Lannett Reports Record Financial Results For Fiscal 2014 Third Quarter

Lannett Company, Inc. (NYSE: LCI) today reported financial results for its fiscal 2014 third quarter and nine months ended March 31, 2014.

For the fiscal 2014 third quarter, net sales doubled to $80.0 million from $39.0 million in last year’s third quarter. Gross profit more than tripled to $56.1 million, or 70% of net sales, from $15.2 million, or 39% of net sales, for the fiscal 2013 third quarter. Research and development (R&D) expenses increased to $10.6 million from $5.2 million for the fiscal 2013 third quarter. Selling, general and administrative (SG&A) expenses were $9.6 million, compared with $5.2 million in the same quarter of the prior year. Operating income rose substantially to $36.0 million from $4.7 million for the third quarter of fiscal 2013. Net income attributable to Lannett Company grew nearly six-fold to $23.0 million, or $0.63 per diluted share, from $3.9 million, or $0.14 per diluted share.

“The fiscal 2014 third quarter represents the sixth consecutive quarter of record net sales, as well as the ninth consecutive quarter in which net sales and adjusted EPS exceeded the comparable prior-year period,” said Arthur Bedrosian, president and chief executive officer of Lannett. “Our excellent financial performance was largely driven by price increases across multiple product categories and strong sales of existing products. We are pleased to have recently received approval for Diazepam Oral Solution (Concentrate) and expect our 19 product applications pending at FDA combined with an additional five ANDAs planned for submission by June 30, 2014 to position us well for continued long-term growth.”

For the first nine months of fiscal 2014, net sales rose 74% to $193.2 million from $110.9 million for the first nine months of fiscal 2013. Cost of sales for the first nine 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 $98.5 million, or 51% of net sales. Excluding the JSP contract renewal charge, gross profit was $118.6 million, or 61% of net sales, compared with $42.2 million, or 38% of net sales, for the first nine months of fiscal 2013. R&D expenses increased to $21.1 million, compared with $12.6 million for the fiscal 2013 period. SG&A expenses increased to $26.6 million, compared with $16.6 million in the same period of the prior year. Operating income was $50.7 million. Excluding the JSP contract renewal charge, operating income grew to $70.8 million from $13.1 million in the first nine months of fiscal 2013.

For the first nine months of fiscal 2014, net income attributable to Lannett Company grew to $33.6 million, or $0.97 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 $46.2 million, or $1.34 per diluted share, compared to net income attributable to Lannett Company of $9.8 million, or $0.34 per diluted share, for the first nine months of the prior year. The first nine 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

The company recently increased prices for certain products. These increases are expected to have the effect of lowering net sales in the fiscal 2014 fourth quarter due to related upfront credits, but result in a significant benefit in fiscal 2015. Accordingly, the company revised its fiscal 2014 guidance as follows:
  • Net sales in the range of $261 million to $267 million, down from previous guidance of $275 million to $285 million;
  • Gross margin as a percentage of net sales of approximately 61.5% to 62.5%, revised from 61% to 63%;
  • R&D expense in the range of $30 million to $31 million, revised from $30 million to $32 million;
  • SG&A expense ranging from $38 million to $39 million, revised from $39 million to $41 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 $24 million to $26 million, down from $28 million to $32 million, which includes $10 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 third quarter ended March 31, 2014. 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 37186038. The conference call will also be available through a live audio 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 Nine months ended
March 31, March 31,
  2014     2013     2014     2013  
 

Net sales
$ 79,997 $ 39,022 $ 193,152 $ 110,880
Cost of sales 23,865 23,852 74,572 68,663
JSP contract renewal cost   -     -     20,100     -  
Gross profit   56,132     15,170     98,480     42,217  
Operating expenses:
Research and development 10,583 5,229 21,113 12,565
Selling, general, and administrative   9,560     5,245     26,629     16,571  
Total operating expenses   20,143     10,474     47,742     29,136  
Operating income   35,989     4,696     50,738     13,081  
Other income (expense):
Foreign currency gain 1 - 1 3
Gain (loss) on sale of assets - 93 (55 ) 51
Gain on investment securities 200 538 1,765 843
Litigation settlement - - - 1,250
Interest and dividend income 109 22 204 84
Interest expense (13 ) (59 ) (117 ) (194 )
Other   -     -     (87 )   -  
Total other income   297     594     1,711     2,037  
Income before income taxes 36,286 5,290 52,449 15,118
Income tax expense   13,280     1,327     18,838     5,353  
Net income 23,006 3,963 33,611 9,765
Less: Net income attributable to noncontrolling interest   11     16     45     11  
Net income attributable to Lannett Company, Inc. $ 22,995   $ 3,947   $ 33,566   $ 9,754  
 
Earnings per common share attributable to Lannett Company, Inc.
Basic $ 0.66 $ 0.14 $ 1.01 $ 0.34
Diluted $ 0.63 $ 0.14 $ 0.97 $ 0.34
 
Weighted average common shares outstanding:
Basic 35,025,968 28,490,175 33,082,460 28,371,189
Diluted 36,769,593 29,115,941 34,586,007 28,644,831
 
  LANNETT COMPANY, INC.    
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)

 

(Unaudited)
March 31, 2014 June 30, 2013
 
ASSETS
Current assets:
Cash and cash equivalents $ 84,113 $ 42,689
Investment securities 39,363 8,461
Accounts receivable, net 59,236 26,413
Inventories, net 41,365 32,531
Prepaid income taxes 2,591 -

Deferred tax assets
8,250 4,874
Other current assets   2,172     1,161  
Total current assets 237,090 116,129
Property, plant and equipment, net 57,005 40,141
Intangible assets, net 948 2,547
Deferred tax assets 11,869 8,005
Other assets   408     930  
TOTAL ASSETS $ 307,320   $ 167,752  
 
 
LIABILITIES
Current liabilities:
Accounts payable $ 21,270 $ 22,668
Accrued expenses 8,760 2,697
Accrued payroll and payroll related 7,082 6,910
Income taxes payable - 154
Current portion of long-term debt   128     670  
Total current liabilities 37,240 33,099
Long-term debt, less current portion   1,041     5,844  
TOTAL LIABILITIES   38,281     38,943  
Commitment and Contingencies
 
STOCKHOLDERS' EQUITY

Common stock ($0.001 par value, 100,000,000 and 50,000,000shares authorized; 35,830,024 and 29,284,592 sharesissued; 35,378,346 and 28,848,679 shares outstanding atMarch 31, 2014 and June 30, 2013, respectively)
 
36 29
Additional paid-in capital 211,384 104,075
Retained earnings 60,119 26,553
Accumulated other comprehensive loss (49 ) (47 )

Treasury stock (451,678 and 435,913 shares at March 31,2014 and June 30, 2013, respectively)
  (2,729 )   (2,034 )
Total Lannett Company, Inc. stockholders' equity 268,761 128,576
Noncontrolling interest   278     233  
Total stockholders' equity   269,039     128,809  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 307,320   $ 167,752  

Copyright Business Wire 2010

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