Lannett Reports Fiscal 2017 Fourth-Quarter And Full-Year Financial Results, Provides Guidance For Fiscal 2018

PHILADELPHIA, Aug. 23, 2017 /PRNewswire/ -- Lannett Company, Inc. (NYSE: LCI) today reported financial results for its fiscal 2017 fourth quarter and full year ended June 30, 2017. 

Lannett Logo (PRNewsFoto/Lannett Company, Inc.)

"In the coming year, we expect a solid increase in net revenues compared with fiscal 2017 and, while much of our industry is facing pricing pressures, we expect our adjusted gross margins to continue to be above 50%, which exceeds the average of our peer companies," said Arthur Bedrosian, chief executive officer of Lannett.  "For the fourth quarter and full year, our full financial results were in-line with the preliminary results issued two weeks ago.  As we previously reported, our fourth quarter was impacted by unanticipated items, which totaled approximately $0.24 per diluted share, as well as pricing and volume pressures.  However, planned product launches, combined with a number of initiatives we have put in place, make us confident in our near- and longer term growth." 

For the fiscal 2017 fourth quarter, total net sales were $139.1 million compared with $168.9 million for the fourth quarter of fiscal 2016.  Gross profit was $58.9 million, or 42% of net sales, compared with $79.9 million, or 47% of net sales.  Research and development (R&D) expenses decreased to $11.4 million from $13.0 million for the fiscal 2016 fourth quarter.  Selling, general and administrative (SG&A) expenses decreased to $16.5 million from $22.0 million.  Acquisition and integration-related expenses were $0.3 million compared with $4.2 million in the prior-year fourth quarter.  Restructuring expenses were $1.8 million compared with $2.4 million.  In last year's fourth quarter, the company recorded an impairment charge of $8.0 million related to acquired intangible assets.  Operating income was $28.8 million compared with $30.4 million.  Interest expense declined to $20.7 million from $27.1 million for the fourth quarter of fiscal 2016.  Income tax expense was $3.1 million versus income tax benefit of $2.9 million in the prior-year period.  Net income attributable to Lannett was $5.7 million, or $0.15 per diluted share, compared with $3.6 million, or $0.10 per diluted share, for the fiscal 2016 fourth quarter. 

For the fiscal 2017 fourth quarter reported on a Non-GAAP basis, adjusted total net sales were $139.1 million compared with $168.9 million for the fourth quarter of fiscal 2016.  Adjusted gross profit was $68.0 million, or 49% of adjusted total net sales, compared with $91.9 million, or 54% of adjusted total net sales, for the prior year fourth quarter.  Adjusted R&D expenses were $11.4 million compared with $13.1 million.  Adjusted SG&A expenses declined to $16.2 million from $17.8 million.  Adjusted operating income was $40.4 million compared with $61.0 million for the prior-year fourth quarter.  Adjusted net income attributable to Lannett was $15.1 million, or $0.40 per diluted share, compared with $27.5 million, or $0.73 per diluted share, for the fiscal 2016 fourth quarter.

For the fiscal 2017 full year, net sales increased to $637.3 million from $566.1 million for fiscal 2016.  During the third quarter of fiscal 2016, the company recorded a reduction to net sales of $23.6 million related to a pre-tax, one-time, settlement agreement with one of its customers.  In the fiscal 2017 third quarter, the company recorded a $4.0 million adjustment to the settlement agreement.  As a result, total net sales were $633.3 million compared with $542.5 million for fiscal 2016.  Gross profit increased to $301.2 million from $286.5 million.  Gross profit as a percentage of total net sales declined to 48% compared with 53% for fiscal 2016, primarily due to the inclusion of Kremer Urban Pharmaceutical's (KU) lower-margin business and purchase accounting related expenses.  R&D expenses were $42.1 million compared with $45.1 million for fiscal 2016.  SG&A expenses were $73.5 million compared with $68.3 million.  Acquisition and integration-related expenses were $4.0 million compared with $27.2 million in the prior year.  Restructuring expenses were $7.2 million for both fiscal 2017 and fiscal 2016.  The company recorded impairment charges related to acquired intangible assets totaling $88.1 million in fiscal 2017 and $8.0 million in fiscal 2016.  Operating income was $86.4 million compared with $130.8 million.  Interest expense was $89.4 million compared with $65.9 million for fiscal 2016.  Income tax expense was $1.1 million compared with $17.3 million.  Net loss attributable to Lannett was $0.6 million, or $0.02 per share, versus net income attributable to Lannett of $44.8 million, or $1.20 per diluted share, for fiscal 2016.

For the fiscal 2017 full year reported on a Non-GAAP basis, adjusted total net sales increased to $637.3 million from $566.1 million for fiscal 2016.  Adjusted gross profit was $343.7 million, or 54% of adjusted total net sales, compared with $348.1 million, or 61% of adjusted total net sales, for fiscal 2016.  Adjusted R&D expenses were $42.1 million compared with $45.1 million.  Adjusted SG&A expenses were $71.3 million compared with $59.0 million.  Adjusted operating income was $230.3 million compared with $244.0 million for the prior year.  Adjusted net income attributable to Lannett was $107.9 million, or $2.86 per diluted share, compared with $127.8 million, or $3.42 per diluted share, for fiscal 2016. 

Guidance for Fiscal 2018
Based on its current outlook the company provided financial guidance for the 2018 fiscal year as follows:


GAAP

Adjusted

Net sales

$655 million to $665 million

$655 million to $665 million

Gross margin %

46% to 47%

51% to 52%

R&D expense

$46 million to $48 million

$46 million to $48 million

SG&A expense

$75 million to $77 million

$73 million to $75 million

Acquisition and integration related, and restructuring expense

$4 million to $5 million

$-

Interest expense

$88 million to $89 million

$67 million to $68 million

Effective tax rate

Approximately 35%

Approximately 35%

Capital expenditures

$65 million to $75 million

$65 million to $75 million

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 2017 fourth quarter and full year ended June 30, 2017.  The conference call will be available to interested parties by dialing 800-447-0521 from the U.S. or Canada, or 847-413-3238 from international locations, passcode 45419254.  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) impairment charges, (4) non-cash interest expense, as well as (5) 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, realizing the expected benefits of growth initiatives, receiving product approvals, successfully commercializing product approvals and achieving the financial metrics stated in the company's guidance for fiscal 2018, 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.

 Contact: 

Robert Jaffe


Robert Jaffe Co., LLC


(424) 288-4098

FINANCIAL SCHEDULES FOLLOW

 

LANNETT COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)





(Unaudited)







June 30, 2017


June 30, 2016








ASSETS






Current assets:





Cash and cash equivalents

$         117,737


$       224,769

Investment securities

27,091


14,094

Accounts receivable, net

204,066


211,722

Inventories


122,604


114,904

Prepaid income taxes

16,703


-

Deferred tax assets

28,905


40,892

Other current assets

6,592


6,434

Total current assets

523,698


612,815

Property, plant and equipment, net

243,148


216,638

Intangible assets, net

453,861


575,503

Goodwill



339,566


333,611

Deferred tax assets

23,848


11,556

Other assets


19,191


13,895

TOTAL ASSETS


$      1,603,312


$    1,764,018















LIABILITIES





Current liabilities:





Accounts payable


$           44,720


$         34,720

Accrued expenses


12,499


9,247

Accrued payroll and payroll-related expenses

4,833


10,572

Rebates payable


44,593


21,894

Royalties payable


3,015


5,127

Restructuring liability

5,431


4,130

Settlement liability


17,000


7,000

Income taxes payable

-


743

Acquisition-related contingent consideration

-


35,000

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

60,117


178,236

Total current liabilities

192,208


306,669

Long-term debt, net

843,530


883,612

Settlement liability

-


12,526

Other liabilities


6,452


6,754

TOTAL LIABILITIES

1,042,190


1,209,561

Commitments and contingencies











STOCKHOLDERS' EQUITY




Common stock($0.001 par value, 100,000,000 shares authorized; 37,528,450 and 37,150,165 shares issued; 36,919,296 and 36,604,202 shares outstanding at June 30, 2017 and June 30, 2016, respectively)







37


37

Additional paid-in capital

292,780


283,301

Retained earnings


277,774


278,355

Accumulated other comprehensive loss

(222)


(295)

Treasury stock(609,154 and 545,963 shares at June 30, 2017 and June 30, 2016, respectively)

(9,247)


(7,349)

Total Lannett Company, Inc. stockholders' equity

561,122


554,049

Noncontrolling interest

-


408

Total stockholders' equity

561,122


554,457

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 

$      1,603,312


$    1,764,018

 

LANNETT COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands, except share and per share data)












Three months ended 


Twelve months ended 



June 30,


June 30,



2017


2016


2017


2016










Net sales


$      139,118


$        168,887


$      637,341


$        566,091

Settlement agreement


-


-


(4,000)


(23,598)

Total net sales


$      139,118


$        168,887


$      633,341


$        542,493

Cost of sales 


72,503


81,407


300,030


237,371

Amortization of intangibles


7,737


7,550


32,098


18,629

Gross profit


58,878


79,930


301,213


286,493

Operating expenses:









Research and development expenses


11,423


12,962


42,073


45,054

Selling, general and administrative expenses


16,519


21,966


73,477


68,325

Acquisition and integration-related expenses


291


4,190


3,965


27,190

Restructuring expenses


1,836


2,417


7,168


7,166

Intangible asset impairment charges


-


8,000


88,084


8,000

Total operating expenses


30,069


49,535


214,767


155,735

Operating income


28,809


30,395


86,446


130,758

Other income (loss)









Loss on extinguishment of debt


-


(3,009)


-


(3,009)

Investment income


683


299


3,768


368

Interest expense


(20,720)


(27,117)


(89,420)


(65,937)

Other


54


75


(244)


(1)

Total other loss


(19,983)


(29,752)


(85,896)


(68,579)

Income before income tax


8,826


643


550


62,179

Income tax expense (benefit)


3,100


(2,948)


1,097


17,322

Net income (loss)


5,726


3,591


(547)


44,857

Less: Net income attributable to noncontrolling interest


-


20


34


75

Net income (loss) attributable to Lannett Company, Inc.


$          5,726


$            3,571


$            (581)


$          44,782










Earnings (loss) per common share attributable to Lannett Company, Inc.









     Basic


$             0.16


$              0.10


$           (0.02)


$              1.23

     Diluted


$             0.15


$              0.10


$           (0.02)


$              1.20










Weighted average common shares outstanding:









     Basic


36,892,902


36,578,020


36,812,524


36,442,782

     Diluted


37,779,354


37,394,787


36,812,524


37,389,445


 

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 June 30, 2017


Total net
sales

Cost of
sales

Amortization
of intangibles

Gross
Profit

Gross
Margin %

R&D
expense

SG&A
expense

Acquisition and
integration-
related
expenses

Restructuring
expenses

Operating
income

Other
income
(loss)

Income
before
income tax

Income tax
expense

Net
income

Net income
attributable to
noncontrolling
interest

Net income
attributable to
Lannett
Company, Inc.

Diluted
earnings
per share
(g)




GAAP Reported

$ 139,118

$ 72,503

$       7,737

$  58,878

42%

$  11,423

$   16,519

$            291

$         1,836

$  28,809

$ (19,983)

$   8,826

$   3,100

$ 5,726

$                -

$          5,726

$   0.15

Adjustments:


















Depreciation of Fixed Assets step-up (a)

-

(1,335)

-

1,335


-

-

-

-

1,335

-

1,335

-

1,335

-

1,335


Amortization of intangibles (b)

-

-

(7,737)

7,737


-

(365)

-

-

8,102

-

8,102

-

8,102

-

8,102


Acquisition and integration-related expenses (c)

-

-

-

-


-

-

(291)

-

291

-

291

-

291

-

291


Restructuring expenses (d)

-

-

-

-


-

-

-

(1,836)

1,836

-

1,836

-

1,836

-

1,836


Non-cash interest (e)

-

-

-

-


-

-

-

-

-

4,743

4,743

-

4,743

-

4,743


Tax adjustments (f)

-

-

-

-


-

-

-

-

-

-

-

6,899

(6,899)

-

(6,899)




















Non-GAAP Adjusted

$   139,118

$  71,168

$             -

$   67,950

49%

$    11,423

$    16,154

$               -

$               -

$   40,373

$   (15,240)

$  25,133

$    9,999

$ 15,134

$                -

$         15,134

$    0.40




















(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)

 The tax effect of the pre-tax adjustments included at applicable tax rates 

(g)

 The weighted average share number for the three months ended June 30, 2017 is 37,779,354 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 June 30, 2016


Total net
sales

Cost of
sales

Amortization
of intangibles

Gross
Profit

Gross
Margin %

R&D
expense

SG&A

expense

Acquisition
and integration-
related
expenses

Restructuring
expenses

Intangible
asset

impairment
charges

Operating
income

Other
income
(loss)

Income

before
income tax

Income tax
expense
(benefit)

Net
income

Net income
attributable to
noncontrolling
interest

Net income
attributable to
Lannett Company,
Inc.

Diluted
earnings per
share (l)




GAAP Reported

$ 168,887

$ 81,407

$       7,550

$ 79,930

47%

$  12,962

$   21,966

$        4,190

$       2,417

$     8,000

$  30,395

$(29,752)

$         643

$  (2,948)

$  3,591

$               20

$                  3,571

$       0.10

Adjustments:



















Depreciation of Fixed Assets step-up (a)

-

(1,834)

-

1,834


108

117

-

-

-

1,609

-

1,609

-

1,609

-

1,609


Amortization of Inventory step-up (b)

-

(2,611)

-

2,611


-

-

-

-

-

2,611

-

2,611

-

2,611

-

2,611


Amortization of intangibles (c)

-

-

(7,550)

7,550


-

(365)

-

-

-

7,915

-

7,915

-

7,915

-

7,915


Separation expenses (d)

-

-

-

-


-

(1,669)

-

-

-

1,669

-

1,669

-

1,669

-

1,669


Refinancing of debt (e)

-

-

-

-


-

(2,242)

-

-

-

2,242

-

2,242

-

2,242

-

2,242


Acquisition and integration-related expenses (f)

-

-

-

-


-

-

(4,190)

-

-

4,190

-

4,190

-

4,190

-

4,190


Restructuring expenses (g)

-

-

-

-


-

-

-

(2,417)

-

2,417

-

2,417

-

2,417

-

2,417


Intangible assets impairment charges (h)

-

-

-

-


-

-

-

-

(8,000)

8,000

-

8,000

-

8,000

-

8,000


Non-cash interest (i)

-

-

-

-


-

-

-

-

-

-

5,341

5,341

-

5,341

-

5,341


Loss on Extinguishment of Debt (j)

-

-

-

-


-

-

-

-

-

-

3,009

3,009

-

3,009

-

3,009


Tax adjustments (k)

-

-

-

-


-

-

-

-

-

-

-

-

15,105

(15,105)

-

(15,105)





















Non-GAAP Adjusted

$   168,887

$   76,962

$             -

$   91,925

54%

$   13,070

$    17,807

$              -

$             -

$           -

$   61,048

$  (21,402)

$     39,646

$   12,157

$  27,489

$                20

$                  27,469

$        0.73





















(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 a fair value step-up in inventory related to the acquisition of KUPI 











(c)

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









(d)

 Relates to separation expenses associated with a former executive officer 













(e)

 To exclude fees related to the refinancing of the 12.0% Senior Notes 













(f)

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











(g)

 To exclude expenses associated with the 2016 Restructuring Plan 













(h)

 To exclude an impairment charge related to certain intangible assets acquired as part of the Kremers Urban Pharmaceuticals Inc. acquisition 








(i)

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













(j)

 To exclude a loss from the extinguishment of debt 















(k)

 The tax effect of the pre-tax adjustments included at applicable tax rates 













(l)

 The weighted average share number for the three months ended June 30, 2016 is 37,394,787 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)




















Twelve months ended June 30, 2017


Total net
sales

Cost of
sales

Amortization
of intangibles

Gross Profit

Gross
Margin %

R&D
expense

SG&A
expense

Acquisition and
integration-
related expenses

Restructuring
expenses

Intangible

asset
impairment
charges

Operating
income

Other
income
(loss)

Income
before
income tax

Income
tax
expense

Net income
(loss)

Net income
attributable to
noncontrolling
interest

Net income (loss)
attributable to
Lannett
Company, Inc.

Diluted
earnings
(loss) per
share (k)




GAAP Reported

$  633,341

$300,030

$     32,098

$     301,213

48%

$   42,073

$   73,477

$          3,965

$          7,168

$    88,084

$  86,446

$  (85,896)

$        550

$ 1,097

$     (547)

$               34

$               (581)

$   (0.02)

Adjustments:



















Settlement agreement (a)

4,000

-

-

4,000


-

-

-

-

-

4,000

-

4,000

-

4,000

-

4,000


Depreciation of Fixed Assets step-up (b)

-

(4,410)

-

4,410


-

-

-

-

-

4,410

-

4,410

-

4,410

-

4,410


Amortization of Inventory step-up (c)

-

(1,938)

-

1,938


-

-

-

-

-

1,938

-

1,938

-

1,938

-

1,938


Amortization of intangibles (d)

-

-

(32,098)

32,098


-

(1,460)

-

-

-

33,558

-

33,558

-

33,558

-

33,558


Acquisition and integration-related expenses (e)

-

-

-

-


-

-

(3,965)

-

-

3,965

-

3,965

-

3,965

-

3,965


Restructuring expenses (f)

-

-

-

-


-

-

-

(7,168)

-

7,168

-

7,168

-

7,168

-

7,168


Intangible assets impairment charges (g)

-

-

-

-


-

-

-

-

(88,084)

88,084

-

88,084

-

88,084

-

88,084


Non-cash interest (h)

-

-

-

-


-

-

-

-

-

-

20,704

20,704

-

20,704

-

20,704


Other (i)

-

-

-

-


-

(715)

-

-

-

715

-

715

-

715

-

715


Tax adjustments (j)

-

-

-

-


-

-

-

-

-

-

-

-

56,094

(56,094)

-

(56,094)





















Non-GAAP Adjusted

$    637,341

$  293,682

$             -

$       343,659

54%

$     42,073

$    71,302

$                -

$                -

$            -

$  230,284

$    (65,192)

$   165,092

$ 57,191

$  107,901

$                34

$           107,867

$      2.86





















(a)

 Relates to an adjustment to the Fiscal 2016 settlement agreement with a former customer 












(b)

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








(c)

 Relates to amortization of a fair value step-up in inventory related to the acquisition of KUPI 












(d)

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









(e)

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











(f)

 To exclude expenses associated with the 2016 Restructuring Plan 














(g)

 To exclude impairment charges related to certain intangible assets acquired as part of the KUPI acquisition 











(h)

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













(i)

 Primarily relates to separation expenses associated with a former employee 













(j)

 The tax effect of the pre-tax adjustments included at applicable tax rates 













(k)

 The weighted average share numbers for the twelve months ended June 30, 2017 are 36,812,524 and 37,695,061 for the GAAP and non-GAAP earnings (loss) per share calculations, respectively 





 

LANNETT COMPANY, INC.

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

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




















Twelve months ended June 30, 2016


Total net
sales

Cost of sales

Amortization
of intangibles

Gross Profit

Gross
Margin %

R&D
expense

SG&A
expense

Acquisition
and integration-

related
expenses

Restructuring
expenses

Intangible asset
impairment charges

Operating
income

Other
income
(loss)

Income
before
income tax

Income
tax
expense

Net income

Net income
attributable to
noncontrolling
interest

Net income
attributable to
Lannett
Company, Inc.

Diluted
earnings

per share
(m)




GAAP Reported

$ 542,493

$ 237,371

$     18,629

$ 286,493

53%

$   45,054

$  68,325

$      27,190

$       7,166

$               8,000

$  130,758

$(68,579)

$   62,179

$17,322

$  44,857

$               75

$        44,782

$   1.20

Adjustments:



















Settlement agreement (a)

23,598

-

-

23,598


-

-

-

-

-

23,598

-

23,598

-

23,598

-

23,598


Depreciation of Fixed Assets step-up (b)

-

(2,222)

-

2,222


18

117

-

-

-

2,087

-

2,087

-

2,087

-

2,087


Amortization of Inventory step-up (c)

-

(17,127)

-

17,127


-

-

-

-

-

17,127

-

17,127

-

17,127

-

17,127


Amortization of intangibles (d)

-

-

(18,629)

18,629


-

(878)

-

-

-

19,507

-

19,507

-

19,507

-

19,507


Separation expenses (e)

-

-

-

-


-

(6,275)

-

-

-

6,275

-

6,275

-

6,275

-

6,275


Refinancing of debt (f)

-

-

-

-


-

(2,242)

-

-

-

2,242

-

2,242

-

2,242

-

2,242


Acquisition and integration-related expenses (g)

-

-

-

-


-

-

(27,190)

-

-

27,190

-

27,190

-

27,190

-

27,190


Restructuring expenses (h)

-

-

-

-


-

-

-

(7,166)

-

7,166

-

7,166

-

7,166

-

7,166


Intangible assets impairment charges (i)

-

-

-

-


-

-

-


(8,000)

8,000

-

8,000

-

8,000

-

8,000


Non-cash interest (j)

-

-

-

-


-

-

-

-

-

-

13,007

13,007

-

13,007

-

13,007


Loss on Extinguishment of Debt (k)

-

-

-

-


-

-

-

-

-

-

3,009

3,009

-

3,009

-

3,009


Tax adjustments (l)

-

-

-

-


-

-

-

-

-

-

-

-

46,145

(46,145)

-

(46,145)





















Non-GAAP Adjusted

$   566,091

$   218,022

$             -

$   348,069

61%

$     45,072

$    59,047

$              -

$             -

$                     -

$    243,950

$  (52,563)

$   191,387

$  63,467

$  127,920

$                75

$        127,845

$    3.42





















(a)

 Relates to a settlement agreement with a former customer 














(b)

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








(c)

 Relates to amortization of fair value step-up in inventory primarily related to the acquisition of KUPI 











(d)

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









(e)

 Relates primarily to separation expenses associated with former employees 













(f)

 To exclude fees related to the refinancing of the 12.0% Senior Notes 













(g)

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











(h)

 To exclude expenses associated with the 2016 Restructuring Plan 














(i)

 To exclude an impairment charge related to certain intangible assets acquired as part of the KUPI acquisition 










(j)

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













(k)

 To exclude a loss from the extinguishment of debt 















(l)

 The tax effect of the pre-tax adjustments included at applicable tax rates 













(m)

 The weighted average share number for the twelve months ended June 30, 2016 is 37,389,445 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 2018 Guidance
















Non-GAAP












GAAP


Adjustments


Adjusted


























Net sales


 $655 - $665 


-


 $655 - $665 










Gross margin percentage


 46.0% - 47.0% 


5%

 (a) 

 51.0% to 52.0% 










R&D expense


 $46 - $48 


-


 $46 - $48 










SG&A expense


 $75 - $77 


($2)

 (b) 

 $73 - $75 










Integration and Restructuring expense


 $4 - $5 


 ($4 - $5) 

 (c) 

-










Interest expense


 $88 - $89 


($21)

 (d) 

 $67 - $68 










Effective tax rate


 approx. 35% 


-


 approx. 35% 










Capital expenditures


 $65 - $75 


-


 $65 - $75 










































(a) The adjustment primarily reflects amortization of purchased intangible assets and depreciation of a fair value step-up in property, plant and equipment related to the acquisition of Kremers Urban Pharmaceuticals, Inc. ("KUPI")

(b) The adjustment reflects amortization of purchased intangible assets related to the acquisition of KUPI

(c) The adjustment reflects expenses related to the 2016 Restructuring Plan as well as integration-related expenses associated with the acquisition of KUPI

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

 


LANNETT COMPANY, INC.


NET SALES BY MEDICAL INDICATION









(in thousands)

Three months ended June 30,


Fiscal Year Ended June 30,


Medical Indication

2017


2016


2017


2016


Antibiotic

$              3,701


$              5,842


$            16,748


$            14,558


Anti Psychosis

11,506


930


58,625


5,462


Cardiovascular

11,143


15,482


50,628


53,541


Central Nervous System

7,423


15,940


39,451


36,291


Gallstone

11,135


13,959


48,600


67,348


Gastrointestinal

15,418


22,268


71,887


52,699


Glaucoma

2,800


5,965


18,763


25,336


Migraine

6,948


5,438


29,014


21,776


Muscle Relaxant

3,427


1,157


13,636


5,403


Obesity

1,137


956


3,956


3,809


Pain Management

6,003


6,418


26,135


29,804


Respiratory

1,090


3,279


10,516


9,982


Thyroid Deficiency

43,738


45,868


174,005


162,411


Urinary

2,281


7,250


14,695


17,398


Other

9,191


8,474


43,240


38,230


Contract manufacturing revenues

2,177


9,661


17,442


22,043


Net Sales

139,118


168,887


637,341


566,091


Settlement agreement

-


-


(4,000)


(23,598)


Total Net Sales

$          139,118


$          168,887


$          633,341


$          542,493

 

SOURCE Lannett Company, Inc.


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