Lannett Announces Fiscal 2020 Third-Quarter Financial Results
PHILADELPHIA, May 6, 2020 /PRNewswire/ -- Lannett Company, Inc. (NYSE: LCI) today reported financial results for its fiscal 2020 third quarter ended March 31, 2020.
"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 Approximately 37% to 39%, down from
from approximately 32.5% to 34.5% 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
Amortization
Gross Profit Gross
R&D
SG&A
Restructuring
Asset impairment
Operating
Other
Income (loss)
Income tax Net income
Diluted earnings
sales of intangibles Margin % expense expense expenses charges income income (loss) before income tax expense (benefit) (loss) (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
Cost of Amortization of intangibles
Gross Gross
R&D
SG&A
Restructuring
Asset impairment
Operating income
Other income
Income before
Income tax
Net income
Diluted earnings
sales sales Profit Margin % expenses expenses expenses charges (loss) (loss) income tax (loss) expense (benefit) (loss) (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
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SOURCE Lannett Company, Inc.
