On August 26, 2020 Lannett Company, Inc. (NYSE: LCI) reported financial results for its fiscal 2020 fourth quarter and full year ended June 30, 2020 (Press release, Lannett, AUG 26, 2020, View Source [SID1234564070]).
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"For both the fiscal 2020 full year and fourth quarter, our net sales and profitability exceeded expectations, driven in large part by a strong performance of our base portfolio and 18 and six new product launches during the year and quarter, respectively," said Tim Crew, chief executive officer of Lannett. "Moreover, during the fourth quarter, we increased our cash position by more than $40 million to approximately $144 million at year end, due to initiatives implemented to improve working capital. We intend to use a portion of the cash to pay down, in full, our Term A Loans at their maturity in November of this year.
"Thus far in fiscal 2021, we have implemented and nearly completed a restructuring and cost reduction plan that we estimate will lower our expenses by approximately $15 million, annually, and launched four new products, including Levothyroxine Tablets. Over the course of the coming year, we intend to continue to launch a number of new products and expand our pipeline through in-house development efforts, as well as in-licensing agreements. We are especially excited and optimistic about recent clinical progress related to a number of drug candidates in our portfolio that have very large addressable markets; we believe these products also have durable value and the potential to be catalysts for significant growth.
"We have provided guidance for the upcoming year, which includes the expected contribution from a number of new product launches in the coming year and a full year of contribution from the 18 products we launched in fiscal 2020. Our outlook also reflects recent and anticipated competitive pressure on certain key products, as well as lower operating expenses as a result of our recently announced restructuring and cost reduction plan."
For the fiscal 2020 fourth quarter on a GAAP basis, net sales were $137.9 million compared with $133.8 million for the fourth quarter of fiscal 2019. Gross profit was $39.6 million, or 29% of net sales, compared with $49.3 million, or 37% of net sales. The company recorded asset impairment charges of $18.8 million compared with $5.9 million in the prior-year fourth quarter. Net loss was $9.7 million, or $0.25 per share, compared with $7.6 million, or $0.20 per share, for the fourth quarter of fiscal 2019.
For the fiscal 2020 fourth quarter reported on a Non-GAAP basis, net sales were $137.9 million compared with $133.8 million for the fourth quarter of fiscal 2019. Adjusted gross profit was $48.9 million, or 35% of net sales, compared with $59.8 million, or 45% of net sales, for the prior-year fourth quarter. Adjusted interest expense decreased to $11.3 million compared with $16.0 million for the fourth quarter of fiscal 2019. Adjusted net income was $13.4 million, or $0.31 per diluted share, compared with $14.7 million, or $0.37 per diluted share, for the fiscal 2019 fourth quarter. Adjusted EBITDA for the fiscal 2020 fourth quarter was $35.2 million.
For the fiscal 2020 full year, on a GAAP basis, net sales were $545.7 million compared with $655.4 million for the fiscal 2019 full year. Gross profit was $165.2 million, or 30% of total net sales, compared with $243.6 million, or 37% of total net sales. The company recorded asset impairment charges of $34.4 million compared with $375.4 million for fiscal 2019. Net loss was $33.4 million, or $0.86 per share, compared with $272.1 million, or $7.20 per diluted share, for fiscal 2019.
For the fiscal 2020 full year reported on a Non-GAAP basis, net sales were $545.7 million compared with $655.4 million for the fiscal 2019 full year. Adjusted gross profit was $204.0 million, or 37% of adjusted net sales, compared with $291.4 million, or 44% of adjusted net sales, for the prior year. Adjusted interest expense significantly declined to $52.5 million from $67.0 million for fiscal 2019. Adjusted net income was $45.6 million, or $1.07 per diluted share, compared with $91.8 million, or $2.35 per diluted share, for the fiscal 2019 full year.
Guidance for Fiscal 2021
Based on its current outlook, the company provided guidance for fiscal year 2021, as follows:
GAAP
Adjusted**
Net sales
$520 million to $545 million
$520 million to $545 million
Gross margin %
Approximately 23% to 25%
Approximately 29% to 31%
R&D expense
$29 million to $32 million
$29 million to $32 million
SG&A expense
$59 million to $62 million
$55 million to $58 million
Restructuring expense
$4 million to $5 million
$ —
Interest and other
$53 million to $54 million
$41 million to $42 million
Effective tax rate
Approximately 34% to 35%
Approximately 21% to 22%
Adjusted EBITDA*
N/A
$100 million to $110 million
Capital expenditures
$15 million to $20 million
$15 million to $20 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 2020 fourth quarter ended June 30, 2020. The conference call will be available to interested parties by dialing 800-447-0521 from the U.S. or Canada, or 847-413-3238 from international locations, passcode 49903262. 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, as defined in the company’s existing Credit Agreement, is appropriate to provide additional information to investors to demonstrate the company’s ability to comply with financial debt covenants. 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) non-cash interest expense, as well as (4) certain other items considered unusual or non-recurring in nature.
*Adjusted EBITDA excludes the same adjustments discussed above, as well as additional adjustments permitted under the company’s existing Credit Agreement.