful Credit Agreement Amendment Provides Financial Flexibility

 

·                  $33 Million Net Cost Reduction Plan Well Underway

 

·                  Levothyroxine Transaction Improved Liquidity; Cash Balance of $164 Million at December 31 Continues to Grow

 

Philadelphia, PA — February 6, 2019 — Lannett Company, Inc. (NYSE: LCI) today reported financial results for its fiscal 2019 second quarter ended December 31, 2018.

 

“Stellar sales across our product offering drove our strong fiscal 2019 second quarter financial results,” said Tim Crew, chief executive officer of Lannett.  “The 17 products launched during calendar year 2018 were key contributors to the growth in the quarter and are expected to contribute approximately $75 million in fiscal 2019 net sales with at least 35% of gross margin.  Complementing our second quarter performance was a well-executed plan associated with the transition of Levothyroxine.

 

“We are increasingly confident about our future.  With approximately 60 products in various stages of operational readiness and development, of which we plan to launch 10 over the next several months, we expect to regularly bring new products to market for the foreseeable future at a similar pace and value as we have in the recent past.  With regard to our cost reduction plan, virtually all main actions have been completed or are in-process to achieve the $33 million of targeted net annualized savings.  In addition, we executed an amendment to our credit agreement, which further enhances our financial flexibility and better positions us to capitalize on more growth opportunities.  As a result of our progress, we have raised our financial guidance for fiscal 2019.”

 

Crew went on to say that by the end of fiscal 2020 the company is on track to replace a substantial majority of normalized gross profit from Levothyroxine, which approximates $100 million and excludes the impact of recent market disruptions and associated share gains.

 

For the fiscal 2019 second quarter, on a GAAP basis, net sales were $193.7 million compared with $184.3 million for the second quarter of fiscal 2018.  Gross profit was $69.8 million, or 36% of total net sales, compared with $87.5 million, or 47% of total net sales.  Research and

 

 

development (R&D) expenses were $9.7 million compared with $10.7 million for the fiscal 2018 second quarter.  Selling, general and administrative (SG&A) expenses decreased to $23.2 million from $28.5 million.  Restructuring expenses were $0.2 million compared with $1.0 million.  Operating income was $36.7 million compared with $47.1 million.  Interest expense was $21.5 million compared with $20.7 million for the second quarter of fiscal 2018.  Net income was $12.4 million, or $0.32 per share, compared with $14.0 million, or $0.37 per diluted share, for the fiscal 2018 second quarter.

 

For the fiscal 2019 second quarter reported on a Non-GAAP basis, adjusted net sales were $193.7 million compared with $184.3 million for the second quarter of fiscal 2018.  Adjusted gross profit was $86.0 million, or 44% of adjusted net sales, compared with $96.7 million, or 52% of adjusted net sales, for the prior-year second quarter.  Adjusted R&D expenses were $8.7 million compared with $10.7 million.  Adjusted SG&A expenses were $17.4 million compared with $20.9 million.  Adjusted operating income was $59.9 million compared with $65.1 million for the prior-year second quarter.  Adjusted interest expense was $17.1 million compared with $16.2 million for the second quarter of fiscal 2018.  Adjusted net income was $33.6 million, or $0.86 per diluted share, compared with $40.6 million, or $1.06 per diluted share, for the fiscal 2018 second quarter.

 

Guidance for Fiscal 2019 —

 

Based on its current outlook, the company has revised its estimates, as follows:

 

 

 

GAAP

 

Adjusted

Net sales

 

$615 million to $635 million, up from $585 million to $615 million

 

$615 million to $635 million, up from $585 million to $615 million

Gross margin %

 

37% to 38%, down from 38% to 39%

 

44% to 45%, unchanged

R&D expense

 

$35 million to $37 million, up from $32 million to $36 million

 

$33 million to $35 million, up from $30 million to $34 million

SG&A expense

 

$78 million to $81 million, up from $75 million to $78 million

 

$66 million to $69 million, up from $63 million to $66 million

Restructuring expense

 

$3 million to $4 million, unchanged

 

$ —

Asset impairment charges

 

$369 million, unchanged

 

$ —

Interest and other

 

$84 million to $86 million, up from $81 million to $83 million

 

$66 million to $68 million, up from $63 million to $65 million

Effective tax rate

 

22% to 23%, unchanged

 

22% to 23%, unchanged

Capital expenditures

 

$30 million to $35 million, unchanged

 

$30 million to $35 million, unchanged

 

 

Conference Call Information and Forward-Looking Statements

 

Later today, the company will host a conference call at 4:30 p.m. ET to review its results of operations for its fiscal 2019 second quarter ended December 31, 2018.  The conference call will be available to interested parties by dialing 866-436-9172 from the U.S. or Canada, or 630-691-2760 from international locations, passcode 48172671.  The call will be broadcast via the Internet at www.lannett.com.  Listeners are encouraged to visit the website at least 10 minutes prior to the start of the scheduled presentation to register, download and install any necessary audio software.  A playback of the call will be archived and accessible on the same website for at least three months.

 

Discussion during the conference call may include forward-looking statements regarding such topics as, but not limited to, the company’s financial status and performance, regulatory and operational developments, and any comments the company may make about its future plans or prospects in response to questions from participants on the conference call.

 

Use of Non-GAAP Financial Measures

 

This news release contains references to Non-GAAP financial measures, which are financial measures that are not prepared in conformity with United States generally accepted accounting principles (U.S. GAAP).  Management uses these measures internally for evaluating its operating performance.  The Company’s management believes that the presentation of Non-GAAP financial measures provides useful supplementary information regarding operational performance, because it enhances an investor’s overall understanding of the financial results for the Company’s core business.  Additionally, it provides a basis for the comparison of the financial results for the Company’s core business between current, past and future periods.  Non-GAAP financial measures should be considered only as a supplement to, and not as a substitute for or as a superior measure to, financial measures prepared in accordance with U.S. GAAP.

 

Detailed reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included with this release.

 

Non-GAAP financial measures exclude, among others, the effects of (1) amortization of purchased intangibles and other purchase accounting entries, (2) acquisition and integration-related expenses, (3) non-cash interest expense, as well as (4) certain other items considered unusual or non-recurring in nature.

 

About Lannett Company, Inc.:

 

Lannett Company, founded in 1942, develops, manufactures, packages, markets and distributes generic pharmaceutical products for a wide range of medical indications — see financial schedule below for net sales by medical indication.  For more information, visit the company’s website at www.lannett.com.

 

 

This news release contains certain statements of a forward-looking nature relating to future events or future business performance.  Any such statements, including, but not limited to, successfully launching and commercializing recently acquired and previously approved products, as well as products in development, achieving cost reductions, successfully consummating transactions with new and existing alliance partners and successfully launching and commercializing products included therein, and achieving the financial metrics stated in the company’s guidance for fiscal 2019, whether expressed or implied, are subject to risks and uncertainties which can cause actual results to differ materially from those currently anticipated due to a number of factors which include, but are not limited to, the difficulty in predicting the timing or outcome of FDA or other regulatory approvals or actions, the ability to successfully commercialize products upon approval, including acquired products, and Lannett’s estimated or anticipated future financial results, future inventory levels, future competition or pricing, future levels of operating expenses, product development efforts or performance, and other risk factors discussed in the company’s Form 10-K and other documents filed with the Securities and Exchange Commission from time to time.  These forward-looking statements represent the company’s judgment as of the date of this news release.  The company disclaims any intent or obligation to update these forward-looking statements.

 

# # #

 

FINANCIAL SCHEDULES FOLLOW

 

 

LANNETT COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

 

 

 

(Unaudited)

 

 

 

 

 

December 31, 2018

 

June 30, 2018

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

163,774

 

$

98,586

 

Accounts receivable, net

 

275,364

 

252,651

 

Inventories

 

136,128

 

141,635

 

Prepaid income taxes

 

—

 

15,159

 

Assets held for sale

 

11,422

 

13,976

 

Other current assets

 

7,958

 

4,863

 

Total current assets

 

594,646

 

526,870

 

Property, plant and equipment, net

 

195,607

 

233,247

 

Intangible assets, net

 

409,870

 

424,425

 

Goodwill

 

—

 

339,566

 

Deferred tax assets

 

100,013

 

22,063

 

Other assets

 

19,320

 

29,133

 

TOTAL ASSETS

 

$

1,319,456

 

$

1,575,304

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

60,178

 

$

56,767

 

Accrued expenses

 

7,283

 

7,425

 

Accrued payroll and payroll-related expenses

 

15,545

 

7,819

 

Deferred revenue

 

23,998

 

—

 

Rebates payable

 

44,384

 

49,400

 

Royalties payable

 

9,615

 

5,955

 

Restructuring liability

 

5,693

 

6,706

 

Liabilities held for sale

 

1,204

 

—

 

Settlement liability

 

8,000

 

—

 

Income taxes payable

 

1,346

 

—

 

Short-term borrowings and current portion of long-term debt

 

66,845

 

66,845

 

Total current liabilities

 

244,091

 

200,917

 

Long-term debt, net

 

746,607

 

772,425

 

Other liabilities

 

2,247

 

3,047

 

TOTAL LIABILITIES

 

992,945

 

976,389

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

Common stock ($0.001 par value, 100,000,000 shares authorized; 38,766,807 and 38,256,839 shares issued; 37,822,927 and 37,380,517 shares outstanding at December 31, 2018 and June 30, 2018, respectively)

 

39

 

38

 

Additional paid-in capital

 

312,322

 

306,817

 

Retained earnings

 

29,016

 

306,464

 

Accumulated other comprehensive loss

 

(502

)

(515

)

Treasury stock (943,880 and 876,322 shares at December 31, 2018 and June 30, 2018, respectively)

 

(14,364

)

(13,889

)

Total stockholders’ equity

 

326,511

 

598,915

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

1,319,456

 

$

1,575,304

 

 

 

LANNETT COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands, except share and per share data)

 

 

 

Three months ended

 

Six months ended

 

 

 

December 31,

 

December 31,

 

 

 

2018

 

2017

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

193,718

 

$

184,305

 

$

348,772

 

$

339,266

 

Cost of sales

 

115,751

 

88,914

 

203,441

 

168,467

 

Amortization of intangibles

 

8,157

 

7,941

 

16,380

 

15,678

 

Gross profit

 

69,810

 

87,450

 

128,951

 

155,121

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development expenses

 

9,723

 

10,722

 

19,533

 

18,131

 

Selling, general and administrative expenses

 

23,197

 

28,493

 

43,785

 

47,531

 

Acquisition and integration-related expenses

 

—

 

65

 

—

 

83

 

Restructuring expenses

 

213

 

1,035

 

1,235

 

1,562

 

Asset impairment charges

 

—

 

—

 

369,499

 

—

 

Total operating expenses

 

33,133

 

40,315

 

434,052

 

67,307

 

Operating income (loss)

 

36,677

 

47,135

 

(305,101

)

87,814

 

Other income (loss):

 

 

 

 

 

 

 

 

 

Investment income

 

556

 

2,325

 

935

 

3,489

 

Interest expense

 

(21,512

)

(20,686

)

(42,945

)

(41,598

)

Other

 

(712

)

3,386

 

(1,008

)

3,135

 

Total other loss

 

(21,668

)

(14,975

)

(43,018

)

(34,974

)

Income (loss) before income tax

 

15,009

 

32,160

 

(348,119

)

52,840

 

Income tax expense (benefit)

 

2,647

 

18,138

 

(72,953

)

25,561

 

Net income (loss)

 

$

12,362

 

$

14,022

 

$

(275,166

)

$

27,279

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.33

 

$

0.38

 

$

(7.30

)

$

0.74

 

Diluted

 

$

0.32

 

$

0.37

 

$

(7.30

)

$

0.72

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

37,761,176

 

37,066,902

 

37,674,200

 

37,029,483

 

Diluted

 

39,112,547

 

38,290,358

 

37,674,200

 

38,087,826

 

 

 

LANNETT COMPANY, INC.

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)

(In thousands, except percentages, share and per share data)

 

 

 

Three months ended December 31, 2018

 

 

 

Net sales

 

Cost of sales

 

Amortization
of intangibles

 

Gross
Profit

 

Gross
Margin
%

 

R&D
expenses

 

SG&A
expenses

 

Restructuring
expenses

 

Operating
income

 

Other
income
(loss)

 

Income
before
income
tax

 

Income tax
expense

 

Net income

 

Diluted
earnings
per share
(k)

 

GAAP Reported

 

$

193,718

 

$

115,751

 

$

8,157

 

$

69,810

 

36

%

$

9,723

 

$

23,197

 

$

213

 

$

36,677

 

$

(21,668

)

$

15,009

 

$

2,647

 

$

12,362

 

$

0.32

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation of fixed assets step-up (a)

 

—

 

(1,124

)

—

 

1,124

 

 

 

—

 

—

 

—

 

1,124

 

—

 

1,124

 

—

 

1,124

 

 

 

Amortization of intangibles (b)

 

—

 

—

 

(8,157

)

8,157

 

 

 

—

 

—

 

—

 

8,157

 

—

 

8,157

 

—

 

8,157

 

 

 

Cody API business Held for Sale (c)

 

—

 

(3,486

)

—

 

3,486

 

 

 

(862

)

34

 

—

 

4,314

 

—

 

4,314

 

—

 

4,314

 

 

 

Depreciation on capitalized software costs (d)

 

—

 

—

 

—

 

—

 

 

 

—

 

(1,058

)

—

 

1,058

 

—

 

1,058

 

—

 

1,058

 

 

 

Legal and financial advisory costs (e)

 

—

 

—

 

—

 

—

 

 

 

—

 

(2,430

)

—

 

2,430

 

—

 

2,430

 

—

 

2,430

 

 

 

Decommissioning of Philadelphia sites (f)

 

—

 

(2,265

)

—

 

2,265

 

 

 

—

 

—

 

—

 

2,265

 

583

 

2,848

 

—

 

2,848

 

 

 

Restructuring expenses (g)

 

—

 

—

 

—

 

—

 

 

 

—

 

—

 

(213

)

213

 

—

 

213

 

—

 

213

 

 

 

Non-cash interest (h)

 

—

 

—

 

—

 

—

 

 

 

—

 

—

 

—

 

—

 

4,396

 

4,396

 

—

 

4,396

 

 

 

Other (i)

 

—

 

(1,126

)

—

 

1,126

 

 

 

(210

)

(2,318

)

—

 

3,654

 

285

 

3,939

 

—

 

3,939

 

 

 

Tax adjustments (j)

 

—

 

—

 

—

 

—

 

 

 

—

 

—

 

—

 

—

 

—

 

—

 

7,199

 

(7,199

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Adjusted

 

$

193,718

 

$

107,750

 

$

—

 

$

85,968

 

44

%

$

8,651

 

$

17,425

 

$

—

 

$

59,892

 

$

(16,404

)

$

43,488

 

$

9,846

 

$

33,642

 

$

0.86

 

 

(a)

 

To exclude depreciation of a fair value step-up in property, plant and equipment related to the acquisition of Kremers Urban Pharmaceuticals, Inc. (“KUPI”)

(b)

 

To exclude amortization of purchased intangible assets primarily related to the acquisitions of KUPI and Silarx Pharmaceuticals, Inc.

(c)

 

To exclude the operating results of the Cody API business Held for Sale which was classified as Held for Sale as of September 30, 2018

(d)

 

To exclude depreciation on previously capitalized software integration costs associated with the KUPI acquisition

(e)

 

To exclude legal and financial advisory costs primarily related to exploring and evaluating debt and capital structure alternatives, including the December 2018 amendment to our Credit Agreement

(f)

 

To exclude the costs associated with the decommissioning and shutdown of the Philadelphia manufacturing and distribution sites

(g)

 

To exclude expenses associated with the 2016 Restructuring Plan as well as the Cody Restructuring Plan

(h)

 

To exclude non-cash interest expense associated with debt issuance costs

(i)

 

To primarily exclude separation costs related to the Company’s cost reduction plan, as well as a special recognition incentive payment

(j)

 

To exclude the tax effect of the pre-tax adjustments included above at applicable tax rates

(k)

 

The weighted average share number for the three months ended December 31, 2018 is 39,112,547 for both the GAAP and the non-GAAP earnings per share calculations

 

 

LANNETT COMPANY, INC.

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)

(In thousands, except percentages, share and per share data)

 

 

 

Three months ended December 31, 2017

 

 

 

Net sales

 

Cost of
sales

 

Amortization
of intangibles

 

Gross
Profit

 

Gross
Margin %

 

R&D
expenses

 

SG&A
expenses

 

Acquisition
and integration-
related
expenses

 

Restructuring
expenses

 

Operating
income

 

Other
income
(loss)

 

Income
before
income tax

 

Income tax
expense

 

Net income

 

Diluted
earnings
per share
(i)

 

GAAP Reported

 

$

184,305

 

$

88,914

 

$

7,941

 

$

87,450

 

47

%

$

10,722

 

$

28,493

 

$

65

 

$

1,035

 

$

47,135

 

$

(14,975

)

$

32,160

 

$

18,138

 

$

14,022

 

$

0.37

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation of Fixed Assets step-up (a)

 

—

 

(1,335

)

—

 

1,335

 

 

 

—

 

—

 

—

 

—

 

1,335

 

—

 

1,335

 

—

 

1,335

 

 

 

Amortization of intangibles (b)

 

—

 

—

 

(7,941

)

7,941

 

 

 

—

 

(217

)

—

 

—

 

8,158

 

—

 

8,158

 

—

 

8,158

 

 

 

Acquisition and integration-related expenses (c)

 

—

 

—

 

—

 

—

 

 

 

—

 

—

 

(65

)

—

 

65

 

—

 

65

 

—

 

65

 

 

 

Restructuring expenses (d)

 

—

 

—

 

—

 

—

 

 

 

—

 

—

 

—

 

(1,035

)

1,035

 

—

 

1,035

 

—

 

1,035

 

 

 

Non-cash interest (e)

 

—

 

—

 

—

 

—

 

 

 

—

 

—

 

—

 

—

 

—

 

4,454

 

4,454

 

—

 

4,454

 

 

 

Litigation settlement gain (f)

 

—

 

—

 

—

 

—

 

 

 

—

 

—

 

—

 

—

 

—

 

(3,500

)

(3,500

)

—

 

(3,500

)

 

 

Other (g)

 

—

 

—

 

—

 

—

 

 

 

—

 

(7,405

)

—

 

—

 

7,405

 

—

 

7,405

 

—

 

7,405

 

 

 

Tax adjustments (h)

 

—

 

—

 

—

 

—

 

 

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

(7,653

)

7,653

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Adjusted

 

$

184,305

 

$

87,579

 

$

—

 

$

96,726

 

52

%

$

10,722

 

$

20,871

 

$

—

 

$

—

 

$

65,133

 

$

(14,021

)

$

51,112

 

$

10,485

 

$

40,627

 

$

1.06

 

 

(a)

 

Relates to depreciation of a fair value step-up in property, plant and equipment related to the acquisition of Kremers Urban Pharmaceuticals, Inc. (“KUPI”)

(b)

 

Relates to amortization of purchased intangible assets primarily related to the acquisitions of KUPI and Silarx Pharmaceuticals, Inc.

(c)

 

Relates to acquisition and integration-related expenses primarily related to the acquisition of KUPI

(d)

 

To exclude expenses associated with the 2016 Restructuring Plan

(e)

 

To exclude non-cash interest expense primarily associated with debt issuance costs

(f)

 

To exclude a settlement gain associated with patent litigation

(g)

 

To exclude separation benefits associated with the former Chief Executive Officer as well as a reversal of indemnified unrecognized tax benefits due to expirations in the statute of limitations, related to the KUPI acquisition

(h)

 

To exclude the impact of the revaluation of net long term deferred tax assets related to the Tax Cut and Jobs Act legislation (“2017 Tax Reform”), partially offset by the tax effect of the pre-tax adjustments included at applicable tax rates as well as the reversal of indemnified unrecognized tax benefits related to the KUPI acquisition

(i)

 

The weighted average share number for the three months ended December 31, 2017 is 38,290,358 for both the GAAP and the non-GAAP earnings per share calculations

 

 

LANNETT COMPANY, INC.

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)

(In thousands, except percentages, share and per share data)

 

 

 

Six months ended December 31, 2018

 

 

 

Net sales

 

Cost of sales

 

Amortization
of intangibles

 

Gross Profit

 

Gross
Margin
%

 

R&D
expenses

 

SG&A
expenses

 

Restructuring
expenses

 

Asset impairment
charges

 

Operating
income
(loss)

 

Other
income
(loss)

 

Income
before
income tax
(loss)

 

Income tax
expense
(benefit)

 

Net income
(loss)

 

Diluted
earnings 
(loss) per
share (l)

 

GAAP Reported

 

$

348,772

 

$

203,441

 

$

16,380

 

$

128,951

 

37

%

$

19,533

 

$

43,785

 

$

1,235

 

$

369,499

 

$

(305,101

)

$

(43,018

)

$

(348,119

)

$

(72,953

)

$

(275,166

)

$

(7.30

)

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation of fixed assets step-up (a)

 

—

 

(2,459

)

—

 

2,459

 

 

 

—

 

—

 

—

 

—

 

2,459

 

—

 

2,459

 

—

 

2,459

 

 

 

Amortization of intangibles (b)

 

—

 

—

 

(16,380

)

16,380

 

 

 

—

 

—

 

—

 

—

 

16,380

 

—

 

16,380

 

—

 

16,380

 

 

 

Cody API business Held for Sale (c)

 

—

 

(3,486

)

—

 

3,486

 

 

 

(862

)

34

 

—

 

—

 

4,314

 

—

 

4,314

 

—

 

4,314

 

 

 

Depreciation on capitalized software costs (d)

 

—

 

—

 

—

 

—

 

 

 

—

 

(2,116

)

—

 

—

 

2,116

 

—

 

2,116

 

—

 

2,116

 

 

 

Legal and financial advisory costs (e)

 

—

 

—

 

—

 

—

 

 

 

—

 

(2,430

)

—

 

—

 

2,430

 

—

 

2,430

 

—

 

2,430

 

 

 

Decommissioning of Philadelphia sites (f)

 

—

 

(2,265

)

—

 

2,265

 

 

 

—

 

—

 

—

 

—

 

2,265

 

583

 

2,848

 

—

 

2,848

 

 

 

Restructuring expenses (g)

 

—

 

—

 

—

 

—

 

 

 

—

 

—

 

(1,235

)

—

 

1,235

 

—

 

1,235

 

—

 

1,235

 

 

 

Asset impairment charges (h)

 

—

 

—

 

—

 

—

 

 

 

—

 

—

 

—

 

(369,499

)

369,499

 

 

 

369,499

 

—

 

369,499

 

 

 

Non-cash interest (i)

 

—

 

—

 

—

 

—

 

 

 

—

 

—

 

—

 

—

 

—

 

8,934

 

8,934

 

—

 

8,934

 

 

 

Other (j)

 

—

 

(1,126

)

—

 

1,126

 

 

 

(210

)

(2,600

)

—

 

—

 

3,936

 

285

 

4,221

 

—

 

4,221

 

 

 

Tax adjustments (k)

 

—

 

—

 

—

 

—

 

 

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

88,703

 

(88,703

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Adjusted

 

$

348,772

 

$

194,105

 

$

—

 

$

154,667

 

44

%

$

18,461

 

$

36,673

 

$

—

 

$

—

 

$

99,533

 

$

(33,216

)

$

66,317

 

$

15,750

 

$

50,567

 

$

1.30

 

 

(a)

 

To exclude depreciation of a fair value step-up in property, plant and equipment related to the acquisition of Kremers Urban Pharmaceuticals, Inc. (“KUPI”)

(b)

 

To exclude amortization of purchased intangible assets primarily related to the acquisitions of KUPI and Silarx Pharmaceuticals, Inc.

(c)

 

To exclude the operating results of the Cody API business Held for Sale which was classified as Held for Sale as of September 30, 2018

(d)

 

To exclude depreciation on previously capitalized software integration costs associated with the KUPI acquisition

(e)

 

To exclude legal and financial advisory costs primarily related to exploring and evaluating debt and capital structure alternatives, including the December 2018 amendment to our Credit Agreement

(f)

 

To exclude the costs associated with the decommissioning and shutdown of the Philadelphia manufacturing and distribution sites

(g)

 

To exclude expenses associated with the 2016 Restructuring Plan as well as the Cody Restructuring Plan

(h)

 

To exclude asset impairment charges related to goodwill and other long-lived assets

(i)

 

To exclude non-cash interest expense associated with debt issuance costs

(j)

 

To primarily exclude separation costs related to the Company’s cost reduction plan, as well as a special recognition incentive payment

(k)

 

To exclude the tax effect of the pre-tax adjustments included above at applicable tax rates

(l)

 

The weighted average share number for the six months ended December 31, 2018 is 37,674,200 for GAAP and 38,937,705 for the non-GAAP earnings (loss) per share calculations

 

 

LANNETT COMPANY, INC.

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)

(In thousands, except percentages, share and per share data)

 

 

 

Six months ended December 31, 2017

 

 

 

Net sales

 

Cost of sales

 

Amortization
of intangibles

 

Gross Profit

 

Gross
Margin %

 

R&D
expenses

 

SG&A
expenses

 

Acquisition
and integration-
related
expenses

 

Restructuring
expenses

 

Operating
income

 

Other
income
(loss)

 

Income
before
income tax

 

Income tax
expense

 

Net income

 

Diluted
earnings
per share
(i)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Reported

 

$

339,266

 

$

168,467

 

$

15,678

 

$

155,121

 

46

%

$

18,131

 

$

47,531

 

$

83

 

$

1,562

 

$

87,814

 

$

(34,974

)

$

52,840

 

$

25,561

 

$

27,279

 

$

0.72

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation of Fixed Assets step-up (a)

 

—

 

(2,670

)

—

 

2,670

 

 

 

—

 

—

 

—

 

—

 

2,670

 

—

 

2,670

 

—

 

2,670

 

 

 

Amortization of intangibles (b)

 

—

 

—

 

(15,678

)

15,678

 

 

 

—

 

(582

)

—

 

—

 

16,260

 

—

 

16,260

 

—

 

16,260

 

 

 

Acquisition and integration-related expenses (c)

 

—

 

—

 

—

 

—

 

 

 

—

 

—

 

(83

)

—

 

83

 

—

 

83

 

—

 

83

 

 

 

Restructuring expenses (d)

 

—

 

—

 

—

 

—

 

 

 

—

 

—

 

—

 

(1,562

)

1,562

 

—

 

1,562

 

—

 

1,562

 

 

 

Non-cash interest (e)

 

—

 

—

 

—

 

—

 

 

 

—

 

—

 

—

 

—

 

—

 

9,014

 

9,014

 

—

 

9,014

 

 

 

Litigation settlement gain (f)

 

—

 

—

 

—

 

—

 

 

 

—

 

—

 

—

 

—

 

—

 

(3,500

)

(3,500

)

—

 

(3,500

)

 

 

Other (g)

 

—

 

—

 

—

 

—

 

 

 

—

 

(7,405

)

—

 

—

 

7,405

 

—

 

7,405

 

—

 

7,405

 

 

 

Tax adjustments (h)

 

—

 

—

 

—

 

—

 

 

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

(2,530

)

2,530

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Adjusted

 

$

339,266

 

$

165,797

 

$

—

 

$

173,469

 

51

%

$

18,131

 

$

39,544

 

$

—

 

$

—

 

$

115,794

 

$

(29,460

)

$

86,334

 

$

23,031

 

$

63,303

 

$

1.66

 

 

(a)

 

Relates to depreciation of a fair value step-up in property, plant and equipment related to the acquisition of Kremers Urban Pharmaceuticals, Inc. (“KUPI”)

(b)

 

Relates to amortization of purchased intangible assets primarily related to the acquisitions of KUPI and Silarx Pharmaceuticals, Inc.

(c)

 

Relates to acquisition and integration-related expenses primarily related to the acquisition of KUPI

(d)

 

To exclude expenses associated with the 2016 Restructuring Plan

(e)

 

To exclude non-cash interest expense primarily associated with debt issuance costs

(f)

 

To exclude a settlement gain associated with patent litigation

(g)

 

To exclude separation benefits associated with the former Chief Executive Officer as well as a reversal of indemnified unrecognized tax benefits due to expirations in the statute of limitations, related to the KUPI acquisition

(h)

 

To exclude the impact of the revaluation of net long term deferred tax assets related to the Tax Cut and Jobs Act legislation (“2017 Tax Reform”), partially offset by the tax effect of the pre-tax adjustments included at applicable tax rates as well as the reversal of indemnified unrecognized tax benefits related to the KUPI acquisition

(i)

 

The weighted average share number for the six months ended December 31, 2017 is 38,087,826 for both the GAAP and the non-GAAP earnings per share calculations

 

 

LANNETT COMPANY, INC.

RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)

($ in millions)

 

 

 

Fiscal Year 2019 Guidance

 

 

 

 

 

 

 

Non-GAAP

 

 

 

GAAP

 

Adjustments

 

Adjusted

 

 

 

 

 

 

 

 

 

Net sales

 

$615 - $635

 

—

 

$615 - $635

 

Gross margin percentage

 

37% - 38%

 

7%

(a)

44% to 45%

 

R&D expense

 

$35 - $37

 

($2)

(b)

$33 - $35

 

SG&A expense

 

$78 - $81

 

($12)

(c)

$66 - $69

 

Restructuring expense

 

$3 - $4

 

($3 - $4)

(d)

—

 

Asset impairment charges

 

$369

 

($369)

(e)

—

 

Interest and other

 

$84 - $86

 

($18)

(f)

$66 - $68

 

Effective tax rate

 

22% to 23%

 

—

 

22% to 23%

 

Capital expenditures

 

$30 - $35

 

—

 

$30 - $35

 

 

(a) The adjustment primarily reflects amortization of purchased intangible assets related to the acquisition of Kremers Urban Pharmaceuticals, Inc. (“KUPI”) and, to a lesser extent, the cost of sales associated with the Cody API business which was classified as Held For Sale as of September 30, 2018

(b) To exclude R&D expense associated with the Cody API business

(c) To exclude various expenses associated with the Company’s overall cost savings initiatives, which includes the Cody API business; legal and financial advisory costs; as well as nonrecurring compensation-related expenses.  In addition, it also excludes depreciation on previously capitalized software integration costs associated with the KUPI acquisition

(d) To exclude expenses associated with the 2016 Restructuring Plan and Cody Restructuring Plan

(e) To exclude asset impairment charges related to goodwill and other long-lived assets

(f) The adjustment primarily reflects non-cash interest expense associated with debt issuance costs

 

 

LANNETT COMPANY, INC.

NET SALES BY MEDICAL INDICATION

 

 

 

Three months ended

 

Six months ended

 

 

 

December 31,

 

December 31,

 

(in thousands)

 

2018

 

2017

 

2018

 

2017

 

Medical Indication

 

 

 

 

 

 

 

 

 

Antibiotic

 

$

4,187

 

$

3,552

 

$

8,276

 

$

6,900

 

Anti-Psychosis

 

14,036

 

22,799

 

24,924

 

37,791

 

Cardiovascular

 

25,680

 

10,135

 

47,450

 

21,441

 

Central Nervous System

 

6,187

 

6,925

 

13,384

 

15,742

 

Gallstone

 

2,489

 

5,282

 

4,703

 

11,846

 

Gastrointestinal

 

10,009

 

15,055

 

25,048

 

29,608

 

Glaucoma

 

512

 

2,164

 

1,060

 

4,832

 

Migraine

 

12,551

 

15,484

 

22,288

 

30,499

 

Muscle Relaxant

 

3,121

 

3,219

 

6,300

 

7,010

 

Pain Management

 

8,968

 

6,128

 

13,915

 

11,889

 

Respiratory

 

1,163

 

2,230

 

2,178

 

3,876

 

Thyroid Deficiency

 

88,477

 

68,794

 

142,354

 

116,008

 

Urinary

 

1,606

 

2,840

 

3,158

 

5,837

 

Other

 

6,827

 

13,105

 

21,168

 

25,802

 

Contract Manufacturing revenue

 

7,905

 

6,593

 

12,566

 

10,185

 

Net Sales

 

$

193,718

 

$

184,305

 

$

348,772

 

$

339,266