Lannett Company Reports Fiscal 2005 Third Quarter Financial Results.PHILADELPHIA Philadelphia, ancient cities Philadelphia, name of several ancient cities. One was in Lydia, W Asia Minor (now W Turkey). At the foot of Mt. Tmolus and near the location of modern Alaşehir, it was founded in the 2d cent. B.C. -- Lannett Company, Inc. (AMEX AMEX See: American Stock Exchange :LCI LCI Livable Centers Initiative LCI Life Cycle Inventory LCI Landing Craft, Infantry LCI La Chaine Info (French cable news channel) LCI Lean Construction Institute LCI Lions Club International ) today reported fiscal 2005 financial results for the third quarter and nine months ended March 31, 2005. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the third quarter of fiscal 2005 were $7.6 million, compared with $16.0 million for the third quarter of fiscal 2004. Net loss for the third quarter of fiscal 2005 was $29.2 million, or $1.21 per basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, including a non-cash impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. loss on the Jerome Stevens Pharmaceuticals, Inc. (JSP (JavaServer Page) An extension to the Java servlet technology from Sun that allows HTML to be combined with Java on the same page. The Java provides the processing, and the HTML provides the layout on the Web page. ) product rights intangible asset Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. of $46.1 million, compared with net income of $3.2 million, or $0.16 per basic and diluted share, for the third quarter of fiscal 2004. The company said it believes that certain events occurred that will make it unlikely that the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of the JSP product rights intangible asset could be realized. For the quarter ended March 31, 2005, the company performed an impairment test and concluded that the intangible asset was impaired. As a result, Lannett recorded a non-cash impairment loss of $46.1 million to write down the asset to its fair value of $16.1 million as of March 31, 2005. Management believes that several factors contributed to the impairment of this asset. In December 2004, the Levothyroxine Sodium le·vo·thy·rox·ine sodium n. An isomer of thyroxine in a salt form, used to treat thyroxine deficiency. levothyroxine sodium (lē´vōthīrak´sēn), tablet See digitizer tablet and tablet computer. TABLET - A query language. ["Human Factor Comparison of a Procedural and a Non-procedural Query Language", C. Welty et al, ACM Trans Database Sys 6(4):626-649 (Dec 1981)]. product received the AB rating to Synthroid Syn·throid A trademark for the drug levothyroxine sodium. levothyroxine sodium (L-thyroxine, T4) Eltroxin (CA) (UK), Evotrox (UK), Levothroid, Levoxyl, PMS-Levothyroxine Sodium (CA), Synthroid, Unithroid (R). The expected sales increase as a result of the AB rating did not occur in the third quarter of 2005. The delay in receiving the AB rating to Synthroid(R) caused the company to be competitively disadvantaged This article or section may contain original research or unverified claims. Please help Wikipedia by adding references. See the for details. This article has been tagged since September 2007. with its Levothyroxine Sodium tablet product and to lose market share to competitors whose products had already received AB ratings to both major brand thyroid thyroid /thy·roid/ (thi´roid) 1. the thyroid gland; see under gland. 2. pertaining to the thyroid gland. 3. scutiform. 4. deficiency drugs. Additionally, the generic market for thyroid deficiency drugs turned out to be smaller than anticipated, as a result of a lower brand-to-generic substitution Substitution Arsinoë put her own son in place of Orestes; her son was killed and Orestes was saved. [Gk. Myth.: Zimmerman, 32] Barabbas robber freed in Christ’s stead. [N.T.: Matthew 27:15–18; Swed. Lit. rate. Increased competition in the generic drug generic drug, a drug sold or prescribed under the nonproprietary name of its active ingredients or under a generally descriptive name rather than under a brand or trade name. market, both from existing competitors and new entrants, resulted in significant pricing pressure on other products supplied by JSP. The combination of these factors resulted in the impairment of the JSP product rights asset. "While we are disappointed with the unfortunate sales results on the JSP products due to the adverse events and market conditions, we continue to develop and invest in the expansion of our product line," said Arthur Bedrosian, president of Lannett. "We have recently received FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. approval for two products which we expect to launch in the coming weeks. Lannett has nine other product applications currently pending at the FDA, and we continue to develop and in-license new products where we see opportunities. Currently, Lannett's R&D effort includes 23 potential candidates for ANDAs, plus outsourced contracts for the development of 22 additional products." For the third quarter of fiscal 2005, gross profit was $3.3 million, or 44% of net sales, compared with $9.1 million, or 57% of net sales, in the third quarter of fiscal 2004. Research and development expenses decreased to $1.2 million from $1.4 million in the same period in 2004. Selling, general and administrative (SG&A) expenses were $2.9 million, compared with $2.3 million in the third quarter of fiscal 2004, largely due to Sarbanes-Oxley costs. Amortization expense for the three months ended March 31, 2005 was $1.7 million, as compared with zero for the prior year period. For the nine months ended March 31, 2005, net sales were $35.5 million, compared with $45.8 million for the same period of 2004. Including the non-cash impairment loss of $46.1 million, the company recorded a net loss for the nine-month period of $27.1 million, or $1.12 per basic and diluted share, compared with net income of $10.5 million, or $0.52 per basic and diluted share, for the first nine months of fiscal 2004. For the fiscal 2005 year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. period, gross profit was $16.6 million, or 47% of net sales, compared with $27.4 million, or 60% of net sales, for the corresponding period. Research and development expenses were $3.5 million for the first nine months of fiscal 2005, relatively unchanged from the same period in 2004. SG&A expenses were $6.8 million, compared with $6.2 million for the fiscal 2004 nine month period, largely due to Sarbanes-Oxley costs. Amortization expense for the nine months ended March 31, 2005 was $5.1 million as compared with zero for the prior year period. On January 27, 2005, the company's board of directors announced the authorization The right or permission to use a system resource; the process of granting access. See access control. of a stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. program. The company repurchased approximately $395,000 of Lannett shares as part of this program, which authorizes management to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. up to $5 million of the company's outstanding common stock from time to time at management's discretion. About Lannett Company: Lannett Company, founded in 1942, develops, manufactures, packages, markets and distributes generic pharmaceutical products for a wide range of indications. For more information, visit Lannett Company's website at www.lannett.com. This news release contains certain statements of a forward-looking nature relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc future events or future business performance. Any such statements, 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 Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. , product development efforts or performance, and other risk factors discussed in the company's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and other documents filed with the Securities and Exchange Commission from time to time. These forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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)
For the Three Months Ended For the Nine Months Ended
March 31, March 31, March 31, March 31,
2005 2004 2005 2004
------------- ------------ ------------- ------------
Net sales $7,603,189 $16,000,251 $35,533,206 $45,795,638
Cost of sales 4,266,839 6,947,195 18,973,152 18,405,293
------------- ------------ ------------- ------------
Gross profit 3,336,350 9,053,056 16,560,054 27,390,345
Research and
development
expenses 1,172,853 1,361,681 3,521,507 3,500,759
Selling, general
and administrative
expenses 2,930,801 2,276,780 6,817,487 6,179,980
Amortization
expense 1,690,083 - 5,070,251 -
Impairment loss
on intangible
asset 46,093,236 - 46,093,236 -
------------- ------------ ------------- ------------
Operating (loss)
income (48,550,623) 5,414,595 (44,942,427) 17,709,606
------------- ------------ ------------- ------------
Other income
(expense) (46,660) 1,632 (147,161) 3,920
------------- ------------ ------------- ------------
(Loss) Income
before taxes (48,597,283) 5,416,227 (45,089,588) 17,713,526
Income tax
(benefit)
expense (19,438,913) 2,217,829 (18,035,836) 7,258,196
------------- ------------ ------------- ------------
Net (loss)
income $(29,158,370) $3,198,398 $(27,053,752) $10,455,330
============= ============ ============= ============
(Loss) Earnings
per share:
Basic $(1.21) $0.16 $(1.12) $0.52
============= ============ ============= ============
Diluted $(1.21) $0.16 $(1.12) $0.52
============= ============ ============= ============
Shares used to
calculate (loss)
earnings per
share:
Basic 24,103,256 20,058,753 24,092,958 20,049,647
============= ============ ============= ============
Diluted 24,103,256 20,265,833 24,092,958 20,263,146
============= ============ ============= ============
LANNETT COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31, June 30,
2005 2004
------------- -------------
(Unaudited)
Assets:
Current Assets:
Cash $10,786,863 $8,966,954
Trade accounts receivable, net 8,663,377 24,240,887
Inventories 17,923,955 12,813,250
Prepaid taxes 2,181,155 882,613
Other current assets 1,172,315 1,016,050
Deferred tax asset 941,069 942,689
------------- -------------
Total current assets 41,668,734 48,862,443
Property and equipment, net 16,597,130 9,592,895
Investment securities-available-for-sale 5,944,077 -
Deferred tax asset 18,634,013 166,332
Intangible asset, net 16,062,002 65,725,490
Construction in progress 1,919,674 7,352,821
Other assets 187,710 204,103
------------- -------------
Total Assets $101,013,340 $131,904,084
============= =============
Liabilities and Shareholders' Equity:
Current liabilities $16,229,364 $19,938,629
Long-term debt, less current portion 7,744,206 8,104,141
Unearned grant funds 500,000 -
Deferred income taxes and other
liabilities 1,614,323 1,614,323
Shareholders' equity 74,925,447 102,246,991
------------- -------------
Total Liabilities and Shareholders'
Equity $101,013,340 $131,904,084
============= =============
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