Lannett Reports Record Financial Results For Fiscal 2014 Second Quarter

Lannett Company, Inc. (NYSE: LCI) today reported financial results for its fiscal 2014 second quarter and six months ended December 31, 2013.

For the fiscal 2014 second quarter, net sales rose 84% to $67.3 million from $36.6 million in last year’s second quarter. Gross profit more than tripled to $41.0 million, or 61% of net sales, from $13.4 million, or 37% of net sales, for the fiscal 2013 second quarter. Research and development (R&D) expenses increased to $5.8 million from $3.6 million for the fiscal 2013 second quarter. Selling, general and administrative (SG&A) expenses were $9.9 million, compared with $5.2 million in the same quarter of the prior year. Operating income grew substantially to $25.4 million from $4.7 million for the second quarter of fiscal 2013. Net income attributable to Lannett Company grew nearly six-fold to $16.6 million, or $0.46 per diluted share, from $2.9 million, or $0.10 per diluted share.

“For the fiscal 2014 second quarter, we recorded the highest net sales, gross margin and net income in our company’s history,” said Arthur Bedrosian, president and chief executive officer of Lannett. “Our excellent financial performance was driven by price increases, strong sales of existing products and favorable product mix. The successful recent stock offering and newly established $50 million credit facility provide liquidity to fund our future growth, which includes the development of our deep pipeline as well as potential acquisitions. We continue to believe our company’s future is very bright.”

Bedrosian added, “We have now recorded five consecutive quarters of record sales, crossed the billion dollar market cap threshold and, in December, began trading on the New York Stock Exchange.”

For the first six months of fiscal 2014, net sales rose 57% to $113.2 million from $71.9 million for the first six months of fiscal 2013. Cost of sales for the first six months of fiscal 2014 included a non-recurring, pre-tax charge of $20.1 million related to the previously announced contract extension with Jerome Stevens Pharmaceuticals, Inc. (JSP) to continue as the exclusive distributor in the United States of three JSP products. Accordingly, gross profit was $42.3 million, or 37% of net sales. Excluding the JSP contract renewal charge, gross profit was $62.4 million, or 55% of net sales, compared with $27.0 million, or 38% of net sales, for the first six months of fiscal 2013. R&D expenses increased to $10.5 million, compared with $7.3 million for the fiscal 2013 period. SG&A expenses increased to $17.1 million, compared with $11.3 million in the same period of the prior year. Operating income was $14.7 million. Excluding the JSP contract renewal charge, operating income grew to $34.8 million from $8.4 million in the first half of fiscal 2013.

For the first six months of fiscal 2014, net income attributable to Lannett Company grew to $10.6 million, or $0.31 per diluted share. Adjusted net income, which excludes the impact of the non-recurring JSP contract renewal charge equal to $12.6 million after-tax, was $23.2 million, or $0.69 per diluted share, compared to net income attributable to Lannett Company of $5.8 million, or $0.20 per diluted share, for the first six months of the prior year. The first six months of fiscal 2013 included a favorable pre-tax litigation settlement of $1.3 million, equal to $0.03 per diluted share.

Guidance for Fiscal 2014

Based on Lannett’s current outlook, the company revised upward its financial guidance for the fiscal 2014 full year as follows:
  • Net sales in the range of $275 million to $285 million, up approximately 12% from previous guidance of $245 million to $255 million;
  • Gross margin as a percentage of net sales of approximately 61% to 63%, up 4 percentage points from 57% to 59%;
  • R&D expense in the range of $30 million to $32 million, up from $27 million to $29 million;
  • SG&A expense ranging from $39 million to $41 million, up from $35 million to $37 million;
  • The full year effective tax rate to be in the range of 36% to 38%, unchanged from previous guidance; and
  • Capital expenditures in fiscal 2014 in the range of $28 million to $32 million, unchanged from previous guidance, which includes $15 million for the purchase and partial fit-out of two buildings recently acquired by the company.

The company noted that its guidance for fiscal 2014 does not include the impact of the JSP contract extension, which resulted in the non-recurring pre-tax charge of $20.1 million recorded in the first quarter of fiscal 2014.

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 2014 second quarter ended December 31, 2013. The conference call will be available to interested parties by dialing 877-261-8992 from the U.S. or Canada, or 847-619-6548 from international locations, passcode 36559881. The conference call will also be available through a live audio Internet broadcast at www.lannett.com. A playback of the call will be archived and accessible at this site 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.

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, achieving the financial metrics stated in the company’s guidance for fiscal 2014, expected product approvals, potential acquisitions, the successful commercialization of products in development and products included in the contract extension with Jerome Stevens Pharmaceuticals, Inc., product applications pending at the FDA and recently approved products, 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, 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.
 
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,

2013

2012

2013

2012
 
Net sales $ 67,326 $ 36,564 $ 113,155 $ 71,858
Cost of sales 26,284 23,143 50,707 44,811
JSP contract renewal cost   -     -     20,100     -  
Gross profit   41,042     13,421     42,348     27,047  
Operating expenses:
Research and development 5,785 3,572 10,530 7,336
Selling, general, and administrative   9,890     5,155     17,069     11,326  
Total operating expenses   15,675     8,727     27,599     18,662  
Operating income   25,367     4,694     14,749     8,385  
Other income (expense):
Foreign currency gain - - - 3
Gain (loss) on sale of assets 7 (112 ) (55 ) (42 )
Gain on investment securities 1,102 71 1,565 305
Litigation settlement - - - 1,250
Interest and dividend income 49 27 95 62
Interest expense (46 ) (72 ) (104 ) (135 )
Other   (87 )   -     (87 )   -  

Total other income (expense)
  1,025     (86 )   1,414     1,443  
Income before income tax 26,392 4,608 16,163 9,828
Income tax expense   9,800     1,749     5,558     4,026  
Net income 16,592 2,859 10,605 5,802
Less: Net income attributable to noncontrolling interest   26     (22 )   34     (5 )
Net income attributable to Lannett Company, Inc. $ 16,566   $ 2,881   $ 10,571   $ 5,807  
 
Earnings per common share attributable to Lannett Company, Inc.
Basic $ 0.48 $ 0.10 $ 0.33 $ 0.21
Diluted $ 0.46 $ 0.10 $ 0.31 $ 0.20
 
Weighted average common shares outstanding:
Basic 34,677,426 28,347,464 32,131,831 28,312,989
Diluted 36,276,326 28,450,597 33,561,454 28,424,027
 
 
LANNETT COMPANY, INC.
CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)
   

 
(Unaudited)

December 31, 2013

June 30, 2013
 

ASSETS
Current assets:
Cash and cash equivalents $ 94,387 $ 42,689
Investment securities 11,463 8,461
Accounts receivable, net 51,412 26,413
Inventories, net 35,756 32,531
Deferred tax assets 9,013 4,874
Other current assets   2,344     1,161  

Total current assets
204,375 116,129
Property, plant and equipment, net 53,295 40,141
Intangible assets, net 1,414 2,547
Deferred tax assets 12,155 8,005
Other assets   414     930  
TOTAL ASSETS $ 271,653   $ 167,752  
 
 

LIABILITIES
Current liabilities:
Accounts payable $ 19,261 $ 22,668
Accrued expenses 4,393 2,697
Accrued payroll and payroll related 6,027 6,910
Income taxes payable 4,539 154
Current portion of long-term debt   276     670  

Total current liabilities
34,496 33,099
Long-term debt, less current portion   1,074     5,844  
TOTAL LIABILITIES   35,570     38,943  
Commitment and Contingencies
 

STOCKHOLDERS' EQUITY

Common stock ($0.001 par value, 50,000,000 shares authorized; 35,298,489 and 29,284,592 shares issued; 34,862,576 and 28,848,679 shares outstanding at December 31, 2013 and June 30, 2013, respectively)
35 29
Additional paid-in capital 200,729 104,075
Retained earnings 37,124 26,553
Accumulated other comprehensive loss (38 ) (47 )
Treasury stock (435,913 shares at December 31, 2013 and June 30, 2013)   (2,034 )   (2,034 )
Total Lannett Company, Inc. stockholders' equity 235,816 128,576
Noncontrolling interest   267     233  
Total stockholders' equity   236,083     128,809  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 271,653   $ 167,752  

Copyright Business Wire 2010

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