Lannett Announces Fiscal 2021 Second-Quarter Financial Results In Line Or Above Expectations

 

PHILADELPHIA, Feb. 3, 2021 /PRNewswire/ -- Lannett Company, Inc. (NYSE: LCI) today reported financial results for its fiscal 2021 second quarter ended December 31, 2020. 

"For the fiscal 2021 second quarter, net sales exceeded our expectations, and adjusted earnings per share and adjusted EBITDA were in line with our estimates," said Tim Crew, chief executive officer of Lannett. "We accomplished these results even though we continued to see new competitive approvals on certain key products and experienced certain out of the ordinary items, which negatively impacted our gross margin. Of course, there has also been an overall decline of total prescriptions related to the ongoing pandemic, which we expect will reverse in time. Further, our potentially durable, high-value pipeline assets in our portfolio continue to progress. So, while these immediate competitive pressures, along with the discontinuation of certain product lines noted below, have caused us to revise down our full-year guidance, we remain optimistic for our mid- and longer term growth prospects.

"Turning to our balance sheet, in November we used a portion of our existing cash to pay down, in full, our Term A Loans, which will lower our annual interest expense and principal payments, going forward. In December, we established a new $30 million revolving credit facility, further enhancing our financial flexibility.  

"At quarter end, as previously disclosed, we made the decision to rationalize our product offering by discontinuing certain lower margin product lines. As a result, when combined with declines in key products, our expectation for the second half of fiscal 2021 compared with the first half is for our net sales to decrease but gross margin percentage to remain approximately the same."

For the fiscal 2021 second quarter on a GAAP basis, net sales were $133.9 million compared with $136.1 million for the second quarter of fiscal 2020. Gross profit of $0.8 million, or 1% of net sales, included a $16.6 million inventory write down associated with the discontinued product lines and $5.0 million to fully expense the cost to renew a product distribution contract. This compares with gross profit for the prior-year second quarter of $41.3 million, or 30% of net sales. During the fiscal 2021 second quarter, the company recorded non-cash, asset impairment charges of $198.0 million, primarily related to the write down of intangible assets associated with the acquisition of Kremers Urban Pharmaceuticals. Net loss was $171.9 million, or $4.36 per share, compared to net income of $5.1 million, or $0.13 per diluted share, for the second quarter of fiscal 2020.

For the fiscal 2021 second quarter reported on a Non-GAAP basis, net sales were $133.9 million compared with $136.1 million for the second quarter of fiscal 2020. Adjusted gross profit was $31.1 million, or 23% of net sales, compared with $50.2 million, or 37% of net sales, for the prior-year second quarter. Adjusted interest expense decreased to $10.5 million compared with $13.1 million for the second quarter of fiscal 2020. Adjusted net income was $3.2 million, or $0.08 per diluted share, compared with $11.7 million, or $0.27 per diluted share, for the fiscal 2020 second quarter. Adjusted EBITDA for the fiscal 2021 second quarter was $24.0 million.

Guidance for Fiscal 2021
Based on its current outlook, the company revised guidance for fiscal year 2021, as follows:

 

GAAP

Adjusted**

Net sales

$480 million to $500 million, down from $520 million to $545 million

$480 million to $500 million, down from $520 million to $545 million

Gross margin %

Approximately 14% to 16%, down from approximately 23% to 25%

Approximately 24% to 26%, down from approximately 29% to 31%

R&D expense

$26 million to $28 million, down from $29 million to $32 million

$26 million to $28 million, down from $29 million to $32 million

SG&A expense

$58 million to $60 million, down from $59 million to $62 million

$52 million to $54 million, down from $55 million to $58 million

Restructuring expense

$4 million

$--

Asset impairment charges

$198 million

$--

Interest and other

$53 million to $54 million, unchanged

$41 million to $42 million, unchanged

Effective tax rate

Approximately 27% to 28%

Approximately 26% to 27%

Adjusted EBITDA*

N/A

$75 million to $85 million, down from $100 million to $110 million

Capital expenditures

$10 million to $15 million, down from $15 million to $20 million

$10 million to $15 million, down from $15 million to $20 million

 

**A reconciliation of Adjusted amounts to most directly comparable GAAP amounts can be found in the attached financial tables.

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 2021 second quarter ended December 31, 2020. 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 50088413. 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, including Adjusted EBITDA, 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. The Company also believes that including Adjusted EBITDA is appropriate to provide additional information to investors. 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) restructuring expenses, (3) non-cash interest expense, as well as (4) certain other items considered unusual or non-recurring in nature.

*Adjusted EBITDA excludes the same adjustments discussed above, as well as additional adjustments permitted under the company's existing Credit Agreement.

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 commercializing recently introduced products and launching and successfully commercializing additional products in fiscal 2021, achieving cost savings from the recently announced restructuring and cost savings plan, the potential material impact of COVID-19 on future financial results, and achieving the financial metrics stated in the company's revised guidance for fiscal 2021, 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, 2020

 

June 30, 2020

             

ASSETS

         

Current assets:

       

Cash and cash equivalents

$                       34,224

 

$         144,329

Accounts receivable, net

160,131

 

125,688

Inventories

 

122,204

 

142,867

Income taxes receivable

64,570

 

14,419

Assets held for sale

 

2,678

 

2,678

Other current assets

 

23,993

 

13,227

Total current assets

407,800

 

443,208

Property, plant and equipment, net

173,157

 

179,518

Intangible assets, net

 

163,488

 

374,735

Operating lease right-of-use asset 

8,650

 

9,343

Deferred tax assets

 

132,409

 

117,890

Other assets

 

14,767

 

11,861

TOTAL ASSETS

 

$                    900,271

 

$      1,136,555

             
             

LIABILITIES

       

Current liabilities:

       

Accounts payable

 

$                       42,670

 

$           32,535

Accrued expenses

 

4,092

 

14,962

Accrued payroll and payroll-related expenses

8,946

 

16,304

Rebates payable

 

43,791

 

38,175

Royalties payable

 

20,782

 

20,863

Restructuring liability

161

 

27

Current operating lease liabilities

2,115

 

1,097

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

39,345

 

88,189

Other current liabilities

1,770

 

2,713

Total current liabilities

163,672

 

214,865

Long-term debt, net

 

578,483

 

592,940

Long-term operating lease liabilities

9,233

 

9,844

Other liabilities

 

19,625

 

16,010

TOTAL LIABILITIES

 

771,013

 

833,659

             

STOCKHOLDERS' EQUITY

     

Common stock($0.001 par value, 100,000,000 shares authorized; 40,832,843 and 39,963,127 shares issued;

     

 39,504,777 and 38,798,787 shares outstanding at December 31, 2020 and June 30, 2020, respectively)

41

 

40

Additional paid-in capital

326,939

 

321,164

Accumulated deficit

 

(179,738)

 

(1,291)

Accumulated other comprehensive loss

(595)

 

(627)

Treasury stock(1,328,066 and 1,164,340 shares at December 31, 2020 and June 30, 2020, respectively)

(17,389)

 

(16,390)

Total stockholders' equity

129,258

 

302,896

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 

$                    900,271

 

$      1,136,555

 

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,

   

2020

 

2019

 

2020

 

2019

                 

Net sales

 

$       133,920

 

$          136,110

 

$       260,399

 

$          263,452

Cost of sales 

 

124,488

 

86,663

 

216,675

 

164,319

Amortization of intangibles

 

8,657

 

8,153

 

17,246

 

15,181

Gross profit

 

775

 

41,294

 

26,478

 

83,952

Operating expenses:

               

Research and development expenses

 

5,644

 

6,906

 

12,183

 

15,846

Selling, general and administrative expenses

 

13,730

 

17,421

 

28,866

 

38,729

Restructuring expenses

 

-

 

192

 

4,043

 

1,580

Asset impairment charges

 

198,000

 

-

 

198,000

 

1,618

Total operating expenses

 

217,374

 

24,519

 

243,092

 

57,773

Operating income (loss)

 

(216,599)

 

16,775

 

(216,614)

 

26,179

Other income (loss):

               

Loss on extinguishment of debt

 

-

 

-

 

-

 

(2,145)

Investment income

 

43

 

430

 

88

 

1,159

Interest expense

 

(13,496)

 

(16,694)

 

(27,982)

 

(35,986)

Other

 

28

 

(735)

 

5

 

199

Total other loss

 

(13,425)

 

(16,999)

 

(27,889)

 

(36,773)

Loss before income tax

 

(230,024)

 

(224)

 

(244,503)

 

(10,594)

Income tax benefit

 

(58,076)

 

(5,308)

 

(66,056)

 

(3,521)

Net income (loss) 

 

$      (171,948)

 

$              5,084

 

$      (178,447)

 

$            (7,073)

                 

Earnings (loss) per common share:

               

     Basic

 

$             (4.36)

 

$                0.13

 

$             (4.55)

 

$              (0.18)

     Diluted (1) 

 

$             (4.36)

 

$                0.13

 

$             (4.55)

 

$              (0.18)

                 

Weighted average common shares outstanding:

               

     Basic

 

39,443,441

 

38,605,052

 

39,257,211

 

38,457,159

     Diluted (1) 

 

39,443,441

 

40,557,503

 

39,257,211

 

38,457,159

 

(1) Effective with the 4.5% Senior Convertible Note issued on September 27, 2019, the diluted earnings per share was calculated based on the "if-converted" method.

 

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, 2020

 

Net sales

Cost of sales

Amortization
of intangibles

Gross
Profit

Gross
Margin
%

R&D
expenses

SG&A
expenses

Asset impairment
charges

Operating
income
(loss)

Other loss

Income
(loss)
before
income tax

Income
tax benefit

Net income
(loss)

Diluted
earnings
(loss) per
share (j)

 
 
 

GAAP Reported

$    133,920

$        124,488

$             8,657

$           775

1%

$          5,644

$           13,730

$                  198,000

$    (216,599)

$     (13,425)

$     (230,024)

$   (58,076)

$    (171,948)

$               (4.36)

Adjustments:

                           

Amortization of intangibles (a)

-

-

(8,657)

8,657

 

-

-

-

8,657

-

8,657

-

8,657

 

Cody API business (b)

-

(84)

-

84

 

(3)

(28)

-

115

-

115

-

115

 

Depreciation on capitalized software costs (c)

-

-

-

-

 

-

(1,051)

-

1,051

-

1,051

-

1,051

 

Asset impairment charges (d)

-

-

-

-

 

-

-

(198,000)

198,000

-

198,000

-

198,000

 

Write-downs for excess and obsolete inventory (e)

-

(16,623)

-

16,623

 

-

-

-

16,623

-

16,623

-

16,623

 

 Distribution agreement renewal costs (f)

-

(4,966)

-

4,966

 

-

-

-

4,966

-

4,966

-

4,966

 

Non-cash interest (g)

-

-

-

-

 

-

-

-

-

2,973

2,973

-

2,973

 

Other (h)

-

-

-

-

 

-

(553)

-

553

-

553

-

553

 

Tax adjustments (i)

-

-

-

-

 

-

-

-

-

-

-

57,784

(57,784)

 
                             

Non-GAAP Adjusted

$      133,920

$          102,815

$                    -

$       31,105

23%

$           5,641

$             12,098

$                              -

$          13,366

$       (10,452)

$             2,914

$          (292)

$            3,206

$                  0.08

                             

(a)

To exclude amortization of purchased intangible assets primarily related to the acquisition of KUPI 

             

(b)

To exclude the operating results of the ceased Cody API business

                 

(c)

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

       

(d)

To exclude asset impairment charges primarily related to the KUPI product rights intangible assets

             

(e)

To exclude write-downs for excess and obsolete inventory related to the discontinuance of certain product lines 

       

(f)

To exclude the consideration recorded to renew the Company's distribution agreement with Recro Gainesville LLC 

       

(g)

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

               

(h)

To primarily exclude the reimbursement of legal costs associated with a distribution agreement 

             

(i)

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

             

(j)

The weighted average share number for the three months ended December 31, 2020 is 39,443,441 for GAAP and 41,074,706 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)

                             

Three months ended December 31, 2019

 

Net sales

Cost of sales

Amortization
of intangibles

Gross
Profit

Gross
Margin
%

R&D
expense

SG&A
expense

Restructuring
expenses

Operating
income

Other income
(loss)

Income (loss)
before
income tax

Income tax
expense
(benefit)

Net
income

Diluted
earnings
per share (i)

GAAP Reported

$           136,110

$             86,663

$               8,153

$      41,294

30%

$        6,906

$         17,421

$               192

$     16,775

$           (16,999)

$                 (224)

$              (5,308)

$        5,084

$              0.13

Adjustments:

                           

Amortization of intangibles (a)

-

-

(8,153)

8,153

 

-

-

-

8,153

-

8,153

-

8,153

 

Cody API business (b)

-

(206)

-

206

 

(85)

(161)

-

452

-

452

-

452

 

Depreciation on capitalized software costs (c)

-

-

-

-

 

-

(1,058)

-

1,058

-

1,058

-

1,058

 

Decommissioning of Philadelphia sites (d)

-

(303)

-

303

 

-

-

-

303

-

303

-

303

 

Restructuring expenses (e)

-

-

-

-

 

-

-

(192)

192

-

192

-

192

 

Non-cash interest (f)

-

-

-

-

 

-

-

-

-

3,563

3,563

-

3,563

 

Other (g)

-

(209)

-

209

 

-

(135)

-

344

630

974

-

974

 

Tax adjustments (h)

-

-

-

-

 

-

-

-

-

-

-

8,111

(8,111)

 
                             

Non-GAAP Adjusted

$             136,110

$               85,945

$                       -

$        50,165

37%

$         6,821

$           16,067

$                   -

$       27,277

$             (12,806)

$               14,471

$                 2,803

$       11,668

$                0.27

                             

(a)

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

         

(b)

To exclude the operating results of the ceased Cody API business

                   

(c)

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

           

(d)

To exclude the costs related to the decommissioning and shutdown of the Philadelphia manufacturing and distribution sites

           

(e)

To exclude expenses associated with the Cody API Restructuring Plan

                 

(f)

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

                 

(g)

To primarily exclude a settlement related to a shareholder derivative lawsuit against certain current and former officers and directors of the Company

       

(h)

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

               

(i)

The weighted average share number for the three months ended December 31, 2019 is 40,557,503 for GAAP and 46,198,445 for the non-GAAP earnings per share calculations. Effective with the 4.5% Senior Convertible Note issued on September 27, 2019, the diluted earnings per share was calculated based on the "if-converted" method.

                             

 

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, 2020

 

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 loss

Income
(loss) before
income tax

Income tax
expense
(benefit)

Net
income
(loss)

Diluted
earnings
(loss) per
share (k)

GAAP Reported

$       260,399

$        216,675

$           17,246

$    26,478

10%

$       12,183

$          28,866

$               4,043

$        198,000

$     (216,614)

$        (27,889)

$       (244,503)

$       (66,056)

$   (178,447)

$          (4.55)

Adjustments:

                             

Amortization of intangibles (a)

-

-

(17,246)

17,246

 

-

-

-

-

17,246

-

17,246

-

17,246

 

Cody API business (b)

-

(158)

-

158

 

(5)

(455)

-

-

618

-

618

-

618

 

Depreciation on capitalized software costs (c)

-

-

-

-

 

-

(2,102)

-

-

2,102

-

2,102

-

2,102

 

Restructuring expenses (d)

-

-

-

-

 

-

-

(4,043)

-

4,043

-

4,043

-

4,043

 

Asset impairment charges (e)

-

-

-

-

 

-

-

-

(198,000)

198,000

-

198,000

-

198,000

 

Write-downs for excess and obsolete inventory (f)

-

(16,623)

-

16,623

 

-

-

-

-

16,623

-

16,623

-

16,623

 

 Distribution agreement renewal costs (g)

-

(4,966)

-

4,966

 

-

-

-

-

4,966

-

4,966

-

4,966

 

Non-cash interest (h)

-

-

-

-

 

-

-

-

-

-

6,250

6,250

-

6,250

 

Other (i)

-

-

-

-

 

-

(1,504)

-

-

1,504

-

1,504

-

1,504

 

Tax adjustments (j)

-

-

-

-

 

-

-

-

-

-

-

-

67,453

(67,453)

 
                               

Non-GAAP Adjusted

$         260,399

$          194,928

$                    -

$      65,471

25%

$         12,178

$            24,805

$                      -

$                    -

$           28,488

$          (21,639)

$               6,849

$             1,397

$           5,452

$             0.13

                               

(a)

To exclude amortization of purchased intangible assets primarily related to the acquisition of KUPI 

               

(b)

To exclude the operating results of the ceased Cody API business

                   

(c)

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

             

(d)

To exclude expenses associated with the 2020 Restructuring Plan

                   

(e)

To exclude asset impairment charges primarily related to the KUPI product rights intangible assets

               

(f)

To exclude write-downs for excess and obsolete inventory related to the discontinuance of certain product lines 

             

(g)

To exclude the consideration recorded to renew the Company's distribution agreement with Recro Gainesville LLC 

             

(h)

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

                 

(i)

To primarily exclude the reimbursement of legal costs associated with a distribution agreement 

               

(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 six months ended December 31, 2020 is 39,257,211 for GAAP and 40,915,504 for the non-GAAP earnings (loss) per share calculations

     

 

LANNETT COMPANY, INC.

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION

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

                               

Six months ended December 31, 2019

 

Net sales

Cost of sales

Amortization
of intangibles

Gross
Profit

Gross
Margin
%

R&D expense

SG&A
expense

Restructuring
expenses

Asset
impairment
charges

Operating
income

Other
income
(loss)

Income
(loss) before
income tax

Income tax
expense
(benefit)

Net income
(loss)

Diluted
earnings (loss)
per share (k)

GAAP Reported

$        263,452

$        164,319

$          15,181

$       83,952

32%

$          15,846

$          38,729

$            1,580

$            1,618

$          26,179

$        (36,773)

$        (10,594)

$           (3,521)

$           (7,073)

$                     (0.18)

Adjustments:

                             

Amortization of intangibles (a)

-

-

(15,181)

15,181

 

-

-

-

-

15,181

-

15,181

-

15,181

 

Cody API business (b)

-

(1,928)

-

1,928

 

(505)

(375)

-

-

2,808

-

2,808

-

2,808

 

Depreciation on capitalized software costs (c)

-

-

-

-

 

-

(2,117)

-

-

2,117

-

2,117

-

2,117

 

Decommissioning of Philadelphia sites (d)

-

(1,292)

-

1,292

 

-

-

-

-

1,292

-

1,292

-

1,292

 

Restructuring expenses (e)

-

-

-

-

 

-

-

(1,580)

-

1,580

-

1,580

-

1,580

 

Asset impairment charges (f)

-

-

-

-

 

-

-

-

(1,618)

1,618

-

1,618

-

1,618

 

Non-cash interest (g)

-

-

-

-

 

-

-

-

-

-

7,571

7,571

-

7,571

 

Loss on extinguishment of debt (h)

-

-

-

-

 

-

-

-

-

-

2,145

2,145

-

2,145

 

Other (i)

-

(417)

-

417

 

-

(2,224)

-

-

2,641

(336)

2,305

-

2,305

 

Tax adjustments (j)

-

-

-

-

 

-

-

-

-

-

-

-

9,110

(9,110)

 
                               

Non-GAAP Adjusted

$          263,452

$          160,682

$                    -

$       102,770

39%

$            15,341

$            34,013

$                    -

$                    -

$            53,416

$          (27,393)

$            26,023

$              5,589

$            20,434

$                        0.49

                               

(a)

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

           

(b)

To exclude the operating results of the ceased Cody API business 

                   

(c)

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

             

(d)

To exclude the costs related to the decommissioning and shutdown of the Philadelphia manufacturing and distribution sites 

           

(e)

To exclude expenses associated with the Cody API Restructuring Plan 

                   

(f)

To exclude impairment charges primarily associated with an operating lease right-of-use asset 

               

(g)

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

                   

(h)

To exclude the loss on extinguishment of debt primarily related to the partial repayment of the outstanding Term Loan A balance 

           

(i)

To primarily exclude accrued separation costs related to the Company's former Chief Financial Officer as well as gains on sales of assets previously held for sale, partially offset by legal settlements 

   

(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 six months ended December 31, 2019 is 38,457,159 for GAAP and 43,723,412 for the non-GAAP earnings (loss) per share calculations. Effective with the 4.5% Senior Convertible Note issued on September 27, 2019, the diluted earnings per share was calculated based on the "if-converted" method.

                               

 

 

LANNETT COMPANY, INC.

       
 

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA (UNAUDITED)

       
 

($ in thousands)

       
               
     

Three months ended 

       
     

December 31, 2020

       
               
 

Net loss

 

$                          (171,948)

         
                 
 

Interest expense

 

13,496

         
 

Depreciation and amortization

 

14,375

         
 

Income tax benefit

 

(58,076)

         
 

EBITDA

 

(202,153)

         
                 
 

Share-based compensation

 

1,991

         
 

Inventory write-down (a)

 

20,609

         
 

Asset impairment charges (b) 

 

198,000

         
 

Investment income

 

(43)

         
 

Other non-operating loss

 

(28)

         
 

Distribution agreement renewal costs (c)

 

4,966

         
 

Other(d)

 

668

         
 

Adjusted EBITDA (Non-GAAP)

 

$                              24,010

         
                 
 

(a)

To exclude write-downs for excess and obsolete inventory primarily related to the discontinuance of certain product lines 

(b)

To exclude asset impairment charges primarily related to the KUPI product rights intangible assets

(c)

To exclude the consideration recorded to renew the Company's distribution agreement with Recro Gainesville LLC 

(d)

To primarily exclude the reimbursement of legal costs associated with a distribution agreement, as well as the operating results of the ceased Cody API business

 

LANNETT COMPANY, INC.

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

($ in millions)

       
   

Fiscal Year 2021 Guidance

 
           

Non-GAAP

 
   

GAAP

 

Adjustments

 

Adjusted

 
               

Net sales

 

 $480 - $500 

 

-

 

 $480 - $500 

 

Gross margin percentage

 

approx. 14% to 16%

 

10%

 (a) 

approx. 24% to 26%

 

R&D expense

 

 $26 - $28 

 

-

 

 $26 - $28 

 

SG&A expense

 

 $58 - $60 

 

($6)

 (b) 

 $52 - $54 

 

Restructuring expense

 

$4

 

($4)

 (c) 

-

 

Asset impairment charges

 

$198

 

($198)

 (d) 

-

 

Interest and other

 

 $53 - $54 

 

($12)

 (e) 

 $41 - $42 

 

Effective tax rate

 

 approx. 27% to 28% 

 

(1%)

 (f) 

approx. 26% to 27%

 

Adjusted EBITDA

 

 N/A 

 

 N/A 

 

 $75 - $85 

 

Capital expenditures

 

 $10 - $15 

 

-

 

 $10 - $15 

 
               
 

(a)

The adjustment primarily reflects amortization of purchased intangible assets related to the acquisition of Kremers Urban Pharmaceuticals, Inc. ("KUPI"), write-downs for excess and obsolete inventory related to the discontinuance of certain product lines, and consideration recorded to renew the Company's distribution agreement with Recro Gainesville LLC

(b)

The adjustment primarily excludes depreciation on previously capitalized software integration costs associated with the KUPI acquisition

(c)

To exclude expenses associated with the 2020 Restructuring Plan

(d)

To exclude asset impairment charges primarily related to the KUPI product rights intangible assets

(e)

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

(f)

The adjustment reflects the impact of tax credits and deductions relate to expected annual pre-tax income (loss) as well as the impact of the CARES Act, which allows the Company to carryback the expected taxable loss into a prior fiscal year, where the statutory tax rate was 35%

 

LANNETT COMPANY, INC.

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA (UNAUDITED)

($ in millions)

       
 

Fiscal Year 2021 Guidance

 

Low

 

High

       

Net loss

$     (197.6)

 

$     (189.1)

       

Interest expense

53.0

 

54.0

Depreciation and amortization

55.0

 

55.0

Income taxes

(73.4)

 

(73.9)

EBITDA

(163.0)

 

(154.0)

       

Share-based compensation

9.0

 

9.0

Inventory write-down

27.0

 

28.0

Asset impairment charges

198.0

 

198.0

Restructuring expenses

4.0

 

4.0

Adjusted EBITDA (Non-GAAP)

$         75.0

 

$         85.0

 

LANNETT COMPANY, INC.

NET SALES BY MEDICAL INDICATION

               
 

Three months ended

 

Six months ended

($ in thousands)

December 31,

 

December 31,

Medical Indication

2020

 

2019

 

2020

 

2019

Analgesic

$    3,572

 

$    2,111

 

$    6,692

 

$    3,995

Anti-Psychosis

13,317

 

22,697

 

26,345

 

50,730

Cardiovascular

16,336

 

23,972

 

36,050

 

45,579

Central Nervous System

24,614

 

19,331

 

47,139

 

38,588

Endocrinology

9,496

 

-

 

12,729

 

-

Gastrointestinal

18,575

 

18,313

 

35,675

 

35,275

Infectious Disease

23,044

 

18,078

 

44,976

 

29,973

Migraine

6,083

 

10,878

 

15,773

 

20,021

Respiratory/Allergy/Cough/Cold

2,267

 

3,075

 

3,693

 

5,781

Urinary

1,361

 

1,233

 

2,819

 

1,668

Other

8,410

 

9,934

 

16,044

 

19,796

Contract Manufacturing revenue

6,845

 

6,488

 

12,464

 

12,046

   Net Sales

$ 133,920

 

$ 136,110

 

$ 260,399

 

$ 263,452

 

Contact:

Robert Jaffe

 

Robert Jaffe Co., LLC

 

(424) 288-4098

 

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/lannett-announces-fiscal-2021-second-quarter-financial-results-in-line-or-above-expectations-301221440.html

SOURCE Lannett Company, Inc.

 
 
Company Codes: NYSE:LCI
 

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