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Lannett Announces Fiscal 2020 Third-Quarter Financial Results

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Financial and Business Highlights:

- Q3 Net Sales of $144 Million , a Record, Post Levothyroxine

- Adjusted EBITDA of $36 Million , In Line with Expectations

- Commenced Marketing Four Products in FY20 Q3, Two Thus Far in Q4

PHILADELPHIA , May 6, 2020 /PRNewswire/ -- Lannett Company, Inc. (NYSE: LCI) today reported financial results for its fiscal 2020 third quarter ended March 31 , 2020. 

Lannett Logo (PRNewsFoto/Lannett Company, Inc.)
Lannett Logo (PRNewsFoto/Lannett Company, Inc.)

"I am incredibly proud of the effort and dedication of all of our employees in response to the COVID-19 public health crisis," said Tim Crew , chief executive officer of Lannett. "We focused on employee safety and our team continues to produce important medications for patients. We also recently brought a number of new drug products to market. Fortunately for Lannett, all of our finished-dose manufacturing is U.S. based. We have long articulated our supply chain has less global fragmentation than that of many of our competitors. As a result, our supply chain for products and key ingredients has to date been only modestly affected by challenges associated with COVID-19.  

"For our fiscal 2020 third quarter, net sales were higher than expected due to COVID-19, as patients appear to have purchased extra supply of their medications and some customers increased their purchases of some of our products to address patient demand and avoid shortages.

"We plan to launch several new products in the next several months, and look forward to our scheduled meeting in early June with the FDA to plan next steps for the clinical advancement of our biosimilar insulin glargine partnered product candidate."

For the fiscal 2020 third quarter on a GAAP basis, net sales were $144.4 million compared with $172.8 million for the third quarter of fiscal 2019. Gross profit was $41.7 million , or 29% of net sales, compared with $65.3 million , or 38% of net sales. For the fiscal 2020 third quarter, operating expenses included an asset impairment charge of $14.0 million related to the write-down of the value of a product license agreement. Net loss was $16.6 million , or $0.43 per share, versus net income of $10.6 million , or $0.27 per diluted share, for the third quarter of fiscal 2019.

For the fiscal 2020 third quarter reported on a Non-GAAP basis, net sales were $144.4 million compared with $172.8 million for the third quarter of fiscal 2019. Adjusted gross profit was $52.3 million , or 36% of net sales, compared with $77.0 million , or 45% of net sales, for the prior-year third quarter. Adjusted interest expense was $12.7 million compared with $17.0 million for the third quarter of fiscal 2019. Adjusted net income was $11.7 million , or $0.27 per diluted share, compared with $26.6 million , or $0.68 per diluted share, for the fiscal 2019 third quarter. Adjusted EBITDA for the fiscal 2020 third quarter was $35.9 million .

Guidance for Fiscal 2020

Based on its current outlook, the company tightened the range for net sales and revised certain other items in its GAAP and adjusted guidance for fiscal year 2020.  The full guidance is as follows:


GAAP

Adjusted**

Net sales

$535 million to $545 million, from $530 million to $550 million

$535 million to $545 million, from $530 million to $550 million

Gross margin %

Approximately 29.5% to 31.5%, down from approximately 32.5% to 34.5%

Approximately 37% to 39%, down from approximately 39% to 41%

R&D expense

$31 million to $32 million, down from $34 million to $36 million

$31 million to $32 million, down from $34 million to $36 million

SG&A expense

$75 million to $77 million, up from $69 million to $72 million

$65 million to $67 million, up from $63 million to $66 million

Restructuring expense

$2 million to $3 million, unchanged

$ --

Asset impairment charges

$16 million, up from $2 million

$ --

Interest and other

$66 million to $68 million, down from $67 million to $69 million

$50 million to $51 million, down from $51 million to $53 million

Effective tax rate

Approximately 16% to 17%, unchanged

Approximately 21% to 22%, unchanged

Adjusted EBITDA*

N/A

$137 million to $147 million, down from $145 million to $160 million

Capital expenditures

$15 million to $20 million, down from $20 million to $25 million

$15 million to $20 million, down from $20 million to $25 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 2020 third quarter ended March 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 49654451.  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, as defined in the company's existing Credit Agreement, is appropriate to provide additional information to investors to demonstrate the company's ability to comply with financial debt covenants.  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, launching an additional products in the coming months, the potential material impact of COVID-19 on future financial results, and achieving the financial metrics stated in the company's guidance for fiscal 2020, 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

(UNAUDITED)

(In thousands, except share and per share data)















ASSETS



March 31, 2020


June 30, 2019

Current assets:





Cash and cash equivalents

$          101,455


$     140,249

Accounts receivable, net

180,356


164,752

Inventories


135,955


143,971

Prepaid income taxes

8,414


-

Assets held for sale

2,678


9,671

Other current assets

14,450


13,606

Total current assets

443,308


472,249

Property, plant and equipment, net

181,408


186,670

Intangible assets, net

401,044


411,229

Operating lease right-of-use assets

9,774


-

Deferred tax assets


111,793


109,305

Other assets


11,824


7,960

TOTAL ASSETS


$       1,159,151


$  1,187,413








LIABILITIES





Current liabilities:





Accounts payable


$            33,834


$       13,493

Accrued expenses


14,115


5,805

Accrued payroll and payroll-related expenses

13,121


19,924

Rebates payable


43,304


46,175

Royalties payable


21,362


16,215

Restructuring liability

61


2,315

Income taxes payable

-


2,198

Current operating lease liabilities

1,045


-

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

95,064


66,845

Other current liabilities

2,850


3,652

Total current liabilities

224,756


176,622

Long-term debt, net

599,553


662,203

Long-term operating lease liabilities

10,189


-

Other liabilities


14,115


14,547

TOTAL LIABILITIES

848,613


853,372








STOCKHOLDERS' EQUITY




Common stock ($0.001 par value, 100,000,000 shares authorized; 39,898,838




 and 38,969,518 shares issued; 38,741,712 and 38,010,714 shares outstanding at




March 31, 2020 and June 30, 2019, respectively)

40


39

Additional paid-in capital

319,064


317,023

Retained earnings


8,410


32,075

Accumulated other comprehensive loss

(641)


(615)

Treasury stock(1,157,126 and 958,804 shares at March 31, 2020 and June 30, 2019, respectively)

(16,335)


(14,481)

Total stockholders' equity

310,538


334,041

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 

$       1,159,151


$  1,187,413

 

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,




2020


2019


2020


2019












Net sales


$    144,372


$    172,794


$    407,824


$    521,566


Cost of sales 


94,380


99,571


258,699


303,012


Amortization of intangibles


8,316


7,906


23,497


24,286


Gross profit


41,676


65,317


125,628


194,268


Operating expenses:










Research and development expenses


7,441


9,838


23,287


29,371


Selling, general, and administrative expenses


22,147


21,649


60,876


65,434


Restructuring expenses


191


452


1,771


1,687


Asset impairment charges


13,989


-


15,607


369,499


Total operating expenses


43,768


31,939


101,541


465,991


Operating income (loss)


(2,092)


33,378


24,087


(271,723)


Other income (loss):










Loss on extinguishment of debt


-


(413)


(2,145)


(413)


Investment income


393


925


1,552


1,860


Interest expense


(16,177)


(21,485)


(52,163)


(64,430)


Other


(380)


(401)


(181)


(1,409)


Total other loss


(16,164)


(21,374)


(52,937)


(64,392)


Income (loss) before income tax


(18,256)


12,004


(28,850)


(336,115)


Income tax expense (benefit)


(1,664)


1,359


(5,185)


(71,594)


Net income (loss)


$    (16,592)


$      10,645


$    (23,665)


$  (264,521)












Earnings (loss) per common share:










     Basic


$        (0.43)


$          0.28


$        (0.61)


$        (7.01)


     Diluted (1)


$        (0.43)


$          0.27


$        (0.61)


$        (7.01)












Weighted average common shares outstanding:










     Basic


38,707,049


37,842,224


38,539,850


37,729,099


     Diluted (1)


38,707,049


39,330,847


38,539,850


37,729,099






















(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 March 31, 2020


Net sales

Cost of sales

Amortization of intangibles

Gross Profit

Gross Margin %

R&D expense

SG&A expense

Restructuring expenses

Asset impairment charge

Operating income (loss)

Other income (loss)

Income (loss) before income tax

Income tax expense (benefit)

Net income (loss)

Diluted earnings (loss) per share (k)




GAAP Reported

$ 144,372

$ 94,380

$ 8,316

$ 41,676

29%

$ 7,441

$ 22,147

$ 191

13,989

$ (2,092)

$ (16,164)

$ (18,256)

$ (1,664)

$ (16,592)

$ (0.43)

Adjustments:
















Amortization of intangibles (a)

-

-

(8,316)

8,316


-

-

-

-

8,316

-

8,316

-

8,316


Cody API business (b)

-

(983)

-

983


(47)

(58)

-

-

1,088

-

1,088

-

1,088


Depreciation on capitalized software costs (c)

-

-

-

-


-

(1,058)

-

-

1,058

-

1,058

-

1,058


Decommissioning of Philadelphia sites (d)

-

(192)

-

192


-

-

-

-

192

-

192

-

192


Branded prescription drug fee (e)

-

-

-

-


-

(2,957)

-

-

2,957

-

2,957

-

2,957


Restructuring expenses (f)

-

-

-

-


-

-

(191)

-

191

-

191

-

191


Asset impairment charge (g)

-

-

-

-


-

-

-

(13,989)

13,989

-

13,989

-

13,989


Non-cash interest (h)

-

-

-

-


-

-

-

-

-

3,430

3,430

-

3,430


Other (i)

-

(1,168)

-

1,168


(29)

(354)

-

-

1,551

357

1,908

-

1,908


Tax adjustments (j)

-

-

-

-


-

-

-

-

-

-

-

4,832

(4,832)


















Non-GAAP Adjusted

$ 144,372

$ 92,037

$ -

$ 52,335

36%

$ 7,365

$ 17,720

$ -

$ -

$ 27,250

$ (12,377)

$ 14,873

$ 3,168

$ 11,705

$ 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, including costs to transfer products to other locations

(e)

To exclude the federally mandated branded prescription drug fee related to Levothyroxine, a product the Company no longer sells

(f)

To exclude expenses associated with the Cody API Restructuring Plan

(g)

To exclude an impairment charge associated with an agreement to distribute Methylphenidate AB

(h)

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

(i)

To exclude costs primarily related to the write-down of property, plant and equipment as well as COVID-19 special recognition payments

(j)

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

(k)

The weighted average share number for the three months ended March 31, 2020 is 38,707,049 for GAAP and 46,132,471 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 GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)

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
















Three months ended March 31, 2019


Net sales

Cost of sales

Amortization of intangibles

Gross Profit

Gross Margin %

R&D expenses

SG&A expenses

Restructuring expenses

Operating income

Other income (loss)

Income before income tax

Income tax expense

Net income

Diluted earnings per share (k)




GAAP Reported

$ 172,794

$ 99,571

$ 7,906

$ 65,317

38%

$ 9,838

$ 21,649

$ 452

$ 33,378

$ (21,374)

$ 12,004

$ 1,359

$ 10,645

$ 0.27

Adjustments:















Amortization of intangibles (a)

-

-

(7,906)

7,906


-

-

-

7,906

-

7,906

-

7,906


Cody API business Held for Sale (b)

-

(1,342)

-

1,342


(775)

(979)

-

3,096

-

3,096

-

3,096


Depreciation on capitalized software costs (c)

-

-

-

-


-

(1,058)

-

1,058

-

1,058

-

1,058


Legal and financial advisory costs (d)

-

-

-

-


-

(961)

-

961

-

961

-

961


Decommissioning of Philadelphia sites (e)

-

(1,760)

-

1,760


-

-

-

1,760

-

1,760

-

1,760


Restructuring expenses (f)

-

-

-

-


-

-

(452)

452

-

452

-

452


Non-cash interest (g)

-

-

-

-


-

-

-

-

4,514

4,514

-

4,514


Loss on extinguishment of debt (h)

-

-

-

-


-

-

-

-

413

413

-

413


Other (i)

-

(625)

-

625


-

(1,188)

-

1,813

352

2,165

-

2,165


Tax adjustments (j)

-

-

-

-


-

-

-

-

-

-

6,363

(6,363)

















Non-GAAP Adjusted

$ 172,794

$ 95,844

$ -

$ 76,950

45%

$ 9,063

$ 17,463

$ -

$ 50,424

$ (16,095)

$ 34,329

$ 7,722

$ 26,607

$ 0.68
















(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 Cody API business Held for Sale which was classified as Held for Sale as of September 30, 2018

(c)

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

(d)

To exclude legal and financial advisory costs primarily related to exploring and evaluating debt and capital structure alternatives

(e)

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

(f)

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

(g)

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

(h)

To exclude the loss on extinguishment of debt related to open market repurchases of Term Loans

(i)

To primarily exclude separation costs related to the Company's cost reduction plan, a reversal of indemnified unrecognized tax benefits due to expirations in the statute of limitations, as well as a write-down of certain assets related to the Company's foreign subsidiary

(j)

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

(k)

The weighted average share number for the three months ended March 31, 2019 is 39,330,847 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, 2020


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 (l)




GAAP Reported

$ 407,824

$ 258,699

$ 23,497

$ 125,628

31%

$ 23,287

$ 60,876

$ 1,771

15,607

$ 24,087

$ (52,937)

$ (28,850)

$ (5,185)

$ (23,665)

$ (0.61)

Adjustments:
















Amortization of intangibles (a)

-

-

(23,497)

23,497


-

-

-

-

23,497

-

23,497

-

23,497


Cody API business (b)

-

(2,911)

-

2,911


(552)

(433)

-

-

3,896

-

3,896

-

3,896


Depreciation on capitalized software costs (c)

-

-

-

-


-

(3,175)

-

-

3,175

-

3,175

-

3,175


Decommissioning of Philadelphia sites (d)

-

(1,484)

-

1,484


-

-

-

-

1,484

-

1,484

-

1,484


Branded prescription drug fee (e)

-

-

-

-


-

(2,957)

-

-

2,957

-

2,957

-

2,957


Restructuring expenses (f)

-

-

-

-


-

-

(1,771)

-

1,771

-

1,771

-

1,771


Asset impairment charges (g)

-

-

-

-


-

-

-

(15,607)

15,607

-

15,607

-

15,607


Non-cash interest (h)

-

-

-

-


-

-

-

-

-

11,001

11,001

-

11,001


Loss on extinguishment of debt (i)

-

-

-

-


-

-

-

-

-

2,145

2,145

-

2,145


Other (j)

-

(1,585)

-

1,585


(29)

(2,578)

-

-

4,192

21

4,213

-

4,213


Tax adjustments (k)

-

-

-

-


-

-

-

-

-

-

-

13,942

(13,942)


















Non-GAAP Adjusted

$ 407,824

$ 252,719

$ -

$ 155,105

38%

$ 22,706

$ 51,733

$ -

$ -

$ 80,666

$ (39,770)

$ 40,896

$ 8,757

$ 32,139

$ 0.76



(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, including costs to transfer products to other locations

(e)

To exclude the federally mandated branded prescription drug fee related to Levothyroxine, a product the Company no longer sells

(f)

To exclude expenses associated with the Cody API Restructuring Plan

(g)

To exclude impairment charges primarily associated with an agreement to distribute Methylphenidate AB

(h)

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

(i)

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

(j)

To primarily exclude accrued separation costs related to the Company's former Chief Financial Officer, COVID-19 special recognition payments, as well as legal settlements, partially offset by gains on sales of assets previously held for sale


(k)

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

(l)

The weighted average share number for the nine months ended March 31, 2020 is 38,539,850 for GAAP and 44,248,722 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 GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)

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

















Nine months ended March 31, 2019


Net
sales

Cost of
sales

Amortization of intangibles

Gross
Profit

Gross
Margin %

R&D
expenses

SG&A
expenses

Restructuring
expenses

Asset impairment
charges

Operating income
(loss)

Other income
(loss)

Income before
income tax (loss)

Income tax
expense (benefit)

Net income
(loss)

Diluted earnings
(loss) per share (m)




GAAP Reported

$ 521,566

$ 303,012

$ 24,286

$ 194,268

37%

$ 29,371

$ 65,434

$ 1,687

$ 369,499

$ (271,723)

$ (64,392)

$ (336,115)

$ (71,594)

$ (264,521)

$ (7.01)

Adjustments:
















Depreciation of fixed assets step-up (a)

-

(2,459)

-

2,459


-

-

-

-

2,459

-

2,459

-

2,459


Amortization of intangibles (b)

-

-

(24,286)

24,286


-

-

-

-

24,286

-

24,286

-

24,286


Cody API business Held for Sale (c)

-

(4,828)

-

4,828


(1,637)

(945)

-

-

7,410

-

7,410

-

7,410


Depreciation on capitalized software costs (d)

-

-

-

-


-

(3,175)

-

-

3,175

-

3,175

-

3,175


Legal and financial advisory costs (e)

-

-

-

-


-

(3,389)

-

-

3,389

-

3,389

-

3,389


Decommissioning of Philadelphia sites (f)

-

(4,025)

-

4,025


-

-

-

-

4,025

583

4,608

-

4,608


Restructuring expenses (g)

-

-

-

-


-

-

(1,687)

-

1,687

-

1,687

-

1,687


Asset impairment charges (h)

-

-

-

-


-

-

-

(369,499)

369,499


369,499

-

369,499


Non-cash interest (i)

-

-

-

-


-

-

-

-

-

13,448

13,448

-

13,448


Loss on extinguishment of debt (j)

-

-

-

-


-

-

-

-

-

413

413

-

413


Other (k)

-

(1,751)

-

1,751


(210)

(3,789)

-

-

5,750

637

6,387

-

6,387


Tax adjustments (l)

-

-

-

-


-

-

-

-

-

-

-

95,066

(95,066)


















Non-GAAP Adjusted

$ 521,566

$ 289,949

$ -

$ 231,617

44%

$ 27,524

$ 54,136

$ -

$ -

$ 149,957

$ (49,311)

$ 100,646

$ 23,472

$ 77,174

$ 1.98



















(a)

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

(b)

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

(c)

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

(d)

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

(e)

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

(f)

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

(g)

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

(h)

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

(i)

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

(j)

To exclude the loss on extinguishment of debt related to open market repurchases of Term Loans

(k)

To primarily exclude separation costs related to the Company's cost reduction plan, a special recognition incentive payment, as well as reversals of indemnified unrecognized tax benefits due to expirations in the statute of limitations

(l)

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

(m)

The weighted average share number for the nine months ended March 31, 2019 is 37,729,099 for GAAP and 39,066,670 for the non-GAAP earnings (loss) per share calculations

LANNETT COMPANY, INC.

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA (UNAUDITED)

($ in thousands)






Three months ended



March 31, 2020




Net loss


$ (16,592)




Interest expense


16,177

Depreciation and amortization


14,508

Income tax benefit


(1,664)

EBITDA


12,429




Share-based compensation


1,870

Inventory write-down


2,432

Asset impairment charge


13,989

Investment income


(393)

Other non-operating loss


380

Restructuring expenses


191

Restructuring payments


(537)

Cody API business (a)


1,088

Branded prescription drug fee (b)


2,957

Other (c)


1,519

Adjusted EBITDA (Non-GAAP)


$ 35,925



(a)

To exclude the operating results of the ceased Cody API business

(b)

To exclude the federally mandated branded prescription drug fee related to Levothyroxine, a product the Company no longer sells

(c)

To primarily exclude COVID-19 special recognition payments as well as the costs related to the decommissioning and shutdown of the Philadelphia manufacturing and distribution sites, including costs to transfer products to other locations

LANNETT COMPANY, INC.

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

($ in millions)







Fiscal Year 2020 Guidance








Non-GAAP




GAAP


Adjustments


Adjusted










Net sales


$535 - $545


-


$535 - $545


Gross margin percentage


approx. 29.5% to 31.5%


7.5%

(a)

approx. 37% to 39%


R&D expense


$31 - $32


-


$31 - $32


SG&A expense


$75 - $77


($10)

(b)

$65 - $67


Restructuring expense


$2 - $3


($2 - $3)

(c)

-


Asset impairment charges


$16


($16)

(d)

-


Interest and other


$66 - $68


($16 - $17)

(e)

$50 - $51


Effective tax rate


approx. 16% to 17%


5%

(f)

approx. 21% to 22%


Adjusted EBITDA


N/A


N/A


$137 - $147


Capital expenditures


$15 - $20


-


$15 - $20




















(a)

The adjustment primarily reflects amortization of purchased intangible assets related to the acquisition of Kremers Urban Pharmaceuticals, Inc. ("KUPI")

(b)

The adjustment primarily excludes depreciation on previously capitalized software integration costs associated with the KUPI acquisition as well as a federally mandated branded prescription drug fee related to Levothyroxine, a product the Company no longer sells

(c)

To exclude expenses associated with the Cody API Restructuring Plan

(d)

This adjustment primarily excludes an impairment charge associated with an agreement to distribute Methylphenidate AB

(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 relative to expected annual pre-tax income



LANNETT COMPANY, INC.

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA (UNAUDITED)

($ in millions)






Fiscal Year 2020 Guidance


Low


High





Net loss

$ (26.0)


$ (20.7)





Interest expense

66.0


68.0

Depreciation and amortization

56.0


57.0

Income taxes

(5.0)


(4.3)

EBITDA

91.0


100.0





Share-based compensation

10.0


10.0

Inventory write-down

10.0


11.0

Asset impairment charges

16.0


16.0

Branded prescription drug fee

3.0


3.0

Cody API business

4.0


4.0

Decommissioning of Philadelphia sites

2.0


2.0

Separation costs

1.0


1.0

Restructuring expenses

2.0


3.0

Restructuring payments

(3.0)


(4.0)

Other

1.0


1.0

Adjusted EBITDA (Non-GAAP)

$ 137.0


$ 147.0

LANNETT COMPANY, INC.

NET SALES BY MEDICAL INDICATION










Three months ended


Nine months ended

($ in thousands)

March 31,


March 31,

Medical Indication

2020


2019


2020


2019

Analgesic

$ 2,811


$ 946


$ 6,806


$ 5,322

Anti-Psychosis

27,858


20,616


78,588


45,541

Cardiovascular

21,746


22,783


67,325


70,233

Central Nervous System

18,566


15,906


57,154


37,565

Endocrinology

-


55,210


-


197,565

Gastrointestinal

20,745


16,501


56,020


47,038

Infectious Disease

21,749


4,162


51,722


13,258

Migraine

12,886


9,846


32,907


32,134

Respiratory/Allergy/Cough/Cold

2,966


2,549


8,747


9,521

Urinary

1,149


2,096


2,817


5,233

Other

8,051


14,247


27,847


37,658

Contract manufacturing revenue

5,845


7,932


17,891


20,498

Total net sales

$ 144,372


$ 172,794


$ 407,824


$ 521,566

Contact:

Robert Jaffe


Robert Jaffe Co., LLC


(424) 288-4098

Cision
Cision

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SOURCE Lannett Company, Inc.