PHILADELPHIA, Feb. 3, 2016 /PRNewswire/ -- Lannett Company, Inc. (NYSE: LCI) today reported financial results for its fiscal 2016 second quarter and first six months ended December 31, 2015. As previously announced, the company completed the acquisition of Kremers Urban Pharmaceuticals Inc. (KU) on November 25, 2015. Accordingly, fiscal 2016 second quarter and year-to-date financial results include the operations of KU since the acquisition date.
For the fiscal 2016 second quarter, net sales increased to $127.1 million from $114.8 million in last year’s second quarter. Gross profit was $71.6 million, or 56% of net sales, compared with $87.2 million, or 76% of net sales. Research and development (R&D) expenses increased to $9.1 million from $7.8 million for the fiscal 2015 second quarter. Selling, general and administrative (SG&A) expenses were $14.7 million compared with $10.8 million. Acquisition-related expenses increased to $17.6 million from $2.0 million in the comparable prior-year period. Operating income was $30.3 million compared with $66.5 million. Net income attributable to Lannett was $13.5 million, or $0.36 per diluted share, compared with $44.8 million, or $1.21 per diluted share, for the fiscal 2015 second quarter.
On a Non-GAAP adjusted basis, gross profit was $81.0 million, or 64% of net sales, compared with $87.2 million, or 76% of net sales, for the fiscal 2015 second quarter. Adjusted SG&A expenses were $11.6 million compared with $10.8 million. Adjusted operating income was $60.4 million compared with $68.6 million for the prior-year second quarter. Adjusted net income attributable to Lannett was $35.4 million, or $0.95 per diluted share, compared with $46.1 million, or $1.24 per diluted share, for the fiscal 2015 second quarter.
“We are making solid progress on integrating KU and implementing accelerated restructuring and cost savings measures,” said Arthur Bedrosian, chief executive officer of Lannett. “As announced earlier this week, we have begun taking definitive and immediate actions to enhance efficiencies throughout the organization and reduce costs by approximately $40 million in the first 12 months following the close of the KU acquisition. We estimate that our actions will result in annualized cost savings of approximately $50 million by the end of fiscal 2018 and $65 million by the end of fiscal 2020.
“We are excited about Lannett’s future by building upon the strong foundation already in place and further growing our business. Our team is focused on rapidly integrating KU, leveraging our significantly larger size and reach and advancing our deep pipeline, which includes 37 drug applications pending at the FDA and more than 50 product candidates in various stages of development.”
For the first six months of fiscal 2016, net sales rose 12% to $233.5 million from $208.2 million in the comparable prior-year period. Gross profit was $149.1 million, or 64% of net sales, compared with $158.8 million, or 76% of net sales. R&D expenses increased to $15.6 million from $14.2 million for the fiscal 2015 first six months. SG&A expenses were $30.2 million compared with $21.3 million in the same period of the prior year. Acquisition-related expenses increased to $21.5 million from $2.1 million in the comparable prior-year period. Operating income was $81.7 million compared with $121.2 million. Net income attributable to Lannett Company was $46.7 million, or $1.25 per diluted share, compared with $79.7 million, or $2.15 per diluted share, for the first six months of fiscal 2015.
On a Non-GAAP adjusted basis, gross profit was $158.8 million, or 68% of net sales, compared with $158.8 million, or 76% of net sales, for the first six months of fiscal 2015. Adjusted SG&A expenses were $25.4 million compared with $21.3 million. Adjusted operating income was $117.7 million compared with $123.3 million for the prior-year period. Adjusted net income attributable to Lannett was $72.5 million, or $1.94 per diluted share, compared with $81.1 million, or $2.19 per diluted share, for the fiscal 2015 first six months.
Guidance for Fiscal 2016
Based on its current outlook the company reiterated its financial guidance for the fiscal 2016 full year as follows:
- Net sales in the range of $585 million to $595 million;
- Adjusted gross margin as a percentage of net sales of approximately 62% to 63%;
- Adjusted R&D expense in the range of $49 million to $51 million;
- Adjusted SG&A expense ranging from $59 million to $61 million;
- Adjusted interest expense in the range of $50 million to $53 million;
- The adjusted effective tax rate for the full year in the range of 34% to 35%; and
- Capital expenditures in fiscal 2016 in the range of $35 million to $45 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 the fiscal 2016 second quarter ended December 31, 2015. The conference call will be available to interested parties by dialing 888-771-4371 from the U.S. or Canada, or 847-585-4405 from international locations, passcode 41706958. The call will be broadcast via the Internet at www.lannett.com.
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