Exhibit 99.1
| Contact: | Robert Jaffe | |
| Robert Jaffe Co., LLC | ||
| (424) 288-4098 |
LANNETT ANNOUNCES FISCAL 2021 THIRD-QUARTER FINANCIAL RESULTS
| · | Q3 Business and Financial Highlights: |
| · | Net Sales Were $112 Million |
| · | Adjusted Gross Margin, Adjusted Profitability Better than Expected |
| · | Cash Significantly Increased to More Than $80 Million |
| · | Full-Year Adjusted Top- and Bottom-Line Guidance Reiterated |
| · | Added Another Large, Durable Asset to Pipeline, Biosimilar Insulin Aspart |
| · | Post Quarter End: |
| · | Completed Re-financing Transaction |
| · | Retired Outstanding Term B Loan Balance of ~$540 Million |
| · | Improves Cash Flow Significantly |
| · | Extended Debt Maturity to 2026 at Fixed Interest Rates |
| · | Submitted ANDA for Generic ADVAIR DISKUS® |
Philadelphia, PA – May 5, 2021 – Lannett Company, Inc. (NYSE: LCI) today reported financial results for its fiscal 2021 third quarter ended March 31, 2021.
“In recent months, we have significantly advanced a number of strategic initiatives,” said Tim Crew, chief executive officer of Lannett. “In April, we successfully completed a transaction to refinance our debt, using the proceeds to retire the outstanding Term Loan B balance of approximately $540 million that was set to mature in November of next year. As a result, we have extended the maturity of our debt to 2026 from 2022, which is after several high-value pipeline assets are expected to be commercialized. Moreover, we improved our free cash flow, by approximately $50 million in the first year alone, which we plan to use, in part, to support our growth initiatives.
“We were pleased with our fiscal 2021 third quarter financial results. While net sales were slightly lower than our expectations, adjusted gross margin, adjusted EBITDA and adjusted earnings per share were higher than we anticipated. Selling, general and administrative expenses were lower compared with the same quarter last year. Moreover, we ended the quarter with more than $80 million in cash, up from approximately $34 million at December 31, 2020.
“Looking ahead, we expect to launch a number of products in the coming months, and we continue to advance our durable, large market opportunity assets. Last month we announced the submission of an Abbreviated New Drug Application (ANDA) for generic ADVAIR DISKUS®, an inhalation drug device combination product. Also, the pivotal clinical trial has been initiated for generic Flovent Diskus®, another key respiratory product in our pipeline. And, last but not least, in the third quarter we added to our pipeline another potentially large and durable biosimilar asset, fast acting insulin aspart.”
For the fiscal 2021 third quarter on a GAAP basis, net sales were $112.4 million compared with $144.4 million for the third quarter of fiscal 2020. Gross profit was $26.5 million, or 24% of net sales, compared with $41.7 million, or 29% of net sales. During last year’s third quarter, the company recorded non-cash, asset impairment charges of $14.0 million, related to the write-down of the value of a product license agreement. Net loss was $7.1 million, or $0.18 per share, compared with $16.6 million, or $0.43 per share, for the third quarter of fiscal 2020.
For the fiscal 2021 third quarter reported on a Non-GAAP basis, net sales were $112.4 million compared with $144.4 million for the third quarter of fiscal 2020. Adjusted gross profit was $30.4 million, or 27% of net sales, compared with $52.3 million, or 36% of net sales, for the prior-year third quarter. Adjusted interest expense decreased to $9.8 million compared with $12.7 million for the second quarter of fiscal 2020. Adjusted net income was $1.0 million, or $0.02 per diluted share, compared with $11.7 million, or $0.27 per diluted share, for the fiscal 2020 third quarter. Adjusted EBITDA for the fiscal 2021 third quarter was $17.0 million.
Guidance for Fiscal 2021
Based on its current outlook and recent financing, the company revised guidance for fiscal year 2021, with the primary change related to interest expense, and is as follows:
| GAAP | Adjusted* | |
| Net sales | $480 million to $500 million, unchanged | $480 million to $500 million, unchanged |
| Gross margin % | Approximately 14% to 16%, unchanged | Approximately 24% to 26%, unchanged |
| R&D expense | $26 million to $28 million, unchanged | $26 million to $28 million, unchanged |
| SG&A expense | $62 million to $64 million, up from $58 million to $60 million | $52 million to $54 million, unchanged |
| Restructuring expense | $4 million, unchanged | $-- |
| Asset impairment charges | $198 million, unchanged | $-- |
| Interest and other | Approximately $71 million, up from $53 million to $54 million | Approximately $44 million, up from $41 million to $42 million |
| Effective tax rate | Approximately 27% to 28% | N/A |
| Income tax expense/(benefit) | N/A | $1 million to ($1 million) |
| Adjusted EBITDA | N/A | $75 million to $85 million, unchanged |
| Capital expenditures | $10 million to $15 million, unchanged | $10 million to $15 million, unchanged |
*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 2021 third quarter ended March 31, 2021. The conference call will be available to interested parties by dialing 888-895-5479 from the U.S. or Canada, or 847-619-6250 from international locations, passcode 50156994. 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 is appropriate to provide additional information to investors. 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.
ADVAIR DISKUS® and Flovent® Diskus® are registered trademarks of GlaxoSmithKline.
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 and launching and successfully commercializing additional products in fiscal 2021, achieving cost savings from the recently announced restructuring and cost savings plan, the potential material impact of COVID-19 on future financial results, and achieving the financial metrics stated in the company’s revised guidance for fiscal 2021, 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 |
| (In thousands, except share and per share data) |
| (Unaudited) | ||||||||
| March 31, 2021 | June 30, 2020 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 81,290 | $ | 144,329 | ||||
| Accounts receivable, net | 114,691 | 125,688 | ||||||
| Inventories | 113,074 | 142,867 | ||||||
| Income taxes receivable | 40,043 | 14,419 | ||||||
| Assets held for sale | 2,678 | 2,678 | ||||||
| Other current assets | 18,135 | 13,227 | ||||||
| Total current assets | 369,911 | 443,208 | ||||||
| Property, plant and equipment, net | 168,844 | 179,518 | ||||||
| Intangible assets, net | 160,138 | 374,735 | ||||||
| Operating lease right-of-use asset | 10,762 | 9,343 | ||||||
| Deferred tax assets | 138,019 | 117,890 | ||||||
| Other assets | 14,696 | 11,861 | ||||||
| TOTAL ASSETS | $ | 862,370 | $ | 1,136,555 | ||||
| LIABILITIES | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 32,605 | $ | 32,535 | ||||
| Accrued expenses | 4,025 | 14,962 | ||||||
| Accrued payroll and payroll-related expenses | 9,758 | 16,304 | ||||||
| Rebates payable | 31,848 | 38,175 | ||||||
| Royalties payable | 14,541 | 20,863 | ||||||
| Restructuring liability | 42 | 27 | ||||||
| Current operating lease liabilities | 2,040 | 1,097 | ||||||
| Short-term borrowings and current portion of long-term debt | - | 88,189 | ||||||
| Other current liabilities | 2,270 | 2,713 | ||||||
| Total current liabilities | 97,129 | 214,865 | ||||||
| Long-term debt, net | 610,698 | 592,940 | ||||||
| Long-term operating lease liabilities | 11,306 | 9,844 | ||||||
| Other liabilities | 19,187 | 16,010 | ||||||
| TOTAL LIABILITIES | 738,320 | 833,659 | ||||||
| STOCKHOLDERS' EQUITY | ||||||||
| Common stock ($0.001 par value, 100,000,000 shares authorized; 40,872,485 and 39,963,127 shares issued; 39,539,798 and 38,798,787 shares outstanding at March 31, 2021 and June 30, 2020, respectively) | 41 | 40 | ||||||
| Additional paid-in capital | 328,911 | 321,164 | ||||||
| Accumulated deficit | (186,880 | ) | (1,291 | ) | ||||
| Accumulated other comprehensive loss | (603 | ) | (627 | ) | ||||
| Treasury stock (1,332,687 and 1,164,340 shares at March 31, 2021 and June 30, 2020, respectively) | (17,419 | ) | (16,390 | ) | ||||
| Total stockholders' equity | 124,050 | 302,896 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 862,370 | $ | 1,136,555 | ||||
| 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, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net sales | $ | 112,370 | $ | 144,372 | $ | 372,769 | $ | 407,824 | ||||||||
| Cost of sales | 82,063 | 94,380 | 298,738 | 258,699 | ||||||||||||
| Amortization of intangibles | 3,851 | 8,316 | 21,097 | 23,497 | ||||||||||||
| Gross profit | 26,456 | 41,676 | 52,934 | 125,628 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development expenses | 5,973 | 7,441 | 18,156 | 23,287 | ||||||||||||
| Selling, general and administrative expenses | 17,636 | 22,147 | 46,502 | 60,876 | ||||||||||||
| Restructuring expenses | - | 191 | 4,043 | 1,771 | ||||||||||||
| Asset impairment charges | - | 13,989 | 198,000 | 15,607 | ||||||||||||
| Total operating expenses | 23,609 | 43,768 | 266,701 | 101,541 | ||||||||||||
| Operating income (loss) | 2,847 | (2,092 | ) | (213,767 | ) | 24,087 | ||||||||||
| Other income (loss): | ||||||||||||||||
| Loss on extinguishment of debt | - | - | - | (2,145 | ) | |||||||||||
| Investment income | 80 | 393 | 168 | 1,552 | ||||||||||||
| Interest expense | (12,631 | ) | (16,177 | ) | (40,613 | ) | (52,163 | ) | ||||||||
| Other | 18 | (380 | ) | 23 | (181 | ) | ||||||||||
| Total other loss | (12,533 | ) | (16,164 | ) | (40,422 | ) | (52,937 | ) | ||||||||
| Loss before income tax | (9,686 | ) | (18,256 | ) | (254,189 | ) | (28,850 | ) | ||||||||
| Income tax benefit | (2,544 | ) | (1,664 | ) | (68,600 | ) | (5,185 | ) | ||||||||
| Net loss | $ | (7,142 | ) | $ | (16,592 | ) | $ | (185,589 | ) | $ | (23,665 | ) | ||||
| Loss per common share: | ||||||||||||||||
| Basic | $ | (0.18 | ) | $ | (0.43 | ) | $ | (4.72 | ) | $ | (0.61 | ) | ||||
| Diluted (1) | $ | (0.18 | ) | $ | (0.43 | ) | $ | (4.72 | ) | $ | (0.61 | ) | ||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | 39,511,296 | 38,707,049 | 39,340,670 | 38,539,850 | ||||||||||||
| Diluted (1) | 39,511,296 | 38,707,049 | 39,340,670 | 38,539,850 | ||||||||||||
(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, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | Cost of sales | Amortization of intangibles | Gross Profit | Gross Margin % | R&D expenses | SG&A expenses | Operating income | Other loss | Income (loss) before income tax | Income tax benefit | Net income (loss) | Diluted earnings (loss) per share (g) | ||||||||||||||||||||||||||||||||||||||||
| GAAP Reported | $ | 112,370 | $ | 82,063 | $ | 3,851 | $ | 26,456 | 24 | % | $ | 5,973 | $ | 17,636 | $ | 2,847 | $ | (12,533 | ) | $ | (9,686 | ) | $ | (2,544 | ) | $ | (7,142 | ) | $ | (0.18 | ) | |||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of intangibles (a) | - | - | (3,851 | ) | 3,851 | - | - | 3,851 | - | 3,851 | - | 3,851 | ||||||||||||||||||||||||||||||||||||||||
| Cody API business (b) | - | (91 | ) | - | 91 | - | (18 | ) | 109 | - | 109 | - | 109 | |||||||||||||||||||||||||||||||||||||||
| Depreciation on capitalized software costs (c) | - | - | - | - | - | (1,051 | ) | 1,051 | - | 1,051 | - | 1,051 | ||||||||||||||||||||||||||||||||||||||||
| Non-cash interest (d) | - | - | - | - | - | - | - | 2,823 | 2,823 | - | 2,823 | |||||||||||||||||||||||||||||||||||||||||
| Other (e) | - | - | - | - | - | (2,191 | ) | 2,191 | - | 2,191 | - | 2,191 | ||||||||||||||||||||||||||||||||||||||||
| Tax adjustments (f) | - | - | - | - | - | - | - | - | - | 1,923 | (1,923 | ) | ||||||||||||||||||||||||||||||||||||||||
| Non-GAAP Adjusted | $ | 112,370 | $ | 81,972 | $ | - | $ | 30,398 | 27 | % | $ | 5,973 | $ | 14,376 | $ | 10,049 | $ | (9,710 | ) | $ | 339 | $ | (621 | ) | $ | 960 | $ | 0.02 | ||||||||||||||||||||||||
(a) To exclude amortization of purchased intangible assets primarily related to the acquisition of KUPI
(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 non-cash interest expense associated with debt issuance costs
(e) To primarily exclude the reimbursement of legal costs associated with a distribution agreement
(f) To exclude the tax effect of the pre-tax adjustments included above at applicable tax rates
(g) The weighted average share number for the three months ended March 31, 2021 is 39,511,296 for GAAP and 41,051,998 for the non-GAAP earnings (loss) 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)
| 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 charges | Operating
income (loss) | Other 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)
| Nine months ended March 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 loss | Income (loss) before income tax | Income tax expense (benefit) | Net income (loss) | Diluted earnings (loss) per share (k) | ||||||||||||||||||||||||||||||||||||||||||||||
| GAAP Reported | $ | 372,769 | $ | 298,738 | $ | 21,097 | $ | 52,934 | 14 | % | $ | 18,156 | $ | 46,502 | $ | 4,043 | $ | 198,000 | $ | (213,767 | ) | $ | (40,422 | ) | $ | (254,189 | ) | $ | (68,600 | ) | $ | (185,589 | ) | $ | (4.72 | ) | ||||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of intangibles (a) | - | - | (21,097 | ) | 21,097 | - | - | - | - | 21,097 | - | 21,097 | - | 21,097 | ||||||||||||||||||||||||||||||||||||||||||||||
| Cody API business (b) | - | (249 | ) | - | 249 | (5 | ) | (473 | ) | - | - | 727 | - | 727 | - | 727 | ||||||||||||||||||||||||||||||||||||||||||||
| Depreciation on capitalized software costs (c) | - | - | - | - | - | (3,153 | ) | - | - | 3,153 | - | 3,153 | - | 3,153 | ||||||||||||||||||||||||||||||||||||||||||||||
| Restructuring expenses (d) | - | - | - | - | - | - | (4,043 | ) | - | 4,043 | - | 4,043 | - | 4,043 | ||||||||||||||||||||||||||||||||||||||||||||||
| Asset impairment charges (e) | - | - | - | - | - | - | - | (198,000 | ) | 198,000 | - | 198,000 | - | 198,000 | ||||||||||||||||||||||||||||||||||||||||||||||
| Write-downs for excess and obsolete inventory (f) | - | (16,623 | ) | - | 16,623 | - | - | - | - | 16,623 | - | 16,623 | - | 16,623 | ||||||||||||||||||||||||||||||||||||||||||||||
| Distribution agreement renewal costs (g) | - | (4,966 | ) | - | 4,966 | - | - | - | - | 4,966 | - | 4,966 | - | 4,966 | ||||||||||||||||||||||||||||||||||||||||||||||
| Non-cash interest (h) | - | - | - | - | - | - | - | - | - | 9,073 | 9,073 | - | 9,073 | |||||||||||||||||||||||||||||||||||||||||||||||
| Other (i) | - | - | - | - | - | (3,695 | ) | - | - | 3,695 | - | 3,695 | - | 3,695 | ||||||||||||||||||||||||||||||||||||||||||||||
| Tax adjustments (j) | - | - | - | - | - | - | - | - | - | - | - | 69,376 | (69,376 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Non-GAAP Adjusted | $ | 372,769 | $ | 276,900 | $ | - | $ | 95,869 | 26 | % | $ | 18,151 | $ | 39,181 | $ | - | $ | - | $ | 38,537 | $ | (31,349 | ) | $ | 7,188 | $ | 776 | $ | 6,412 | $ | 0.16 | |||||||||||||||||||||||||||||
(a) To exclude amortization of purchased intangible assets primarily related to the acquisition of KUPI
(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 expenses associated with the 2020 Restructuring Plan
(e) To exclude asset impairment charges primarily related to the KUPI product rights intangible assets
(f) To exclude write-downs for excess and obsolete inventory related to the discontinuance of certain product lines
(g) To exclude the consideration recorded to renew the Company's distribution agreement with Recro Gainesville LLC
(h) To exclude non-cash interest expense associated with debt issuance costs
(i) To primarily exclude the reimbursement of legal costs associated with a distribution agreement
(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 nine months ended March 31, 2021 is 39,340,670 for GAAP and 40,933,946 for the non-GAAP earnings (loss) per share calculations
LANNETT COMPANY, INC.
RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
(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 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 NET LOSS TO ADJUSTED EBITDA (UNAUDITED)
($ in thousands)
| Three months ended | ||||
| March 31, 2021 | ||||
| Net loss | $ | (7,142 | ) | |
| Interest expense | 12,631 | |||
| Depreciation and amortization | 9,628 | |||
| Income tax benefit | (2,544 | ) | ||
| EBITDA | 12,573 | |||
| Share-based compensation | 1,863 | |||
| Inventory write-down | 399 | |||
| Investment income | (80 | ) | ||
| Other non-operating loss | (18 | ) | ||
| Other (a) | 2,300 | |||
| Adjusted EBITDA (Non-GAAP) | $ | 17,037 | ||
(a) To primarily exclude the reimbursement of legal costs associated with a distribution agreement, as well as the operating results of the ceased Cody API business
LANNETT COMPANY, INC.
RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)
($ in millions)
| Fiscal Year 2021 Guidance | ||||||||
| Non-GAAP | ||||||||
| GAAP | Adjustments | Adjusted | ||||||
| Net sales | $480 - $500 | - | $480 - $500 | |||||
| Gross margin percentage | approx. 14% to 16% | 10% | (a) | approx. 24% to 26% | ||||
| R&D expense | $26 - $28 | - | $26 - $28 | |||||
| SG&A expense | $62 - $64 | $ | (10) | (b) | $52 - $54 | |||
| Restructuring expense | $4 | $ | (4) | (c) | - | |||
| Asset impairment charges | $198 | $ | (198) | (d) | - | |||
| Interest and other | approx. $71 | $ | (27) | (e) | approx. $44 | |||
| Effective tax rate | approx. 27% to 28% | - | N/A | |||||
| Income tax expense (benefit) | N/A | - | $1 - $(1) | (f) | ||||
| Adjusted EBITDA | N/A | N/A | $75 - $85 | |||||
| Capital expenditures | $10 - $15 | - | $10 - $15 | |||||
(a) The adjustment primarily reflects amortization of purchased intangible assets related to the acquisition of Kremers Urban Pharmaceuticals, Inc. ("KUPI"), write-downs for excess and obsolete inventory related to the discontinuance of certain product lines, and consideration recorded to renew the Company's distribution agreement with Recro Gainesville LLC
(b) The adjustment primarily excludes depreciation on previously capitalized software integration costs associated with the KUPI acquisition and the reimbursement of legal costs associated with a distribution agreement
(c) To exclude expenses associated with the 2020 Restructuring Plan
(d) To exclude asset impairment charges primarily related to the KUPI product rights intangible assets
(e) The adjustment primarily reflects non-cash interest expense associated with debt issuance costs and the anticipated loss on extinguishment of debt related to the refinancing of the Term Loan B in April 2021.
(f) The non-GAAP adjusted effective income tax rate was replaced with the dollar amount of income tax expense (benefit) to provide additional clarity around the anticipated expense (benefit) for Fiscal 2021. The non-GAAP adjusted income tax expense (benefit) reflects the impact of tax credits and deductions related to expected annual pre-tax income (loss) as well as the impact of the CARES Act, which allows the Company to carryback the expected taxable loss into a prior fiscal year, where the statutory tax rate was 35%.
LANNETT COMPANY, INC.
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA (UNAUDITED)
($ in millions)
| Fiscal Year 2021 Guidance | ||||||||
| Low | High | |||||||
| Net loss | $ | (214.7 | ) | $ | (205.2 | ) | ||
| Interest expense | 71.0 | 71.0 | ||||||
| Depreciation and amortization | 55.0 | 55.0 | ||||||
| Income taxes | (79.3 | ) | (79.8 | ) | ||||
| EBITDA | (168.0 | ) | (159.0 | ) | ||||
| Share-based compensation | 9.0 | 9.0 | ||||||
| Inventory write-down | 27.0 | 28.0 | ||||||
| Asset impairment charges | 198.0 | 198.0 | ||||||
| Restructuring expenses | 4.0 | 4.0 | ||||||
| Distribution agreement renewal costs | 5.0 | 5.0 | ||||||
| Adjusted EBITDA (Non-GAAP) | $ | 75.0 | $ | 85.0 | ||||
LANNETT COMPANY, INC.
NET SALES BY MEDICAL INDICATION
| Three months ended | Nine months ended | |||||||||||||||
| ($ in thousands) | March 31, | March 31, | ||||||||||||||
| Medical Indication | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Analgesic | $ | 3,836 | $ | 2,811 | $ | 10,528 | $ | 6,806 | ||||||||
| Anti-Psychosis | 11,678 | 27,858 | 38,023 | 78,588 | ||||||||||||
| Cardiovascular | 16,573 | 21,746 | 52,623 | 67,325 | ||||||||||||
| Central Nervous System | 24,509 | 18,566 | 71,648 | 57,154 | ||||||||||||
| Endocrinology | 6,822 | - | 19,551 | - | ||||||||||||
| Gastrointestinal | 16,817 | 20,745 | 52,492 | 56,020 | ||||||||||||
| Infectious Disease | 10,610 | 21,749 | 55,586 | 51,722 | ||||||||||||
| Migraine | 5,169 | 12,886 | 20,942 | 32,907 | ||||||||||||
| Respiratory/Allergy/Cough/Cold | 2,548 | 2,966 | 6,241 | 8,747 | ||||||||||||
| Urinary | 1,566 | 1,149 | 4,385 | 2,817 | ||||||||||||
| Other | 8,617 | 8,051 | 24,661 | 27,847 | ||||||||||||
| Contract Manufacturing revenue | 3,625 | 5,845 | 16,089 | 17,891 | ||||||||||||
| Net Sales | $ | 112,370 | $ | 144,372 | $ | 372,769 | $ | 407,824 | ||||||||