LANNETT REPORTS IMPROVED FISCAL 2023 SECOND QUARTER FINANCIAL RESULTS; RAISES FULL-YEAR GUIDANCE

GAAP

Adjusted*

Net sales

$285 million to $305 million, up from $275 million to $300 million

$285 million to $305 million, up from $275 million to $300 million

Gross margin %

Approximately 15% to 17%, up from approximately 13% to 15%

Approximately 17% to 19%, up from approximately 15% to 17%

R&D expense

$21 million to $23 million, down from $23 million to $25 million

$21 million to $23 million, down from $23 million to $25 million

SG&A expense

$66 million to $68 million, up from $64 million to $67 million

$61 million to $63 million, up from $56 million to $59 million

Restructuring expenses

$3 million to $4 million, up from $0 to $1 million

--

Asset impairment charges

$10.7 million, up from $4.7 million

--

Interest and other

Approximately $67 million, up from approximately $60 million

Approximately $53 million, unchanged

Effective tax rate

Approximately 0% to 1%, changed from approximately 0% to 4%

Approximately 20% to 22%, down from approximately 23.5% to 24.5%

(Negative) Adjusted EBITDA

N/A

($5 million) to $1 million, changed from ($12 million) to $0 million

Capital expenditures

Approximately $8 million to $10 million, changed from approximately $8 million to $12 million

Approximately $8 million to $10 million, changed from approximately $8 million to $12 million

*A reconciliation of Adjusted amounts to most directly comparable GAAP amounts can be found in the financial tables following this release.

LANNETT COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

December 31, 2022

June 30, 2022

ASSETS

Current assets:

Cash and cash equivalents

$                                  55,850

$                    87,854

Accounts receivable, net

80,344

56,241

Inventories

94,776

95,158

Current income taxes receivable

-

36,793

Assets held for sale

1,300

-

Other current assets

18,257

14,070

Total current assets

250,527

290,116

Property, plant and equipment, net

116,473

133,178

Intangible assets, net

29,639

32,179

Operating lease right-of-use asset 

9,274

9,646

Income taxes receivable

17,984

-

Other assets

14,462

19,316

TOTAL ASSETS

$                               438,359

$                  484,435

LIABILITIES

Current liabilities:

Accounts payable

$                                  33,165

$                    29,737

Accrued expenses

25,688

23,667

Accrued payroll and payroll-related expenses

9,151

8,342

Rebates payable

21,377

21,568

Royalties payable

7,466

5,677

Restructuring liability

410

490

Current operating lease liabilities

2,074

2,064

Other current liabilities

12,885

13,395

Total current liabilities

112,216

104,940

Long-term debt, net

623,855

614,948

Long-term operating lease liabilities

9,441

9,994

Other liabilities

5,121

5,616

TOTAL LIABILITIES

750,633

735,498

STOCKHOLDERS' DEFICIT

Common stock ($0.001 par value, 100,000,000 shares authorized; 42,996,851 and 42,269,137 shares issued;

41,247,806 and 40,704,572 shares outstanding at December 31, 2022 and June 30, 2022, respectively)

43

42

Additional paid-in capital

367,134

363,957

Accumulated deficit

(660,713)

(596,386)

Accumulated other comprehensive loss

(367)

(411)

Treasury stock (1,749,045 and 1,564,565 shares at December 31, 2022 and June 30, 2022, respectively)

(18,371)

(18,265)

Total stockholders' deficit

(312,274)

(251,063)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$                               438,359

$                  484,435

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,

2022

2021

2022

2021

Net sales

$               80,894

$           86,508

$             155,973

$         188,033

Cost of sales 

65,258

76,990

126,543

157,998

Amortization of intangibles

1,358

3,808

2,553

7,804

Gross profit

14,278

5,710

26,877

22,231

Operating expenses (income):

Research and development expenses

4,928

4,747

12,107

10,511

Selling, general and administrative expenses

18,317

18,791

35,014

37,696

Restructuring expenses

335

891

481

891

Asset impairment charges

5,969

49,361

10,637

49,361

Gain on sale of intangible assets

(500)

-

(3,563)

-

Total operating expenses

29,049

73,790

54,676

98,459

Operating loss

(14,771)

(68,080)

(27,799)

(76,228)

Other income (expense), net:

Investment income

399

46

491

80

Interest expense

(15,184)

(14,430)

(30,214)

(28,654)

Loss on loan receivable

(6,826)

-

(6,826)

-

Other

106

11

87

(51)

Total other expense, net

(21,505)

(14,373)

(36,462)

(28,625)

Loss before income tax

(36,276)

(82,453)

(64,261)

(104,853)

Income tax expense (benefit)

32

(1,368)

66

(1,426)

Net loss

$             (36,308)

$         (81,085)

$              (64,327)

$        (103,427)

Loss per common share:

     Basic

$                  (0.88)

$             (2.01)

$                  (1.57)

$              (2.58)

     Diluted

$                  (0.88)

$             (2.01)

$                  (1.57)

$              (2.58)

Weighted average common shares outstanding:

     Basic

41,170,839

40,358,137

41,056,607

40,142,974

     Diluted

41,170,839

40,358,137

41,056,607

40,142,974

LANNETT COMPANY, INC.

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

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

Six months ended December 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

Gain on sale

of intangible assets

Operating

loss

Other

expense

Loss before

income tax

Income tax

expense (benefit)

Net loss

Diluted loss

per share (k)

GAAP Reported

$        155,973

$        126,543

$             2,553

$          26,877

17 %

$          12,107

$          35,014

$                481

$          10,637

$           (3,563)

$         (27,799)

$         (36,462)

$         (64,261)

$                  66

$         (64,327)

$             (1.57)

Adjustments:

Amortization of intangibles (a)

-

-

(2,553)

2,553

-

-

-

-

-

2,553

-

2,553

-

2,553

Cody API business (b)

-

(90)

-

90

-

(16)

-

-

-

106

-

106

-

106

Depreciation on capitalized software costs (c)

-

-

-

-

-

(2,102)

-

-

-

2,102

-

2,102

-

2,102

Restructuring expenses (d)

-

-

-

-

-

-

(481)

-

-

481

-

481

-

481

Asset impairment charges (e)

-

-

-

-

-

-

-

(10,637)

-

10,637

-

10,637

-

10,637

Gain on sale of intangible assets (f)

-

-

-

-

-

-

-

-

3,563

(3,563)

-

(3,563)

-

(3,563)

Non-cash interest (g)

-

-

-

-

-

-

-

-

-

-

3,637

3,637

-

3,637

Loss on loan receivable (h)

-

-

-

-

-

-

-

-

-

-

6,826

6,826

-

6,826

Other (i)

-

-

-

-

-

(2,603)

-

-

-

2,603

(140)

2,463

-

2,463

Tax adjustments (j)

-

-

-

-

-

-

-

-

-

-

-

-

(7,945)

7,945

Non-GAAP Adjusted

$          155,973

$          126,453

$                    -

$            29,520

19 %

$            12,107

$            30,293

$                    -

$                    -

$                    -

$           (12,880)

$           (26,139)

$           (39,019)

$             (7,879)

$           (31,140)

$               (0.76)

(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 primarily associated with the 2022 Restructuring Plan

(e)

To exclude asset impairment charges related to the Company's State Road and Torresdale facilities

(f)

To exclude the gain on sale of assets related to several ANDAs, primarily purchased by Chartwell Pharmaceuticals, Inc. 

(g)

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

(h)

To exclude the write-down of a loan receivable to a third party company operating in the online pharmaceutical business

(i)

To primarily exclude costs related to strategic review initiatives and the gain on a legal settlement

(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 six months ended December 31, 2022 is 41,056,607 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)

Six months ended December 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

loss

Other

expense

Loss before

income tax

Income tax

benefit

Net loss

Diluted loss

per share (j)

GAAP Reported

$        188,033

$        157,998

$             7,804

$          22,231

12 %

$          10,511

$          37,696

$                891

$          49,361

$         (76,228)

$         (28,625)

$      (104,853)

$           (1,426)

$      (103,427)

$             (2.58)

Adjustments:

Amortization of intangibles (a)

-

-

(7,804)

7,804

-

-

-

-

7,804

-

7,804

-

7,804

Cody API business (b)

-

(50)

-

50

(6)

(270)

-

-

326

-

326

-

326

Depreciation on capitalized software costs (c)

-

-

-

-

-

(2,102)

-

-

2,102

-

2,102

-

2,102

Restructuring expenses (d)

-

-

-

-

-

-

(891)

-

891

-

891

-

891

Distribution agreement renewal costs (e)

-

-

-

-

-

(219)

-

-

219

-

219

-

219

Asset impairment charges (f)

-

-

-

-

-

-

-

(49,361)

49,361

-

49,361

-

49,361

Non-cash interest (g)

-

-

-

-

-

-

-

-

-

2,959

2,959

-

2,959

Other (h)

-

(177)

-

177

(1)

(5,944)

-

-

6,122

-

6,122

-

6,122

Tax adjustments (i)

-

-

-

-

-

-

-

-

-

-

-

(7,162)

7,162

Non-GAAP Adjusted

$          188,033

$          157,771

$                    -

$            30,262

16 %

$            10,504

$            29,161

$                    -

$                    -

$             (9,403)

$           (25,666)

$           (35,069)

$             (8,588)

$           (26,481)

$               (0.66)

(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 non-cash interest expense associated with debt issuance costs

(h)

To primarily exclude the reimbursement of legal costs associated with a distribution agreement, one-time employee retention awards and separation costs related to the Company's former Chief Information Officer

(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 six months ended December 31, 2021 is 40,142,974 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 December 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

Gain on sale

of intangible assets

Operating

loss

Other

expense

Loss before

income tax

Income tax

expense (benefit)

Net loss

Diluted loss

per share (k)

GAAP Reported

$             80,894

$             65,258

$               1,358

$             14,278

18 %

$               4,928

$             18,317

$                335

$               5,969

$                 (500)

$           (14,771)

$           (21,505)

$           (36,276)

$                     32

$           (36,308)

$                (0.88)

Adjustments:

Amortization of intangibles (a)

-

-

(1,358)

1,358

-

-

-

-

-

1,358

-

1,358

-

1,358

Cody API business (b)

-

(40)

-

40

-

(7)

-

-

-

47

-

47

-

47

Depreciation on capitalized software costs (c)

-

-

-

-

-

(1,051)

-

-

-

1,051

-

1,051

-

1,051

Restructuring expenses (d)

-

-

-

-

-

-

(335)

-

-

335

-

335

-

335

Asset impairment charges (e)

-

-

-

-

-

-

-

(5,969)

-

5,969

-

5,969

-

5,969

Gain on sale of intangible assets (f)

-

-

-

-

-

-

-

-

500

(500)

-

(500)

-

(500)

Non-cash interest (g)

-

-

-

-

-

-

-

-

-

-

1,860

1,860

-

1,860

Loss on loan receivable (h)

-

-

-

-

-

-

-

-

-

-

6,826

6,826

-

6,826

Other (i)

-

-

-

-

-

(1,500)

-

-

-

1,500

(140)

1,360

-

1,360

Tax adjustments (j)

-

-

-

-

-

-

-

-

-

-

-

-

(3,954)

3,954

Non-GAAP Adjusted

$               80,894

$               65,218

$                       -

$               15,676

19 %

$                 4,928

$               15,759

$                    -

$                       -

$                       -

$               (5,011)

$             (12,959)

$             (17,970)

$               (3,922)

$             (14,048)

$                 (0.34)

(a)

To exclude amortization of purchased intangible assets 

(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 primarily associated with the 2022 Restructuring Plan

(e)

To exclude asset impairment charges related to the Company's Torresdale facility

(f)

To exclude the gain on sale of one of the Company's ANDAs

(g)

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

(h)

To exclude the write-down of a loan receivable to a third party company operating in the online pharmaceutical business

(i)

To primarily exclude costs related to strategic review initiatives and the gain on a legal settlement

(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 December 31, 2022 is 41,170,839 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 December 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

loss

Other

expense

Loss before

income tax

Income

tax benefit

Net loss

Diluted loss

per share (i)

GAAP Reported

$             86,508

$             76,990

$               3,808

$               5,710

7 %

$               4,747

$             18,791

$                891

$             49,361

$           (68,080)

$           (14,373)

$           (82,453)

$              (1,368)

$           (81,085)

$                (2.01)

Adjustments:

Amortization of intangibles (a)

-

-

(3,808)

3,808

-

-

-

-

3,808

-

3,808

-

3,808

Cody API business (b)

-

(17)

-

17

-

(257)

-

-

274

-

274

-

274

Depreciation on capitalized software costs (c)

-

-

-

-

-

(1,051)

-

-

1,051

-

1,051

-

1,051

Restructuring expenses (d)

-

-

-

-

-

-

(891)

-

891

-

891

-

891

Asset impairment charges (e)

-

-

-

-

-

-

-

(49,361)

49,361

-

49,361

-

49,361

Non-cash interest (f)

-

-

-

-

-

-

-

-

-

1,520

1,520

-

1,520

Other (g)

-

(177)

-

177

(1)

(3,525)

-

-

3,703

-

3,703

-

3,703

Tax adjustments (h)

-

-

-

-

-

-

-

-

-

-

-

(4,588)

4,588

Non-GAAP Adjusted

$               86,508

$               76,796

$                       -

$                 9,712

11 %

$                 4,746

$               13,958

$                    -

$                       -

$               (8,992)

$             (12,853)

$             (21,845)

$               (5,956)

$             (15,889)

$                 (0.39)

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

(f)

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

(g)

To primarily exclude the reimbursement of legal costs associated with a distribution agreement, one-time employee retention awards and separation costs related to the Company's former Chief Information Officer

(h)

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

LANNETT COMPANY, INC.

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA (UNAUDITED)

($ in thousands)

Three months ended 

December 31, 2022

Net loss

$                               (36,308)

Interest expense

15,184

Depreciation and amortization

6,287

Income tax expense

32

EBITDA

(14,805)

Share-based compensation

1,532

Inventory write-down

592

Asset impairment charges (a) 

5,969

Loss on loan receivable (b)

6,826

Investment income

(399)

Gain on sale of intangible assets (c)

(500)

Other non-operating expense

(106)

Restructuring expenses

335

Other (d) 

1,548

Adjusted EBITDA (Non-GAAP)

$                                       992

(a)

To exclude asset impairment charges related to the Company's Torresdale facility

(b)

To exclude the write-down of a loan receivable to a third party company operating in the online pharmaceutical business

(c)

To exclude the gain on sale of one of the Company's ANDAs

(d)

To primarily exclude costs related to strategic review initiatives 

LANNETT COMPANY, INC.