UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Current Report
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Item 2.06 Material Impairments
As a result of the decision by Lannett Company, Inc. (the “Company”) to discontinue certain product lines and the reduction in net sales and gross margin of certain other product lines, as more fully discussed in Item 8.01 below, the Company has determined that such decision represents a “triggering event” under United States Generally Accepted Accounting Principles (US GAAP). Accordingly, the Company began performing an analysis to determine the potential for impairment of certain long-lived assets of the Company, primarily its intangible assets. Based on the analysis performed to date, the Company determined that a material impairment charge related to the Company’s product rights intangible assets acquired in connection with the acquisition of Kremers Urban Pharmaceuticals, Inc. (“KUPI”) is required and that no impairment charge of its other long-lived assets is required at this time. The impairment charge results from the decline in net sales and gross margin of certain product lines acquired in connection with the KUPI acquisition, including those product lines being discontinued. The expected impairment charge is estimated to be in the range of $180 million to $210 million and will be reflected in the Company’s financial statements for the second quarter of fiscal 2021. The impairment charge will not result in any cash expenditures.
Item 8.01 Other Events
On January 10, 2021, the Company decided to discontinue 23 lower gross margin product lines, which contributed approximately $31 million and approximately $4 million of net sales in fiscal 2020 and in the first quarter of fiscal 2021, respectively, including product lines that were acquired through various past business and product acquisitions. As a result of the discontinuance of the aforementioned product lines and the reduction in net sales and gross margin of certain product lines since the time of such acquisitions, the Company commenced the impairment analysis discussed in Item 2.06 above.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
LANNETT COMPANY |
By: | /s/ Samuel H. Israel | |
Chief Legal Officer and General Counsel | ||
Date: January 14, 2021 |