Financial

Lannett Announces Fiscal 2021 Fourth-Quarter, Full-Year Financial Results

– Q4 Business and Financial Highlights:

— Net Sales Were $106 Million

— Cash Increased to Over $93 Million at June 30

— ANDA for Generic ADVAIR DISKUS® Submitted, Accepted for Priority Review

— Completed Re-financing Transaction, Debt Maturity Extended to 2026

– Post Quarter End:

— Added Generic Spiriva® Handihaler® to Pipeline, Third Drug/Device Respiratory Asset, Fifth Large, Durable Product Opportunity

PHILADELPHIA, Aug. 25, 2021 /PRNewswire/ — Lannett Company, Inc. (NYSE: LCI) today reported financial results for its fiscal 2021 fourth quarter and full year ended June 30, 2021.

Lannett Logo (PRNewsFoto/Lannett Company, Inc.)

Lannett Logo (PRNewsFoto/Lannett Company, Inc.)

“With the recently signed agreement to be the exclusive U.S. distributor of a generic Spiriva® Handihaler®, we now have disclosed at least five large, durable assets in our pipeline,” said Tim Crew, chief executive officer of Lannett. “Each of these products has the potential to both be a significant contributor to our financial performance and to do so for an extended period of time. Combined, these products have the potential to transform our company. Currently, we believe all five products could be approved, or tentatively approved, by 2025, with the product closest to commercialization, generic ADVAIR DISKUS®, potentially launching next calendar year, followed by generic Flovent Diskus® in 2023, biosimilar Insulin Glargine in 2024 and biosimilar Insulin Aspart in 2025.

“Regarding our financial performance, throughout the fiscal 2021 full year several of our key products faced a highly competitive pricing environment. Despite these pressures, net sales of $479 million were just below our expectations of approximately $480 million, while adjusted gross margin of 26% was at the top end of our expectations. Importantly, our cash position increased to over $93 million at June 30, 2021, up from approximately $81 million at March 31, 2021.

“As earlier noted, in April, we successfully completed a refinancing transaction, which extended the maturity of our debt to 2026, upsized our credit facility and significantly freed up cash flow during the term of the debt, primarily through the elimination of mandatory debt payments until maturity. We thus have more financial flexibility to progress our portfolio and more resources to further invest in our growth initiatives.

“For the upcoming year our goals include: successfully commercializing recently and soon-to-be approved drug product candidates; advancing the development of our large, durable assets; further expanding our existing strategic relationships and forming new ones to add complementary products to our portfolio; and all the while, maintaining prudent expense discipline.”

For the fiscal 2021 fourth quarter on a GAAP basis, net sales were $106.0 million compared with $137.9 million for the fourth quarter of fiscal 2020. Gross profit was $22.7 million, or 21% of net sales, compared with $39.6 million, or 29% of net sales. Income tax expense was $129.2 million, primarily attributable to the impact of the full valuation allowance recorded against the Company’s deferred tax assets, compared to income tax benefit of $10.1 million for the prior year fourth quarter. Net loss was $177.9 million, or $4.50 per share, compared with $9.7 million, or $0.25 per share, for the fourth quarter of fiscal 2020.

For the fiscal 2021 fourth quarter reported on a Non-GAAP basis, net sales were $106.0 million compared with $137.9 million for the fourth quarter of fiscal 2020. Adjusted gross profit was $26.4 million, or 25% of net sales, compared with $48.9 million, or 35% of net sales. Adjusted operating income was $4.9 million compared with $26.7 million. Adjusted interest expense increased to $12.1 million from $11.3 million for the fourth quarter of fiscal 2020. Adjusted net loss was $7.4 million, or $0.19 per share, versus adjusted net income of $13.4 million, or $0.31 per diluted share, for the fiscal 2020 fourth quarter. Adjusted EBITDA for the fiscal 2021 fourth quarter was $12.1 million.

For the fiscal 2021 full year, on a GAAP basis, net sales were $478.8 million compared with $545.7 million for the fiscal 2020 full year. Gross profit was $75.6 million, or 16% of total net sales, compared with $165.2 million, or 30% of total net sales. During fiscal 2021, the company recorded non-cash asset impairment charges of $216.6 million, primarily related to the write down of intangible assets associated with the acquisition of Kremers Urban Pharmaceuticals product rights and the write-down of the value of a product license agreement. Income tax expense was $60.6 million, primarily attributable to the impact of the full valuation allowance recorded against the Company’s deferred tax assets, compared to income tax benefit of $15.3 million for the prior year. Net loss was $363.5 million, or $9.23 per share, compared with $33.4 million, or $0.86 per share, for fiscal 2020.

For the fiscal 2021 full year reported on a Non-GAAP basis, net sales were $478.8 million compared with $545.7 million for the fiscal 2020 full year. Adjusted gross profit was $122.3 million, or 26% of adjusted net sales, compared with $204.0 million, or 37% of adjusted net sales, for the prior year. Adjusted operating income was $43.4 million compared with $107.4 million. Adjusted interest expense declined to $43.7 million from $52.5 million for fiscal 2020. Adjusted net loss was $1.0 million, or $0.03 per share, versus adjusted net income of $45.6 million, or $1.07 per diluted share, for the fiscal 2020 full year.

Guidance for Fiscal 2022

Based on its current outlook, the company provided guidance for fiscal year 2022 as follows:

GAAP

Adjusted*

Net sales

$400 million to $440 million

$400 million to $440 million

Gross margin %

Approximately 19 to 21%

Approximately 23% to 25%

R&D expense

$26 million to $29 million

$26 million to $29 million

SG&A expense

$64 million to $68 million

$58 million to $61 million

Interest and other

Approximately $58 million

Approximately $52 million

Effective tax rate

Approximately 0% to 5%

Approximately 21% to 22%

Adjusted EBITDA

N/A

$40 million to $55 million

Capital expenditures

$12 million to $18 million

$12 million to $18 million

*A reconciliation of Adjusted amounts to most directly comparable GAAP amounts can be found in the attached financial tables.

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 its fiscal 2021 fourth quarter and full year ended June 30, 2021. The conference call will be available to interested parties by dialing 888-771-4371 from the U.S. or Canada, or 847-585-4405 from international locations, passcode 50215666. 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.

Use of Non-GAAP Financial Measures

This news release contains references to Non-GAAP financial measures, including Adjusted EBITDA, which are financial measures that are not prepared in conformity with United States generally accepted accounting principles (U.S. GAAP). Management uses these measures internally for evaluating its operating performance. The Company’s management believes that the presentation of Non-GAAP financial measures provides useful supplementary information regarding operational performance, because it enhances an investor’s overall understanding of the financial results for the Company’s core business. Additionally, it provides a basis for the comparison of the financial results for the Company’s core business between current, past and future periods. The Company also believes that including Adjusted EBITDA is appropriate to provide additional information to investors. Non-GAAP financial measures should be considered only as a supplement to, and not as a substitute for or as a superior measure to, financial measures prepared in accordance with U.S. GAAP.

Detailed reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included with this release.

Non-GAAP financial measures exclude, among others, the effects of (1) amortization of purchased intangibles and other purchase accounting entries, (2) restructuring expenses, (3) asset impairment charges, (4) non-cash interest expense, as well as (5) certain other items considered unusual or non-recurring in nature.

ADVAIR DISKUS® and Flovent® Diskus® are registered trademarks of GlaxoSmithKline. Spiriva® Handihaler® are registered trademarks of Boehringer Ingelheim.

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 – see financial schedule below for net sales by medical indication. 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, successfully commercializing recently introduced products and launching and successfully commercializing additional products in fiscal 2022, the potential material impact of COVID-19 on future financial results, and achieving the financial metrics stated in the company’s guidance for fiscal 2022, 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, including acquired products, and 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.

FINANCIAL SCHEDULES FOLLOW

LANNETT COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

June 30, 2021

June 30, 2020

ASSETS

Current assets:

Cash and cash equivalents

$ 93,286

$ 144,329

Accounts receivable, net

98,834

125,688

Inventories

109,545

142,867

Income taxes receivable

35,050

14,419

Assets held for sale

2,678

2,678

Other current assets

14,170

13,227

Total current assets

353,563

443,208

Property, plant and equipment, net

166,674

179,518

Intangible assets, net

137,835

374,735

Operating lease right-of-use asset

10,559

9,343

Deferred tax assets

117,890

Other assets

15,106

11,861

TOTAL ASSETS

$ 683,737

$ 1,136,555

LIABILITIES

Current liabilities:

Accounts payable

$ 29,585

$ 32,535

Accrued expenses

13,077

14,962

Accrued payroll and payroll-related expenses

10,680

16,304

Rebates payable

19,025

38,175

Royalties payable

13,779

20,863

Restructuring liability

8

27

Current operating lease liabilities

2,045

1,097

Short-term borrowings and current portion of long-term debt

88,189

Other current liabilities

2,270

2,713

Total current liabilities

90,469

214,865

Long-term debt, net

590,683

592,940

Long-term operating lease liabilities

11,047

9,844

Other liabilities

19,009

16,010

TOTAL LIABILITIES

711,208

833,659

STOCKHOLDERS’ EQUITY (DEFICIT)

Common stock ($0.001 par value, 100,000,000 shares authorized; 40,913,148 and 39,963,127 shares issued; 39,576,606 and 38,798,787 shares outstanding at June 30, 2021 and June 30, 2020, respectively)

41

40

Additional paid-in capital

355,239

321,164

Accumulated deficit

(364,766)

(1,291)

Accumulated other comprehensive loss

(548)

(627)

Treasury stock (1,336,542 and 1,164,340 shares at June 30, 2021 and June 30, 2020, respectively)

(17,437)

(16,390)

Total stockholders’ equity (deficit)

(27,471)

302,896

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

$ 683,737

$ 1,136,555

LANNETT COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands, except share and per share data)

Three months ended

Twelve months ended

June 30,

June 30,

2021

2020

2021

2020

Net sales

$ 106,009

$ 137,920

$ 478,778

$ 545,744

Cost of sales

79,597

89,809

378,335

348,508

Amortization of intangibles

3,753

8,519

24,850

32,016

Gross profit

22,659

39,592

75,593

165,220

Operating expenses:

Research and development expenses

6,017

6,691

24,173

29,978

Selling, general and administrative expenses

21,576

18,591

68,078

79,467

Restructuring expenses

4,043

1,771

Asset impairment charges

18,550

18,841

216,550

34,448

Total operating expenses

46,143

44,123

312,844

145,664

Operating income (loss)

(23,484)

(4,531)

(237,251)

19,556

Other income (loss):

Loss on extinguishment of debt

(10,341)

(10,341)

(2,145)

Investment income

68

94

236

1,646

Interest expense

(13,217)

(14,682)

(53,830)

(66,845)

Other

(1,687)

(659)

(1,664)

(840)

Total other loss

(25,177)

(15,247)

(65,599)

(68,184)

Loss before income tax

(48,661)

(19,778)

(302,850)

(48,628)

Income tax expense (benefit)

129,225

(10,077)

60,625

(15,262)

Net loss

$ (177,886)

$ (9,701)

$ (363,475)

$ (33,366)

Loss per common share (1):

Basic

$ (4.50)

$ (0.25)

$ (9.23)

$ (0.86)

Diluted

$ (4.50)

$ (0.25)

$ (9.23)

$ (0.86)

Weighted average common shares outstanding (1):

Basic

39,544,909

38,752,080

39,391,589

38,592,618

Diluted

39,544,909

38,752,080

39,391,589

38,592,618

(1) Effective with the Warrants issued on April 22, 2021, the basic and diluted earnings per share was calculated based on the two-class method.

LANNETT COMPANY, INC.

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)

(In thousands, except percentages, share and per share data)

Twelve months ended June 30, 2021

Net sales

Cost of sales

Amortization of
intangibles

Gross Profit

Gross
Margin
%

R&D
expenses

SG&A
expenses

Restructuring
expenses

Asset
impairment
charges

Operating
income
(loss)

Other loss

Loss before
income tax

Income tax
expense

Net loss

Diluted loss
per share
(n)

GAAP Reported

$ 478,778

$ 378,335

$ 24,850

$ 75,593

16%

$ 24,173

$ 68,078

$ 4,043

$ 216,550

$ (237,251)

$ (65,599)

$ (302,850)

$ 60,625

$ (363,475)

$ (9.23)

Adjustments:

Amortization of intangibles (a)

(24,850)

24,850

24,850

24,850

24,850

Cody API business (b)

(270)

270

(5)

(486)

761

761

761

Depreciation on capitalized software costs (c)

(4,204)

4,204

4,204

4,204

Branded prescription drug fee (d)

(831)

831

831

831

Restructuring expenses (e)

(4,043)

4,043

4,043

4,043

Asset impairment charges (f)

(216,550)

216,550

216,550

216,550

Write-downs for excess and obsolete inventory (g)

(16,623)

16,623

16,623

16,623

16,623

Distribution agreement renewal costs (h)

(4,966)

4,966

4,966

4,966

4,966

Loss on extinguishment of debt (i)

10,341

10,341

10,341

Debt refinancing costs (j)

(2,262)

2,262

2,262

2,262

Non-cash interest (k)

10,146

10,146

10,146

Other (l)

(5,610)

5,610

1,500

7,110

7,110

Tax adjustments (m)

(59,763)

59,763

Non-GAAP Adjusted

$ 478,778

$ 356,476

$ –

$ 122,302

26%

$ 24,168

$ 54,685

$ –

$ –

$ 43,449

$ (43,612)

$ (163)

$ 862

$ (1,025)

$ (0.03)

(a)

To exclude amortization of purchased intangible assets primarily related to the acquisition of KUPI

(b)

To exclude the operating results of the ceased Cody API business

(c)

To exclude depreciation on previously capitalized software integration costs associated with the KUPI acquisition

(d)

To exclude the federally mandated branded prescription drug fee related to Levothyroxine sold under the JSP agreement, which has not been sold since fiscal year ended June 30, 2019

(e)

To exclude expenses associated with the 2020 Restructuring Plan

(f)

To exclude asset impairment charges primarily related to the KUPI product rights intangible assets and the intangible asset for a distribution and supply agreement with Cediprof, Inc. for the Levothyroxine tablets product

(g)

To exclude write-downs for excess and obsolete inventory related to the discontinuance of certain product lines

(h)

To exclude the consideration recorded to renew the Company’s distribution agreement with Recro Gainesville LLC

(i)

To exclude the loss on extinguishment of debt related to the retirement of the Term Loan B in April 2021

(j)

To exclude legal and financial advisory costs related to the debt refinancing in April 2021

(k)

To exclude non-cash interest expense associated with debt issuance costs

(l)

To primarily exclude the reimbursement of legal costs associated with a distribution agreement and costs associated with a legal settlement

(m)

To exclude the impact of the full valuation allowance booked against the Company’s deferred tax assets as well as the tax effect of the pre-tax adjustments included above at applicable tax rates

(n)

The weighted average share number for the twelve months ended June 30, 2021 is 39,391,589 for GAAP and the non-GAAP loss per share calculations

LANNETT COMPANY, INC.

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)

(In thousands, except percentages, share and per share data)

Twelve months ended June 30, 2020

Net sales

Cost of sales

Amortization of
intangibles

Gross Profit

Gross
Margin
%

R&D
expenses

SG&A
expenses

Restructuring
expenses

Asset
impairment
charges

Operating
income

Other loss

Income
(loss) before
income tax

Income tax
expense
(benefit)

Net income
(loss)

Diluted
earnings
(loss) per
share (l)

GAAP Reported

$ 545,744

$ 348,508

$ 32,016

$ 165,220

30%

$ 29,978

$ 79,467

$ 1,771

$ 34,448

$ 19,556

$ (68,184)

$ (48,628)

$ (15,262)

$ (33,366)

$ (0.86)

Adjustments:

Amortization of intangibles (a)

(32,016)

32,016

32,016

32,016

32,016

Cody API business (b)

(2,752)

2,752

(617)

(528)

3,897

3,897

3,897

Depreciation on capitalized software costs (c)

(4,233)

4,233

4,233

4,233

Decommissioning of Philadelphia sites (d)

(1,903)

1,903

1,903

1,903

1,903

Branded prescription drug fee (e)

(2,957)

2,957

2,957

2,957

Restructuring expenses (f)

(1,771)

1,771

1,771

1,771

Asset impairment charges (g)

(34,448)

34,448

34,448

34,448

Non-cash interest (h)

14,336

14,336

14,336

Loss on extinguishment of debt (i)

2,145

2,145

2,145

Other (j)

(2,094)

2,094

(94)

(4,395)

6,583

21

6,604

6,604

Tax adjustments (k)

25,378

(25,378)

Non-GAAP Adjusted

$ 545,744

$ 341,759

$ –

$ 203,985

37%

$ 29,267

$ 67,354

$ –

$ –

$ 107,364

$ (51,682)

$ 55,682

$ 10,116

$ 45,566

$ 1.07

(a)

To exclude amortization of purchased intangible assets primarily related to the acquisitions of KUPI and Silarx Pharmaceuticals, Inc.

(b)

To exclude the operating results of the ceased Cody API business

(c)

To exclude depreciation on previously capitalized software integration costs associated with the KUPI acquisition

(d)

To exclude the costs associated with the decommissioning and shutdown of the Philadelphia manufacturing and distribution sites

(e)

To exclude the federally mandated branded prescription drug fee related to Levothyroxine sold under the JSP agreement, which has not been sold since fiscal year ended June 30, 2019

(f)

To exclude expenses associated with the Cody API Restructuring Plan

(g)

To exclude asset impairment charges primarily associated with an agreement to distribute Methylphenidate AB and related to the abandonment of several pipeline products within the KUPI IPR&D and Silarx IPR&D asset portfolios

(h)

To exclude non-cash interest expense associated with debt issuance costs

(i)

To exclude the loss on extinguishment of debt primarily related to the partial repayment of the outstanding Term Loan A balance

(j)

To primarily exclude accrued separation costs related to the Company’s former Chief Financial Officer and the Company’s cost reduction plan, as well as COVID-19 special recognition payments, legal settlements and costs previously incurred as part of the Company’s refinancing efforts, partially offset by gains on sales of assets previously held for sale

(k)

To exclude the tax effect of the pre-tax adjustments included above at applicable tax rates

(l)

The weighted average share number for the twelve months ended June 30, 2020 is 38,592,618 for GAAP and 44,677,463 for the non-GAAP earnings (loss) per share calculations

LANNETT COMPANY, INC.

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)

(In thousands, except percentages, share and per share data)

Three months ended June 30, 2021

Net sales

Cost of sales

Amortization
of intangibles

Gross Profit

Gross
Margin
%

R&D
expenses

SG&A
expenses

Asset
impairment
charges

Operating
income
(loss)

Other loss

Loss before
income tax

Income tax
expense

Net loss

Diluted loss
per share (k)

GAAP Reported

$ 106,009

$ 79,597

$ 3,753

$ 22,659

21%

$ 6,017

$ 21,576

$ 18,550

$ (23,484)

$ (25,177)

$ (48,661)

$ 129,225

$ (177,886)

$ (4.50)

Adjustments:

Amortization of intangibles (a)

(3,753)

3,753

3,753

3,753

3,753

Cody API business (b)

(21)

21

(13)

34

34

34

Depreciation on capitalized software costs (c)

(1,051)

1,051

1,051

1,051

Branded prescription drug fee (d)

(831)

831

831

831

Asset impairment charges (e)

(18,550)

18,550

18,550

18,550

Loss on extinguishment of debt (f)

10,341

10,341

10,341

Debt refinancing costs (g)

(2,262)

2,262

2,262

2,262

Non-cash interest (h)

1,073

1,073

1,073

Other (i)

(1,915)

1,915

1,500

3,415

3,415

Tax adjustments (j)

(129,139)

129,139

Non-GAAP Adjusted

$ 106,009

$ 79,576

$ –

$ 26,433

25%

$ 6,017

$ 15,504

$ –

$ 4,912

$ (12,263)

$ (7,351)

$ 86

$ (7,437)

$ (0.19)

(a)

To exclude amortization of purchased intangible assets primarily related to the acquisition of KUPI

(b)

To exclude the operating results of the ceased Cody API business

(c)

To exclude depreciation on previously capitalized software integration costs associated with the KUPI acquisition

(d)

To exclude the federally mandated branded prescription drug fee related to Levothyroxine sold under the JSP agreement, which has not been sold since fiscal year ended June 30, 2019

(e)

To exclude asset impairment charges primarily related to its intangible asset for a distribution and supply agreement with Cediprof, Inc. for the Levothyroxine tablets product

(f)

To exclude the loss on extinguishment of debt related to the retirement of the Term Loan B in April 2021

(g)

To exclude legal and financial advisory costs related to the debt refinancing in April 2021

(h)

To exclude non-cash interest expense associated with debt issuance costs

(i)

To primarily exclude the reimbursement of legal costs associated with a distribution agreement and costs associated with a legal settlement

(j)

To exclude the impact of the full valuation allowance booked against the Company’s deferred tax assets as well as the tax effect of the pre-tax adjustments included above at applicable tax rates

(k)

The weighted average share number for the three months ended June 30, 2021 is 39,544,909 for GAAP and non-GAAP loss per share calculations.

LANNETT COMPANY, INC.

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)

(In thousands, except percentages, share and per share data)

Three months ended June 30, 2020

Net sales

Cost of sales

Amortization
of intangibles

Gross Profit

Gross
Margin
%

R&D
expenses

SG&A
expenses

Asset
impairment
charges

Operating
income
(loss)

Other loss

Income
(loss) before
income tax

Income tax
expense
(benefit)

Net income
(loss)

Diluted
earnings
(loss) per
share (i)

GAAP Reported

$ 137,920

$ 89,809

$ 8,519

$ 39,592

29%

$ 6,691

$ 18,591

$ 18,841

$ (4,531)

$ (15,247)

$ (19,778)

$ (10,077)

$ (9,701)

$ (0.25)

Adjustments:

Amortization of intangibles (a)

(8,519)

8,519

8,519

8,519

8,519

Cody API business (b)

158

(158)

(66)

(95)

3

3

3

Depreciation on capitalized software costs (c)

(1,058)

1,058

1,058

1,058

Decommissioning of Philadelphia sites (d)

(419)

419

419

419

419

Asset impairment charges (e)

(18,841)

18,841

18,841

18,841

Non-cash interest (f)

3,335

3,335

3,335

Other (g)

(508)

508

(64)

(1,817)

2,389

2,389

2,389

Tax adjustments (h)

11,436

(11,436)

Non-GAAP Adjusted

$ 137,920

$ 89,040

$ –

$ 48,880

35%

$ 6,561

$ 15,621

$ –

$ 26,698

$ (11,912)

$ 14,786

$ 1,359

$ 13,427

$ 0.31

(a)

To exclude amortization of purchased intangible assets primarily related to the acquisitions of KUPI and Silarx Pharmaceuticals, Inc.

(b)

To exclude the operating results of the ceased Cody API business

(c)

To exclude depreciation on previously capitalized software integration costs associated with the KUPI acquisition

(d)

To exclude the costs associated with the decommissioning and shutdown of the Philadelphia manufacturing and distribution sites

(e)

To exclude asset impairment charges primarily related to the abandonment of several pipeline products within the KUPI IPR&D and Silarx IPR&D asset portfolios

(f)

To exclude non-cash interest expense associated with debt issuance costs

(g)

To exclude costs primarily related to separation costs related to the Company’s cost reduction plan, COVID-19 special recognition payments, as well as costs previously incurred as part of the Company’s refinancing efforts

(h)

To exclude the tax effect of the pre-tax adjustments included above at applicable tax rates

(i)

The weighted average share number for the three months ended June 30, 2020 is 38,752,080 for GAAP and 46,111,366 for non-GAAP earnings (loss) per share calculations

LANNETT COMPANY, INC.

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA (UNAUDITED)

($ in thousands)

Three months ended

June 30, 2021

Net loss

$ (177,886)

Interest expense

13,217

Depreciation and amortization

9,479

Income tax expense

129,225

EBITDA

(25,965)

Share-based compensation

1,841

Inventory write-down

715

Asset impairment charges (a)

18,550

Investment income

(68)

Loss on extinguishment of debt (b)

10,341

Other non-operating loss

187

Debt refinancing costs (c)

2,262

Legal settlement (d)

1,500

Other (e)

2,781

Adjusted EBITDA (Non-GAAP)

$ 12,144

(a)

To exclude asset impairment charges primarily related to its intangible asset for a distribution and supply agreement with Cediprof, Inc. for the Levothyroxine tablets product

(b)

To exclude the loss on extinguishment of debt related to the retirement of the Term Loan B in April 2021

(c)

To exclude legal and financial advisory costs related to the debt refinancing in April 2021

(d)

To exclude costs associated with a legal settlement

(e)

To primarily exclude the reimbursement of legal costs associated with a distribution agreement as well as the federally mandated branded prescription drug fee related to Levothyroxine sold under the JSP agreement, which has not been sold since fiscal year ended June 30, 2019

LANNETT COMPANY, INC.

RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)

($ in millions)

Fiscal Year 2022 Guidance

Non-GAAP

GAAP

Adjustments

Adjusted

Net sales

$400 – $440

$400 – $440

Gross margin percentage

approx. 19% to 21%

4%

(a)

approx. 23% to 25%

R&D expense

$26 – $29

$26 – $29

SG&A expense

$64 – $68

($6 – $7)

(b)

$58 – $61

Interest and other

approx. $58

($6)

(c)

approx. $52

Effective tax rate

approx. 0% to 5%

approx. 21% to 22%

Adjusted EBITDA

N/A

N/A

$40 – $55

Capital expenditures

$12 – $18

$12 – $18

(a) The adjustment primarily reflects amortization of purchased intangible assets related to the acquisition of Kremers Urban Pharmaceuticals, Inc. (“KUPI”)

(b) The adjustment primarily excludes depreciation on previously capitalized software integration costs associated with the KUPI acquisition and the reimbursement of legal costs associated with a distribution agreement

(c) The adjustment primarily reflects non-cash interest expense associated with debt issuance costs

LANNETT COMPANY, INC.

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA (UNAUDITED)

($ in millions)

Fiscal Year 2022 Guidance

Low

High

Net loss

$ (72.0)

$ (60.0)

Interest expense

58.0

58.0

Depreciation and amortization

38.0

41.0

Income taxes

(3.0)

EBITDA

24.0

36.0

Share-based compensation

9.0

9.0

Inventory write-down

7.0

8.0

Other (a)

2.0

Adjusted EBITDA (Non-GAAP)

$ 40.0

$ 55.0

(a) Relates to the reimbursement of legal costs associated with a distribution agreement

LANNETT COMPANY, INC.

NET SALES BY MEDICAL INDICATION

Three months ended

Twelve months ended

($ in thousands)

June 30,

June 30,

Medical Indication

2021

2020

2021

2020

Analgesic

$ 4,156

$ 1,874

$ 14,684

$ 8,680

Anti-Psychosis

5,697

26,346

43,720

104,934

Cardiovascular

13,364

21,251

65,987

88,576

Central Nervous System

23,467

20,102

95,115

77,256

Endocrinology

7,519

27,070

Gastrointestinal

15,048

17,457

67,540

73,477

Infectious Disease

12,175

21,515

67,761

73,237

Migraine

4,612

11,359

25,554

44,266

Respiratory/Allergy/Cough/Cold

3,017

2,829

9,258

11,576

Urinary

1,401

1,408

5,786

4,225

Other

10,651

7,166

35,312

35,013

Contract Manufacturing revenue

4,902

6,613

20,991

24,504

Net Sales

$ 106,009

$ 137,920

$ 478,778

$ 545,744

Contact:

Robert Jaffe

Robert Jaffe Co., LLC

(424) 288-4098

Cision

Cision

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SOURCE Lannett Company, Inc.