0000950124-01-503696.txt : 20011107
0000950124-01-503696.hdr.sgml : 20011107
ACCESSION NUMBER: 0000950124-01-503696
CONFORMED SUBMISSION TYPE: 10QSB
PUBLIC DOCUMENT COUNT: 2
CONFORMED PERIOD OF REPORT: 20010930
FILED AS OF DATE: 20011102
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: LANNETT CO INC
CENTRAL INDEX KEY: 0000057725
STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834]
IRS NUMBER: 230787699
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0630
FILING VALUES:
FORM TYPE: 10QSB
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-09036
FILM NUMBER: 1773513
BUSINESS ADDRESS:
STREET 1: 9000 STATE RD
CITY: PHILADELPHIA
STATE: PA
ZIP: 19136
BUSINESS PHONE: 2153339000
MAIL ADDRESS:
STREET 1: 9000 STATE ROAD
STREET 2: 9000 STATE ROAD
CITY: PHLADELPHIA
STATE: PA
ZIP: 19136
FORMER COMPANY:
FORMER CONFORMED NAME: NETHERLANDS SECURITIES INC
DATE OF NAME CHANGE: 19660629
10QSB
1
k65736e10qsb.txt
FORM 10QSB
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001.
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO
____________.
COMMISSION FILE NO. 0-9036
LANNETT COMPANY, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
STATE OF DELAWARE 23-0787-699
(STATE OF INCORPORATION) (I.R.S. EMPLOYER I.D. NO.)
9000 STATE ROAD
PHILADELPHIA, PA 19136
(215) 333-9000
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND TELEPHONE NUMBER)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
---- ----
As of October 22, 2001, there were 13,206,128 shares of the issuer's common
stock, $.001 par value, outstanding.
Page 1 of 18 pages
Exhibit Index on Page 14
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets as of
September 30, 2001 (unaudited) and
June 30, 2001.............................................................................3
Consolidated Statements of Income
for the three months ended September 30, 2001
and 2000 (unaudited).......................................................................4
Consolidated Statements of Cash Flows
for the three months ended September 30, 2001
and 2000 (unaudited).......................................................................5
Notes to Consolidated Financial
Statements (unaudited).................................................................6 - 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations..............................................................................8 - 11
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.............................................................................11
ITEM 2. Changes in Securities and Use of Proceeds.....................................................12
ITEM 3. Defaults upon Senior Securities...............................................................12
ITEM 4. Submission of Matters to a Vote of Security Holders...........................................12
ITEM 5. Other Information.............................................................................12
ITEM 6. Exhibits and Reports on Form 8-K..............................................................14
2
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
LANNETT COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS 9/30/01 6/30/01
------ ------------ ------------
CURRENT ASSETS:
Cash $ - $ -
Trade accounts receivable (net of allowance of $25,000) 2,650,366 4,366,587
Inventories 3,140,432 3,156,109
Prepaid expenses 109,153 112,736
Deferred tax asset 491,693 983,403
------------ ------------
Total current assets 6,391,644 8,618,835
------------ ------------
PROPERTY, PLANT AND EQUIPMENT 9,207,790 8,667,955
Less accumulated depreciation (3,275,626) (3,089,735)
------------ ------------
5,932,164 5,578,220
------------ ------------
RESTRICTED CASH EQUIVALENTS 926,825 1,225,649
OTHER ASSETS 319,714 242,913
------------ ------------
Total assets $ 13,570,347 $ 15,665,617
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Line of Credit $ 812,132 $ 2,000,000
Line of Credit-Shareholder 2,975,000 4,225,000
Accounts payable 501,246 917,397
Accrued expenses 554,490 569,919
Income taxes payable 231,319 248,109
Current portion of long-term debt 728,330 728,330
------------ ------------
Total current liabilities 5,802,517 8,688,755
------------ ------------
LONG-TERM DEBT, LESS CURRENT PORTION 3,697,685 3,819,892
------------ ------------
DEFERRED TAX LIABILITY 641,285 641,285
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock -
authorized 50,000,000 shares par value $.001:
issued and outstanding, 13,206,128 shares 13,206 13,206
Additional paid-in capital 2,312,575 2,312,575
Retained earnings 1,103,079 189,904
------------ ------------
Total shareholders' equity 3,428,860 2,515,685
------------ ------------
Total liabilities and shareholders' equity $ 13,570,347 $ 15,665,617
============ ============
See notes to consolidated financial statements
3
LANNETT COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE MONTHS ENDED
--------------------------
9/30/01 9/30/00
------------ ------------
NET SALES $ 4,072,832 $ 1,763,965
COST OF SALES 1,546,444 1,160,879
------------ ------------
Gross profit 2,526,388 603,086
RESEARCH AND DEVELOPMENT EXPENSES 346,804 345,480
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 665,304 412,628
------------ ------------
Operating profit/(loss) 1,514,280 (155,022)
------------ ------------
OTHER INCOME (EXPENSE):
Income from settlement of lawsuit, net of associated fees - 1,173,149
Interest income-restricted 11,903 29,522
Interest expense, including $70,792 and $111,817 to shareholder (121,298) (208,536)
------------ ------------
(109,395) 994,135
------------ ------------
NET INCOME BEFORE TAXES 1,404,885 839,113
------------ ------------
INCOME TAXES 491,710 256,885
------------ ------------
NET INCOME $ 913,175 $ 582,228
============ ============
BASIC INCOME PER SHARE $ .07 $ .04
============ ============
DILUTED INCOME PER SHARE $ .07 $ .04
============ ============
BASIC WEIGHTED AVERAGE
NUMBER OF SHARES 13,206,128 13,206,128
============ ============
DILUTED WEIGHTED AVERAGE
NUMBER OF SHARES 13,245,769 13,206,128
============ ============
See notes to consolidated financial statements
4
LANNETT COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED
--------------------------
9/30/01 9/30/00
----------- -----------
OPERATING ACTIVITIES:
Net income $ 913,175 $ 582,228
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 196,474 186,855
Deferred income tax expense 491,710 240,000
Changes in assets and liabilities which provided/(used) cash:
Trade accounts receivable 1,716,221 58,404
Inventories 15,677 (776,223)
Prepaid expenses and other assets (83,801) 406,007
Accounts payable (416,151) (272,135)
Accrued expenses (32,219) (230,447)
----------- -----------
Net cash provided by operating activities 2,801,086 720,689
----------- -----------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (539,835) (719,726)
----------- -----------
Net cash used in investing activities (539,835) (719,726)
----------- -----------
FINANCING ACTIVITIES:
Net repayments under line of credit (1,187,868) (228,538)
Net repayments under line of credit-shareholder (1,250,000) --
Repayments of debt (122,207) (171,997)
Proceeds from debt, net of restricted cash 298,824 399,572
----------- -----------
Net cash used in financing activities (2,261,251) (963)
----------- -----------
NET DECREASE IN CASH -- --
CASH, BEGINNING OF PERIOD -- --
----------- -----------
CASH, END OF PERIOD $ -- $ --
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid during period $ 135,344 $ 208,536
Income taxes paid during period $ 16,790 $ 0
See notes to consolidated financial statements
5
LANNETT COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position
and the results of operations and cash flows.
The results of operations for the three months ended September 30, 2001 and
2000 are not necessarily indicative of results for the full year.
While the Company believes that the disclosures presented are adequate to
make the information not misleading, it is suggested that these consolidated
financial statements be read in conjunction with the consolidated financial
statements and the notes included in the Company's Annual Report on Form
10-KSB for the year ended June 30, 2001.
NOTE 2. NEW ACCOUNTING STANDARDS
In July 2000, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities.
This statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives), and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. This statement, as amended by SFAS No. 137, Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date of
FASB Statement No. 133, was effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. There has been no accounting, or financial effect
on the Company for the quarter ended September 30, 2001 with respect to this
Statement. The Company will continue to analyze the impact, if any, of adopting
SFAS No. 133 will have on its consolidated financial position and results of
operations.
On July 20, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 141, Business Combinations,
and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is effective for all
business combinations completed after June 30, 2001. SFAS 142 is effective for
fiscal years beginning after December 15, 2001; however, certain provisions of
this Statement apply to goodwill and other intangible assets acquired between
July 1, 2001 and the effective date of SFAS 142. Major provisions of these
Statements and their effective dates for the Company are as follows:
- all business combinations initiated after June 30, 2001 must use the
purchase method of accounting. The pooling of interest method of accounting
is prohibited except for transactions initiated before July 1, 2001.
- intangible assets acquired in a business combination must be recorded
separately from goodwill if they arise from contractual or other legal
rights or are separable from the acquired entity and can be sold,
transferred, licensed, rented or exchanged, either individually or as part
of a related contract, asset or liability
- goodwill, as well as intangible assets with indefinite lives, acquired
after June 30, 2001, will not be amortized. Effective July 1, 2002, all
previously recognized goodwill and intangible assets with indefinite lives
will no longer be subject to amortization.
- effective July 1, 2002, goodwill and intangible assets with indefinite
lives will be tested for impairment annually and whenever there is an
impairment indicator
6
- all acquired goodwill must be assigned to reporting units for purposes of
impairment testing and segment reporting.
Although it is still reviewing the provisions of these Statements, management's
preliminary assessment is that these Statements will not have a material impact
on the Company's financial position or results of operations.
NOTE 3. INVENTORIES
Inventories consist of the following:
September 30, June 30,
2001 2001
---------------- ------------
(unaudited)
Raw materials $ 1,351,785 $ 1,516,030
Work-in-process 758,624 686,359
Finished goods 800,667 712,992
Packaging supplies 229,356 240,728
------------ ------------
$ 3,140,432 $ 3,156,109
============= =============
NOTE 4. INCOME TAXES
The provision for federal and state income taxes for the three months ended
September 30, 2001 and 2000 was $491,710 and $256,885, respectively.
NOTE 5. RELATED PARTY TRANSACTIONS
The Company had sales of approximately $37,000 and $16,000 during the three
months ended September 30, 2001 and 2000, respectively, to a distributor (the
"related party") in which the owner is a relative of the Chairman of the Board
of Directors and principal shareholder of the Company. The Company also incurred
sales commissions payable to the related party of approximately $65,000 and
$144,000 during the three months ended September 30, 2001 and 2000,
respectively. Accounts receivable includes amounts due from the related party of
approximately $38,000 and $34,000 at September 30, 2001 and June 30, 2001,
respectively. Accrued expenses includes amounts due to the related party of
approximately $13,000 and $29,000 at September 30, 2001 and June 30, 2001,
respectively.
NOTE 6. SETTLEMENT OF LAWSUIT
Included in other income is $1,173,149 in income from the settlement of a
lawsuit, net of fees, for First Quarter Fiscal 2001. The lawsuit was initiated
after a chemical supplier failed to supply the Company with raw material for its
manufacturing process, despite the existence of a signed five-year supply
contract. Lannett alleged that the breach of contract delayed the introduction
of one of its products into the marketplace. Consequently, the Company and the
defending party settled the suit out of court. The Company received
approximately $1.5 million in First Quarter Fiscal 2001. The Company incurred
approximately $300,000 in legal fees relating to the lawsuit. These fees were
netted with the income received in First Quarter Fiscal 2001.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS.
In addition to historical information, this Form 10-QSB contains
forward-looking information. The forward-looking information contained herein is
subject to certain risks and uncertainties that could cause actual results to
differ materially from those projected in the forward-looking statements.
Important factors that might cause such a difference include, but are not
limited to, those discussed in the following section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's analysis only as of the date of this Form
10-QSB. The Company undertakes no obligation to publicly revise or update these
forward-looking statements to reflect events or circumstances which arise later.
Readers should carefully review the risk factors described in other documents
the Corporation files from time to time with the Securities and Exchange
Commission, including the Annual report on Form 10-KSB filed by the Corporation
in Fiscal 2001, and any Current Reports on Form 8-K filed by the corporation.
RESULTS OF OPERATIONS -THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED
WITH THREE MONTHS ENDED SEPTEMBER 30, 2000.
Net sales for the three months ended September 30, 2001 ("First Quarter
Fiscal 2002") increased by 130.9% to $4,072,832 from net sales of $1,763,965 for
the three months ended September 30, 2000 ("First Quarter Fiscal 2001"). Sales
increased during First Quarter Fiscal 2002 as a result of higher sales of the
Company's prescription (Rx) line of products, including Primidone 50 mg tablets,
which was first marketed in May of 2001, offset by a slight decrease in
over-the-counter (OTC) product sales. This increase is due to improvements in
the Company's promotional activities for its niche line of products, which are
sold to distributors, wholesalers and retail chains throughout the nation. Rx
sales increased by approximately $2,575,000 from First Quarter Fiscal 2001 to
First Quarter Fiscal 2002. OTC product sales decreased by approximately $266,000
from First Quarter Fiscal 2001 to First Quarter Fiscal 2002. This decrease in
OTC sales is a result of increased competition.
Cost of sales increased by 33.2%, to $1,546,444 in First Quarter Fiscal
2002 from $1,160,879 in First Quarter Fiscal 2001. The cost of sales increase is
due to an increase in direct variable costs, including raw materials and labor,
related to the increase in sales from the First Quarter Fiscal 2001 to the First
Quarter Fiscal 2002. Gross profit margins for First Quarter Fiscal 2002 and
First Quarter Fiscal 2001 were 62.0% and 34.2%, respectively. The increase in
the gross profit percentage is due to the product sales mix, and a higher
absorption of fixed overhead and production costs.
Selling, general and administrative expenses increased by 61.2% to
$665,304 in First Quarter Fiscal 2002 from $412,628 in First Quarter Fiscal
2001. This increase is a result of an increase in commissions to sales
representatives for incremental sales programs.
As a result of the foregoing, the Company reported an operating profit
of $1,514,280 for First Quarter Fiscal 2002, as compared to an operating loss of
$155,022 for First Quarter Fiscal 2001.
8
Included in other income is $1,173,149 in income from the settlement of
a lawsuit, net of fees, for First Quarter Fiscal 2001. The lawsuit was initiated
after a chemical supplier failed to supply the Company with raw material for its
manufacturing process, despite the existence of a signed five-year supply
contract. Lannett alleged that the breach of contract delayed the introduction
of one of its products into the marketplace. Consequently, the Company and the
defending party settled the suit out of court. The Company received
approximately $1.5 million in First Quarter Fiscal 2001. The Company incurred
approximately $300,000 in legal fees relating to the lawsuit. These fees were
netted with the income received in First Quarter Fiscal 2001.
The Company's interest expense decrease from $208,536 in First Quarter
Fiscal 2001 to $121,298 in First Quarter Fiscal 2002 as a result of principal
repayments, and reduced interest rates.
The Company's income tax expense increased from $256,885 in First
Quarter Fiscal 2001 to $491,710 in First Quarter Fiscal 2002 as a result of the
increase in taxable income.
The Company reported net income of $913,175 for First Quarter Fiscal
2002, $0.07 basic income per share, $0.07 on a diluted basis, compared to net
income of $582,228 for First Quarter Fiscal 2001, $0.04 basic income per share,
$0.04 on a diluted basis.
LIQUIDITY AND CAPITAL RESOURCES -
Net cash provided from operating activities of $2,801,086 during First
Quarter Fiscal 2002 was attributable to net income of $913,175 as adjusted for
the effects of non-cash items of $688,184 and changes in operating assets and
liabilities totaling $1,199,727. Significant changes in operating assets and
liabilities are comprised of: i) a decrease in accounts receivable of $1,716,221
due to the timing of cash payments for sales which occurred at the end of the
prior quarter, and ii) a decrease in accounts payable of $416,151 due to
payments for increased operational expenses, such as raw materials, incurred as
a result of increased sales levels.
The net cash used in investing activities consisted of $539,835
expended during First Quarter Fiscal 2002 for equipment, and building additions.
The Company has budgeted for $1,300,000 in capital expenditures in Fiscal 2002.
The anticipated additional capital expenditure requirements will support the
Company's growth related to new product introductions. As of September 30, 2001,
approximately $927,000 from the proceeds of the bonds issued during Fiscal 1999
was available in financing restricted for certain future capital expenditures.
The Company has a $4,250,000 revolving line of credit from a
shareholder who is also the Chairman of the Board ("Shareholder Line of
Credit"). At September 30, 2001, the Company has $2,975,000 outstanding and
$1,275,000 available under this line of credit. The maturity date on the
Shareholder Line of Credit was extended to December 1, 2001. Accrued interest at
September 30, 2001, and June 30, 2001 was $0.
In April 1999, the Company entered into a loan agreement (the
"Agreement") with a governmental authority (the "Authority") to finance future
construction and growth projects of the Company. The Authority has issued
$3,700,000 in tax-exempt variable rate demand and fixed rate revenue bonds to
provide the funds to finance such growth projects pursuant to a trust indenture
(the "Trust Indenture"). A portion of the Company's proceeds from the bonds was
used to pay for bond issuance costs of approximately $170,000. The remainder of
the proceeds were deposited into a money market account, which is restricted for
future plant and equipment needs of the Company as specified in the Agreement.
The Agreement requires the Company to repay the Authority loan through
installment payments beginning in May 2003 and continuing through May 2014, the
year the bonds mature. At September 30, 2001, the Company had approximately
$3,700,000 outstanding on the
9
Authority loan, of which $3,697,685 is classified as a long-term liability. In
April 1999, an irrevocable letter of credit of $3,770,000 was issued by a bank
to secure payment of the Authority Loan and a portion of the related accrued
interest. At September 30, 2001, no portion of the letter of credit has been
utilized.
In April 1999, the Company authorized and directed the issuance of
$2,300,000 in taxable variable rate demand and fixed rate revenue bonds pursuant
to a trust indenture between the Company and a bank as trustee (the "Trust
Indenture"). From the proceeds of the bonds, $750,000 was utilized to pay
deferred interest owed to the principal shareholder of the Company and
approximately $1,440,000 was paid to a bank to refinance a mortgage term loan
and equipment term loans. The remainder of the proceeds was used to pay bond
issuance costs of approximately $109,000. The Trust Indenture requires the
Company to repay the bonds through installment payments beginning in May 2000
and continuing through May 2003, the year the bonds mature. At September 30,
2001, the Company had $726,015 outstanding on the bonds, which is classified as
currently due. In April 1999, an irrevocable letter of credit of approximately
$2,349,000 was issued by a bank to secure payment of the bonds and a portion of
the related accrued interest. At September 30, 2001 no portion of the letter of
credit has been utilized.
The Company has a $2,000,000 line of credit from a bank. The line of
credit is due November 30, 2001, at which time the Company expects to renew and
extend the due date. The line of credit is limited to 80% of qualified accounts
receivable and 50% of qualified inventory. At September 30, 2001, the Company
had $812,132 outstanding and $1,187,868 available under the line of credit.
The Company believes that cash generated from its operations and the
balances available under the Company's existing loans and lines of credit as of
September 30, 2001, are sufficient to finance its level operations and currently
anticipated capital expenditures.
Except as set forth in this report, the Company is not aware of any
trends, events or uncertainties that have or are reasonably likely to have a
material adverse impact on the Company's short-term or long-term liquidity or
financial condition.
PROSPECTS FOR THE FUTURE
As of September 30, 2001, twenty additional products are currently
under development. Two of these products are being developed and manufactured
for another company; and the other eighteen products are being developed as part
of the Lannett product line. Four of the Lannett products have been redeveloped
and submitted to the Food and Drug Administration ("FDA") for supplemental
approval. Seven additional products represent previously approved Abbreviated
New Drug Applications ("ANDA's") which the Company is planning to reintroduce.
The other seven Lannett products represent new products that the Company is
planning to introduce. Since the Company has no control over the FDA review
process, management is unable to anticipate whether or when it will be able to
begin producing and shipping additional products
PART II. OTHER INFORMATION
10
ITEM 1. LEGAL PROCEEDINGS
Regulatory Proceedings. The Company is engaged in an industry which is subject
to considerable government regulation relating to the development, manufacturing
and marketing of pharmaceutical products. Accordingly, incidental to its
business, the Company periodically responds to inquiries or engages in
administrative and judicial proceedings involving regulatory authorities,
particularly the FDA and the Drug Enforcement Agency.
Employee Claims. A claim of retaliatory discrimination has been filed by a
former employee with the Pennsylvania Human Relations Commission ("PHRC"), and
the Equal Employment Opportunity Commission ("EEOC"). The Company has denied
liability in this matter. The PHRC has made a determination that the complaint
against the Company should be dismissed because the facts do not establish
probable cause of the allegations of discrimination. The matter is still pending
before the EEOC. Management believes that the outcome of this claim will not
have a material adverse impact on the financial position of the Company.
Additionally, two separate claims of discrimination have been filed
against the Company with the PHRC and the EEOC. The Company was notified of the
Complaints in June 2001 and July 2001, respectively. The Company has filed
answers with the PHRC and EEOC denying the allegations. The PHRC and the EEOC
are investigating the claims pursuant to their normal procedures. Management
believes that the outcomes of these claims also will not have material adverse
impacts on the financial position of the Company.
DES Cases. The Company is currently engaged in several civil actions as a
co-defendant with many other manufacturers of Diethylstilbestrol ("DES"), a
synthetic hormone. Prior litigation established that the Company's pro rata
share of any liability is less than one-tenth of one percent. The Company was
represented in many of these actions by the insurance company with which the
Company maintained coverage during the time period that damages were alleged to
have occurred. The insurance company denied coverage of actions filed after
January 1, 1992. With respect to these actions, the Company paid nominal damages
or stipulated to its pro rata share of any liability. The Company has either
settled or is currently defending over 500 such claims. Management believes that
the outcome will not have a material adverse impact on the financial position of
the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) A list of the exhibits required by Item 601 of Regulation S-B to be
filed as a part of this Form 10-QSB is shown on the Exhibit Index
filed herewith.
(b) The Company did not file any reports on Form 8-K during First Quarter
Fiscal 2002.
12
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
LANNETT COMPANY, INC.
Dated: October 22, 2001 By: /s/ Larry Dalesandro
--------------------
Larry Dalesandro
Chief Operating Officer
By: /s/ William Farber
--------------------
William Farber
Chairman of the Board
13
EXHIBIT INDEX
Exhibit
Number Description Method of Filing Page
------ ----------- ---------------- ----
3(a) Articles of Incorporation Incorporated by reference to the Proxy Statement -
filed with respect to the Annual Meeting of
Shareholders held on December 6, 1991 (the "1991
Proxy Statement").
3(b) By-Laws, as amended Incorporated by reference to the 1991 Proxy -
Statement.
4(a) Specimen Certificate for Common Incorporated by reference to Exhibit 4(a) to -
Stock Form 8 dated April 23, 1993 (Amendment No. 3 to
Form 10-K f/y/e June 30, 1992) ("Form 8")
10(a) Loan Agreement dated August 30, Incorporated by reference to the Annual Report -
1991 between the Company and on Form 10-K f/y/e June 30, 1991
William Farber
10(b) Amendment #1 to Loan Agreement Incorporated by reference to Exhibit 10(b) to -
dated March 15, 1993 the Annual Report on Form 10-KSB f/y/e June 30,
1993 ("1993 Form 10-K")
10(c) Amendment #2 to Loan Agreement Incorporated by reference to Exhibit 10(c) to -
dated August 1, 1994 the Annual Report on Form 10-KSB f/y/e June 30,
1994 ("1994 Form 10-K")
10(d) Amendment #3 to Loan Agreement Incorporated by reference to Exhibit 10(d) to -
dated May 15, 1995 the Annual Report on Form 10-KSB f/y/e June 30,
1995 ("1995 Form 10-K")
10(e) Amendment #4 to Loan Agreement Incorporated by reference to Exhibit 10(e) to -
dated December 31, 1995 the Annual Report on Form 10-KSB f/y/e June 30,
1996 ("1996 Form 10-K")
10(f) Amendment #5 to Loan Agreement Incorporated by reference to Exhibit 10(f) to -
dated June 30, 1996 the Annual Report on Form 10-KSB f/y/e June 30,
1996 ("1996 Form 10-K")
10(g) Amendment #6 to Loan Agreement Incorporated by reference to Exhibit 10(g) to
dated November 1, 1996 the Annual Report on Form 10-KSB f/y/e June 30,
1997 ("1997 Form 10-KSB")
10(h) Amendment #7 to Loan Agreement Incorporated by reference to Exhibit 10(h) to
dated September 9, 1997 the Annual Report on 1997 Form 10-KSB
10(i) Amendment #8 to Loan Agreement Incorporated by reference to Exhibit 10(i) to
dated June 30, 1998 the Annual Report on Form 10-KSB f/y/e June 30,
1998 ("1998 Form 10-KSB")
14
Exhibit
Number Description Method of Filing Page
------ ----------- ---------------- ----
10(j) Amendment #9 to Loan Agreement Incorporated by reference to Exhibit 10(j) to
dated December 30, 1998 the Annual Report on Form 10-KSB f/y/e June 30,
1999 ("1999 Form 10-KSB")
10(k) Loan Agreement dated May 4, 1993 Incorporated by reference to Exhibit 10(c) to -
between the Company and Meridian the 1993 Form 10-K
Bank
10(l) Amendment to Loan Documents Incorporated by reference to Exhibit 10(e) to -
between the Company and Meridian the Annual Report on Form 10-KSB f/y/e June 30,
Bank dated as of December 8, 1993 1994 ("1994 Form 10-K")
10(m) Letter Agreement between the Incorporated by reference to Exhibit 10(f) to -
Company and Meridian Bank dated the Annual Report on Form 10-KSB f/y/e June 30,
December 21, 1993 1994 ("1994 Form 10-K")
10(n) Third Amendment to Loan Incorporated by reference to Exhibit 10(g) to -
Agreement dated as of June 9, the Annual Report on Form 10-KSB f/y/e June 30,
1994 1994 ("1994 Form 10-K")
10(o) Fourth Amendment to Loan Incorporated by reference to Exhibit 10(i) to -
Documents between the Company the Annual Report on Form 10-KSB f/y/e June 30,
and Meridian Bank as of October 1995 ("1995 Form 10-K")
27, 1994
10(p) Letter Agreement between the Incorporated by reference to Exhibit 10(j) to -
Company and Meridian Bank dated the Annual Report on Form 10-KSB f/y/e June 30,
October 27, 1994 1995 ("1995 Form 10-K")
10(q) Letter Agreement between the Incorporated by reference to Exhibit 10(k) to -
Company and Meridian Bank dated the Annual Report on Form 10-KSB f/y/e June 30,
July 10, 1995 1995 ("1995 Form 10-K")
10(r) Amendment to Security Agreement Incorporated by reference to Exhibit 10(l) to -
between the Company and Meridian the Annual Report on Form 10-KSB f/y/e
Bank dated as of July 31, 1995 June 30, 1995 ("1995 Form 10-K")
10(s) Line of Credit Note dated July Incorporated by reference to Exhibit 10(m) to -
31, 1995 the Annual Report on Form 10-KSB f/y/e June 30,
1995 ("1995 Form 10-K")
10(t) Fifth Amendment to Loan Incorporated by reference to Exhibit 10(n) to -
Agreement dated July 31, 1995 the Annual Report on Form 10-KSB f/y/e June 30,
1995 ("1995 Form 10-K")
10(u) Amendment to Loan agreement Incorporated by reference to Exhibit 10(q) to -
between the Company and Meridian the Annual Report on Form 10-KSB f/y/e June 30,
Bank, dated March 5, 1996. 1996 ("1996 Form 10-K")
15
Exhibit
Number Description Method of Filing Page
------ ----------- ---------------- ----
10(v) Amendment to Loan agreement Incorporated by reference to Exhibit 10(h) to
between the Company and the Annual Report on 1997 Form 10-KSB
Corestates Bank, dated
March 20, 1997.
10(w) Amendment to Loan agreement Incorporated by reference to Exhibit 10(h) to
between the Company and the Annual Report on 1997 Form 10-KSB
Corestates Bank, dated
March 20, 1997.
10(x) Amendment to Loan agreement Incorporated by reference to Exhibit 10(h) to
between the Company and the Annual Report on 1997 Form 10-KSB
Corestates Bank, dated
May 23, 1997.
10(y) Amendment to Loan agreement Incorporated by reference to Exhibit 10(h) to
between the Company and the Annual Report on 1997 Form 10-KSB
Corestates Bank, dated September
24, 1997.
10(z) Amendment to Loan agreement Incorporated by reference to Exhibit 10(h) to
between the Company and the Annual Report on 1997 Form 10-KSB
Corestates Bank, dated December
10, 1997.
10(aa) Amendment to Loan agreement Incorporated by reference to Exhibit 10(h) to
between the Company and the Annual Report on 1997 Form 10-KSB
Corestates Bank, dated December
10, 1997.
10(ab) Amendment to Loan agreement Incorporated by reference to Exhibit 10(aa) to
between the Company and the Annual Report on 1998 Form 10-KSB
Corestates Bank, dated June
11, 1998.
10(ac) Amendment to Loan agreement Incorporated by reference to Exhibit 10(ab) to
between the Company and the Annual Report on 1998 Form 10-KSB
Corestates Bank, dated June
1998.
10(ad) Line of Credit Note dated March Incorporated by reference to Exhibit 10(ad) to
11, 1999 the Annual Report on 1999 Form 10-KSB
10(ae) Taxable Variable Rate Incorporated by reference to Exhibit 10(ae) to
Demand/Fixed Rate Revenue the Annual Report on 1999 Form 10-KSB
Bonds, Series of 1999
16
Exhibit
Number Description Method of Filing Page
------ ----------- ---------------- ----
10(af) Philadelphia Authority for Incorporated by reference to Exhibit 10(af) to
Industrial Development the Annual Report on 1999 Form 10-KSB
Tax-Exempt Variable Rate
Demand/Fixed Revenue Bonds
(Lannett Company, Inc. Project)
Series of 1999
10(ag) Reimbursement and Agreements Incorporated by reference to Exhibit 10(ag) to
supporting bond issues the Annual Report on 1999 Form 10-KSB
10(ah) Amendment No. 1 to Reimbursement Incorporated by reference to Exhibit 10(i) to
Agreement and Waiver the Annual Report on 1999 Form 10-KSB
10(ai) Employment Agreement between the Incorporated by reference to Exhibit 10(ah) to
Company and Vlad Mikijanic the Annual Report on 1994 Form 10-KSB
10(aj) Supply Agreement dated January Incorporated by reference to Exhibit 10(ad) to
14, 1997 the Annual Report on 1998 Form 10-KSB
10(ak) Supply Agreement dated January Incorporated by reference to Exhibit 10(ae) to
17, 1997 the Annual Report on 1998 Form 10-KSB
10(al) Supply Agreement dated January Incorporated by reference to Exhibit 10(af) to
17, 1997 the Annual Report on 1998 Form 10-KSB
10(am) Supply Agreement dated February Incorporated by reference to Exhibit 10(ag) to
11, 1997 the Annual Report on 1998 Form 10-KSB
10(an) Supply Agreement dated May 27, Incorporated by reference to Exhibit 10(ah) to
1997 the Annual Report on 1998 Form 10-KSB
11 Computation of Per Share Earnings Filed Herewith 18
22 Subsidiaries of the Company Incorporated by reference to the Annual Report
on Form 10-K f/y/e June 30, 1990
23 Consent of Deloitte & Touche Incorporated by reference to Exhibit 23 to the
Annual Report on 1999 Form 10-KSB
17
EX-11
3
k65736ex11.txt
COMPUTATION OF PER SHARE EARNINGS
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
LANNETT COMPANY, INC AND SUBSIDIARY
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
THREE MONTHS ENDED SEPTEMBER 30
2001 2001 2000 2000
---------------------------------------------------------------------
Net Income Shares Net Income Shares
Basic earnings per share factors $913,175 13,206,128 $582,228 13,206,128
Effect of potentially dilutive
option plans and debentures:
Employee stock options 39,641 -
----------------------------------------------------------
Diluted earnings per share factors $913,175 13,245,769 $582,228 13,206,128
-------- ---------- -------- ----------
Basic earnings per share $ 0.07 $ 0.04
Diluted earnings per share $ 0.07 $ 0.04
Options to purchase 51,500 shares, 68,450 shares, 30,000 shares and 1,300 shares
of common stock at $0.80 per share, $1.125 per share, $1.38 per share and $3.78
per share, respectively, were outstanding at September 30, 2001. Of these
options, 39,641 shares were included in the calculation of outstanding shares
for the purpose of calculating diluted earnings per share. Options to purchase
136,700 shares, 80,000 shares and 1,550 shares of common stock at $1.125 per
share, $1.38 per share and $3.78 per share, respectively, were outstanding at
September 30, 2000. These options were not included in the computation of
diluted earnings per share for the three months ended September 30, 2000 because
to do so would be antidilutive.
18