LANNETT REPORTS FISCAL 2022 THIRD-QUARTER FINANCIAL RESULTS

GAAP

Adjusted*

Net sales

$335 million to $350 million, from $335 million to $360 million

$335 million to $350 million, from $335 million to $360 million

Gross margin %

Approximately 8.5% to 9.5%, from approximately 10% to 11%

Approximately 13.5% to 14.5%, from approximately 14% to 15%

R&D expense

$22 million to $24 million, from $23 million to $26 million

$22 million to $24 million, from $23 million to $26 million

SG&A expense

$71 million to $73 million, from $66.5 million to $69.5 million

$55 million to $57 million, from $55 million to $58 million

Restructuring expense

$3 million to $4 million

$--

Asset impairment

$49.4 million

$--

Interest and other

Approximately $58 million, unchanged

Approximately $52 million, unchanged

Effective tax rate

Approximately 0% to 3%, from approximately 0% to 5%

Approximately 23.5% to 24.5%, from 23% to 24%

Adjusted EBITDA

N/A

$0 to $8 million, unchanged

Capital expenditures

Approximately $12 million, from $10 million to $14 million

Approximately $12 million, from $10 million to $14 million

Contact:

Robert Jaffe

Robert Jaffe Co., LLC

(424) 288-4098

LANNETT COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

March 31, 2022

June 30, 2021

ASSETS

Current assets:

Cash and cash equivalents

$                               106,108

$                    93,286

Accounts receivable, net

63,974

98,834

Inventories

95,434

109,545

Income taxes receivable

37,236

35,050

Assets held for sale

-

2,678

Other current assets

15,953

14,170

Total current assets

318,705

353,563

Property, plant and equipment, net

140,120

166,674

Intangible assets, net

88,351

137,835

Operating lease right-of-use asset 

10,028

10,559

Other assets

15,103

15,106

TOTAL ASSETS

$                               572,307

$                  683,737

LIABILITIES

Current liabilities:

Accounts payable

$                                  28,571

$                    29,585

Accrued expenses

15,872

13,077

Accrued payroll and payroll-related expenses

10,817

10,680

Rebates payable

24,332

19,025

Royalties payable

6,145

13,779

Restructuring liability

899

8

Current operating lease liabilities

2,059

2,045

Other current liabilities

5,660

2,270

Total current liabilities

94,355

90,469

Long-term debt, net

610,080

590,683

Long-term operating lease liabilities

10,285

11,047

Other liabilities

16,895

19,009

TOTAL LIABILITIES

731,615

711,208

STOCKHOLDERS' DEFICIT

Common stock ($0.001 par value, 100,000,000 shares authorized; 42,180,724 and 40,913,148 shares issued;

40,616,948 and 39,576,606 shares outstanding at March 31, 2022 and June 30, 2021, respectively)

42

41

Additional paid-in capital

362,531

355,239

Accumulated deficit

(503,091)

(364,766)

Accumulated other comprehensive loss

(526)

(548)

Treasury stock (1,563,776 and 1,336,542 shares at March 31, 2022 and June 30, 2021, respectively)

(18,264)

(17,437)

Total stockholders' deficit

(159,308)

(27,471)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$                               572,307

$                  683,737

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,

2022

2021

2022

2021

Net sales

$               78,357

$         112,370

$             266,390

$         372,769

Cost of sales 

72,658

82,063

230,656

298,738

Amortization of intangibles

2,621

3,851

10,425

21,097

Gross profit

3,078

26,456

25,309

52,934

Operating expenses:

Research and development expenses

5,807

5,973

16,318

18,156

Selling, general and administrative expenses

17,572

17,636

55,268

46,502

Restructuring expenses

1,782

-

2,673

4,043

Asset impairment charges

-

-

49,361

198,000

Total operating expenses

25,161

23,609

123,620

266,701

Operating income (loss)

(22,083)

2,847

(98,311)

(213,767)

Other income (expense):

Investment income

34

80

114

168

Interest expense

(14,517)

(12,631)

(43,171)

(40,613)

Other

303

18

252

23

Total other expense

(14,180)

(12,533)

(42,805)

(40,422)

Loss before income tax

(36,263)

(9,686)

(141,116)

(254,189)

Income tax benefit

(1,365)

(2,544)

(2,791)

(68,600)

Net loss

$             (34,898)

$           (7,142)

$           (138,325)

$        (185,589)

Loss per common share (1):

     Basic

$                  (0.86)

$             (0.18)

$                  (3.44)

$              (4.72)

     Diluted

$                  (0.86)

$             (0.18)

$                  (3.44)

$              (4.72)

Weighted average common shares outstanding (1):

     Basic

40,503,301

39,511,296

40,261,330

39,340,670

     Diluted

40,503,301

39,511,296

40,261,330

39,340,670

(1) Effective with the Warrants issued on April 22, 2021, the basic and diluted earnings per share was calculated based on the two-class 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, 2022

Net sales

Cost of sales

Amortization of

intangibles

Gross Profit

Gross

Margin %

R&D expenses

SG&A expenses

Restructuring

expenses

Asset impairment

charges

Operating loss

Other expense

Loss before

income tax

Income tax

benefit

Net loss

Diluted loss

per share (l)

GAAP Reported

$           266,390

$           230,656

$             10,425

$             25,309

10%

$             16,318

$             55,268

$             2,673

$             49,361

$           (98,311)

$           (42,805)

$         (141,116)

$              (2,791)

$         (138,325)

$                (3.44)

Adjustments:

Amortization of intangibles (a)

-

-

(10,425)

10,425

-

-

-

-

10,425

-

10,425

-

10,425

Cody API business (b)

-

(109)

-

109

(6)

(289)

-

-

404

-

404

-

404

Depreciation on capitalized software costs (c)

-

-

-

-

-

(3,153)

-

-

3,153

-

3,153

-

3,153

Restructuring expenses (d)

-

-

-

-

-

-

(2,673)

-

2,673

-

2,673

-

2,673

 Distribution agreement renewal costs (e)

-

-

-

-

-

(219)

-

-

219

-

219

-

219

Asset impairment charges (f)

-

-

-

-

-

-

-

(49,361)

49,361

-

49,361

-

49,361

Write-downs for excess and obsolete inventory (g)

-

(3,244)

-

3,244

-

-

-

-

3,244

-

3,244

-

3,244

Reimbursement of legal costs (h)

-

-

-

-

-

(8,215)

-

-

8,215

-

8,215

-

8,215

Non-cash interest (i)

-

-

-

-

-

-

-

-

-

4,553

4,553

-

4,553

Other (j)

-

(487)

-

487

(3)

(879)

-

-

1,369

124

1,493

-

1,493

Tax adjustments (k)

-

-

-

-

-

-

-

-

-

-

-

(11,358)

11,358

Non-GAAP Adjusted

$             266,390

$             226,816

$                       -

$               39,574

15%

$               16,309

$               42,513

$                    -

$                       -

$             (19,248)

$             (38,128)

$             (57,376)

$             (14,149)

$             (43,227)

$                 (1.07)

(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 2021 Restructuring Plan

(e)

To exclude the consideration recorded to renew the Company's distribution agreement with Recro Gainesville LLC 

(f)

To exclude asset impairment charges primarily related to the KUPI product rights intangible assets and the facility and certain equipment at Silarx in Carmel, NY

(g)

To exclude write-downs for excess and obsolete inventory related to certain product lines discontinued as a result of the sale of the Silarx facility

(h)

To exclude the reimbursement of legal costs associated with a distribution agreement

(i)

To exclude non-cash interest expense associated with debt issuance costs

(j)

To primarily exclude one-time employee retention awards and separation costs related to the Company's former Chief Information Officer

(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, 2022 is 40,261,330 for GAAP and non-GAAP 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)

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 (UNAUDITED)

(In thousands, except percentages, share and per share data)

Three months ended March 31, 2022

Net sales

Cost of sales

Amortization of

intangibles

Gross Profit

Gross

Margin %

R&D expenses

SG&A expenses

Restructuring

expenses

Operating loss

Other expense

Loss before

income tax

Income tax

benefit

Net loss

Diluted loss per

share (j)

GAAP Reported

$             78,357

$             72,658

$               2,621

$               3,078

4%

$               5,807

$             17,572

$             1,782

$           (22,083)

$           (14,180)

$           (36,263)

$              (1,365)

$           (34,898)

$                (0.86)

Adjustments:

Amortization of intangibles (a)

-

-

(2,621)

2,621

-

-

-

2,621

-

2,621

-

2,621

Cody API business (b)

-

(59)

-

59

-

(19)

-

78

-

78

-

78

Depreciation on capitalized software costs (c)

-

-

-

-

-

(1,051)

-

1,051

-

1,051

-

1,051

Restructuring expenses (d)

-

-

-

-

-

-

(1,782)

1,782

-

1,782

-

1,782

Write-downs for excess and obsolete inventory (e)

-

(3,244)

-

3,244

-

-

-

3,244

-

3,244

-

3,244

Reimbursement of legal costs (f)

-

-

-

-

-

(3,048)

-

3,048

-

3,048

-

3,048

Non-cash interest (g)

-

-

-

-

-

-

-

-

1,594

1,594

-

1,594

Other (h)

-

(310)

-

310

(2)

(102)

-

414

124

538

-

538

Tax adjustments (i)

-

-

-

-

-

-

-

-

-

-

(4,196)

4,196

Non-GAAP Adjusted

$               78,357

$               69,045

$                       -

$                 9,312

12%

$                 5,805

$               13,352

$                    -

$               (9,845)

$             (12,462)

$             (22,307)

$               (5,561)

$             (16,746)

$                 (0.41)

(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 2021 Restructuring Plan

(e)

To exclude write-downs for excess and obsolete inventory related to certain product lines discontinued as a result of the sale of the Silarx facility

(f)

To exclude the reimbursement of legal costs associated with a distribution agreement

(g)

To exclude non-cash interest expense associated with debt issuance costs

(h)

To primarily exclude one-time employee retention awards 

(i)

To exclude the tax effect of the pre-tax adjustments included above at applicable tax rates

(j)

The weighted average share number for the three months ended March 31, 2022 is 40,503,301 for GAAP and non-GAAP 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, 2021

Net sales

Cost of sales

Gross Profit

Gross Margin

%

SG&A expenses

Operating

income 

Other expense

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 NET LOSS TO ADJUSTED EBITDA (UNAUDITED)

($ in thousands)

Three months ended 

March 31, 2022

Net loss

$                               (34,898)

Interest expense

14,517

Depreciation and amortization

7,788

Income tax benefit

(1,365)

EBITDA

(13,958)

Share-based compensation

1,699

Inventory write-down

7,373

Investment income

(34)

Other non-operating income

(303)

Restructuring expenses

1,782

Reimbursement of legal costs (a)

3,048

Other (b)

491

Adjusted EBITDA (Non-GAAP)

$                                         98

(a)

To exclude the reimbursement of legal costs associated with a distribution agreement

(b)

To primarily exclude one-time employee retention awards 

LANNETT COMPANY, INC.

RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)

($ in millions)

Fiscal Year 2022 Guidance

Non-GAAP

GAAP

Adjustments

Adjusted

Net sales

 $335 - $350 

-

 $335 - $350 

Gross margin percentage

approx. 8.5% to 9.5%

5%

 (a) 

approx. 13.5% to 14.5%

R&D expense

 $22 - $24 

-

 $22 - $24 

SG&A expense

 $71 - $73 

($16)

 (b) 

 $55 - $57 

Restructuring expense

 $3 - $4 

 ($3 - $4) 

 (c) 

-

Asset impairment charges

$49.4

($49.4)

 (d) 

-

Interest and other

 approx. $58 

($6)

 (e) 

 approx. $52 

Effective tax rate

 approx. 0% to 3% 

-

 approx. 23.5% to 24.5% 

Adjusted EBITDA

 N/A 

 N/A 

 $0 - $8 

Capital expenditures

 approx. $12 

-

 approx. $12 

(a) The adjustment primarily reflects amortization of purchased intangible assets related to the acquisition of Kremers Urban Pharmaceuticals, Inc. ("KUPI")

(b) The adjustment primarily excludes depreciation on previously capitalized software integration costs associated with the KUPI acquisition and the reimbursement of legal costs associated with a distribution agreement

(c) To exclude expenses associated with the 2021 Restructuring Plan

(d) To exclude asset impairment charges primarily related to the KUPI product rights intangible assets and the Company's former facility in Carmel, NY

(e) The adjustment primarily reflects non-cash interest expense associated with debt issuance costs

LANNETT COMPANY, INC.

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA (UNAUDITED)

($ in millions)

Fiscal Year 2022 Guidance

Low

High