--Adjusted EPS Higher Than Expected; Outlook for Fiscal 2018 Net Sales and Adjusted Profitability Affirmed--
PHILADELPHIA, May 7, 2018 /PRNewswire/ -- Lannett Company, Inc. (NYSE: LCI) today reported financial results for its fiscal 2018 third quarter ended March 31, 2018.
"We continue to make good progress executing on our strategic initiatives," said Tim Crew, chief executive officer of Lannett. "During the quarter, we acquired five products from UCB and entered into three new agreements with our strategic alliance partners, which I am delighted to report have progressed and already created new revenue streams. To further build out our product offering, earlier today we announced the acquisition of a portfolio of primarily oral solution medications, comprised of 23 approved Abbreviated New Drug Applications (ANDAs) and one pending ANDA. Moreover, we have re-aligned and added depth and expertise to the management team, resulting in improved manufacturing output and a re-invigorated marketing plan to launch our products.
"With regard to our third quarter financial results, profitability on an adjusted basis exceeded our expectations. Our financial performance reflected the discipline of lower adjusted operating expenses and a mix of positive and negative sales variances to a few of our key products.
"Looking ahead, our plan is to launch over the next several weeks, and into fiscal 2019, a number of our previously approved and recently acquired or in-licensed products. While these launches will have a marginal financial benefit to our fiscal fourth quarter performance, we expect a more substantive impact on fiscal 2019 financial results. Also, we continue to be engaged in numerous discussions with existing and new potential partners to add even more products to our portfolio that will further diversify our revenues, provide affordable alternatives for our customers, and enhance our efficiencies and bottom line."
For the fiscal 2018 third quarter, on a GAAP basis, net sales were $174.4 million compared with $165.7 million for the third quarter of fiscal 2017. During the third quarter of last year, the company recorded a $4.0 million adjustment to a settlement agreement with one of its customers, which resulted in total net sales for the prior-year period of $161.7 million. Gross profit was $67.1 million, or 38% of total net sales, compared with $72.4 million, or 45% of total net sales. Research and development (R&D) expenses of $2.7 million benefited from a cancelled order for pre-launch inventory totaling $3.8 million. This compares with R&D expenses of $8.3 million for the fiscal 2017 third quarter. Selling, general and administrative (SG&A) expenses decreased to $14.1 million from $17.6 million. Restructuring expenses were $1.4 million compared with $1.6 million. Following a strategic evaluation of its pipeline, the company sold rights to a pipeline product to its development partner for an upfront payment and future payments based on FDA approval and other milestones. As a result of this transaction, the company recorded a loss on sale of intangible asset of $15.5 million in the current year third quarter. In the prior-year third quarter, the company recorded acquisition and integration-related expenses of $1.3 million. Operating income was $33.3 million compared with $43.6 million. Interest expense was $22.8 million compared with $22.4 million for the third quarter of fiscal 2017. The company recorded an income tax benefit of $2.3 million versus income tax expense of $7.3 million in the prior-year period. Net income attributable to Lannett was $12.8 million, or $0.33 per diluted share, compared with $14.9 million, or $0.40 per diluted share, for the fiscal 2017 third quarter.
For the fiscal 2018 third reported on a Non-GAAP basis, adjusted net sales were $174.4 million compared with $165.7 million for the third quarter of fiscal 2017. Adjusted gross profit was $76.7 million, or 44% of adjusted net sales, compared with $85.5 million, or 52% of adjusted net sales, for the prior-year third quarter. Adjusted R&D expenses were $2.7 million compared with $8.3 million. Adjusted SG&A expenses were $14.1 million compared with $17.3 million. Adjusted operating income was $59.8 million compared with $59.9 million for the prior-year third quarter. Adjusted interest expense declined to $16.2 million from $16.7 million for the third quarter of fiscal 2017. Adjusted income tax expense was $13.2 million compared with $15.0 million in the prior-year period. Adjusted net income attributable to Lannett was $30.5 million, or $0.80 per diluted share, compared with $29.2 million, or $0.77 per diluted share, for the fiscal 2017 third quarter.
Guidance for Fiscal 2018
Based on its current outlook, the company's fiscal 2018 full year net sales and adjusted profitability is unchanged, although individual elements of its financial guidance from February 7, 2018 have been revised, as follows.
GAAP Adjusted
---- --------
Net sales $685 million to $695 million, updated from $680 million to $700 million $685 million to $695 million, updated from $680 million to $700 million
--------- ----------------------------------- -----------------------------------
Gross margin % Approximately 42%, down from 42% to Approximately 48%, down from 48% to
43% 49%
------------- ----------------------------------- -----------------------------------
R&D expense $30 million to $32 million, down from $36 million to $38 million $30 million to $32 million, down from $36 million to $38 million
----------- ----------------------------------- -----------------------------------
SG&A expense $79 million to $81 million, Unchanged $71 million to $73 million, Unchanged
------------ ----------------------------------- -----------------------------------
Integration and
restructuring
related expense $4 million to $5 million, unchanged $ --
---------------- ----------------------------------- ----
Loss on Sale of
Intangible asset $16 million $ --
----------------- ----------- ----
Interest expense
and other $79 million to $80 million, Up from $77 million to $78 million $62 million to $63 million, Unchanged
---------------- ----------------------------------- -----------------------------------
Effective tax rate Approximately 35%, down from Approximately 28%, up from
approximately 39% approximately 27%
------------------ ----------------------------- ---------------------------
Capital Approximately $50 million, changed Approximately $50 million, changed
expenditures from the range of $45 million to from the range of $45 million to
$55 million $55 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 2018 third quarter ended March 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 46898785. 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, realizing enhanced efficiencies, successfully consummating transactions with new and existing alliance partners and successfully launching commercializing products included therein, 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)
March 31, 2018 June 30, 2017
-------------- -------------
ASSETS
------
Current assets:
Cash and cash equivalents $114,016 $117,737
Investment securities 9,089 27,091
Accounts receivable, net 238,767 204,066
Inventories 133,290 122,604
Prepaid income taxes 16,563 16,703
Other current assets 10,045 6,592
------ -----
Total current assets 521,770 494,793
Property, plant and equipment,
net 267,398 243,148
Intangible assets, net 420,582 453,861
Goodwill 339,566 339,566
Deferred tax assets 18,713 52,753
Other assets 29,462 19,191
TOTAL ASSETS $1,597,491 $1,603,312
========== ==========
LIABILITIES
-----------
Current liabilities:
Accounts payable $67,501 $44,720
Accrued expenses 5,832 12,499
Accrued payroll and payroll-
related expenses 9,318 4,833
Rebates payable 41,267 44,593
Royalties payable 9,540 3,015
Restructuring liability 3,328 5,431
Settlement liability - 17,000
Short-term borrowings and
current portion of long-term
debt 66,845 60,117
------ ------
Total current liabilities 203,631 192,208
Long-term debt, net 784,689 843,530
Other liabilities 2,199 6,452
TOTAL LIABILITIES 990,519 1,042,190
------- ---------
Commitments and contingencies
STOCKHOLDERS' EQUITY
--------------------
Common stock ($0.001 par value,
100,000,000 shares authorized;
38,176,302 and 37,528,450
shares issued; 37,305,266 and
36,919,296 shares outstanding
at March 31, 2018 and June 30,
2017, respectively) 38 37
Additional paid-in capital 303,376 292,780
Retained earnings 317,823 277,774
Accumulated other comprehensive
loss (450) (222)
Treasury stock (871,036 and
609,154 shares at March 31,
2018 and June 30, 2017,
respectively) (13,815) (9,247)
------- ------
Total stockholders' equity 606,972 561,122
------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,597,491 $1,603,312
========== ==========
LANNETT COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except share and per share data)
Three months ended Nine months ended
March 31, March 31,
--------- ---------
2018 2017 2018 2017
---- ---- ---- ----
Net sales $174,386 $165,720 $513,652 $498,223
Settlement agreement - (4,000) - (4,000)
Total net sales $174,386 $161,720 $513,652 $494,223
-------- -------- -------- --------
Cost of sales 99,036 81,553 267,503 227,527
Amortization of intangibles 8,293 7,737 23,971 24,361
Gross profit 67,057 72,430 222,178 242,335
------ ------ ------- -------
Operating expenses:
Research and development
expenses 2,730 8,340 20,861 30,650
Selling, general, and
administrative expenses 14,112 17,629 61,643 56,958
Acquisition and integration-
related expenses - 1,256 83 3,674
Restructuring expenses 1,421 1,568 2,983 5,332
Loss on sale of intangible
asset 15,514 - 15,514 -
Intangible asset impairment
charges - - - 88,084
--- --- --- ------
Total operating expenses 33,777 28,793 101,084 184,698
------ ------ ------- -------
Operating income 33,280 43,637 121,094 57,637
------ ------ ------- ------
Other income (loss):
Investment income 719 1,037 4,208 3,085
Interest expense (22,842) (22,373) (64,440) (68,700)
Other (662) (35) 2,473 (298)
---- --- ----- ----
Total other loss (22,785) (21,371) (57,759) (65,913)
------- ------- ------- -------
Income (loss) before income
tax 10,495 22,266 63,335 (8,276)
Income tax expense (benefit) (2,275) 7,337 23,286 (2,003)
------ ----- ------ ------
Net income (loss) 12,770 14,929 40,049 (6,273)
Less: Net income attributable
to noncontrolling interest - - - 34
--- --- --- ---
Net income (loss) attributable
to Lannett Company, Inc. $12,770 $14,929 $40,049 $(6,307)
======= ======= ======= =======
Earnings (loss) per common
share attributable to Lannett
Company, Inc.:
Basic $0.34 $0.41 $1.08 $(0.17)
Diluted $0.33 $0.40 $1.05 $(0.17)
Weighted average common shares
outstanding:
Basic 37,136,945 36,849,208 37,064,781 36,785,829
Diluted 38,287,005 37,752,304 38,112,193 36,785,829
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 March 31, 2018
---------------------------------
Net sales Cost of Amortization Gross Gross R&D SG&A Acquisition and Restructuring Loss on sale of Operating Other Income Income tax Net income Net income Net income Diluted
sales of intangibles Profit Margin % expense expense integration- expenses intangible asset income income before expense attributable to attributable to earnings
related (loss) income (benefit) noncontrolling Lannett per share
expenses tax interest Company, Inc. (g)
--- --- --- -------- --- ---
GAAP Reported $174,386 $99,036 $8,293 $67,057 38% $2,730 $14,112 $ - $1,421 15,514 $33,280 $(22,785) $10,495 $(2,275) $12,770 $ - $12,770 $0.33
Adjustments:
------------
Depreciation of
Fixed Assets step-
up (a) - (1,335) - 1,335 - - - - - 1,335 - 1,335 - 1,335 - 1,335
Amortization of
intangibles (b) - - (8,293) 8,293 - - - - - 8,293 - 8,293 - 8,293 - 8,293
Restructuring
expenses (c) - - - - - - - (1,421) - 1,421 - 1,421 - 1,421 - 1,421
Loss on sale of
intangible asset
(d) - - - - - - - - (15,514) 15,514 15,514 - 15,514 - 15,514
Non-cash interest
(e) - - - - - - - - - - 6,642 6,642 - 6,642 - 6,642
Tax adjustments (f) - - - - - - - - - - - - 15,508 (15,508) - (15,508)
Non-GAAP Adjusted $174,386 $97,701 $ - $76,685 44% $2,730 $14,112 $ - $ - $ - $59,843 $(16,143) $43,700 $13,233 $30,467 $ - $30,467 $0.80
======== ======= ==================== ======= === ====== ======= ===================== ================== ====================== ======= ======== ======= ======= ======= =================== ======= =====
(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) To exclude expenses associated with the
2016 Restructuring Plan
(d) To exclude a loss realized on a sale of an
intangible asset
(e) To exclude non-cash interest expense
primarily associated with debt issuance
costs
(f) 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
(g) The weighted average share number for the
three months ended March 31, 2018 is
38,287,005 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 March 31, 2017
---------------------------------
Total net Cost of Amortization Gross Gross R&D SG&A Acquisition and Restructuring Operating Other Income Income tax Net income Net income Net income Diluted
sales sales of intangibles Profit Margin % expense expense integration- expenses income income before expense attributable to attributable to earnings
related (loss) income noncontrolling Lannett per share
expenses tax interest Company, Inc. (h)
--- --- --- -------- --- ---
GAAP Reported $161,720 $81,553 $7,737 $72,430 45% $8,340 $17,629 $1,256 $1,568 $43,637 $(21,371) $22,266 $7,337 $14,929 $ - $14,929 $0.40
Adjustments:
------------
Settlement
agreement (a) 4,000 - - 4,000 - - - - 4,000 - 4,000 - 4,000 - 4,000
Depreciation of
Fixed Assets step-
up (b) - (1,335) - 1,335 - - - - 1,335 - 1,335 - 1,335 - 1,335
Amortization of
intangibles (c) - - (7,737) 7,737 - (365) - - 8,102 - 8,102 - 8,102 - 8,102
Acquisition and
integration-
related expenses
(d) - - - - - - (1,256) - 1,256 - 1,256 - 1,256 - 1,256
Restructuring
expenses (e) - - - - - - - (1,568) 1,568 - 1,568 - 1,568 - 1,568
Non-cash interest
(f) - - - - - - - - - 5,688 5,688 - 5,688 - 5,688
Tax adjustments (g) - - - - - - - - - - - 7,679 (7,679) - (7,679)
Non-GAAP Adjusted $165,720 $80,218 $ - $85,502 52% $8,340 $17,264 $ - $ - $59,898 $(15,683) $44,215 $15,016 $29,199 $ - $29,199 $0.77
======== ======= =================== ======= === ====== ======= =================== =============== ======= ======== ======= ======= ======= ================ ======= =====
(a) Relates to an adjustment 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 purchased intangible assets primarily related to the acquisitions of KUPI and Silarx Pharmaceuticals, Inc.
(d) Relates to acquisition and integration-related expenses primarily related to the acquisition of KUPI
(e) To exclude expenses associated with the 2016 Restructuring Plan
(f) To exclude non-cash interest expense primarily associated with debt issuance costs
(g) The tax effect of the pre-tax adjustments included at applicable tax rates
(h) The weighted average share number for the three months ended March 31, 2017 is 37,752,304 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)
Nine months ended March 31, 2018
--------------------------------
Net Cost of Amortization Gross Gross R&D SG&A Acquisition and Restructuring Loss on sale of Operating Other Income Income tax Net income Net income Net income Diluted
sales sales of intangibles Profit Margin % expense expense integration- expenses intangible asset income income before expense attributable to attributable to earnings
related (loss) income noncontrolling Lannett per share
expenses tax interest Company, Inc. (j)
--- --- --- -------- --- ---
GAAP Reported $513,652 $267,503 $23,971 $222,178 43% $20,861 $61,643 $83 $2,983 $15,514 $121,094 $(57,759) $63,335 $23,286 $40,049 $ - $40,049 $1.05
Adjustments:
------------
Depreciation of
Fixed Assets step-
up (a) - (4,005) - 4,005 - - - - - 4,005 - 4,005 - 4,005 - 4,005
Amortization of
intangibles (b) - - (23,971) 23,971 - (582) - - - 24,553 - 24,553 - 24,553 - 24,553
Acquisition and
integration-
related expenses
(c) - - - - - - (83) - - 83 - 83 - 83 - 83
Restructuring
expenses (d) - - - - - - - (2,983) - 2,983 - 2,983 - 2,983 - 2,983
Loss on sale of
intangible asset
(e) - - - - - - - - (15,514) 15,514 15,514 - 15,514 - 15,514
Non-cash interest
(f) - - - - - - - - - - 15,656 15,656 - 15,656 - 15,656
Litigation
settlement gain
(g) - - - - - - - - - - (3,500) (3,500) - (3,500) - (3,500)
Other (h) - - - - - (7,405) - - - 7,405 - 7,405 - 7,405 - 7,405
Tax adjustments (i) - - - - - - - - - - - - 12,978 (12,978) - (12,978)
Non-GAAP Adjusted $513,652 $263,498 $ - $250,154 49% $20,861 $53,656 $ - $ - $ - $175,637 $(45,603) $130,034 $36,264 $93,770 $ - $93,770 $2.46
======== ======== =================== ======== === ======= ======= =================== =============== ================== ======== ======== ======== ======= ======= ================ ======= =====
(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 a
loss realized
on a sale of an
intangible
asset
(f) To exclude non-
cash interest
expense
primarily
associated with
debt issuance
costs
(g) To exclude a
settlement gain
associated with
patent
litigation
(h) 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
(i) 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
(j) The weighted
average share
number for the
nine months
ended March 31,
2018 is
38,112,193 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)
Nine months ended March 31, 2017
--------------------------------
Total net Cost of Amortization Gross Profit Gross R&D SG&A Acquisition and Restructuring Intangible Operating Other Income Income Net income Net income Net income (loss) Diluted
sales sales of intangibles Margin % expense expense integration- expenses asset income income (loss) before tax (loss) attributable to attributable to earnings
related expenses impairment (loss) income tax expense noncontrolling Lannett (loss) per
charges (benefit) interest Company, Inc. share (k)
--- --- --- -------- -------- ---------
GAAP Reported $494,223 $227,527 $24,361 $242,335 49% $30,650 $56,958 $3,674 $5,332 $88,084 $57,637 $(65,913) $(8,276) $(2,003) $(6,273) $34 $(6,307) $(0.17)
Adjustments:
------------
Settlement
agreement (a) 4,000 - - 4,000 - - - - - 4,000 - 4,000 - 4,000 - 4,000
Depreciation of
Fixed Assets step-
up (b) - (3,075) - 3,075 - - - - - 3,075 - 3,075 - 3,075 - 3,075
Amortization of
Inventory step-up
(c) - (1,938) - 1,938 - - - - - 1,938 - 1,938 - 1,938 - 1,938
Amortization of
intangibles (d) - - (24,361) 24,361 - (1,095) - - - 25,456 - 25,456 - 25,456 - 25,456
Acquisition and
integration-
related expenses
(e) - - - - - - (3,674) - - 3,674 - 3,674 - 3,674 - 3,674
Restructuring
expenses (f) - - - - - - - (5,332) - 5,332 - 5,332 - 5,332 - 5,332
Intangible assets
impairment charges
(g) - - - - - - - - (88,084) 88,084 - 88,084 - 88,084 - 88,084
Non-cash interest
(h) - - - - - - - - - - 15,961 15,961 - 15,961 - 15,961
Other (i) - - - - - (715) - - - 715 - 715 - 715 - 715
Tax adjustments (j) - - - - - - - - - - - - 49,195 (49,195) - (49,195)
Non-GAAP Adjusted $498,223 $222,514 $ - $275,709 55% $30,650 $55,148 $ - $ - $ - $189,911 $(49,952) $139,959 $47,192 $92,767 $34 $92,733 $2.46
======== ======== =================== ======== === ======= ======= ===================== =============== ================= ======== ======== ======== ======= ======= === ======= =====
Relates to an
adjustment to a
settlement
agreement with
a former
(a) customer
Relates to
depreciation of
a fair value
step-up in
property, plant
and equipment
related to the
acquisition of
Kremers Urban
Pharmaceuticals,
(b) Inc. ("KUPI")
Relates to
amortization of
a fair value
step-up in
(c) inventory r
elated to the
acquisition of
KUPI
Relates to
amortization of
purchased
intangible
assets
primarily
related to the
acquisitions of
KUPI and Silarx
Pharmaceuticals,
(d) Inc.
Relates to
acquisition and
integration-
related
expenses
primarily
related to the
acquisition of
(e) KUPI
To exclude
expenses
associated with
the 2016
Restructuring
(f) Plan
To exclude
impairment
charges related
to certain
intangible
assets acquired
as part of the
KUPI
(g) acquisition
To exclude non-
cash interest
expense
primarily
associated with
debt issuance
(h) costs
Primarily
relates to
separation
expenses
associated with
a former
(i) employee
The tax effect
of the pre-tax
adjustments
included at
applicable tax
(j) rates
The weighted
average share
numbers for the
nine months
ended March 31,
2017 are
36,785,829 and
37,669,173 for
the GAAP and
non-GAAP
earnings (loss)
per share
calculations,
(k) respectively
LANNETT COMPANY, INC.
RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)
($ in millions)
Fiscal Year 2018 Guidance
-------------------------
Non-GAAP
GAAP Adjustments Adjusted
---- ----------- --------
Net sales $685 - $695 - $685 - $695
Gross margin percentage approx. 42% 6% (a) approx. 48%
R&D expense $30 - $32 - $30 - $32
SG&A expense $79 - $81 ($8) (b) $71 - $73
Integration and Restructuring expense $4 - $5 ($4 - $5) (c) -
Loss on Sale of Intangible Asset $16 ($16) (d) -
--- ----
Interest expense and other $79 - $80 ($17) (e) $62 - $63
Effective tax rate approx. 35% (7%) (f) approx. 28%
Capital expenditures approx. $50 - approx. $50
(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
severance
benefits to the
former chief
executive
officer, a
reversal of
indemnified
unrecognized
tax benefits as
well as
amortization of
purchased
intangible
assets related
to the
acquisition of
KUPI
(c) The adjustment
primarily
reflects
expenses
related to the
2016
Restructuring
Plan
(d) The adjustment
reflects a loss
on sale of an
intangible
asset acquired
as part of the
acquisition of
KUPI
(e) The adjustment
primarily
reflects non-
cash interest
expense
associated with
debt issuance
costs as well
as a litigation
settlement gain
(f) The adjustment
primarily
reflects the
impact of the
revaluation of
net long term
deferred tax
assets related
to the Tax Cut
and Jobs Act
legislation
("2017 Tax
Reform")
LANNETT COMPANY, INC.
NET SALES BY MEDICAL INDICATION
Three months ended Nine months ended
(in thousands) March 31, March 31,
--------- ---------
Medical Indication 2018 2017 2018 2017
------------------ ---- ---- ---- ----
Antibiotic $3,801 $4,474 $10,701 $13,047
Anti-Psychosis 9,336 14,433 47,127 47,119
Cardiovascular 18,514 14,815 39,955 39,484
Central Nervous System 8,395 11,124 24,137 32,028
Gallstone 3,828 11,157 15,674 37,465
Gastrointestinal 16,562 19,441 46,171 56,470
Glaucoma 875 4,868 5,706 15,962
Migraine 12,888 7,043 43,387 22,066
Muscle Relaxant 3,299 3,673 10,309 10,208
Pain Management 6,594 6,085 18,483 20,132
Respiratory 2,324 4,256 6,200 9,426
Thyroid Deficiency 69,975 44,999 185,983 130,267
Urinary 33 2,619 5,870 12,413
Other 12,376 14,555 38,178 36,870
Contract Manufacturing revenue 5,586 2,178 15,771 15,266
----- ----- ------ ------
Net Sales 174,386 165,720 513,652 498,223
------- ------- ------- -------
Settlement agreement - (4,000) - (4,000)
Total Net Sales $174,386 $161,720 $513,652 $494,223
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SOURCE Lannett Company, Inc.
