Lannett Reports Record Net Sales for Fiscal 2014 First Quarter

  Lannett Reports Record Net Sales for Fiscal 2014 First Quarter

                --Adjusted EPS of $0.22 Exceeds Expectations;
                Company Revises Fiscal 2014 Guidance Upward--

Business Wire

PHILADELPHIA -- November 7, 2013

Lannett Company, Inc. (NYSE MKT: LCI) today reported financial results for its
fiscal 2014 first quarter ended September 30, 2013.

For the fiscal 2014 first quarter, net sales rose 30% to $45.8 million from
$35.3 million for last year’s first quarter. Cost of sales for the fiscal 2014
first quarter 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 $1.3
million, or 3% of net sales. Excluding the JSP contract renewal charge, gross
profit was $21.4 million, or 47% of net sales, compared with $13.6 million, or
39% of net sales, for the fiscal 2013 first quarter. Research and development
(R&D) expenses increased to $4.7 million, compared with $3.8 million for the
fiscal 2013 first quarter. Selling, general and administrative (SG&A) expenses
increased to $7.2 million, compared with $6.2 million in the same quarter of
the prior year. Operating loss for the fiscal 2014 first quarter was $10.6
million. Excluding the JSP contract renewal charge, operating income more than
doubled to $9.5 million from $3.7 million in the first quarter of fiscal 2013.

For the fiscal 2014 first quarter, net loss attributable to Lannett Company
was $6.0 million, or $0.20 per share. Adjusted net income, which excludes the
impact of the non-recurring JSP contract renewal charge equal to $12.7 million
after-tax, was $6.7 million, or $0.22 per diluted share, compared to fiscal
2013 first quarter net income attributable to Lannett Company of $2.9 million,
or $0.10 per diluted share. The fiscal 2013 first quarter included a favorable
pre-tax litigation settlement of $1.3 million, equal to $0.02 per diluted
share.

“We continued our positive momentum in the fiscal 2014 first quarter with
record net sales,” said Arthur Bedrosian, president and chief executive
officer of Lannett. “In addition, excluding the impact of the non-recurring
JSP contract renewal charge, our gross profit and bottom-line were the highest
in the company’s history. Our excellent financial performance was driven by
strong sales of existing products, price increases and favorable product mix.”

Bedrosian added, “The recently completed contract extension with Jerome
Stevens will allow us to continue to market several important medications that
have been key drivers of our positive financial performance. Moreover, last
month we successfully closed on a stock offering in which we received net
proceeds of approximately $71.5 million. We intend to use the net proceeds
from this offering for potential acquisitions, strategic partnerships and
general corporate purposes.”

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 $245 million to $255 million, up approximately
    35% from previous guidance of $181 million to $186 million;
  *Gross margin as a percentage of net sales of approximately 57% to 59%, up
    15 percentage points from 43% to 44%;
  *R&D expense in the range of $27 million to $29 million, up from $24
    million to $26 million;
  *SG&A expense ranging from $35 million to $37 million, up from $28 million
    to $30 million;
  *The full year effective tax rate to be in the range of 36% to 38%, up from
    34% to 36%;
  *Weighted average common shares outstanding for fiscal 2014 to be
    approximately 35.4 million, the increase reflecting the impact of the
    recently completed public offering of 4.3 million shares; and,
  *Capital expenditures in fiscal 2014 are expected to be in the range of $28
    million to $32 million, unchanged from previous guidance, which includes
    the purchase and partial fit-out of a new facility.

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 first quarter ended September
30, 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 35995945. 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
                                               September 30,
                                               2013             2012
                                                                
Net sales                                      $ 45,829         $ 35,294
Cost of sales                                    24,423           21,668
JSP contract renewal cost                       20,100         -          
Gross profit                                    1,306          13,626     
Operating expenses:
Research and development                         4,745            3,764
Selling, general, and administrative            7,179          6,171      
Total operating expenses                        11,924         9,935      
Operating income (loss)                         (10,618    )    3,691      
Other income (expense):
Foreign currency gain                            -                3
Gain (loss) on sale of assets                    (62        )     70
Gain on investment securities                    463              234
Litigation settlement                            -                1,250
Interest and dividend income                     46               35
Interest expense                                (58        )    (63        )
Total other income                              389            1,529      
Net income (loss) before income tax              (10,229    )     5,220
Income tax expense (benefit)                    (4,242     )    2,277      
Net income (loss)                                (5,987     )     2,943
Less: Net income attributable to                8              17         
noncontrolling interest
Net income (loss) attributable to Lannett      $ (5,995     )   $ 2,926      
Company, Inc.
                                                                
Earnings (loss) per common share
attributable to Lannett Company, Inc.
Basic                                          $ (0.20      )   $ 0.10
Diluted                                        $ (0.20      )   $ 0.10
                                                                
Weighted average common shares outstanding:
Basic                                            29,586,237       28,278,514
Diluted                                          29,586,237       28,469,224

                                                           
LANNETT COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
                                            (Unaudited)
                                            September 30,        June 30, 2013
                                            2013
                                                                 
ASSETS
Current assets:
Cash and cash equivalents                   $  35,727            $  42,689
Investment securities                          10,072               8,461
Accounts receivable, net                       29,749               26,413
Inventories, net                               34,524               32,531
Income taxes receivable                        3,167                -
Deferred tax assets                            6,346                4,874
Other current assets                          2,823              1,161    
Total current assets                           122,408              116,129
Property, plant and equipment, net             40,954               40,141
Intangible assets, net                         1,881                2,547
Deferred tax assets                            9,561                8,005
Other assets                                  315                930      
TOTAL ASSETS                                $  175,119          $  167,752  
                                                                 
                                                                 
LIABILITIES
Current liabilities:
Accounts payable                            $  16,636            $  22,668
Accrued expenses                               3,936                2,697
Accrued payroll and payroll related            3,054                6,910
Income taxes payable                           -                    154
Current portion of long-term debt             673                670      
Total current liabilities                      24,299               33,099
Long-term debt, less current portion          5,714              5,844    
TOTAL LIABILITIES                             30,013             38,943   
Commitment and Contingencies
                                                                 
STOCKHOLDERS' EQUITY


Common stock ($0.001 par value,
50,000,000 shares authorized; 30,958,403
and 29,284,592 share issued; 30,522,490        31                   29
and 28,848,679 shares outstanding at
September 30, 2013 and June 30, 2013,
respectively)
Additional paid-in capital                     126,358              104,075
Retained earnings                              20,558               26,553
Accumulated other comprehensive loss           (48      )           (47      )
Treasury stock (435,913 shares at             (2,034   )          (2,034   )
September 30, 2013 and June 30, 2013)
Total Lannett Company, Inc. stockholders'      144,865              128,576
equity
Noncontrolling interest                       241                233      
Total stockholders' equity                    145,106            128,809  
TOTAL LIABILITIES AND STOCKHOLDERS'         $  175,119          $  167,752  
EQUITY

Contact:

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