EXHIBIT 99.1
LANNETT COMPANY REPORTS EARNINGS RESULTS FOR ITS 4TH
QUARTER AND FISCAL YEAR 2004
PHILADELPHIA, PA -- August 20, 2004 -- LANNETT COMPANY, INC. (AMEX:
LCI). The Company's annual results of operations for the fiscal year ended June
30, 2004 (Fiscal 2004) surpassed last year's record highs in sales, operating
income and net income.
Net sales increased from $42.5 million in Fiscal 2003 to $63.8 million
in Fiscal 2004. Net sales rose from $12.2 million in the fourth quarter of
Fiscal 2003 to $18.0 million in the fourth quarter of Fiscal 2004. These
increases were due primarily to recent introductions of new products, including
Levothyroxine Sodium tablets and the branded product, Unithroid(R) tablets. In
addition, the Company successfully increased its market share and sales revenue
for several of its other products.
Gross profit margins decreased from 62% in Fiscal 2003 to 58% in Fiscal
2004, and from 63% in the fourth quarter of Fiscal 2003 to 53% in the fourth
quarter of Fiscal 2004. The decrease in gross profit margins is a result of a
decrease in net weighted average prices for some of the Company's products due
to increased market competition, and increases in direct and indirect costs,
including raw material prices, compensation and benefit expenses and
depreciation expense.
Research and development (R&D) expenses increased due to the Company's
continued strategy of investing a portion of its profits in the development of
new
generic drug products. Total R&D expenses increased from $2.6 million in Fiscal
2003 to $5.9 million in Fiscal 2004, and from $900,000 in the fourth quarter of
Fiscal 2003 to $2.4 million in the fourth quarter of Fiscal 2004. A significant
portion of the increases in R&D expenses represents the cost of performing
generic bioequivalence tests, which is commonly required for ANDA submissions.
The Company incurred approximately $2.3 million in Fiscal 2004 for
bioequivalence testing fees, compared to $265,000 in Fiscal 2003. The remainder
of the increase in R&D expenses was due to an increase in compensation and
benefit expenses and costs of raw materials used in the R&D process.
Selling, general and administrative (SG&A) expenses increased from $4.3
million in Fiscal 2003 to $8.9 million in Fiscal 2004, and from $1.1 million in
the fourth quarter of Fiscal 2003 to $2.7 million in the fourth quarter of
Fiscal 2004. SG&A expenses increased due to an increase in compensation and
benefit expenses, insurance premiums, professional service fees, consulting
services, advertising and other marketing expenses.
Included in the Fiscal 2004 results of operations are approximately
$1.4 million in operating expenses not expected to recur in Fiscal 2005,
including approximately $830,000 in incentive compensation costs, $270,000 in
legal and consulting fees related to the Company's successful efforts to prevent
a local union from organizing a portion of their employees and approximately
$300,000 in other expenses, including fees for work performed by or under the
direction of the Special Committee of the
Board of Directors, which was created as a result of an option granted by
William Farber, the Company's Chairman and majority stockholder, to Perrigo
Company, Inc. for the acquisition of shares owned by Mr. Farber and his wife,
and any potential subsequent transaction between Perrigo Company, Inc. (Perrigo)
and the remaining stockholders of the Company. As previously disclosed, Perrigo
chose not to exercise the option previously granted.
The Company's results of operations also include approximately $1.3
million in non-cash amortization expense related to the intangible asset created
by an agreement whereby the Company exchanged four million (4,000,000) shares of
its capital stock to Jerome Stevens Pharmaceutical, Inc. (JSP) for the exclusive
marketing and distribution rights to JSP's line of products. Operating income
before the $1.3 million in amortization expense was $4.5 million for the fourth
quarter of Fiscal 2004, compared to $5.7 million in the fourth quarter of the
prior year. The decrease is a result of the increases in R&D and SG&A expenses.
On an annual basis, operating income before the $1.3 million in amortization
expense was $22.1 million for Fiscal 2004, compared to $19.3 million in Fiscal
2003.
Net income decreased from $3.1 million in the fourth quarter of Fiscal
2003 to $2.8 million in the fourth quarter of Fiscal 2004 as a result of the
amortization expense and the increases in R&D and SG&A expenses. On an annual
basis, net income increased from $11.7 million in Fiscal 2003 to $13.2 million
in Fiscal 2004.
The following table presents Lannett's unaudited results of operations
for the quarters ended June 30, 2004 and 2003 and the audited results of
operations for the years ended June 30, 2004 and 2003:
Quarter Ended Year Ended
6/30/04 6/30/03 6/30/04 6/30/03
Unaudited Unaudited Audited Audited
(In thousands, except (In thousands, except
for Diluted Income per Share) for Diluted Income per Share)
Net Sales $ 17,986 $ 12,157 $ 63,781 $ 42,487
Cost of Sales 8,452 4,480 26,857 16,258
-------- -------- -------- --------
Gross Profit 9,534 7,677 36,924 26,229
R&D Expenses 2,394 906 5,895 2,575
SG&A Expenses 2,684 1,114 8,864 4,338
Amortization of Intangible Asset 1,315 -- 1,315 --
-------- -------- -------- --------
Operating Profit 3,141 5,657 20,850 19,316
Other Income/(Expense) (45) (154) (41) (315)
-------- -------- -------- --------
Income Before Taxes 3,096 5,503 20,809 19,001
Income Tax Expense 336 2,406 7,594 7,335
-------- -------- -------- --------
Net Income 2,760 3,097 13,215 11,666
======== ======== ======== ========
Diluted Income per Share $ 0.12 $ 0.15 $ 0.63 $ 0.58
======== ======== ======== ========
Diluted Weighted Average Number
of Shares 23,391 20,269 21,054 20,121
======== ======== ======== ========
The following table presents Lannett's consolidated balance sheet as of
June 30, 2004 and 2003:
ASSETS
Current Assets
Cash $ 8,967 $ 3,529
Trade accounts receivable, net 15,356 8,516
Inventories 12,813 8,176
Prepaid Expenses 1,016 367
Deferred tax asset 1,109 570
Prepaid income taxes 883 --
--------- ---------
Total current assets 40,144 21,158
Property, Plant and Equipment 22,613 11,886
Less accumulated depreciation (5,667) (4,478)
--------- ---------
16,946 7,408
Intangible Asset, net 65,725 --
--------- ---------
Other Assets 204 496
--------- ---------
Total Assets $ 123,019 $ 29,062
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 1,989 $ 718
Accounts payable 5,640 2,665
Accrued expenses 3,425 526
Income taxes payable -- 64
--------- ---------
Total current liabilities 11,054 3,973
Long-term debt, less current portion 8,104 2,379
--------- ---------
Deferred Tax Liability 1,614 1,112
--------- ---------
Shareholders' Equity
Common Stock 24 20
Additional paid-in capital 69,956 2,526
Retained earnings 32,267 19,052
--------- ---------
Total shareholders' equity 102,247 21,598
--------- ---------
Total liabilities and shareholders' equity $ 123,019 $ 29,062
========= =========
THIS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS, WHICH EXPRESS THE
CURRENT BELIEFS AND EXPECTATIONS OF MANAGEMENT. SUCH STATEMENTS ARE BASED ON
CURRENT EXPECTATIONS AND INVOLVE A NUMBER OF KNOWN AND UNKNOWN RISKS AND
UNCERTAINTIES THAT COULD CAUSE LANNETT'S FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS TO DIFFER SIGNIFICANTLY FROM THE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. IMPORTANT
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE LANNETT'S
ABILITY TO SUCCESSFULLY DEVELOP AND COMMERCIALIZE ADDITIONAL PHARMACEUTICAL
PRODUCTS, THE INTRODUCTION OF COMPETITIVE GENERIC PRODUCTS, THE IMPACT OF
COMPETITION FROM BRAND-NAME COMPANIES THAT SELL THEIR OWN GENERIC PRODUCTS OR
SUCCESSFULLY EXTEND THE EXCLUSIVITY PERIOD OF THEIR BRANDED PRODUCTS, THE
AVAILABILITY OF PRODUCT LIABILITY COVERAGE IN THE CURRENT INSURANCE MARKET, THE
IMPACT OF PHARMACEUTICAL INDUSTRY REGULATION AND PENDING LEGISLATION THAT COULD
AFFECT THE PHARMACEUTICAL INDUSTRY, THE DIFFICULTY OF PREDICTING U.S. FOOD AND
DRUG ADMINISTRATION AND OTHER REGULATORY AUTHORITY APPROVALS, ACCEPTANCE AND
DEMAND FOR NEW PHARMACEUTICAL PRODUCTS AND NEW THERAPIES, UNCERTAINTIES
REGARDING MARKET ACCEPTANCE OF INNOVATIVE PRODUCTS NEWLY LAUNCHED, CURRENTLY
BEING SOLD OR IN DEVELOPMENT, THE IMPACT OF RESTRUCTURING OF CLIENTS, RELIANCE
ON STRATEGIC ALLIANCES, EXPOSURE TO PRODUCT LIABILITY CLAIMS, DEPENDENCE ON
PATENT AND OTHER PROTECTIONS FOR INNOVATIVE PRODUCTS, FLUCTUATIONS IN CURRENCY,
EXCHANGE AND INTEREST RATES, OPERATING RESULTS AND OTHER FACTORS THAT ARE
DISCUSSED IN LANNETT'S ANNUAL REPORT ON FORM 10KSB FOR ITS FISCAL YEAR ENDED
JUNE 30, 2003 AND ITS OTHER FILINGS WITH THE U.S. SECURITIES AND EXCHANGE
COMMISSION. FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE ON WHICH THEY
ARE MADE, AND THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY OR REVISE
ANY FORWARD-LOOKING STATEMENT, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE
DEVELOPMENTS OR OTHERWISE.
The Company's common stock trades on the American Stock Exchange under
the symbol "LCI". For more information please call Investor Relations at
215/333-9000.
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