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Lannett Reports Strong Financial Results for Fiscal 2013 Second Quarter



  Lannett Reports Strong Financial Results for Fiscal 2013 Second Quarter

    --Growth Momentum Continues with 32% Sales Increase; Company Increases
                           Guidance for Full Year--

Business Wire

PHILADELPHIA -- February 7, 2013

Lannett Company, Inc. (NYSE MKT: LCI) today reported continued strong
momentum, with sharply improved financial results for its fiscal 2013 second
quarter ended December 31, 2012, compared with the prior year period.

Net sales for the fiscal 2013 second quarter rose significantly to $36.6
million, up 32% from $27.7 million last year. Gross profit nearly doubled to
$13.4 million from $7.4 million for the fiscal 2012 second quarter. As a
percentage of net sales, gross margin increased to 37% from 27% last year.
Research and development (R&D) expenses were $3.6 million, compared with $2.5
million for the fiscal 2012 second quarter. Selling, general and
administrative (SG&A) expenses were $5.2 million, compared with $4.4 million
in the same quarter of the prior year. Operating income increased to $4.7
million from $495,000 for the second quarter of fiscal 2012. Net income
attributable to Lannett Company rose to $2.9 million, or $0.10 per diluted
share, from $609,000, or $0.02 per diluted share, for the same period last
year.

“The positive performance for our second quarter and the favorable outlook for
the second half of our fiscal year reflect continued strong sales from our
base products and market penetration from our recently approved products,”
said Arthur Bedrosian, president and chief executive officer of Lannett.
“Gross margin was positively impacted by favorable sales mix and price
increases, along with enhanced manufacturing efficiencies that are partially
attributable to recent product launches. We believe Lannett’s R&D investments,
which are ratcheting up as the year proceeds, combined with the operating
momentum we are now achieving, will pave the way for continued growth and
progress in the future,” Bedrosian added.

For the first half of fiscal 2013, net sales increased to $71.9 million from
$56.6 million for the corresponding prior year period. Gross profit rose to
$27.0 million from $16.0 million last year. As a percentage of net sales,
gross margin increased to 38% from 28% last year. R&D expenses were $7.3
million, compared with $4.9 million for the first six months of fiscal 2012.
SG&A expenses amounted to $11.3 million, versus $9.2 million for the first
half of fiscal 2012. Operating income advanced to $8.4 million from $1.9
million a year ago. Net income attributable to Lannett Company increased to
$5.8 million, equal to $0.20 per diluted share, from $815,000, or $0.03 per
diluted share, for the first half of fiscal 2012. Net income for the most
recent six-month period included a favorable litigation settlement of $1.3
million and other non-operating items, equal to $0.03 per diluted share.

Upward Revised Guidance for Fiscal 2013

Based on Lannett’s current outlook, the company revised its financial guidance
upward for the fiscal 2013 full year as follows:

  * Net sales of $140 million to $142 million, up from the previous guidance
    of $132 million to $136 million;
  * Gross margin as a percentage of net sales of approximately 36% to 37%, up
    from 34% to 35%;
  * R&D expense in the range of $17 million to $18 million, down slightly from
    $18 million to $20 million;
  * SG&A expense ranging from $24 million to $25 million, versus $21 million
    to $23 million;
  * Other income of approximately $1.5 million, essentially equal to the
    litigation settlement the company reported in the first quarter; and
  * Capital expenditures in the range of $10 million to $12 million, 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 2013 second quarter ended December
31, 2012. The conference call will be available to interested parties by
dialing 866-813-5647 from the U.S. or Canada, or 847-619-6249 from
international locations, passcode 34177997. 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 and 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 upward revised guidance, expected product approvals, the successful
commercialization of products in development, 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. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except for share and per share data)
                                                                   
                 Three months ended                Six months ended
                 December 31,                      December 31,
                   2012             2011             2012             2011
                                                                     
Net sales        $ 36,564         $ 27,734         $ 71,858         $ 56,612
Cost of sales      22,620           19,771           43,784           39,513
Amortization
of intangible      470              470              941              938
assets
Product            53               66               86               118         
royalties
                                                                     
Gross profit       13,421           7,427            27,047           16,043
                                                                     
Research and
development        3,572            2,513            7,336            4,939
expenses
Selling,
general, and       5,155            4,419            11,326           9,164       
administrative
expenses
                                                                     
Operating          4,694            495              8,385            1,940       
income
                                                                     
Other income
(expense):
Foreign
currency gain      -                (8         )     3                (3         )
(loss)
Gain (loss) on     (112       )     (3         )     (42        )     4
sale of assets
Realized gain
(loss) on          132              27               96               (146       )
investments
Unrealized
gain (loss) on     (61        )     675              209              (151       )
investments
Litigation         -                -                1,250            -
settlement
Interest and
dividend           27               36               62               89
income
Interest           (72        )     (73        )     (135       )     (150       )
expense
                   (86        )     654              1,443            (357       )
                                                                     
Income before
income tax         4,608            1,149            9,828            1,583
expense
Income tax         1,749            519              4,026            731         
expense
Net income         2,859            630              5,802            852
Less net
income (loss)
attributable       22               (21        )     5                (37        )
to
noncontrolling
interest
                                                                     
Net income
attributable     $ 2,881          $ 609            $ 5,807          $ 815         
to Lannett
Company, Inc.
                                                                     
Earnings per
common share -
Lannett
Company, Inc.:
Basic              0.10             0.02             0.21             0.03
Diluted            0.10             0.02             0.20             0.03
                                                                     
Weighted
average number
of shares
outstanding:
Basic              28,347,464       28,526,658       28,312,989       28,479,195
Diluted            28,450,597       28,773,477       28,424,027       28,733,435
                                                                                  
                                                                                  

LANNETT COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
 
                                             (Unaudited)        
                                             December 31, 2012   June 30, 2012
                                                                  
ASSETS
Current Assets
     Cash and cash equivalents               $   31,455          $  22,562
     Investment securities                       6,638              6,667
     Trade accounts receivable (net of
     allowance of $111 and $124,                 41,370             42,212
     respectively)
     Inventories, net                            30,688             27,064
     Prepaid income taxes                        249                2,120
     Deferred tax assets                         4,955              4,833
     Other current assets                        1,309              1,023     
                  Total Current Assets           116,664            106,481
                                                                  
     Property, plant and equipment, net          38,876             37,068
     Intangible assets, net                      3,488              4,429
     Deferred tax assets                         8,540              9,069
     Other assets                                810                1,171     
                  TOTAL ASSETS               $   168,378         $  158,218   
                                                                  
                                                                  
LIABILITIES
Current Liabilities
     Accounts payable                        $   18,625          $  17,989
     Accrued expenses                            1,982              1,518
     Accrued payroll and payroll related         3,810              3,198
     Current portion of long-term debt           654                648
     Rebates, chargebacks and returns            18,961             17,039    
     payable
                  Total Current                  44,032             40,392
                  Liabilities
                                                                  
     Long-term debt, less current portion        6,255              6,513     
                  TOTAL LIABILITIES              50,287             46,905    
     Commitment and Contingencies
                                                                  
SHAREHOLDERS' EQUITY
     Common stock - authorized 50,000,000
     shares, par value $0.001; issued,
     28,822,773 and 28,594,437 shares,           29                 29
     respectively; outstanding, 28,386,894
     and 28,252,192 shares, respectively
     Additional paid in capital                  100,913            99,515
     Retained earnings                           19,043             13,236
     Accumulated other comprehensive loss        (26       )        (63      )
     Treasury stock at cost - 435,879 and        (2,034    )        (1,594   )
     342,245 shares, respectively
                  Total Shareholders'
                  Equity Attributable to         117,925            111,123
                  Lannett Company, Inc.
     Noncontrolling interest                     166                190       
                  TOTAL SHAREHOLDERS'            118,091            111,313   
                  EQUITY
                                                                  
                  TOTAL LIABILITIES AND      $   168,378         $  158,218   
                  SHAREHOLDERS' EQUITY

Contact:

PondelWilkinson Inc.
Roger Pondel, 310-279-5980
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