Lannett Reports Record Fiscal 2015 Second Quarter Net Sales of $115 Million, EPS of $1.21

--Company Raises Outlook for Fiscal 2015--

PHILADELPHIA--()--Lannett Company, Inc. (NYSE: LCI) today reported financial results for its fiscal 2015 second quarter ended December 31, 2014.

“Strong sales and gross margin across a number of product categories drove our record financial results”

For the fiscal 2015 second quarter, net sales rose 71% to $114.8 million from $67.3 million in last year’s second quarter. Gross profit doubled to $87.2 million, or 76% of net sales, from $41.0 million, or 61% of net sales. Research and development (R&D) expenses increased to $7.8 million from $5.8 million for the fiscal 2014 second quarter. Selling, general and administrative (SG&A) expenses were $12.8 million, compared with $9.9 million in the same quarter of the prior year. Operating income more than doubled to $66.5 million from $25.4 million for the prior year second quarter. Net income attributable to Lannett Company grew 170% to $44.8 million, or $1.21 per diluted share, from $16.6 million, or $0.46 per diluted share.

“Strong sales and gross margin across a number of product categories drove our record financial results,” said Arthur Bedrosian, chief executive officer of Lannett. “The fiscal 2015 second quarter represents the ninth consecutive quarter of record net sales, as well as the twelfth consecutive quarter in which net sales and adjusted EPS exceeded the comparable prior-year period. Looking ahead, we expect our momentum in the first half of the year to continue into the second half.”

For the first six months of fiscal 2015, net sales rose 84% to $208.2 million from $113.2 million in the comparable prior-year period. Gross profit was $158.8 million, or 76% of net sales. This compares with gross profit for the first six months of fiscal 2014 of $42.3 million, or 37% of net sales, which included a non-recurring pre-tax charge of $20.1 million related to the contract extension with Jerome Stevens Pharmaceuticals, Inc. (JSP). Excluding the JSP contract renewal charge, gross profit was $62.4 million, or 55% of net sales. R&D expenses increased to $14.2 million from $10.5 million for the fiscal 2014 first six months. SG&A expenses were $23.4 million, compared with $17.1 million in the same period of the prior year. Operating income was $121.2 million compared with $14.7 million for the first six months of the prior year. Excluding the JSP contract renewal charge, operating income for the prior-year period was $34.8 million. Net income attributable to Lannett Company was $79.7 million, or $2.15 per diluted share, compared with $10.6 million, or $0.31 per diluted share. Adjusted net income, which excludes the impact of the JSP contract renewal charge equal to $12.6 million after-tax, was $23.2 million, or $0.69 per diluted share, in the first six months of fiscal 2014.

Guidance for Fiscal 2015

Based on Lannett’s current outlook, the company raised its financial guidance for the fiscal 2015 full year as follows:

  • Net sales in the range of $395 million to $405 million, up from previous guidance of $370 million to $390 million;
  • Gross margin as a percentage of net sales of approximately 74% to 75%, revised from 73% to 75%;
  • R&D expense in the range of $29 million to $31 million, down from previous guidance of $34 million to $36 million;
  • SG&A expense ranging from $47 million to $49 million, up from $46 million to $48 million;
  • The full year effective tax rate to be in the range of 34% to 35%, down from previous guidance of 36% to 38%; and
  • Capital expenditures in fiscal 2015 in the range of $40 million to $50 million, which includes $7 million to continue the partial fit-out of two buildings recently acquired by the company, unchanged from previous guidance.

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 2015 second quarter ended December 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 38859987. 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.

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 2015, 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,

2014

2013

2014

2013

 
Net sales $ 114,822 $ 67,326 $ 208,209 $ 113,155
Cost of sales 27,621 26,284 49,441 50,707
JSP contract renewal cost   -     -     -     20,100  
Gross profit   87,201     41,042     158,768     42,348  
Operating expenses:
Research and development 7,836 5,785 14,199 10,530
Selling, general, and administrative   12,822     9,890     23,375     17,069  
Total operating expenses   20,658     15,675     37,574     27,599  
Operating income   66,543     25,367     121,194     14,749  
Other income (expense):
Gain (loss) on sale of assets - 7 20 (55 )
Gain on investment securities 680 1,102 695 1,565
Interest and dividend income 106 49 208 95
Interest expense (73 ) (46 ) (111 ) (104 )
Other   -     (87 )   -     (87 )
Total other income   713     1,025     812     1,414  
Income before income tax 67,256 26,392 122,006 16,163
Income tax expense   22,435     9,800     42,235     5,558  
Net income 44,821 16,592 79,771 10,605
Less: Net income attributable to noncontrolling interest   10     26     28     34  
Net income attributable to Lannett Company, Inc. $ 44,811   $ 16,566   $ 79,743   $ 10,571  
 
Earnings per common share attributable to Lannett Company, Inc.
Basic $ 1.26 $ 0.48 $ 2.24 $ 0.33
Diluted $ 1.21 $ 0.46 $ 2.15 $ 0.31
 
Weighted average common shares outstanding:
Basic 35,669,904 34,677,426 35,633,917 32,131,831
Diluted 37,074,024 36,276,326 37,025,667 33,561,454
 
 
LANNETT COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
 
   

(Unaudited)

   
December 31, 2014 June 30, 2014
 

ASSETS

Current assets:
Cash and cash equivalents $ 170,607 $ 105,587
Investment securities 14,328 40,693
Accounts receivable, net 90,645 61,325
Inventories, net 42,642 44,844
Deferred tax assets 11,655 11,265
Other current assets   4,156     1,833  
Total current assets 334,033 265,547
Property, plant and equipment, net 75,276 61,704
Intangible assets, net 1,186 927
Deferred tax assets 12,917 14,234
Other assets   320     361  
TOTAL ASSETS $ 423,732   $ 342,773  
 
 

LIABILITIES

Current liabilities:
Accounts payable $ 19,045 $ 20,982
Accrued expenses 4,181 3,901
Accrued payroll and payroll-related expenses 5,459 12,860
Rebates payable 10,198 4,558
Income taxes payable 4,149 4,569
Current portion of long-term debt   132     129  
Total current liabilities 43,164 46,999
Long-term debt, less current portion   942     1,009  
TOTAL LIABILITIES   44,106     48,008  
Commitments and Contingencies
 

STOCKHOLDERS' EQUITY

Common stock ($0.001 par value, 100,000,000 shares authorized; 36,217,404 and 36,088,272 shares issued; 35,700,412 and 35,571,280 shares outstanding at December 31, 2014 and June 30, 2014, respectively)

36 36
Additional paid-in capital 222,149 216,793
Retained earnings 163,397 83,654
Accumulated other comprehensive loss (320 ) (54 )
Treasury stock (516,992 shares at December 31, 2014 and June 30, 2014)   (5,959 )   (5,959 )
Total Lannett Company, Inc. stockholders' equity 379,303 294,470
Noncontrolling interest   323     295  
Total stockholders' equity   379,626     294,765  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 423,732   $ 342,773  

Contacts

Robert Jaffe Co., LLC
Robert Jaffe, (424) 288-4098

Lannett Company, Inc.