LANNETT COMPANY, INC. PHILADELPHIA, Feb. 3, 2016 /PRNewswire/ -- Lannett Company, Inc. (NYSE: LCI) today reported financial results for its fiscal 2016 second quarter and first six months ended December 31, 2015. As previously announced, the company completed the acquisition of Kremers Urban Pharmaceuticals Inc. (KU) on November 25, 2015. Accordingly, fiscal 2016 second quarter and year-to-date financial results include the operations of KU since the acquisition date.
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For the fiscal 2016 second quarter, net sales increased to $127.1 million from $114.8 million in last year's second quarter. Gross profit was $71.6 million, or 56% of net sales, compared with $87.2 million, or 76% of net sales. Research and development (R&D) expenses increased to $9.1 million from $7.8 million for the fiscal 2015 second quarter. Selling, general and administrative (SG&A) expenses were $14.7 million compared with $10.8 million. Acquisition-related expenses increased to $17.6 million from $2.0 million in the comparable prior-year period. Operating income was $30.3 million compared with $66.5 million. Net income attributable to Lannett was $13.5 million, or $0.36 per diluted share, compared with $44.8 million, or $1.21 per diluted share, for the fiscal 2015 second quarter.
On a Non-GAAP adjusted basis, gross profit was $81.0 million, or 64% of net sales, compared with $87.2 million, or 76% of net sales, for the fiscal 2015 second quarter. Adjusted SG&A expenses were $11.6 million compared with $10.8 million. Adjusted operating income was $60.4 million compared with $68.6 million for the prior-year second quarter. Adjusted net income attributable to Lannett was $35.4 million, or $0.95 per diluted share, compared with $46.1 million, or $1.24 per diluted share, for the fiscal 2015 second quarter.
"We are making solid progress on integrating KU and implementing accelerated restructuring and cost savings measures," said Arthur Bedrosian, chief executive officer of Lannett. "As announced earlier this week, we have begun taking definitive and immediate actions to enhance efficiencies throughout the organization and reduce costs by approximately $40 million in the first 12 months following the close of the KU acquisition. We estimate that our actions will result in annualized cost savings of approximately $50 million by the end of fiscal 2018 and $65 million by the end of fiscal 2020.
"We are excited about Lannett's future by building upon the strong foundation already in place and further growing our business. Our team is focused on rapidly integrating KU, leveraging our significantly larger size and reach and advancing our deep pipeline, which includes 37 drug applications pending at the FDA and more than 50 product candidates in various stages of development."
For the first six months of fiscal 2016, net sales rose 12% to $233.5 million from $208.2 million in the comparable prior-year period. Gross profit was $149.1 million, or 64% of net sales, compared with $158.8 million, or 76% of net sales. R&D expenses increased to $15.6 million from $14.2 million for the fiscal 2015 first six months. SG&A expenses were $30.2 million compared with $21.3 million in the same period of the prior year. Acquisition-related expenses increased to $21.5 million from $2.1 million in the comparable prior-year period. Operating income was $81.7 million compared with $121.2 million. Net income attributable to Lannett Company was $46.7 million, or $1.25 per diluted share, compared with $79.7 million, or $2.15 per diluted share, for the first six months of fiscal 2015.
On a Non-GAAP adjusted basis, gross profit was $158.8 million, or 68% of net sales, compared with $158.8 million, or 76% of net sales, for the first six months of fiscal 2015. Adjusted SG&A expenses were $25.4 million compared with $21.3 million. Adjusted operating income was $117.7 million compared with $123.3 million for the prior-year period. Adjusted net income attributable to Lannett was $72.5 million, or $1.94 per diluted share, compared with $81.1 million, or $2.19 per diluted share, for the fiscal 2015 first six months.
Guidance for Fiscal 2016
Based on its current outlook the company reiterated its financial guidance for the fiscal 2016 full year as follows:
-- Net sales in the range of $585 million to $595 million;
-- Adjusted gross margin as a percentage of net sales of approximately 62%
to 63%;
-- Adjusted R&D expense in the range of $49 million to $51 million;
-- Adjusted SG&A expense ranging from $59 million to $61 million;
-- Adjusted interest expense in the range of $50 million to $53 million;
-- The adjusted effective tax rate for the full year in the range of 34% to
35%; and
-- Capital expenditures in fiscal 2016 in the range of $35 million to $45
million.
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 the fiscal 2016 second quarter ended December 31, 2015. The conference call will be available to interested parties by dialing 888-771-4371 from the U.S. or Canada, or 847-585-4405 from international locations, passcode 41706958. 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 net income attributable to the Company, and its components, as well as Adjusted earnings per diluted share, which are financial measures that are not prepared in conformity with United States generally accepted accounting principles (U.S. GAAP). 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. 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.
Adjusted net income and Adjusted earnings per diluted share exclude, among others, the effects of (1) the amortization of purchased intangibles, (2) acquisition-related expenses and other purchase accounting entries, (3) non-cash interest expense, as well as (4) certain other items considered unusual or non-recurring in nature.
The company's fiscal 2016 guidance has been provided only on a Non-GAAP basis. This is due to the inherent difficulty of forecasting the timing or amount of items that would be included in the most directly comparable forward-looking GAAP financial measures. Because a reconciliation is not available without unreasonable effort, it is not included in this release.
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. 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, realizing the expected benefits of optimizing operations, enhancing efficiencies or significantly reducing costs and achieving the financial metrics stated in the company's guidance for fiscal 2016, 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.
Contact: Robert Jaffe
Robert Jaffe Co.,
LLC
(424) 288-4098
FINANCIAL SCHEDULES FOLLOW
LANNETT COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
December 31, 2015 June 30, 2015
----------------- -------------
ASSETS
------
Current assets:
Cash and cash equivalents $178,830 $200,340
Investment securities 13,986 13,467
Accounts receivable, net 241,230 91,103
Inventories 124,009 46,191
Prepaid income taxes 13,689 -
Deferred tax assets 23,032 16,270
Other current assets 18,487 3,175
------ -----
Total current assets 613,263 370,546
Property, plant and equipment, net 198,397 94,556
Intangible assets, net 689,061 29,090
Goodwill 234,492 141
Deferred tax assets 8,946 12,495
Other assets 8,584 1,938
TOTAL ASSETS $1,752,743 $508,766
========== ========
LIABILITIES
-----------
Current liabilities:
Accounts payable $33,506 $19,195
Accrued expenses 14,725 4,928
Accrued payroll and payroll-
related expenses 24,011 10,397
22,553 7,553
Rebates payable
6,482 -
Royalties payable
Income taxes payable - 1,340
Current portion of long-term debt 45,638 135
------ ---
Total current liabilities 146,915 43,548
Long-term debt, less current
portion, net 1,014,877 874
Acquisition-related contingent
consideration 35,000 -
Other liabilities 6,290 578
TOTAL LIABILITIES 1,203,082 45,000
--------- ------
Commitments and Contingencies
STOCKHOLDERS' EQUITY
--------------------
Common stock ($0.001 par value, 100,000,000 shares authorized; 36,991,896 and 36,783,381 shares
issued; 36,457,466 and 36,264,585 shares outstanding at December 31, 2015 and June 30, 2015,
respectively)
37 37
Additional paid-in capital 276,219 236,178
Retained earnings 280,274 233,573
Accumulated other comprehensive
loss (269) (295)
Treasury stock(534,430 and 518,796
shares at December 31, 2015 and
June 30, 2015, respectively) (6,988) (6,080)
------ ------
Total Lannett Company, Inc.
stockholders' equity 549,273 463,413
Noncontrolling interest 388 353
Total stockholders' equity 549,661 463,766
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,752,743 $508,766
========== ========
LANNETT COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except share and per share data)
Three months ended Six months ended
December 31, December 31,
------------ ------------
2015 2014 2015 2014
---- ---- ---- ----
Net sales $127,059 $114,822 $233,492 $208,209
Cost of sales 51,800 27,600 80,619 49,400
Amortization of intangibles 3,614 21 3,801 41
Gross profit 71,645 87,201 149,072 158,768
------ ------ ------- -------
Operating expenses:
Research and development
expenses 9,069 7,836 15,597 14,199
Selling, general, and
administrative expenses 14,666 10,823 30,202 21,306
Acquisition-related expenses 17,585 1,999 21,527 2,069
------ ----- ------ -----
Total operating expenses 41,320 20,658 67,326 37,574
------ ------ ------ ------
Operating income 30,325 66,543 81,746 121,194
------ ------ ------ -------
Other income (loss)
Investment income (loss) 975 786 (135) 903
Interest expense (11,772) (73) (11,832) (111)
Other (30) - (30) 20
--- --- --- ---
Total other income (loss) (10,827) 713 (11,997) 812
------- --- ------- ---
Income before income tax 19,498 67,256 69,749 122,006
Income tax expense 5,958 22,435 23,013 42,235
----- ------ ------ ------
Net income 13,540 44,821 46,736 79,771
Less: Net income attributable to
noncontrolling interest 20 10 35 28
--- --- --- ---
Net income attributable to
Lannett Company, Inc. $13,520 $44,811 $46,701 $79,743
======= ======= ======= =======
Earnings per common share
attributable to Lannett
Company, Inc.
Basic $0.37 $1.26 $1.28 $2.24
Diluted $0.36 $1.21 $1.25 $2.15
Weighted average common shares
outstanding:
Basic 36,388,542 35,669,904 36,349,597 35,633,917
Diluted 37,388,450 37,074,024 37,401,878 37,025,667
LANNETT COMPANY, INC.
RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)
(In thousands, except share and per share data)
Three months ended Three months ended
December 31, December 31,
------------ ------------
GAAP Non-GAAP GAAP Non-GAAP
Reported Adjustments Adjusted Reported Adjustments Adjusted
2015 2015 2015 2014 2014 2014
---- ---- ---- ---- ---- ----
Net sales 127,059 - 127,059 114,822 - 114,822
Cost of sales 51,800 (5,760) (a) 46,040 27,600 - 27,600
Amortization of intangibles 3,614 (3,614) (b) - 21 (21) (b) -
Gross profit 71,645 9,374 81,019 87,201 21 87,222
------ ----- ------ ------ --- ------
Operating expenses:
Research and development expenses 9,069 - 9,069 7,836 - 7,836
Selling, general, and
administrative expenses 14,666 (3,102) (c) 11,564 10,823 - 10,823
Acquisition-related expenses 17,585 (17,585) (d) - 1,999 (1,999) (d) -
------ ------- --- ----- ------ ---
Total operating expenses 41,320 (20,687) 20,633 20,658 (1,999) 18,659
------ ------- ------ ------ ------ ------
Operating income 30,325 30,061 60,386 66,543 2,020 68,563
Other income (loss): (10,827) 2,663 (e) (8,164) 713 - 713
------- ----- ------ --- --- ---
Income before income tax 19,498 32,724 52,222 67,256 2,020 69,276
Income tax expense 5,958 10,826 (f) 16,784 22,435 697 (f) 23,132
----- ------ ------ ------ --- ------
Net income 13,540 21,898 35,438 44,821 1,323 46,144
Less: Net income attributable to
noncontrolling interest 20 - 20 10 - 10
--- --- --- --- --- ---
Net income attributable to
Lannett Company, Inc. 13,520 21,898 35,418 44,811 1,323 46,134
====== ====== ====== ====== ===== ======
Earnings per common share
attributable to Lannett Company,
Inc.
Basic $0.37 $0.97 $1.26 $1.29
Diluted $0.36 $0.95 $1.21 $1.24
Weighted average common shares
outstanding:
Basic 36,388,542 36,388,542 35,669,904 35,669,904
Diluted 37,388,450 37,388,450 37,074,024 37,074,024
(a) To exclude
amortization of
a fair value
step-up in
inventory
related to the
acquisition of
Kremers Urban
Pharmaceuticals,
Inc.
(b) To exclude
amortization of
purchased
intangible
assets primarily
related to the
acquisition of
Kremers Urban
Pharmaceuticals,
Inc. and Silarx
Pharmaceuticals,
Inc.
(c) To exclude
separation
expenses
associated with
certain
employees as
well as
integration-
related expenses
and amortization
of purchased
intangibles
related to the
acquisition of
Kremers Urban
Pharmaceuticals,
Inc.
(d) To exclude
acquisition-
related expenses
primarily
related to the
acquisition of
Kremers Urban
Pharmaceuticals
Inc.
(e) To exclude non-
cash interest
expense
associated with
debt issuance
costs
(f) The tax effect of
the pre-tax
adjustments
included above
at applicable
tax rates
LANNETT COMPANY, INC.
RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)
(In thousands, except share and per share data)
Six months ended Six months ended
December 31, December 31,
------------ ------------
GAAP Non-GAAP GAAP Non-GAAP
Reported Adjustments Adjusted Reported Adjustments Adjusted
2015 2015 2015 2014 2014 2014
---- ---- ---- ---- ---- ----
Net sales 233,492 - 233,492 208,209 - 208,209
Cost of sales 80,619 (5,900) (a) 74,719 49,400 - 49,400
Amortization of intangibles 3,801 (3,801) (b) - 41 (41) (b) -
Gross profit 149,072 9,701 158,773 158,768 41 158,809
------- ----- ------- ------- --- -------
Operating expenses:
Research and development expenses 15,597 - 15,597 14,199 - 14,199
Selling, general, and
administrative expenses 30,202 (4,754) (c) 25,448 21,306 - 21,306
Acquisition-related expenses 21,527 (21,527) (d) - 2,069 (2,069) (d) -
------ ------- --- ----- ------ ---
Total operating expenses 67,326 (26,281) 41,045 37,574 (2,069) 35,505
------ ------- ------ ------ ------ ------
Operating income 81,746 35,982 117,728 121,194 2,110 123,304
Other income (loss): (11,997) 2,663 (e) (9,334) 812 - 812
------- ----- ------ --- --- ---
Income before income tax 69,749 38,645 108,394 122,006 2,110 124,116
Income tax expense 23,013 12,860 (f) 35,873 42,235 730 (f) 42,965
------ ------ ------ ------ --- ------
Net income 46,736 25,785 72,521 79,771 1,380 81,151
Less: Net income attributable to
noncontrolling interest 35 - 35 28 - 28
--- --- --- --- --- ---
Net income attributable to
Lannett Company, Inc. 46,701 25,785 72,486 79,743 1,380 81,123
====== ====== ====== ====== ===== ======
Earnings per common share
attributable to Lannett Company,
Inc.
Basic $1.28 $1.99 $2.24 $2.28
Diluted $1.25 $1.94 $2.15 $2.19
Weighted average common shares
outstanding:
Basic 36,349,597 36,349,597 35,633,917 35,633,917
Diluted 37,401,878 37,401,878 37,025,667 37,025,667
(a) To exclude
amortization of
a fair value
step-up in
inventory
primarily
related to the
acquisition of
Kremers Urban
Pharmaceuticals,
Inc.
(b) To exclude
amortization of
purchased
intangible
assets primarily
related to the
acquisition of
Kremers Urban
Pharmaceuticals,
Inc. and Silarx
Pharmaceuticals,
Inc.
(c) To exclude
separation
expenses
associated with
certain
employees as
well as
integration-
related expenses
and amortization
of purchased
intangibles
related to the
acquisition of
Kremers Urban
Pharmaceuticals,
Inc.
(d) To exclude
acquisition-
related expenses
primarily
related to the
acquisition of
Kremers Urban
Pharmaceuticals
Inc.
(e) To exclude non-
cash interest
expense
associated with
debt issuance
costs
(f) The tax effect of
the pre-tax
adjustments
included above
at applicable
tax rates
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SOURCE Lannett Company, Inc.
