Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Jun. 30, 2017 | Jul. 31, 2017 | Dec. 31, 2016 | |
Document and Entity Information | |||
Entity Registrant Name | LANNETT CO INC | ||
Entity Central Index Key | 57,725 | ||
Document Type | 10-K | ||
Document Period End Date | Jun. 30, 2017 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --06-30 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | $ 613,312,878 | ||
Entity Common Stock, Shares Outstanding | 37,284,317 | ||
Document Fiscal Year Focus | 2,017 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2017 | Jun. 30, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 117,737 | $ 224,769 |
Investment securities | 27,091 | 14,094 |
Accounts receivable, net | 204,066 | 211,722 |
Inventories | 122,604 | 114,904 |
Prepaid income taxes | 16,703 | |
Deferred tax assets | 28,905 | 40,892 |
Other current assets | 6,592 | 6,434 |
Total current assets | 523,698 | 612,815 |
Property, plant and equipment, net | 243,148 | 216,638 |
Intangible assets, net | 453,861 | 575,503 |
Goodwill | 339,566 | 333,611 |
Deferred tax assets | 23,848 | 11,556 |
Other assets | 19,191 | 13,895 |
TOTAL ASSETS | 1,603,312 | 1,764,018 |
Current liabilities: | ||
Accounts payable | 44,720 | 34,720 |
Accrued expenses | 12,499 | 9,247 |
Accrued payroll and payroll-related expenses | 4,833 | 10,572 |
Rebates payable | 44,593 | 21,894 |
Royalties payable | 3,015 | 5,127 |
Restructuring liability | 5,431 | 4,130 |
Settlement liability | 17,000 | 7,000 |
Income taxes payable | 743 | |
Acquisition-related contingent consideration | 35,000 | |
Short-term borrowings and current portion of long-term debt | 60,117 | 178,236 |
Total current liabilities | 192,208 | 306,669 |
Long-term debt, net | 843,530 | 883,612 |
Settlement liability | 12,526 | |
Other liabilities | 6,452 | 6,754 |
TOTAL LIABILITIES | 1,042,190 | 1,209,561 |
Commitments and contingencies (Note 12 and 13) | ||
STOCKHOLDERS' EQUITY | ||
Common stock ($0.001 par value, 100,000,000 shares authorized; 37,528,450 and 37,150,165 shares issued; 36,919,296 and 36,604,202 shares outstanding at June 30, 2017 and 2016, respectively) | 37 | 37 |
Additional paid-in capital | 292,780 | 283,301 |
Retained earnings | 277,774 | 278,355 |
Accumulated other comprehensive loss | (222) | (295) |
Treasury stock (609,154 and 545,963 shares at June 30, 2017 and 2016, respectively) | (9,247) | (7,349) |
Total Lannett Company, Inc. stockholders' equity | 561,122 | 554,049 |
Noncontrolling interest | 408 | |
Total stockholders' equity | 561,122 | 554,457 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 1,603,312 | $ 1,764,018 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2017 | Jun. 30, 2016 |
CONSOLIDATED BALANCE SHEETS | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized shares | 100,000,000 | 100,000,000 |
Common stock, issued shares | 37,528,450 | 37,150,165 |
Common stock, outstanding shares | 36,919,296 | 36,604,202 |
Treasury stock, shares | 609,154 | 545,963 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | |||
Net sales | $ 637,341 | $ 566,091 | $ 406,837 |
Settlement agreement | (4,000) | (23,598) | |
Total net sales | 633,341 | 542,493 | 406,837 |
Cost of sales | 300,030 | 237,371 | 100,344 |
Amortization of intangibles | 32,098 | 18,629 | 137 |
Gross profit | 301,213 | 286,493 | 306,356 |
Operating expenses: | |||
Research and development expenses | 42,073 | 45,054 | 30,342 |
Selling, general and administrative expenses | 73,477 | 68,325 | 45,206 |
Acquisition and integration-related expenses | 3,965 | 27,190 | 4,321 |
Restructuring expenses | 7,168 | 7,166 | |
Intangible asset impairment charge | 88,084 | 8,000 | |
Total operating expenses | 214,767 | 155,735 | 79,869 |
Operating income | 86,446 | 130,758 | 226,487 |
Other income (loss): | |||
Loss on extinguishment of debt | (3,009) | ||
Investment income | 3,768 | 368 | 1,130 |
Interest expense | (89,420) | (65,937) | (207) |
Other | (244) | (1) | 12 |
Total other income (loss) | (85,896) | (68,579) | 935 |
Income before income taxes | 550 | 62,179 | 227,422 |
Income tax expense | 1,097 | 17,322 | 77,430 |
Net income (loss) | (547) | 44,857 | 149,992 |
Less: Net income attributable to noncontrolling interest | 34 | 75 | 73 |
Net income (loss) attributable to Lannett Company, Inc. | $ (581) | $ 44,782 | $ 149,919 |
Earnings (loss) per common share attributable to Lannett Company, Inc.: | |||
Basic (in dollars per share) | $ (0.02) | $ 1.23 | $ 4.18 |
Diluted (in dollars per share) | $ (0.02) | $ 1.20 | $ 4.04 |
Weighted average common shares outstanding: | |||
Basic (in shares) | 36,812,524 | 36,442,782 | 35,827,167 |
Diluted (in shares) | 36,812,524 | 37,389,445 | 37,127,117 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | |||
Net income (loss) | $ (547) | $ 44,857 | $ 149,992 |
Other comprehensive income (loss), before taxes: | |||
Foreign currency translation gain (loss) | 73 | (241) | |
Total other comprehensive income (loss), net of taxes | 73 | (241) | |
Comprehensive income (loss) | (474) | 44,857 | 149,751 |
Less: Total comprehensive income attributable to noncontrolling interest | 34 | 75 | 73 |
Comprehensive income (loss) attributable to Lannett Company, Inc. | $ (508) | $ 44,782 | $ 149,678 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands | Stockholders' Equity Attributable to Lannett Co., Inc. | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (loss) | Treasury Stock | Noncontrolling Interest | Total |
Balance at Jun. 30, 2014 | $ 294,470 | $ 36 | $ 216,793 | $ 83,654 | $ (54) | $ (5,959) | $ 295 | $ 294,765 |
Balance (in shares) at Jun. 30, 2014 | 36,088 | |||||||
Increase (Decrease) in Shareholders' Equity | ||||||||
Shares issued in connection with share-based compensation plans | 4,938 | $ 1 | 4,937 | 4,938 | ||||
Shares issued in connection with share-based compensation plans (in shares) | 695 | |||||||
Share-based compensation | 6,397 | 6,397 | 6,397 | |||||
Excess tax benefits on share-based compensation awards | 8,051 | 8,051 | 8,051 | |||||
Purchase of treasury stock | (121) | (121) | (121) | |||||
Distribution to noncontrolling interests | (15) | (15) | ||||||
Other comprehensive income (loss), net of income tax | (241) | (241) | (241) | |||||
Net income (loss) | 149,919 | 149,919 | 73 | 149,992 | ||||
Balance at Jun. 30, 2015 | 463,413 | $ 37 | 236,178 | 233,573 | (295) | (6,080) | 353 | 463,766 |
Balance (in shares) at Jun. 30, 2015 | 36,783 | |||||||
Increase (Decrease) in Shareholders' Equity | ||||||||
Shares issued in connection with share-based compensation plans | 4,134 | 4,134 | 4,134 | |||||
Shares issued in connection with share-based compensation plans (in shares) | 367 | |||||||
Share-based compensation | 11,562 | 11,562 | 11,562 | |||||
Excess tax benefits on share-based compensation awards | 1,507 | 1,507 | 1,507 | |||||
Purchase of treasury stock | (1,269) | (1,269) | (1,269) | |||||
Issuance of warrant | 29,920 | 29,920 | 29,920 | |||||
Distribution to noncontrolling interests | (20) | (20) | ||||||
Net income (loss) | 44,782 | 44,782 | 75 | 44,857 | ||||
Balance at Jun. 30, 2016 | 554,049 | $ 37 | 283,301 | 278,355 | (295) | (7,349) | 408 | 554,457 |
Balance (in shares) at Jun. 30, 2016 | 37,150 | |||||||
Increase (Decrease) in Shareholders' Equity | ||||||||
Shares issued in connection with share-based compensation plans | 2,818 | 2,818 | 2,818 | |||||
Shares issued in connection with share-based compensation plans (in shares) | 378 | |||||||
Share-based compensation | 7,719 | 7,719 | 7,719 | |||||
Purchase of noncontrolling interest | (1,058) | (1,058) | (442) | (1,500) | ||||
Purchase of treasury stock | (1,898) | (1,898) | (1,898) | |||||
Other comprehensive income (loss), net of income tax | 73 | 73 | 73 | |||||
Net income (loss) | (581) | (581) | $ 34 | (547) | ||||
Balance at Jun. 30, 2017 | $ 561,122 | $ 37 | $ 292,780 | $ 277,774 | $ (222) | $ (9,247) | $ 561,122 | |
Balance (in shares) at Jun. 30, 2017 | 37,528 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
OPERATING ACTIVITIES: | |||
Net income (loss) | $ (547) | $ 44,857 | $ 149,992 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 55,340 | 33,433 | 5,583 |
Deferred income tax benefit | (305) | (19,497) | (3,266) |
Share-based compensation | 7,719 | 11,562 | 6,397 |
Excess tax benefits on share-based compensation awards | (1,507) | (8,051) | |
Intangible assets impairment charges | 88,084 | 8,000 | |
Loss (gain) on sale of assets | 290 | 92 | (33) |
Loss (gain) on investment securities | (2,914) | 11 | (705) |
Loss on extinguishment of debt | 3,009 | ||
Amortization of debt discount and other debt issuance costs | 20,577 | 12,484 | 110 |
Other noncash expenses | 1,889 | 523 | |
Changes in assets and liabilities which provided (used) cash; net of acquisitions: | |||
Accounts receivable, net | 1,701 | 15,149 | (25,382) |
Inventories | (7,700) | 15,296 | 1,358 |
Prepaid income taxes/Income taxes payable | (17,748) | 1,717 | 5,127 |
Other current assets and other assets | 1,916 | 7,719 | (1,673) |
Rebates payable | 14,369 | 4,525 | 2,995 |
Royalties payable | (2,112) | 1,524 | |
Restructuring liability | 1,301 | 4,130 | |
Settlement liability | 1,000 | 18,598 | |
Accounts payable | 5,000 | (3,723) | (2,498) |
Accrued expenses | 3,252 | (1,760) | 1,027 |
Accrued payroll and payroll-related expenses | (5,739) | (20,865) | (2,463) |
Net cash provided by operating activities | 165,373 | 135,277 | 128,518 |
INVESTING ACTIVITIES: | |||
Purchases of property, plant and equipment | (48,694) | (24,267) | (31,676) |
Proceeds from sale of property, plant and equipment | 112 | 16 | 94 |
Purchases of intangible assets | (300) | ||
Acquisitions, net of cash acquired | (934,178) | (41,862) | |
Proceeds from sale of investment securities | 67,828 | 39,895 | 75,770 |
Purchase of investment securities | (77,911) | (40,533) | (47,839) |
Net cash used in investing activities | (58,665) | (959,067) | (45,813) |
FINANCING ACTIVITIES: | |||
Proceeds from issuance of debt | 1,048,610 | ||
Short-term borrowings under revolving credit facility | 125,000 | ||
Repayments of short-term borrowings and long-term debt | (178,233) | (295,033) | (129) |
Purchase of noncontrolling interest | (1,500) | ||
Acquisition-related contingent consideration | (35,000) | ||
Proceeds from issuance of stock | 2,818 | 4,134 | 4,938 |
Payment of debt issuance costs | (34,710) | (435) | |
Excess tax benefits on share-based compensation awards | 1,507 | 8,051 | |
Purchase of treasury stock | (1,898) | (1,269) | (121) |
Distributions to noncontrolling shareholders | (20) | (15) | |
Net cash provided by (used in) financing activities | (213,813) | 848,219 | 12,289 |
Effect on cash and cash equivalents of changes in foreign exchange rates | 73 | (241) | |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (107,032) | 24,429 | 94,753 |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 224,769 | 200,340 | 105,587 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | 117,737 | 224,769 | 200,340 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||
Interest paid (net of amounts capitalized) | 67,115 | 52,916 | 206 |
Income taxes paid, net | 19,150 | 35,141 | $ 75,569 |
Credits issued pursuant to Settlement Agreement | $ 5,000 | ||
Issuance of unsecured 12.0% Senior Notes to finance KUPI acquisition | 200,000 | ||
Issuance of a warrant to finance KUPI acquisition | 29,920 | ||
Acquisition-related contingent consideration | $ 35,000 |
CONSOLIDATED STATEMENTS OF CAS8
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) | Jun. 30, 2016 |
CONSOLIDATED STATEMENTS OF CASH FLOWS | |
Debt instrument, stated percentage | 12.00% |
The Business And Nature of Oper
The Business And Nature of Operations | 12 Months Ended |
Jun. 30, 2017 | |
The Business And Nature of Operations | |
The Business And Nature of Operations | Note 1. The Business And Nature of Operations Lannett Company, Inc. (a Delaware corporation) and its subsidiaries (collectively, the “Company” or “Lannett”) develop, manufacture, package, market and distribute solid oral and extended release (tablets and capsules), topical, nasal and oral solution finished dosage forms of drugs, that address a wide range of therapeutic areas. Certain of these products are manufactured by others and distributed by the Company, most notably under the Jerome Stevens Distribution Agreement. The Company also manufactures active pharmaceutical ingredients through its Cody Laboratories, Inc. (“Cody Labs”) subsidiary, providing a vertical integration benefit. On November 25, 2015, the Company completed the acquisition of Kremers Urban Pharmaceuticals, Inc. (“KUPI”), the former U.S. specialty generic pharmaceuticals subsidiary of global biopharmaceuticals company UCB S.A (“UCB”). KUPI is a specialty pharmaceuticals manufacturer focused on the development of products that are difficult to formulate or utilize specialized delivery technologies. Strategic benefits of the acquisition include expanded manufacturing capacity, a diversified product portfolio and pipeline and complementary research and development expertise. The Company operates pharmaceutical manufacturing plants in Philadelphia, Pennsylvania; Cody, Wyoming; Carmel, New York and Seymour, Indiana. The Company’s customers include generic pharmaceutical distributors, drug wholesalers, chain drug stores, private label distributors, mail-order pharmacies, other pharmaceutical manufacturers, managed care organizations, hospital buying groups, governmental entities and health maintenance organizations. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Jun. 30, 2017 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | Note 2. Summary of Significant Accounting Policies Basis of Presentation The Consolidated Financial Statements have been prepared in conformity with generally accepted accounting principles in the United States. (“U.S. GAAP”) Principles of consolidation The Consolidated Financial Statements include the accounts of Lannett Company, Inc. and its wholly-owned subsidiaries, as well as Cody LCI Realty, LLC (“Realty”), a variable interest entity (“VIE”) in which the Company had a 50% ownership interest until November 30, 2016, when the Company acquired the remaining 50% interest. Noncontrolling interest in Realty was recorded net of tax as net income attributable to the noncontrolling interest. Additionally, all intercompany accounts and transactions have been eliminated. Business Combinations Acquired businesses are accounted for using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective estimated fair values. The fair values and useful lives assigned to each class of assets acquired and liabilities assumed are based on, among other factors, the expected future period of benefit of the asset, the various characteristics of the asset and projected future cash flows. Significant judgment is employed in determining the assumptions utilized as of the acquisition date and for each subsequent measurement period. Accordingly, changes in assumptions described above, could have a material impact on our consolidated results of operations. Reclassifications Certain prior year amounts have been reclassified to conform to the current year financial statement presentation. Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are required in the determination of revenue recognition and sales deductions for estimated chargebacks, rebates, returns and other adjustments including a provision for the Company’s liability under the Medicare Part D program. Additionally, significant estimates and assumptions are required when determining the fair value of long-lived assets, including goodwill and intangible assets, income taxes, contingencies, share-based compensation and contingent consideration. Because of the inherent subjectivity and complexity involved in these estimates and assumptions, actual results could differ from those estimates. Foreign currency translation The Consolidated Financial Statements are presented in U.S. Dollars, the reporting currency of the Company. The financial statements of the Company’s foreign subsidiary are maintained in local currency and translated into U.S. dollars at the end of each reporting period. Assets and liabilities are translated at period-end exchange rates, while revenues and expenses are translated at average exchange rates during the period. The adjustments resulting from the use of differing exchange rates are recorded as part of stockholders’ equity in accumulated other comprehensive income (loss). Gains and losses resulting from transactions denominated in foreign currencies are recognized in the Consolidated Statements of Operations under Other income (loss). Amounts recorded due to foreign currency fluctuations are immaterial to the Consolidated Financial Statements. Cash and cash equivalents The Company considers all highly liquid investments with original maturities less than or equal to three months at the date of purchase to be cash and cash equivalents. Cash and cash equivalents are stated at cost, which approximates fair value, and consist of bank deposits and certificates of deposit that are readily convertible into cash. The Company maintains its cash deposits and cash equivalents at well-known, stable financial institutions. Such amounts frequently exceed insured limits. Investment securities The Company’s investment securities consist of publicly-traded equity securities which are classified as trading investments. Investment securities are recorded at fair value based on quoted market prices from broker or dealer quotations or transparent pricing sources at each reporting date. Realized and unrealized gains and losses are included in the Consolidated Statements of Operations under Other income (loss). Allowance for doubtful accounts The Company continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses. The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time balances are past due, the Company’s previous loss history, the customer’s current ability to pay its obligations to the Company and the condition of the general economy and the industry as a whole. The Company writes off accounts receivable when they are determined to be uncollectible. Inventories Inventories are stated at the lower of cost and net realizable value by the first-in, first-out method. Inventories are regularly reviewed and provisions for excess and obsolete inventory are recorded based primarily on current inventory levels and estimated sales forecasts. Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed on a straight-line basis over the assets’ estimated useful lives. Intangible Assets Definite-lived intangible assets are stated at cost less accumulated amortization. Amortization of definite-lived intangible assets is computed on a straight-line basis over the assets’ estimated useful lives, generally for periods ranging from 10 to 15 years. The Company continually evaluates the reasonableness of the useful lives of these assets. Indefinite-lived intangible assets are not amortized, but instead are tested at least annually for impairment. Costs to renew or extend the term of a recognized intangible asset are expensed as incurred. Valuation of Long-Lived Assets, including Intangible Assets The Company’s long-lived assets primarily consist of property, plant and equipment and definite and indefinite-lived intangible assets. Property, plant and equipment and definite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances (“triggering events”) indicate that the carrying amount of the asset may not be recoverable. If a triggering event is determined to have occurred, the asset’s carrying value is compared to the future undiscounted cash flows expected to be generated by the asset. If the carrying value exceeds the undiscounted cash flow of the asset, then impairment exists. Indefinite-lived intangible assets are tested for impairment at least annually during the fourth quarter of each fiscal year or more frequently if events or changes in circumstances indicate that the asset might be impaired. An impairment loss is measured as the excess of the asset’s carrying value over its fair value, which in most cases is calculated using a discounted cash flow model. Discounted cash flow models are highly reliant on various assumptions which are considered Level 3 inputs, including estimates of future cash flows (including long-term growth rates), discount rates and the probability of achieving the estimated cash flows. In-Process Research and Development Amounts allocated to in-process research and development (“IPR&D”) in connection with a business combination are recorded at fair value and are considered indefinite-lived intangible assets subject to impairment testing in accordance with the Company’s impairment testing policy for indefinite-lived intangible assets. As products in development are approved for sale, amounts will be allocated to product rights and will be amortized over their estimated useful lives. Definite-lived intangible assets are amortized over the expected life of the asset. The judgments made in determining the estimated fair value of in-process research and development, as well as asset lives, can materially impact our results of operations. The Company’s fair value assessments are highly reliant on various assumptions which are considered Level 3 inputs, including estimates of future cash flows (including long-term growth rates), discount rates and the probability of achieving the estimated cash flows. Goodwill Goodwill, which represents the excess of purchase price over the fair value of net assets acquired, is carried at cost. Goodwill is tested for impairment on an annual basis on the first day of the fourth quarter of each fiscal year or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company first performs a qualitative assessment to determine if the quantitative impairment test is required. If changes in circumstances indicate an asset may be impaired, the Company performs the quantitative impairment test. The Company first determines the fair value of our reporting unit (generic pharmaceuticals). If the net book value of our reporting unit exceeds its fair value, the difference will be recorded as a goodwill impairment, not to exceed the carrying amount of goodwill. The Company’s fair value assessments are highly reliant on various assumptions which are considered Level 3 inputs, including estimates of future cash flows (including long-term growth rates), discount rates and the probability of achieving the estimated cash flows. The judgments made in determining the estimated fair value of goodwill can materially impact our results of operations. Segment Information The Company operates in one reportable segment, generic pharmaceuticals. As such, the Company aggregates its financial information for all products. The following table identifies the Company’s net sales by medical indication for fiscal years ended June 30, 2017, 2016 and 2015: (In thousands) Fiscal Year Ended June 30, Medical Indication 2017 2016 2015 Antibiotic $ $ $ Anti-Psychosis Cardiovascular Central Nervous System — Gallstone Gastrointestinal — Glaucoma Migraine Muscle Relaxant Obesity Pain Management Respiratory — Thyroid Deficiency Urinary Other Contract manufacturing revenue — Net sales Settlement agreement ) ) — Total net sales $ $ $ Customer, Supplier and Product Concentration The following table presents the percentage of total net sales, for the fiscal years ended June 30, 2017, 2016 and 2015, for certain of the Company’s products, defined as products containing the same active ingredient or combination of ingredients, which accounted for at least 10% of total net sales in any of those periods: June 30, June 30, June 30, Product 1 % % % Product 2 % % % Product 3 % % % The following table presents the percentage of total net sales, for the fiscal years ended June 30, 2017, 2016 and 2015, for certain of the Company’s customers which accounted for at least 10% of total net sales in any of those periods: June 30, June 30, June 30, Customer A % % % Customer B % % % The Company’s primary finished product inventory supplier is Jerome Stevens Pharmaceuticals, Inc. (“JSP”), in Bohemia, New York. Purchases of finished goods inventory from JSP accounted for 36%, 52% and 68% of the Company’s inventory purchases in fiscal years 2017, 2016 and 2015, respectively. See Note 21 “Material Contracts with Suppliers” for more information. Revenue Recognition The Company recognizes revenue when title and risk of loss have transferred to the customer and provisions for rebates, promotional adjustments, price adjustments, returns, chargebacks and other potential adjustments are reasonably determinable and collection is reasonably assured. The Company also considers all other relevant criteria specified in Securities and Exchange Commission Staff Accounting Bulletin No. 104, Topic No. 13, “ Revenue Recognition ”, in determining when to recognize revenue. Net Sales Adjustments When revenue is recognized a simultaneous adjustment to gross sales is made for chargebacks, rebates, returns, promotional adjustments and other potential adjustments. These provisions are primarily estimated based on historical experience, future expectations, contractual arrangements with wholesalers and indirect customers and other factors known to management at the time of accrual. Accruals for provisions are presented in the Consolidated Financial Statements as a reduction to gross sales with the corresponding reserve presented as a reduction of accounts receivable or included as rebates payable, depending on the nature of the reserve. The reserves, presented as a reduction of accounts receivable, totaled $175.8 million and $176.1 million at June 30, 2017 and 2016, respectively. Rebates payable at June 30, 2017 and 2016 included $44.6 million and $21.9 million, respectively, for certain rebate programs, primarily related to Medicare Part D, Medicaid and certain sales allowances and other adjustments paid to indirect customers. Cost of Sales, including Amortization of Intangibles Cost of sales includes all costs related to bringing products to their final selling destination, which includes direct and indirect costs, such as direct material, labor and overhead expenses. Additionally, cost of sales includes product royalties, depreciation, amortization and costs to renew or extend recognized intangible assets, freight charges and other shipping and handling expenses. Research and Development Research and development costs are expensed as incurred, including all production costs until a drug candidate is approved by the Food and Drug Administration (“FDA”). Research and development expenses include costs associated with internal projects as well as costs associated with third-party research and development contracts. Contingencies Loss contingencies, including litigation-related contingencies, are included in the Consolidated Statements of Operations when the Company concludes that a loss is both probable and reasonably estimable. Legal fees related to litigation-related matters are expensed as incurred and are included in the Consolidated Statements of Operations under the Selling, general and administrative line item. Contingent Consideration Contingent consideration resulting from the KUPI acquisition was recorded at its estimated fair value on the acquisition date. The Company agreed to a 50/50 split of the additional tax liabilities UCB will incur associated with the IRS Section 338(H)(10) tax election, up to $35.0 million. These fair value measurements represent Level 3 measurements, as they are based on significant inputs not observable in the market. In the third quarter of Fiscal 2017, the Company paid UCB $35.0 million in connection with the 338(H)(10) election. Restructuring Costs The Company records charges associated with approved restructuring plans to remove duplicative headcount and infrastructure associated with business acquisitions or to simplify business processes. Restructuring charges can include severance costs to eliminate a specified number of employees, infrastructure charges to vacate facilities and consolidate operations and contract cancellation costs. The Company records restructuring charges based on estimated employee terminations, site closure and consolidation plans. The Company accrues severance and other employee separation costs under these actions when it is probable that a liability exists and the amount is reasonably estimable. Share-based Compensation Share-based compensation costs are recognized over the vesting period, using a straight-line method, based on the fair value of the instrument on the date of grant less an estimate for expected forfeitures. The Company uses the Black-Scholes valuation model to determine the fair value of stock options and the stock price on the grant date to value restricted stock. The Black-Scholes valuation model includes various assumptions, including the expected volatility, the expected life of the award, dividend yield and the risk-free interest rate. These assumptions involve inherent uncertainties based on market conditions which are generally outside the Company’s control. Changes in these assumptions could have a material impact on share-based compensation costs recognized in the financial statements. Self-Insurance Effective January 1, 2017, the Company self-insures for certain employee medical and prescription benefits. The Company also maintains stop loss coverage with third party insurers to limit our total liability exposure. The liability for self-insured risks is primarily calculated using independent third party actuarial valuations which take into account actual claims, claims growth and claims incurred but not yet reported. Actual experience, including claim frequency and severity as well as health-care inflation, could result in different liabilities than the amounts currently recorded. The liability for self-insured risks under this plan as of June 30, 2017 was not material to the financial position of the Company. Income Taxes The Company uses the liability method to account for income taxes as prescribed by Accounting Standards Codification (“ASC”) 740, Income Taxes . Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. Deferred tax expense (benefit) is the result of changes in deferred tax assets and liabilities. Deferred income tax assets and liabilities are adjusted to recognize the effects of changes in tax laws or enacted tax rates in the period during which they are signed into law. The factors used to assess the likelihood of realization are the Company’s forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. Under ASC 740, Income Taxes , a valuation allowance is required when it is more likely than not that all or some portion of the deferred tax assets will not be realized through generating sufficient future taxable income. Failure to achieve forecasted taxable income in applicable tax jurisdictions could affect the ultimate realization of deferred tax assets and could result in an increase in the Company’s effective tax rate on future earnings. The Company may recognize the tax benefit from an uncertain tax position claimed on a tax return only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The authoritative accounting standards also provide guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. Earnings Per Common Share Basic earnings per common share attributable to Lannett Company, Inc. is computed by dividing net income attributable to Lannett Company, Inc. common stockholders by the weighted average number of shares outstanding during the period. Diluted earnings per common share attributable to Lannett Company, Inc. is computed by dividing net income attributable to Lannett Company, Inc. common stockholders by the weighted average number of shares outstanding during the period including additional shares that would have been outstanding related to potentially dilutive securities. These potentially dilutive securities consist of stock options, unvested restricted stock and an outstanding warrant. Anti-dilutive securities are excluded from the calculation. Dilutive shares are also excluded in the calculation in periods of net loss because the effect of including such securities would be anti-dilutive. Comprehensive Income (Loss) Comprehensive income (loss) includes all changes in equity during a period except those that resulted from investments by or distributions to the Company’s stockholders. Other comprehensive income (loss) refers to gains and losses that are included in comprehensive income (loss), but excluded from net income as these amounts are recorded directly as an adjustment to stockholders’ equity. Recent Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The authoritative guidance is effective for annual reporting periods beginning after December 15, 2017. Based on a preliminary review of the contracts representing a substantial portion of our revenues, the Company does not expect the guidance to have a material impact on the timing and recognition of our revenues. The Company is still evaluating the adoption method it will elect upon implementation. In July 2015, the FASB issued ASU 2015-11, Inventory — Simplifying the Measurement of Inventory . ASU 2015-11 requires inventory to be subsequently measured using the lower of cost and net realizable value, thereby eliminating the market value approach. Net realizable value is defined as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.” ASU 2015-11 is effective for reporting periods beginning after December 15, 2016 and is applied prospectively. The adoption of ASU 2015-11 did not result in a material impact on the consolidated financial statements. In November 2015, the FASB issued ASU 2015-17, Income Taxes — Balance Sheet Classification of Deferred Taxes. ASU 2015-17 requires all deferred tax assets and liabilities to be classified as noncurrent on the balance sheet. The guidance may be applied either prospectively or retrospectively. ASU 2015-17 is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016. Early adoption is permitted. The Company does not believe this guidance will have a material impact on the consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases. ASU 2016-02 requires an entity to recognize right-of-use assets and liabilities on its balance sheet for all leases with terms longer than 12 months. Lessees and lessors are required to disclose quantitative and qualitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period and requires a modified retrospective application, with early adoption permitted. The Company is currently in the process of assessing the impact this guidance will have on the consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Compensation — Stock Compensation: Improvements to Employee Share-Based Payment Accounting . ASU 2016-09 clarifies several aspects of accounting for share-based compensation including the accounting for excess tax benefits and deficiencies, accounting for forfeitures and the classification of excess tax benefits on the cash flow statement. The Company has elected to early adopt this ASU in the fourth quarter of Fiscal 2017 which did not result in a material impact on the consolidated financial statements. As a result of our election to early adopt, all excess tax benefits are now reflected in the provision for income taxes rather than paid-in capital. The Company has also elected to continue to estimate forfeitures related to share-based payment awards at the time of grant. In addition, the Company has elected to apply the presentation requirements for cash flows related to excess tax benefits prospectively. As such, all tax-related cash flows resulting from share-based payments in Fiscal 2017 are reflected as operating activities on the statement of cash flows. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows — Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017. The Company is currently in the process of assessing the impact this guidance will have on the consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles — Goodwill and Other — Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test which previously required measurement of any goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying value and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; without exceeding the total amount of goodwill allocated to that reporting unit. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company has elected to early adopt this guidance in the fourth quarter of Fiscal 2017 and will apply it on a prospective basis. The Company does not believe that the adoption will have a material impact on its consolidated financial statements. |
Acquisitions
Acquisitions | 12 Months Ended |
Jun. 30, 2017 | |
Acquisitions | |
Acquisitions | Note 3. Acquisitions Kremers Urban Pharmaceuticals Inc. On November 25, 2015, the Company completed the acquisition of KUPI, the former U.S. specialty generic pharmaceuticals subsidiary of global biopharmaceuticals company UCB S.A., pursuant to the terms and conditions of a Stock Purchase Agreement. KUPI is a specialty pharmaceuticals manufacturer focused on the development of products that are difficult to formulate or utilize specialized delivery technologies. Strategic benefits of the acquisition include expanded manufacturing capacity, a diversified product portfolio and pipeline and complementary research and development expertise. Pursuant to the terms of the Stock Purchase Agreement, Lannett purchased 100% of the outstanding equity interests of KUPI for total consideration of approximately $1.2 billion. The following table summarizes the fair value of total consideration transferred to KUPI shareholders at the acquisition date of November 25, 2015: (In thousands) Cash purchase price paid to KUPI shareholders $ Working capital adjustment ) Certain amounts reimbursed by UCB ) Total cash consideration transferred to KUPI shareholders 12.0% Senior Notes issued to UCB Acquisition-related contingent consideration Warrant issued to UCB Total consideration to KUPI shareholders $ The Company funded the acquisition and transaction expenses with proceeds from the issuance of the $910.0 million of term loans, $22.8 million borrowings from a revolving credit facility, the issuance of $250.0 million Senior Notes (see Note 11 “Long-term Debt”) and cash on hand of $94.6 million. Lannett also issued a warrant with an estimated fair value of $29.9 million. As part of the acquisition, the Company and UCB agreed to jointly make an election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended and under the corresponding provisions of state law, to treat the acquisition as a deemed purchase and sale of assets for income tax purposes. The Company agreed to reimburse UCB for 50% of the incremental tax cost of making such election, subject to a reimbursement cap of $35.0 million. This liability was recorded as acquisition-related contingent consideration on the Consolidated Balance Sheet. In the third quarter of Fiscal 2017, the Company paid UCB $35.0 million in connection with this election. The Company also agreed to contingent payments related to Methylphenidate Hydrochloride Extended Release tablets (“Methylphenidate ER”) provided the FDA reinstates the AB-rating for such product and certain sales thresholds are met. On October 18, 2016, the Company received notice from the FDA that it will seek to withdraw approval of the Company’s ANDA for Methylphenidate ER. See Note 10 “Goodwill and Intangible Assets” for more information. The Company used the acquisition method of accounting to account for this transaction. Under the acquisition method of accounting, the assets acquired and liabilities assumed in the transaction were recorded at the date of acquisition at their respective fair values. The purchase price has been allocated to the assets acquired and liabilities assumed for the KUPI business as follows: (In thousands) Purchase Cash and cash equivalents $ Accounts receivable, net of revenue-related reserves Inventories Other current assets Property, plant and equipment Product rights Trade name Other intangible assets In-process research and development Goodwill Deferred tax assets Other assets Total assets acquired Accounts payable ) Accrued expenses ) Accrued payroll and payroll-related expenses ) Rebates payable ) Royalties payable ) Other liabilities ) Total net assets acquired $ In the first quarter of Fiscal 2017, the Company recorded a $6.0 million measurement-period adjustment to the Returns reserve related to the KUPI acquisition. Included in the purchase price allocation above are indemnification assets totaling approximately $20.7 million, of which $10.4 million relates to compensation-related payments, $4.9 million relates to unrecognized tax benefits and $5.4 million for chargeback and rebate-related items. The inventory balance above includes $19.1 million to reflect fair value step-up adjustments. KUPI’s intangible assets primarily consist of product rights and in-process research and development. See Note 10 “Goodwill and Intangible Assets.” Amounts allocated to acquired in-process research and development represent the fair value of purchased in-process technology for research projects that, as of the closing date of the acquisition, had not yet reached technological feasibility and had no alternative future use. The fair value of in-process research and development was based on the excess earnings method, which utilizes forecasts of expected cash inflows (including estimates for ongoing costs) and other contributory charges, on a project-by-project basis at the appropriate discount rate for the inherent risk in each project and will be tested for impairment in accordance with the Company’s policy for testing indefinite-lived intangible assets. Goodwill of $339.4 million arising from the acquisition consists primarily of the value of the employee workforce and the value of products to be developed in the future. The goodwill was assigned to the Company’s only reporting unit. Goodwill recognized is expected to be fully deductible for income tax purposes. Unaudited Pro Forma Financial Results The following supplemental unaudited pro forma information presents the financial results as if the acquisition of KUPI had occurred on July 1, 2014 for the fiscal years ended June 30, 2016 and 2015. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the acquisition been made on July 1, 2014, nor are they indicative of any future results: For the fiscal year ended (In thousands, except per share data) 2016 2015 Total net sales $ $ Net income attributable to Lannett Company, Inc. Earnings per common share attributable to Lannett Company, Inc.: Basic $ $ Diluted $ $ The supplemental pro forma earnings for the fiscal year ended June 30, 2016 were adjusted to exclude $28.9 million of acquisition-related costs, of which $21.5 million was incurred by Lannett and $7.4 million was incurred by KUPI and $17.0 million of expense related to the amortization of fair value adjustments to acquisition-date inventory. The supplemental pro forma earnings for the fiscal year ended June 30, 2015 were adjusted to include $28.9 million of acquisition-related costs, of which $21.5 million was incurred by Lannett and $7.4 million was incurred by KUPI, as well as $18.9 million of expense related to the amortization of fair value step-up adjustments to acquisition-date inventory. Silarx On June 1, 2015, the Company completed the acquisition of Silarx Pharmaceuticals, Inc., a New York corporation and Stoneleigh Realty, LLC, a New York limited liability company (together “Silarx”), pursuant to the terms and conditions of a Stock Purchase Agreement. Silarx manufactures and markets high-quality liquid pharmaceutical products, including generic prescription and over-the-counter products. Silarx operates within a manufacturing facility located in Carmel, New York. Strategic benefits of the acquisition include an FDA-approved manufacturing facility, research and development expertise and added diversity to Lannett’s portfolio of existing and pipeline products. Pursuant to the terms of the Stock Purchase Agreement, Lannett purchased 100% of the outstanding equity interests of Silarx for cash consideration totaling $42.5 million. The Company used the acquisition method of accounting to account for this transaction. Under the acquisition method of accounting, the assets acquired and liabilities assumed in the transaction were recorded at the date of acquisition at their respective fair values using assumptions that were subject to change. The purchase price has been allocated to the assets acquired and liabilities assumed for the Silarx business as follows: (In thousands) Cash $ Accounts receivable, net of revenue-related reserves Inventories Other current assets Property, plant and equipment Product rights In-process research and development Goodwill Other current assets Total assets acquired Accounts payable ) Income taxes payable ) Total net assets acquired $ Amounts allocated to acquired in-process research and development represent an estimate of the fair value of purchased in-process technology for research projects that, as of the closing date of the acquisition, had not yet reached technological feasibility and had no alternative future use. The fair value of in-process research and development was based on the excess earnings method, which utilizes forecasts of expected cash inflows (including estimates for ongoing costs) and other contributory charges, on a project-by-project basis at the appropriate discount rate for the inherent risk in each project and will be tested for impairment in accordance with the Company’s policy for testing indefinite-lived intangible assets. Product rights totaling $10.0 million are comprised of currently marketed products that have an estimated useful life of 15 years. The goodwill of $141 thousand arising from the acquisition consists primarily of the value of the employee workforce and the value of products to be developed in the future. The goodwill was assigned to the Company’s only reporting unit. Goodwill recognized is expected to be fully deductible for income tax purposes. |
Restructuring Charges
Restructuring Charges | 12 Months Ended |
Jun. 30, 2017 | |
Restructuring Charges | |
Restructuring Charges | Note 4. Restructuring Charges 2016 Restructuring Program On February 1, 2016, in connection with the acquisition of KUPI, the Company announced a plan related to the future integration of KUPI and the Company’s operations. The plan focuses on the closure of KUPI’s corporate functions and the consolidation of manufacturing, sales, research and development and distribution functions. The Company estimates that it will incur an aggregate of up to approximately $21.0 million in restructuring charges for actions that have been announced or communicated since the 2016 Restructuring Program began. Of this amount, approximately $12.0 million relates to employee separation costs, approximately $1.0 million relates to contract termination costs and approximately $8.0 million relates to facility closure costs and other actions. The 2016 Restructuring Program is expected to be completed by the end of Fiscal 2019. The expenses associated with the restructuring program included in restructuring expenses during the twelve months ended June 30, 2017 and 2016 were as follows: (In thousands) Twelve Twelve Employee separation costs $ $ Contract termination costs — Facility closure costs Total $ $ A reconciliation of the changes in restructuring liabilities associated with the 2016 Restructuring Program from June 30, 2015 through June 30, 2017 is set forth in the following table: (In thousands) Employee Contract Facility Closure Total Balance at June 30, 2015 $ — $ — $ — $ — Restructuring Charges Payments ) ) ) ) Balance at June 30, 2016 — Restructuring Charges — Payments ) ) ) ) Balance at June 30, 2017 $ $ — $ — $ |
Accounts Receivable
Accounts Receivable | 12 Months Ended |
Jun. 30, 2017 | |
Accounts Receivable | |
Accounts Receivable | Note 5. Accounts Receivable Accounts receivable consisted of the following components at June 30, 2017 and 2016: (In thousands) June 30, June 30, Gross accounts receivable $ $ Less Chargebacks reserve ) ) Less Rebates reserve ) ) Less Returns reserve ) ) Less Other deductions ) ) Less Allowance for doubtful accounts ) ) Accounts receivable, net $ $ For the fiscal year ended June 30, 2017, the Company recorded a provision for chargebacks, rebates, returns and other deductions of $881.3 million, $297.0 million, $25.4 million and $53.4 million, respectively. For the fiscal year ended June 30, 2016, the Company recorded a provision for chargebacks, rebates, returns and other deductions of $646.9 million, $189.2 million, $21.3 million and $50.0 million, respectively. For the fiscal year ended June 30, 2015, the Company recorded a provision for chargebacks, rebates, returns and other deductions of $338.7 million, $83.4 million, $17.7 million and $30.7 million, respectively. |
Inventories
Inventories | 12 Months Ended |
Jun. 30, 2017 | |
Inventories | |
Inventories | Note 6. Inventories Inventories at June 30, 2017 and 2016 consisted of the following: (In thousands) June 30, June 30, Raw Materials $ $ Work-in-process Finished Goods Total $ $ During the fiscal years ended June 30, 2017, 2016 and 2015, the Company recorded write-downs for excess and obsolete inventory of $10.4 million, $9.4 million and $6.7 million, respectively. Inventories were reduced by $4.5 million and $6.9 million at June 30, 2017 and 2016, respectively for excess and obsolete inventory amounts. |
Property, Plant and Equipment
Property, Plant and Equipment | 12 Months Ended |
Jun. 30, 2017 | |
Property, Plant and Equipment | |
Property, Plant and Equipment | Note 7. Property, Plant and Equipment Property, plant and equipment at June 30, 2017 and 2016 consisted of the following: (In thousands) Useful Lives June 30, June 30, Land — $ $ Building and improvements 10 - 39 years Machinery and equipment 5 - 10 years Furniture and fixtures 5 - 7 years Less accumulated depreciation ) ) Construction in progress Property, plant and equipment, net $ $ Depreciation expense for the fiscal years ended June 30, 2017, 2016 and 2015 was $21.8 million, $13.9 million and $5.4 million, respectively. During the fiscal years ended June 30, 2017, 2016 and 2015, the Company had no impairment charges related to property, plant and equipment. Property, plant and equipment, net included amounts held in foreign countries in the amount of $1.0 million at June 30, 2017 and June 30, 2016. |
Fair Value Measurements
Fair Value Measurements | 12 Months Ended |
Jun. 30, 2017 | |
Fair Value Measurements | |
Fair Value Measurements | Note 8. Fair Value Measurements The Company’s financial instruments recorded in the Consolidated Balance Sheets include cash and cash equivalents, accounts receivable, investment securities, accounts payable, accrued expenses and debt obligations. Included in cash and cash equivalents are certificates of deposit with maturities less than or equal to three months at the date of purchase and money market funds. The carrying value of certain financial instruments, primarily cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, approximate their estimated fair values based upon the short-term nature of their maturity dates. The carrying amount of the Company’s debt obligations approximates fair value based on current interest rates available to the Company on similar debt obligations. The Company follows the authoritative guidance of ASC Topic 820 “Fair Value Measurements and Disclosures.” Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The authoritative guidance also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company’s financial assets and liabilities measured at fair value are entirely within Level 1 of the hierarchy as defined below: Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. Level 2 — Directly or indirectly observable inputs, other than quoted prices, such as quoted prices for similar assets or liabilities; quoted prices for identical or similar instruments in markets that are not active; or model-derived valuations whose inputs are observable or whose significant value drivers are observable. Level 3 — Unobservable inputs that are supported by little or no market activity and that are material to the fair value of the asset or liability. Financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation are examples of Level 3 assets and liabilities. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. The Company’s financial assets and liabilities measured at fair value at June 30, 2017 and June 30, 2016 were as follows: June 30, 2017 (In thousands) Level 1 Level 2 Level 3 Total Assets Equity securities $ $ — $ — $ Total Assets $ $ — $ — $ June 30, 2016 (In thousands) Level 1 Level 2 Level 3 Total Assets Equity securities $ $ — $ — $ Total Assets $ $ — $ — $ Liabilities Acquisition-related contingent consideration $ — $ — $ $ Total Liabilities $ — $ — $ $ |
Investment Securities
Investment Securities | 12 Months Ended |
Jun. 30, 2017 | |
Investment Securities | |
Investment Securities | Note 9. Investment Securities The Company uses the specific identification method to determine the cost of securities sold, which consisted entirely of securities classified as trading. The Company had a net gain on investment securities of $2.9 million during the fiscal year ended June 30, 2017, which included an unrealized gain related to securities still held at June 30, 2017 of $964 thousand. The Company had a net loss on investment securities of $11 thousand during the fiscal year ended June 30, 2016, which included an unrealized loss related to securities still held at June 30, 2016 of $51 thousand. The Company had a net gain on investment securities of $705 thousand during the fiscal year ended June 30, 2015, which included an unrealized loss related to securities still held at June 30, 2015 of $1.1 million. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 12 Months Ended |
Jun. 30, 2017 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | Note 10. Goodwill and Intangible Assets The changes in the carrying amount of goodwill for the twelve months ended June 30, 2016 and 2017 are as follows: (In thousands) Generic Balance at June 30, 2015 $ Goodwill acquired Balance at June 30, 2016 Measurement-period adjustments Balance at June 30, 2017 $ Intangible assets, net as of June 30, 2017 and June 30, 2016, consisted of the following: Weighted Gross Carrying Amount Accumulated Amortization Intangible Assets, Net (In thousands) Avg. Life June 30, June 30, June 30, June 30, June 30, June 30, Definite-lived: Cody Labs import license 15 $ $ $ ) $ ) $ $ KUPI product rights 15 ) ) KUPI trade name 2 ) ) KUPI other intangible assets 15 ) ) Silarx product rights 15 ) ) Other product rights 14 ) ) Total definite-lived $ $ $ ) $ ) $ $ Indefinite-lived: KUPI in-process research and development — $ $ $ — $ — $ $ Silarx in-process research and development — — — Other product rights — — — Total indefinite-lived — — Total intangible assets, net $ $ $ ) $ ) $ $ For the fiscal years ended June 30, 2017, 2016 and 2015, the Company recorded amortization expense of $33.6 million, $19.5 million and $137 thousand, respectively. On October 18, 2016, the Company received a notice from the FDA indicating that the FDA will seek to withdraw approval of the Company’s Methylphenidate ER ANDA. As a result of the notice, the Company performed an impairment analysis including a review of revised net sales projections for Methylphenidate ER. This analysis resulted in the Company recording a $65.1 million impairment charge in the first quarter of Fiscal 2017. In the second quarter of Fiscal 2017, the Company abandoned a project within KUPI’s in-process research and development portfolio. The value assigned to the project was $23.0 million. Accordingly, the Company recorded a $23.0 million impairment charge in the second quarter. Future annual amortization expense consists of the following: (In thousands) Annual Amortization Expense 2018 $ 2019 2020 2021 2022 Thereafter $ |
Long-Term Debt
Long-Term Debt | 12 Months Ended |
Jun. 30, 2017 | |
Long-Term Debt | |
Long-Term Debt | Note 11. Long-Term Debt Amended Senior Secured Credit Facility On November 25, 2015, in connection with its acquisition of KUPI, Lannett entered into a credit and guaranty agreement (the “Credit and Guaranty Agreement”) among certain of its wholly-owned domestic subsidiaries, as guarantors, Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent and other lenders providing for a senior secured credit facility (the “Senior Secured Credit Facility”). The Senior Secured Credit Facility consisted of a Term Loan A facility in an aggregate principal amount of $275.0 million, a Term Loan B facility in an aggregate principal amount of $635.0 million and a revolving credit facility providing for revolving loans in an aggregate principal amount of up to $125.0 million. On April 8, 2016, the Company drew down the full $125.0 million Revolving Credit Facility for working capital and other general purposes. In the third quarter of Fiscal 2017, the Company made voluntary payments totaling $100.0 million against its outstanding revolving credit facility balance. In the fourth quarter of Fiscal 2017, the Company repaid the remaining $25.0 million revolving credit facility balance. As of June 30, 2017, there was no balance outstanding under the revolving credit facility. On June 17, 2016, Lannett amended the Senior Secured Credit Facility and the Credit and Guaranty Agreement to raise an incremental term loan in the principal amount of $150.0 million (the “Incremental Term Loan”) and amended certain sections of the agreement (the “Amended Senior Secured Credit Facility”). The terms of this Incremental Term Loan are substantially the same as those applicable to the Term Loan B facility. The Company used the proceeds of the Incremental Term Loan and cash on hand to repurchase the outstanding $250.0 million aggregate principal amount of Lannett’s 12.0% Senior Notes due 2023 (the “Senior Notes”) issued in connection with the KUPI acquisition. As a result of the repurchase of the Senior Notes, the Company recorded a $3.0 million loss on extinguishment of debt in the fourth quarter of Fiscal 2016. The Term Loan A Facility will mature on November 25, 2020. The Term Loan A Facility amortizes in quarterly installments (a) through December 31, 2017 in amounts equal to 1.25% of the original principal amount of the Term Loan A Facility and (b) from January 1, 2018 through September 30, 2020 in amounts equal to 2.50% of the original principal amount of the Term Loan A Facility, with the balance payable on November 25, 2020. The Term Loan B Facility will mature on November 25, 2022. The Term Loan B Facility amortizes in equal quarterly installments in amounts equal to 1.25% of the original principal amount of the Term Loan B Facility with the balance payable on November 25, 2022. Any outstanding Revolving Loans will mature on November 25, 2020. The Amended Senior Secured Credit Facility is guaranteed by all of Lannett’s significant wholly-owned domestic subsidiaries (the “Subsidiary Guarantors”) and is collateralized by substantially all present and future assets of Lannett and the Subsidiary Guarantors. The interest rates applicable to the Amended Term Loan Facility are based on a fluctuating rate of interest of the greater of an adjusted LIBOR and 1.00%, plus a borrowing margin of 4.75% (for Term Loan A Facility) or 5.375% (for Term Loan B Facility). The interest rate applicable to the Revolving Credit Facility is based on a fluctuating rate of interest of an adjusted LIBOR plus a borrowing margin of 4.75%. The interest rate applicable to the unused commitment for the Revolving Credit Facility was initially 0.50%. Beginning March 2016, the interest margins and unused commitment fee on the Revolving Credit Facility are subject to a leveraged based pricing grid. The Amended Senior Secured Credit Facility contains a number of covenants that, among other things, limit the ability of Lannett and its restricted subsidiaries to: incur more indebtedness; pay dividends; redeem stock or make other distributions of equity; make investments; create restrictions on the ability of Lannett’s restricted subsidiaries that are not Subsidiary Guarantors to pay dividends to Lannett or make intercompany transfers; create negative pledges; create liens; transfer or sell assets; merge or consolidate; enter into sale leasebacks; enter into certain transactions with Lannett’s affiliates; and prepay or amend the terms of certain indebtedness. The Amended Senior Secured Credit Facility contains a financial performance covenant that is triggered when the aggregate principal amount of outstanding Revolving Credit Facility and outstanding letters of credit as of the last day of the most recent fiscal quarter is greater than 30% of the aggregate commitments under the Revolving Credit Facility. The covenant provides that Lannett shall not permit its first lien net senior secured leverage ratio as of the last day of any four consecutive fiscal quarters (i) from and after December 31, 2015, to be greater than 4.25:1.00 (ii) from and after December 31, 2017 to be greater than 3.75:1.00 and (iii) from and after December 31, 2019 to be greater than 3.25:1.00. The Amended Senior Secured Credit Facility also contains a financial performance covenant for the benefit of the Term Loan A Facility lenders which provides that Lannett shall not permit its net senior secured leverage ratio as of the last day of any four consecutive fiscal quarters (i) prior to December 31, 2017, to be greater than 4.25:1.00, (ii) as of December 31, 2017 and prior to December 31, 2019 to be greater than 3.75:1.00 and (iii) as of December 31, 2019 and thereafter to be greater than 3.25:1.00. The Amended Senior Secured Credit Facility also contains certain affirmative covenants, including financial and other reporting requirements. In connection with the Senior Secured Credit Facility and the Senior Notes, the Company incurred an initial purchaser’s discount of $72.1 million and debt issuance costs of $32.7 million. These costs are recorded as a reduction of long-term debt in the Consolidated Balance Sheet. In connection with the amendment to the Senior Secured Credit Facility and raising the Incremental Term Loan, the Company capitalized $14.0 million of initial purchaser’s discount and other fees and expensed $2.2 million of legal and other expenses. Long-term debt, net consisted of the following: June 30, June 30, (In thousands) 2017 2016 Term Loan A due 2020 $ Unamortized discount and other debt issuance costs ) ) Term Loan A, net Term Loan B due 2022 Unamortized discount and other debt issuance costs ) ) Term Loan B, net Revolving Credit Facility due 2020 — Other Total debt, net Less short-term borrowings and current portion of long-term debt ) ) Total long-term debt, net $ $ Long-term debt amounts due, for the twelve month periods ending June 30 were as follows: Amounts Payable (In thousands) to Institutions 2018 $ 2019 2020 2021 2022 Thereafter Total $ |
Legal, Regulatory Matters and C
Legal, Regulatory Matters and Contingencies | 12 Months Ended |
Jun. 30, 2017 | |
Legal, Regulatory Matters and Contingencies | |
Legal, Regulatory Matters and Contingencies | Note 12. Legal, Regulatory Matters and Contingencies Richard Asherman On April 16, 2013, Richard Asherman (“Asherman”), the former President of and a member in Realty, filed a complaint (“Complaint”) in Wyoming state court against the Company and Cody Labs. At the same time, he also filed an application for a temporary restraining order to enjoin certain operations at Cody Labs, claiming, among other things, that Cody Labs was in violation of certain zoning laws and that Cody Labs was required to increase the level of its property insurance and to secure performance bonds for work being performed at Cody Labs. Mr. Asherman claimed Cody Labs was in breach of his employment agreement and was required to pay him severance under his employment agreement, including 18 months of base salary, vesting of unvested stock options and continuation of benefits. Mr. Asherman also asserted that the Company was in breach of the Realty Operating Agreement and, among other requested remedies, he sought to have the Company (i) pay him 50% of the value of 1.66 acres of land that Realty previously agreed to donate to an economic development entity associated with the City of Cody, Wyoming, which contemplated transaction has since been avoided and cancelled. Although Mr. Asherman originally sought to require that Lannett acquire his interest in Realty for an unspecified price and/or to dissolve Realty, those claims have been dismissed. In October 2016, the Company and Mr. Asherman reached a tentative agreement in principle to resolve their disputes. On November 30, 2016, the parties agreed to a settlement payment in full and final satisfaction of the claims filed by Asherman without an admission of liability by either party. As part of this settlement, the Company purchased for $1.5 million the remaining noncontrolling interest in Realty, free and clear of all liens, claims and encumbrances. Connecticut Attorney General Inquiry In July 2014, the Company received interrogatories and subpoena from the State of Connecticut Office of the Attorney General concerning its investigation into the pricing of digoxin. According to the subpoena, the Connecticut Attorney General is investigating whether anyone engaged in any activities that resulted in (a) fixing, maintaining or controlling prices of digoxin or (b) allocating and dividing customers or territories relating to the sale of digoxin in violation of Connecticut antitrust law. In June 2016, the Connecticut Attorney General issued interrogatories and a subpoena to an employee of the Company in order to gain access to documents and responses previously supplied to the Department of Justice. In December 2016, the Connecticut Attorney General, joined by numerous other State Attorney General, filed a civil complaint alleging that six pharmaceutical companies engaged in anti-competitive behavior related to Doxycycline Hyclate and Gliburide. The Company was not named in the action and does not compete on the products that formed the basis of the complaint. The Company maintains that it acted in compliance with all applicable laws and regulations and continues to cooperate with the Connecticut Attorney General’s investigation. Federal Investigation into the Generic Pharmaceutical Industry In fiscal years 2015 and 2016, the Company and certain affiliated individuals each were served with a grand jury subpoena relating to a federal investigation of the generic pharmaceutical industry into possible violations of the Sherman Act. The subpoenas request corporate documents of the Company relating to corporate, financial and employee information, communications or correspondence with competitors regarding the sale of generic prescription medications and the marketing, sale, or pricing of certain products, generally for the period of 2005 through the dates of the subpoenas. Based on reviews performed to date by outside counsel, the Company currently believes that it has acted in compliance with all applicable laws and regulations and continues to cooperate with the federal investigation. Texas Medicaid Investigation In August 2015, KUPI received a letter from the Texas Office of the Attorney General alleging that it had inaccurately reported certain price information in violation of the Texas Medicaid Fraud Prevention Act. UCB, KUPI’s previous parent company is handling the defense and is evaluating the allegations and cooperating with the Texas Attorney General’s Office. Per the terms of the Stock Purchase Agreement between the Company and UCB (“Stock Purchase Agreement”) dated September 2, 2015, the Company is fully indemnified for any pre-acquisition amounts. The Company is currently unable to estimate the timing or the outcome of this matter. Government Pricing During the quarter ended December 31, 2016, the Company completed a contract compliance review, for the period January 1, 2012 through June 30, 2016, for one of KUPI’s government-entity customers. As a result of the review, the Company identified certain commercial customer prices and other terms that were not properly disclosed to the government-entity resulting in potential overcharges. As of June 30, 2017, the Company’s best estimate of the liability for potential overcharges is approximately $9.3 million. For the period January 1, 2012 through November 24, 2015 (“the pre-acquisition period”), the Company is fully indemnified per the Stock Purchase Agreement. Accordingly, the Company has recorded an indemnification asset and related liability of $8.3 million related to the pre-acquisition period. The Company does not believe that the ultimate resolution of this matter will have a significant impact on our financial position, results of operations or cash flows. AWP Litigation The Company and some of our competitors have been named as defendants in lawsuits filed in 2016 alleging that the Company and a number of other generic pharmaceutical manufacturers caused the Average Wholesale Prices (AWPs) of our and their products to be inflated, thereby injuring government programs, entities and persons who reimbursed prescription drugs based on AWPs. The Company stopped using AWP as a basis for establishing prices in or around 2002 and the bulk of prescription drugs manufactured by the Company was sold under private label. The Company disputes these allegations and does not believe that the ultimate resolution of these lawsuits will have a significant impact on our financial position, results of operations or cash flows. Private Antitrust and Consumer Protection Litigation The Company and certain competitors have been named as defendants in a number of lawsuits filed in 2016 and 2017 alleging that the Company and certain generic pharmaceutical manufacturers have conspired to fix prices of generic digoxin, levothyroxine, ursodiol and baclofen. These cases are part of a larger group of more than 100 lawsuits generally alleging that approximately 50 generic pharmaceutical manufacturers and distributors conspired to fix prices for at least 18 different generic drugs in violation of the federal Sherman Act, various state antitrust laws, and various state consumer protection statutes. The United States also has been granted leave to intervene in the cases. On April 6, 2017, the Judicial Panel on Multidistrict Litigation ordered that all of the cases alleging price-fixing for generic drugs be consolidated for pretrial proceedings in the United States District Court for the Eastern District of Pennsylvania under the caption In re: Generic Pharmaceuticals Pricing Antitrust Litigation . The various plaintiffs are grouped into three categories — Direct Purchaser Plaintiffs, End Payer Plaintiffs, and Indirect Reseller Purchasers — and filed an Consolidated Amended Complaints against the Company and the other defendants on August 15, 2017. Originally, Plaintiffs filed a single lawsuit related to both doxycycline and digoxin naming the Company and other generic pharmaceutical manufacturers as defendants in the combined cases. However, when the multidistrict litigation was established with separate cases for each generic pharmaceutical at issue, the Company was only named as a defendant in the digoxin cases, and not the doxycycline cases. The Company believes that it acted in compliance with all applicable laws and regulations. Accordingly, the Company disputes the allegations set forth in these class actions. The Company does not believe that the ultimate resolution of these lawsuits will have a significant impact on our financial position, results of operations or cash flows. Shareholder Litigation In November 2016, a purported class action lawsuit was filed in the United States District Court for the Eastern District of Pennsylvania against the Company and two of its officers claiming that the Company in its securities filings made false and misleading statements in connection with its drug pricing methodologies and internal controls with respect to drug pricing methodologies, causing damage to the purported class. An amended complaint was filed in May 2017, and at this time the Company anticipates filing a motion to dismiss. The Company cannot reasonably predict the outcome of the suit at this time. Patent Infringement (Paragraph IV Certification) There is substantial litigation in the pharmaceutical industry with respect to the manufacture, use and sale of new products which are the subject of conflicting patent and intellectual property claims. Certain of these claims relate to paragraph IV certifications, which allege that an innovator patent is invalid or would not be infringed upon by the manufacture, use, or sale of the new drug. Zomig® The Company filed with the Food and Drug Administration an ANDA No. 206350, along with a paragraph IV certification, alleging that the two patents associated with the Zomig® nasal spray product (U.S. Patent No. 6,750,237 and U.S. Patent No. 67,220,767) are invalid. In July 2014, AstraZeneca AB, AstraZeneca UK Limited and Impax Laboratories, Inc. filed two patent infringement lawsuits in the United States District Court for the District of Delaware, alleging that the Company’s filing of ANDA No. 206350 constitutes an act of patent infringement and seeking a declaration that the two patents at issue are valid and infringed. In September 2014, the Company filed a motion to dismiss one patent infringement lawsuit for lack of standing and responded to the second lawsuit by denying that any valid patent claim would be infringed. In the second lawsuit, the Company also counterclaimed for a declaratory judgment that the patent claims are invalid and not infringed. The Court has consolidated the two actions and denied the motion to dismiss the first action without prejudice. In July 2015, the Company filed with the United States Patent and Trademark Office (“USPTO”) a Petition for Inter Partes Review of each of the patents in suit seeking to reject as invalid all claims of the patents in suit. The USPTO has issued a decision denying initiation of the Inter Partes Review. A trial was conducted in September 2016. The Court issued its decision on March 29, 2017, finding that Lannett did not prove that the patents at issue are invalid. The Company has appealed the decision and filed its opening appeal brief on July 11, 2017. The responsive brief by AstraZeneca AB, AstraZeneca UK Limited and Impax Laboratories, Inc. is due on September 5, 2017. A final decision of the appellate court is expected in late 2017 or early 2018. Thalomid® The Company filed with the Food and Drug Administration an ANDA No. 206601, along with a paragraph IV certification, alleging that the fifteen patents associated with the Thalomid drug product (U.S. Patent Nos. 6,045,501; 6,315,720; 6,561,976; 6,561,977; 6,755,784; 6,869,399; 6,908,432; 7,141,018; 7,230,012; 7,435,745; 7,874,984; 7,959,566; 8,204,763; 8,315,886; 8,589,188 and 8,626,53) are invalid, unenforceable and/or not infringed. On January 30, 2015, Celgene Corporation and Children’s Medical Center Corporation filed a patent infringement lawsuit in the United States District Court for the District of New Jersey, alleging that the Company’s filing of ANDA No. 206601 constitutes an act of patent infringement and seeking a declaration that the patents at issue are valid and infringed. The Company filed an answer and affirmative defenses, and an amended answer to the complaint. A mediation before a magistrate judge was held on March 9, 2017. An agreement in principle was reached regarding settlement of the action. The parties currently are negotiating details of a final agreement. SUPREP ® The Company filed ANDA No. 209941 with the Food and Drug Administration seeking approval to sell a bowel preparation oral solution (the “Company’s Oral Solution”), along with a paragraph IV certification, alleging that US Patent 6,946,149 associated with the Suprep® bowel preparation kit would not be infringed by the Company’s Oral Solution and/or that the patent is invalid. On March 20, 2017, Braintree Laboratories, Inc. (“Braintree”) filed a patent infringement lawsuit in the United States District Court for the District of Delaware (C.A. No. 1:17-cv-00293-GMS), alleging that the Company’s filing of ANDA No. 209941 constitutes an act of patent infringement and seeking a declaration that the patent at issue was infringed by the submission of ANDA No. 209941. The Company answered the complaint denying infringement and raising invalidity as a defense, and has filed counterclaims seeking a declaration of non-infringement and invalidity. The matter is currently scheduled for a 4-day bench trial beginning on January 22, 2019. On July 28, 2017, the Company filed a motion for judgment on the pleadings, seeking a ruling that its ANDA product does not infringe the Braintree patent and seeking judgment as a matter of law. Braintree’s responsive brief is due within 30 days and the court is expected to issue a decision in late 2017 or early 2018 on the motion. Although the Company cannot currently predict the length or outcome of paragraph IV litigation, legal expenses associated with these lawsuits could have a significant impact on the financial position, results of operations and cash flows of the Company. EPA Violation Notice On July 13, 2017, the United States Department of Environmental Protection Agency (“EPA”) sent a Finding of Violation to KUPI alleging several violations of national emissions standards for hazardous air pollutants at KUPI’s Seymour, Indiana facility. The EPA is giving the company the opportunity to discuss the matter with the agency before filing a formal complaint or assessing fines with respect to the alleged violations. The Company is conducting an investigation into the matter and cannot reasonably predict the outcome of any potential EPA action at this time. Other Litigation Matters The Company is also subject to various legal proceedings arising out of the normal course of its business including, but not limited to, product liability, intellectual property, patent infringement claims and antitrust matters. It is not possible to predict the outcome of these various proceedings. An adverse determination in any of these proceedings in the future could have a significant impact on the financial position, results of operations and cash flows of the Company. |
Commitments
Commitments | 12 Months Ended |
Jun. 30, 2017 | |
Commitments | |
Commitments | Note 13. Commitments Leases The Company leases certain manufacturing and office equipment, in the ordinary course of business. These leases are typically renewed annually. Rental and lease expense was not material for all periods presented. Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) for the twelve-month periods ending June 30 thereafter are as follows: (In thousands) Amounts Due 2018 $ 2019 2020 2021 2022 Thereafter Total $ Other Commitment During the third quarter of Fiscal 2017, the Company signed an agreement with a company operating in the pharmaceutical business, under which the Company agreed to provide up to $15.0 million in revolving loans for the purpose of expansion and other business needs. The decision to provide any portion of the revolving loan is at the Company’s sole discretion. At any time after the outstanding revolving loan balance is equal to or greater than $7.5 million, the Company has the option to convert the first $7.5 million into a 50% ownership interest in the entity. As of June 30, 2017, $977 thousand was outstanding under the revolving loan. The board of the entity is comprised of five members, two of which are employees of the Company. Based on the guidance set forth in ASC 810-10 Consolidation, the Company has concluded that it has a variable interest in the entity. However, the Company is not the primary beneficiary to the entity and as such, is not required to consolidate the entity’s results of operations. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 12 Months Ended |
Jun. 30, 2017 | |
Accumulated Other Comprehensive Loss | |
Accumulated Other Comprehensive Loss | Note 14. Accumulated Other Comprehensive Loss The Company’s Accumulated Other Comprehensive Loss was comprised of the following components as of June 30, 2017 and 2016: (In thousands) June 30, June 30, Foreign Currency Translation Beginning Balance $ ) $ ) Net (loss) on foreign currency translation (net of tax of $0 and $0) — Reclassifications to net income (net of tax of $0 and $0) — — Other comprehensive (loss), net of tax — — Ending Balance ) ) Total Accumulated Other Comprehensive Loss $ ) $ ) |
Earnings (Loss) Per Common Shar
Earnings (Loss) Per Common Share | 12 Months Ended |
Jun. 30, 2017 | |
Earnings (Loss) Per Common Share | |
Earnings (Loss) Per Common Share | Note 15. Earnings (Loss) Per Common Share A dual presentation of basic and diluted earnings per common share is required on the face of the Company’s Consolidated Statement of Operations as well as a reconciliation of the computation of basic earnings per common share to diluted earnings per common share. Basic earnings per common share excludes the dilutive impact of potentially dilutive securities and is computed by dividing net income (loss) attributable to Lannett Company, Inc. by the weighted average number of common shares outstanding for the period. Diluted earnings per common share is computed using the treasury stock method and includes the effect of potential dilution from the exercise of outstanding stock options and a warrant and treats unvested restricted stock as if it were vested. Potentially dilutive securities have been excluded in the weighted average number of common shares used for the calculation of earnings per share in periods of net loss because the effect of including such securities would be anti-dilutive. A reconciliation of the Company’s basic and diluted earnings per common share was as follows: For Fiscal Year Ended June 30, (In thousands, except share and per share data) 2017 2016 2015 Net income (loss) attributable to Lannett Company, Inc. $ ) $ $ Basic weighted average common shares outstanding Effect of potentially dilutive options and restricted stock awards — Diluted weighted average common shares outstanding Earnings (loss) per common share attributable to Lannett Company, Inc.: Basic $ ) $ $ Diluted $ ) $ $ The number of anti-dilutive shares that have been excluded in the computation of diluted earnings per share for the fiscal years ended June 30, 2017, 2016 and 2015 were 4.3 million, 3.0 million and 83 thousand, respectively. |
Warrant
Warrant | 12 Months Ended |
Jun. 30, 2017 | |
Warrant | |
Warrant | Note 16. Warrant In connection with the KUPI acquisition, Lannett issued to UCB Manufacturing a warrant to purchase up to a total of 2.5 million shares of Lannett’s common stock (the “Warrant”). The Warrant has a term of three years (expiring November 25, 2018) and an exercise price of $48.90 per share, subject to customary adjustments, including for stock splits, dividends and combinations. The Warrant also has a “weighted average” anti-dilution adjustment provision. The fair value included as part of the total consideration transferred to UCB at the acquisition date was $29.9 million. The fair value assigned to the Warrant was determined using the Black-Scholes valuation model. The Company concluded that the warrant was indexed to its own stock and therefore the Warrant has been classified as an equity instrument. |
Share-based Compensation
Share-based Compensation | 12 Months Ended |
Jun. 30, 2017 | |
Share-based Compensation | |
Share-based Compensation | Note 17. Share-based Compensation At June 30, 2017, the Company had two share-based employee compensation plans (the 2011 Long-Term Incentive Plan “LTIP” and the 2014 “LTIP”). Together these plans authorized an aggregate total of 4.5 million shares to be issued. The plans have a total of 2.1 million shares available for future issuances. The Company issues share-based compensation awards with a vesting period ranging up to 3 years and a maximum contractual term of 10 years. The Company issues new shares of stock when stock options are exercised. As of June 30, 2017, there was $6.5 million of total unrecognized compensation cost related to non-vested share-based compensation awards. That cost is expected to be recognized over a weighted average period of 1.8 years. Stock Options The Company measures share-based compensation cost for options using the Black-Scholes option pricing model. The following table presents the weighted average assumptions used to estimate fair values of the stock options granted during the fiscal years ended June 30, the estimated annual forfeiture rates used to recognize the associated compensation expense and the weighted average fair value of the options granted: June 30, June 30, June 30, Risk-free interest rate % % % Expected volatility % % % Expected dividend yield — — — Forfeiture rate % % % Expected term 5.2 years 5.2 years 5.5 years Weighted average fair value $ $ $ Expected volatility is based on the historical volatility of the price of our common shares during the historical period equal to the expected term of the option. The Company uses historical information to estimate the expected term, which represents the period of time that options granted are expected to be outstanding. The risk-free rate for the period equal to the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The forfeiture rate assumption is the estimated annual rate at which unvested awards are expected to be forfeited during the vesting period. This assumption is based on our actual forfeiture rate on historical awards. Periodically, management will assess whether it is necessary to adjust the estimated rate to reflect changes in actual forfeitures or changes in expectations. Additionally, the expected dividend yield is equal to zero, as the Company has not historically issued and has no immediate plans to issue, a dividend. A stock option roll-forward as of June 30, 2017, 2016 and 2015 and changes during the years then ended, is presented below: Weighted Weighted- Average Average Aggregate Remaining Exercise Intrinsic Contractual (In thousands, except for weighted average price and life data) Awards Price Value Life (yrs.) Outstanding at June 30, 2014 Granted Exercised ) $ Forfeited, expired or repurchased ) Outstanding at June 30, 2015 Granted Exercised ) $ Forfeited, expired or repurchased ) Outstanding at June 30, 2016 $ $ Granted Exercised ) $ Forfeited, expired or repurchased ) Outstanding at June 30, 2017 $ $ Vested and expected to vest at June 30, 2017 $ $ Exercisable at June 30, 2017 $ $ Restricted Stock The Company measures restricted stock compensation costs based on the stock price at the grant date less an estimate for expected forfeitures. The annual forfeiture rate used to calculate compensation expense was 6.5% for fiscal year ended June 30, 2017, 2016 and 2015. A summary of restricted stock awards as of June 30, 2017, 2016 and 2015 and changes during the fiscal years then ended, is presented below: (In thousands) Awards Weighted Aggregate Non-vested at June 30, 2014 Granted Vested ) $ Forfeited ) Non-vested at June 30, 2015 Granted Vested ) $ Forfeited ) Non-vested at June 30, 2016 $ Granted Vested ) $ Forfeited ) Non-vested at June 30, 2017 $ Employee Stock Purchase Plan In February 2003, the Company’s stockholders approved an Employee Stock Purchase Plan (“ESPP”). Employees eligible to participate in the ESPP may purchase shares of the Company’s stock at 85% of the lower of the fair market value of the common stock on the first day of the calendar quarter, or the last day of the calendar quarter. Under the ESPP, employees can authorize the Company to withhold up to 10% of their compensation during any quarterly offering period, subject to certain limitations. The ESPP was implemented on April 1, 2003 and is qualified under Section 423 of the Internal Revenue Code. The Board of Directors authorized an aggregate total of 1.1 million shares of the Company’s common stock for issuance under the ESPP. During the fiscal years ended June 30, 2017, 2016 and 2015, 57 thousand shares, 47 thousand shares and 12 thousand shares were issued under the ESPP, respectively. As of June 30, 2017, 542 thousand total cumulative shares have been issued under the ESPP. The following table presents the allocation of share-based compensation costs recognized in the Consolidated Statements of Operations by financial statement line item: For Fiscal Year Ended June 30, (In thousands) 2017 2016 2015 Selling, general and administrative expenses $ $ $ Research and development expenses Cost of sales Total $ $ $ Tax benefit at statutory rate $ $ $ |
Employee Benefit Plan
Employee Benefit Plan | 12 Months Ended |
Jun. 30, 2017 | |
Employee Benefit Plan | |
Employee Benefit Plan | Note 18. Employee Benefit Plan The Company has a 401k defined contribution plan (the “Plan”) covering substantially all employees. Pursuant to the Plan provisions, the Company is required to make matching contributions equal to 50% of each employee’s contribution, not to exceed 4% of the employee’s compensation for the Plan year. Contributions to the Plan during the fiscal years ended June 30, 2017, 2016 and 2015 were $2.1 million, $1.6 million and $855 thousand, respectively. |
Income Taxes
Income Taxes | 12 Months Ended |
Jun. 30, 2017 | |
Income Taxes | |
Income Taxes | Note 19. Income Taxes The provision for income taxes consisted of the following for the fiscal years ended June 30: (In thousands) June 30, June 30, June 30, Current Income Tax Expense (Benefit) Federal $ $ $ State and Local Total Current Income Tax Expense Deferred Income Tax Expense (Benefit) Federal ) ) ) State and Local ) Total Deferred Income Tax Benefit ) ) ) Total Income Tax Expense $ $ $ A reconciliation of the differences between the effective rates and federal statutory rates was as follows: June 30, June 30, June 30, Federal income tax at statutory rate % % % State and local income tax, net % )% % Nondeductible expenses % % — Foreign rate differential % % % Income tax credits )% )% )% Domestic production activity deduction — )% )% Change in tax laws — — % Excess tax benefits on share-based compensation )% — — Other % )% )% Effective income tax rate % % % The principal types of differences between assets and liabilities for financial statement and tax return purposes are accruals, reserves, impairment of intangibles, accumulated amortization, accumulated depreciation and share-based compensation expense. A deferred tax asset is recorded for the future benefits created by the timing of accruals and reserves and the application of different amortization lives for financial statement and tax return purposes. The Company’s deferred tax liability is mainly attributable to different depreciation methods for financial statement and tax return purposes. A deferred tax asset valuation allowance is established if it is more likely than not that the Company will be unable to realize certain of the deferred tax assets. As of June 30, 2017 and 2016, temporary differences which give rise to deferred tax assets and liabilities were as follows: (In thousands) June 30, June 30, Deferred tax assets: Accrued expenses $ $ Share-based compensation expense Reserve for returns Reserves for rebates Reserves for accounts receivable and inventory Intangible impairment Federal net operating loss State net operating loss Impairment on Cody note receivable Accumulated amortization on intangible assets Settlement Liability Foreign net operating loss Other Total deferred tax asset Valuation allowance ) ) Total deferred tax asset less valuation allowance Deferred tax liabilities: Prepaid expenses Property, plant and equipment Other Total deferred tax liability Net deferred tax asset $ $ The net deferred tax asset as of June 30, 2017 and 2016 is reduced by a valuation allowance of $6.4 million and $3.9 million, respectively, which are primarily related to deferred tax assets for various states, the impairment on the Cody note receivable as well as foreign net operating losses. The Company increased the valuation allowance in Fiscal 2017 primarily related to an increase of state deferred tax assets. On April 10, 2007, the Company entered into a Stock Purchase Agreement to acquire Cody by purchasing all of the remaining shares of common stock of Cody. As a result of the acquisition, the Company recorded deferred tax assets related to Cody’s federal net operation loss (NOL) carry-forwards totaling $3.8 million at the date of acquisition with $1.9 million expiring in 2026 and $1.9 million in 2027. The Company may recognize the tax benefit from an uncertain tax position claimed on a tax return only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (exclusive of interest and penalties) was as follows: (In thousands) Balance Balance at June 30, 2015 $ Additions for tax positions of the current year Additions for tax positions of prior years Additions from acquisitions Reductions for tax positions of prior years — Settlements — Lapse of statute of limitations ) Balance at June 30, 2016 $ Additions for tax positions of the current year Additions for tax positions of prior years Additions from acquisitions — Reductions for tax positions of prior years — Settlements — Lapse of statute of limitations ) Balance at June 30, 2017 $ The amount of unrecognized tax benefits at June 30, 2017, 2016 and 2015 was $5.9 million, $6.2 million and $578 thousand respectively, of which $4.2 million, $4.4 million and $578 thousand would impact the Company’s effective tax rate, respectively, if recognized. The Company has not recorded any interest and penalties for the periods ended June 30, 2017, 2016 and 2015 in the statement of operations and no cumulative interest and penalties have been recorded either in the Company’s consolidated balance sheet as of June 30, 2017 and 2016. The Company will recognize interest accrued on unrecognized tax benefits in interest expense and any related penalties in operating expenses. The cumulative amount of unrecognized tax benefits as of June 30, 2017 includes approximately $3.0 million of state reserves related to the acquisition of KUPI, which are expected to be recognized in Fiscal 2018 due to a lapse of statute of limitations. The Company files income tax returns in the United States federal jurisdiction and various states. The Company’s tax returns for Fiscal Year 2013 and prior generally are no longer subject to review as such years generally are closed. The Company believes that an unfavorable resolution for open tax years would not be material to the financial position of the Company. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Jun. 30, 2017 | |
Related Party Transactions | |
Related Party Transactions | Note 20. Related Party Transactions The Company had sales of $3.7 million, $3.1 million and $1.9 million during the fiscal years ended June 30, 2017, 2016 and 2015, respectively, to a generic distributor, Auburn Pharmaceutical Company (“Auburn”). Jeffrey Farber, Chairman of the Board, is the owner of Auburn. Accounts receivable includes amounts due from Auburn of $751 thousand and $682 thousand at June 30, 2017 and 2016, respectively. The Company also had net sales of $1.7 million during the fiscal year ended June 30, 2017 to a generic distributor, KeySource. Albert Paonessa, a current board member, was appointed the CEO of KeySource in May 2017. Accounts receivable includes amounts due from KeySource of $606 thousand as of June 30, 2017. As part of its review, the Audit Committee noted that the amount of net sales to Auburn approximated 0.6%, 0.6% and 0.5% of total net sales during the fiscal years ended June 30, 2017, 2016 and 2015, respectively. The Audit Committee also noted that the amount of net sales to KeySource approximated 0.3% of total net sales during the fiscal year ended June 30, 2017. The Audit Committee reviewed an analysis of sales prices charged to Auburn and KeySource, which compared the average sales prices by product for Auburn and KeySource sales to the average sales prices by product to other Lannett customers during the same period. As a result of this analysis, the Audit Committee ratified the net sales made to Auburn and KeySource during the fiscal year ended June 30, 2017 and 2016. |
Material Contracts with Supplie
Material Contracts with Suppliers | 12 Months Ended |
Jun. 30, 2017 | |
Material Contracts with Suppliers | |
Material Contracts with Suppliers | Note 21. Material Contracts with Suppliers Jerome Stevens Pharmaceuticals Distribution Agreement: The Company’s primary finished goods inventory supplier is JSP, in Bohemia, New York. Purchases of finished goods inventory from JSP accounted for 36%, 52% and 68% of the Company’s inventory purchases in the fiscal year ending June 30, 2017, 2016 and 2015, respectively. On August 19, 2013, the Company entered into an agreement with JSP to extend its initial contract to continue as the exclusive distributor in the United States of three JSP products: Butalbital, Aspirin, Caffeine with Codeine Phosphate Capsules USP; Digoxin Tablets USP; and Levothyroxine Sodium Tablets USP. The amendment to the original agreement extends the initial contract, which was due to expire on March 22, 2014, for five years through March 23, 2019. In connection with the amendment, the Company issued a total of 1.5 million shares of the Company’s common stock to JSP and JSP’s designees. In accordance with its policy related to renewal and extension costs for recognized intangible assets, the Company recorded a $20.1 million expense in cost of sales, which represents the fair value of the shares on August 19, 2013. If the parties agree to a second five year extension from March 23, 2019 to March 23, 2024, the Company is required to issue to JSP or its designees an additional 1.5 million shares of the Company’s common stock. Both Lannett and JSP have the right to terminate the contract if one of the parties does not cure a material breach of the contract within thirty (30) days of notice from the non-breaching party. During the renewal term of the JSP distribution agreement, the Company is required to use commercially reasonable efforts to purchase minimum dollar quantities of JSP products. There is no guarantee that the Company will continue to meet the minimum purchase requirement for Fiscal 2018 and thereafter. If the Company does not meet the minimum purchase requirements, JSP’s sole remedy is to terminate the JSP Distribution Agreement. |
Settlement Agreement
Settlement Agreement | 12 Months Ended |
Jun. 30, 2017 | |
Settlement Agreement | |
Settlement Agreement | Note 22. Settlement Agreement On March 7, 2016, the Company entered into a Settlement Agreement Release and Mutual Release (“Settlement Agreement”) with one of its former customers, pursuant to which Lannett and such customer resolved all disputes between the parties with respect to the termination of the direct sales business relationship by Lannett on December 31, 2013. Pursuant to the terms of the Settlement Agreement, Lannett paid the former customer $8.0 million in cash in calendar year 2016. Lannett will also pay to the former customer the following amounts: (a) in calendar year 2017, at the discretion of the customer, either $8.0 million in cash or a $10.0 million credit memorandum to be applied against invoices for the purchase of products from Lannett or any of its subsidiaries by such customer; and (b) in calendar year 2018, at the discretion of the customer, either $10.0 million in cash or a $12.0 million credit memorandum to be applied against invoices for the purchase of products from Lannett or any of its subsidiaries by such customer. As a result of the settlement agreement, the Company recorded a reduction to net sales in the amount of $23.6 million in the third quarter of Fiscal 2016, which represented the net present value of the future cash payments. In the third quarter of Fiscal 2017, the customer notified the Company that it had elected to receive $10.0 million in credit memorandums in lieu of $8.0 million in cash related to the calendar year 2017 election. As a result of the election, the Company re-assessed the fair value of the settlement agreement which resulted in an increase to the liability and a reduction to net sales of $4.0 million in the third quarter of Fiscal 2017. |
Quarterly Financial Information
Quarterly Financial Information (Unaudited) | 12 Months Ended |
Jun. 30, 2017 | |
Quarterly Financial Information (Unaudited) | |
Quarterly Financial Information (Unaudited) | Note 23. Quarterly Financial Information (Unaudited) Lannett’s quarterly consolidated results of operations are shown below: Fourth Third Second First (In thousands, except per share data) Quarter Quarter Quarter Quarter Fiscal 2017 Net sales $ $ $ $ Settlement agreement — ) — — Total net sales Cost of sales Gross profit Operating expenses Operating income (loss) ) Other loss ) ) ) ) Income tax expense (benefit) ) Less: Net income attributable to noncontrolling interest — — Net income (loss) attributable to Lannett Company, Inc. $ $ $ $ ) Earnings (loss) per common share attributable to Lannett Company Inc. (1) Basic $ $ $ $ ) Diluted $ $ $ $ ) Fourth Third Second First (In thousands, except per share data) Quarter Quarter Quarter Quarter Fiscal 2016 Net sales $ $ $ $ Settlement agreement — ) — — Total net sales Cost of sales Gross profit Operating expenses Operating income Other loss ) ) ) ) Income tax expense (benefit) ) ) Less: Net income attributable to noncontrolling interest Net income (loss) attributable to Lannett Company, Inc. $ $ ) $ $ Earnings (loss) per common share attributable to Lannett Company Inc. (1) Basic $ $ ) $ $ Diluted $ $ ) $ $ Fourth Third Second First (In thousands, except per share data) Quarter Quarter Quarter Quarter Fiscal 2015 Net sales $ $ $ $ Cost of sales Gross profit Operating expenses Operating income Other income (loss) ) Income tax expense Less: Net income attributable to noncontrolling interest Net income attributable to Lannett Company, Inc. $ $ $ $ Earnings per common share attributable to Lannett Company Inc. (1) Basic $ $ $ $ Diluted $ $ $ $ (1) Due to differences in weighted average common shares outstanding, quarterly earnings per share may not add up to the totals reported for the full fiscal year. The decline in operating income in the first and second quarters of Fiscal 2017 is primarily attributable to a $65.1 million and $23.0 million intangible assets impairment charge, respectively. Total net sales in the third and fourth quarters of Fiscal 2017 were negatively impacted by $4.5 million and $5.7 million, respectively, due to the Bipartisan Budget Act of 2015 which required drug manufacturers to pay additional rebates to state Medicaid programs. Total net sales in the third quarter of Fiscal 2017 was also negatively impacted by a $4.0 million adjustment to the Fiscal 2016 settlement agreement amount with a former customer (See Note 22). The decline in operating income in the third and fourth quarters of Fiscal 2016 is primarily attributable to a $23.6 million settlement agreement with a former customer and an $8.0 million intangible assets impairment charge, respectively. Net income attributable to Lannett Company, Inc. in the fourth quarter of Fiscal 2016 also included a $3.0 million loss on extinguishment of debt. The decrease in the effective tax rate in the fourth quarter of Fiscal 2016 is primarily due to state deferred tax benefits recorded as a result of the KUPI acquisition. In addition, research and development tax credits and domestic manufacturing deductions relative to pre-tax income also contributed to the lower rate. The decline in net sales from the second quarter of Fiscal 2015 to the third quarter of Fiscal 2015 was due to lower volumes and increased competition in cardiovascular products. |
Summary of Significant Accoun32
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Jun. 30, 2017 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The Consolidated Financial Statements have been prepared in conformity with generally accepted accounting principles in the United States. (“U.S. GAAP”) |
Principles of consolidation | Principles of consolidation The Consolidated Financial Statements include the accounts of Lannett Company, Inc. and its wholly-owned subsidiaries, as well as Cody LCI Realty, LLC (“Realty”), a variable interest entity (“VIE”) in which the Company had a 50% ownership interest until November 30, 2016, when the Company acquired the remaining 50% interest. Noncontrolling interest in Realty was recorded net of tax as net income attributable to the noncontrolling interest. Additionally, all intercompany accounts and transactions have been eliminated. |
Business Combinations | Business Combinations Acquired businesses are accounted for using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective estimated fair values. The fair values and useful lives assigned to each class of assets acquired and liabilities assumed are based on, among other factors, the expected future period of benefit of the asset, the various characteristics of the asset and projected future cash flows. Significant judgment is employed in determining the assumptions utilized as of the acquisition date and for each subsequent measurement period. Accordingly, changes in assumptions described above, could have a material impact on our consolidated results of operations. |
Reclassifications | Reclassifications Certain prior year amounts have been reclassified to conform to the current year financial statement presentation. |
Use of estimates | Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are required in the determination of revenue recognition and sales deductions for estimated chargebacks, rebates, returns and other adjustments including a provision for the Company’s liability under the Medicare Part D program. Additionally, significant estimates and assumptions are required when determining the fair value of long-lived assets, including goodwill and intangible assets, income taxes, contingencies, share-based compensation and contingent consideration. Because of the inherent subjectivity and complexity involved in these estimates and assumptions, actual results could differ from those estimates. |
Foreign currency translation | Foreign currency translation The Consolidated Financial Statements are presented in U.S. Dollars, the reporting currency of the Company. The financial statements of the Company’s foreign subsidiary are maintained in local currency and translated into U.S. dollars at the end of each reporting period. Assets and liabilities are translated at period-end exchange rates, while revenues and expenses are translated at average exchange rates during the period. The adjustments resulting from the use of differing exchange rates are recorded as part of stockholders’ equity in accumulated other comprehensive income (loss). Gains and losses resulting from transactions denominated in foreign currencies are recognized in the Consolidated Statements of Operations under Other income (loss). Amounts recorded due to foreign currency fluctuations are immaterial to the Consolidated Financial Statements. |
Cash and cash equivalents | Cash and cash equivalents The Company considers all highly liquid investments with original maturities less than or equal to three months at the date of purchase to be cash and cash equivalents. Cash and cash equivalents are stated at cost, which approximates fair value, and consist of bank deposits and certificates of deposit that are readily convertible into cash. The Company maintains its cash deposits and cash equivalents at well-known, stable financial institutions. Such amounts frequently exceed insured limits. |
Investment securities | Investment securities The Company’s investment securities consist of publicly-traded equity securities which are classified as trading investments. Investment securities are recorded at fair value based on quoted market prices from broker or dealer quotations or transparent pricing sources at each reporting date. Realized and unrealized gains and losses are included in the Consolidated Statements of Operations under Other income (loss). |
Allowance for doubtful accounts | Allowance for doubtful accounts The Company continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses. The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time balances are past due, the Company’s previous loss history, the customer’s current ability to pay its obligations to the Company and the condition of the general economy and the industry as a whole. The Company writes off accounts receivable when they are determined to be uncollectible. |
Inventories | Inventories Inventories are stated at the lower of cost and net realizable value by the first-in, first-out method. Inventories are regularly reviewed and provisions for excess and obsolete inventory are recorded based primarily on current inventory levels and estimated sales forecasts. |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed on a straight-line basis over the assets’ estimated useful lives. |
Intangible Assets | Intangible Assets Definite-lived intangible assets are stated at cost less accumulated amortization. Amortization of definite-lived intangible assets is computed on a straight-line basis over the assets’ estimated useful lives, generally for periods ranging from 10 to 15 years. The Company continually evaluates the reasonableness of the useful lives of these assets. Indefinite-lived intangible assets are not amortized, but instead are tested at least annually for impairment. Costs to renew or extend the term of a recognized intangible asset are expensed as incurred. |
Valuation of Long-Lived Assets, including Intangible Assets | Valuation of Long-Lived Assets, including Intangible Assets The Company’s long-lived assets primarily consist of property, plant and equipment and definite and indefinite-lived intangible assets. Property, plant and equipment and definite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances (“triggering events”) indicate that the carrying amount of the asset may not be recoverable. If a triggering event is determined to have occurred, the asset’s carrying value is compared to the future undiscounted cash flows expected to be generated by the asset. If the carrying value exceeds the undiscounted cash flow of the asset, then impairment exists. Indefinite-lived intangible assets are tested for impairment at least annually during the fourth quarter of each fiscal year or more frequently if events or changes in circumstances indicate that the asset might be impaired. An impairment loss is measured as the excess of the asset’s carrying value over its fair value, which in most cases is calculated using a discounted cash flow model. Discounted cash flow models are highly reliant on various assumptions which are considered Level 3 inputs, including estimates of future cash flows (including long-term growth rates), discount rates and the probability of achieving the estimated cash flows. |
In-Process Research and Development | In-Process Research and Development Amounts allocated to in-process research and development (“IPR&D”) in connection with a business combination are recorded at fair value and are considered indefinite-lived intangible assets subject to impairment testing in accordance with the Company’s impairment testing policy for indefinite-lived intangible assets. As products in development are approved for sale, amounts will be allocated to product rights and will be amortized over their estimated useful lives. Definite-lived intangible assets are amortized over the expected life of the asset. The judgments made in determining the estimated fair value of in-process research and development, as well as asset lives, can materially impact our results of operations. The Company’s fair value assessments are highly reliant on various assumptions which are considered Level 3 inputs, including estimates of future cash flows (including long-term growth rates), discount rates and the probability of achieving the estimated cash flows. |
Goodwill | Goodwill Goodwill, which represents the excess of purchase price over the fair value of net assets acquired, is carried at cost. Goodwill is tested for impairment on an annual basis on the first day of the fourth quarter of each fiscal year or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company first performs a qualitative assessment to determine if the quantitative impairment test is required. If changes in circumstances indicate an asset may be impaired, the Company performs the quantitative impairment test. The Company first determines the fair value of our reporting unit (generic pharmaceuticals). If the net book value of our reporting unit exceeds its fair value, the difference will be recorded as a goodwill impairment, not to exceed the carrying amount of goodwill. The Company’s fair value assessments are highly reliant on various assumptions which are considered Level 3 inputs, including estimates of future cash flows (including long-term growth rates), discount rates and the probability of achieving the estimated cash flows. The judgments made in determining the estimated fair value of goodwill can materially impact our results of operations. |
Segment Information | Segment Information The Company operates in one reportable segment, generic pharmaceuticals. As such, the Company aggregates its financial information for all products. The following table identifies the Company’s net sales by medical indication for fiscal years ended June 30, 2017, 2016 and 2015: (In thousands) Fiscal Year Ended June 30, Medical Indication 2017 2016 2015 Antibiotic $ $ $ Anti-Psychosis Cardiovascular Central Nervous System — Gallstone Gastrointestinal — Glaucoma Migraine Muscle Relaxant Obesity Pain Management Respiratory — Thyroid Deficiency Urinary Other Contract manufacturing revenue — Net sales Settlement agreement ) ) — Total net sales $ $ $ |
Customer, Supplier and Product Concentration | Customer, Supplier and Product Concentration The following table presents the percentage of total net sales, for the fiscal years ended June 30, 2017, 2016 and 2015, for certain of the Company’s products, defined as products containing the same active ingredient or combination of ingredients, which accounted for at least 10% of total net sales in any of those periods: June 30, June 30, June 30, Product 1 % % % Product 2 % % % Product 3 % % % The following table presents the percentage of total net sales, for the fiscal years ended June 30, 2017, 2016 and 2015, for certain of the Company’s customers which accounted for at least 10% of total net sales in any of those periods: June 30, June 30, June 30, Customer A % % % Customer B % % % The Company’s primary finished product inventory supplier is Jerome Stevens Pharmaceuticals, Inc. (“JSP”), in Bohemia, New York. Purchases of finished goods inventory from JSP accounted for 36%, 52% and 68% of the Company’s inventory purchases in fiscal years 2017, 2016 and 2015, respectively. See Note 21 “Material Contracts with Suppliers” for more information. |
Revenue Recognition and Net Sales Adjustments | Revenue Recognition The Company recognizes revenue when title and risk of loss have transferred to the customer and provisions for rebates, promotional adjustments, price adjustments, returns, chargebacks and other potential adjustments are reasonably determinable and collection is reasonably assured. The Company also considers all other relevant criteria specified in Securities and Exchange Commission Staff Accounting Bulletin No. 104, Topic No. 13, “ Revenue Recognition ”, in determining when to recognize revenue. Net Sales Adjustments When revenue is recognized a simultaneous adjustment to gross sales is made for chargebacks, rebates, returns, promotional adjustments and other potential adjustments. These provisions are primarily estimated based on historical experience, future expectations, contractual arrangements with wholesalers and indirect customers and other factors known to management at the time of accrual. Accruals for provisions are presented in the Consolidated Financial Statements as a reduction to gross sales with the corresponding reserve presented as a reduction of accounts receivable or included as rebates payable, depending on the nature of the reserve. The reserves, presented as a reduction of accounts receivable, totaled $175.8 million and $176.1 million at June 30, 2017 and 2016, respectively. Rebates payable at June 30, 2017 and 2016 included $44.6 million and $21.9 million, respectively, for certain rebate programs, primarily related to Medicare Part D, Medicaid and certain sales allowances and other adjustments paid to indirect customers. |
Cost of Sales, including Amortization of Intangibles | Cost of Sales, including Amortization of Intangibles Cost of sales includes all costs related to bringing products to their final selling destination, which includes direct and indirect costs, such as direct material, labor and overhead expenses. Additionally, cost of sales includes product royalties, depreciation, amortization and costs to renew or extend recognized intangible assets, freight charges and other shipping and handling expenses. |
Research and Development | Research and Development Research and development costs are expensed as incurred, including all production costs until a drug candidate is approved by the Food and Drug Administration (“FDA”). Research and development expenses include costs associated with internal projects as well as costs associated with third-party research and development contracts. |
Contingencies | Contingencies Loss contingencies, including litigation-related contingencies, are included in the Consolidated Statements of Operations when the Company concludes that a loss is both probable and reasonably estimable. Legal fees related to litigation-related matters are expensed as incurred and are included in the Consolidated Statements of Operations under the Selling, general and administrative line item. |
Contingent Consideration | Contingent Consideration Contingent consideration resulting from the KUPI acquisition was recorded at its estimated fair value on the acquisition date. The Company agreed to a 50/50 split of the additional tax liabilities UCB will incur associated with the IRS Section 338(H)(10) tax election, up to $35.0 million. These fair value measurements represent Level 3 measurements, as they are based on significant inputs not observable in the market. In the third quarter of Fiscal 2017, the Company paid UCB $35.0 million in connection with the 338(H)(10) election. |
Restructuring Costs | Restructuring Costs The Company records charges associated with approved restructuring plans to remove duplicative headcount and infrastructure associated with business acquisitions or to simplify business processes. Restructuring charges can include severance costs to eliminate a specified number of employees, infrastructure charges to vacate facilities and consolidate operations and contract cancellation costs. The Company records restructuring charges based on estimated employee terminations, site closure and consolidation plans. The Company accrues severance and other employee separation costs under these actions when it is probable that a liability exists and the amount is reasonably estimable. |
Share-based Compensation | Share-based Compensation Share-based compensation costs are recognized over the vesting period, using a straight-line method, based on the fair value of the instrument on the date of grant less an estimate for expected forfeitures. The Company uses the Black-Scholes valuation model to determine the fair value of stock options and the stock price on the grant date to value restricted stock. The Black-Scholes valuation model includes various assumptions, including the expected volatility, the expected life of the award, dividend yield and the risk-free interest rate. These assumptions involve inherent uncertainties based on market conditions which are generally outside the Company’s control. Changes in these assumptions could have a material impact on share-based compensation costs recognized in the financial statements. |
Self-Insurance | Self-Insurance Effective January 1, 2017, the Company self-insures for certain employee medical and prescription benefits. The Company also maintains stop loss coverage with third party insurers to limit our total liability exposure. The liability for self-insured risks is primarily calculated using independent third party actuarial valuations which take into account actual claims, claims growth and claims incurred but not yet reported. Actual experience, including claim frequency and severity as well as health-care inflation, could result in different liabilities than the amounts currently recorded. The liability for self-insured risks under this plan as of June 30, 2017 was not material to the financial position of the Company. |
Income Taxes | Income Taxes The Company uses the liability method to account for income taxes as prescribed by Accounting Standards Codification (“ASC”) 740, Income Taxes . Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. Deferred tax expense (benefit) is the result of changes in deferred tax assets and liabilities. Deferred income tax assets and liabilities are adjusted to recognize the effects of changes in tax laws or enacted tax rates in the period during which they are signed into law. The factors used to assess the likelihood of realization are the Company’s forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. Under ASC 740, Income Taxes , a valuation allowance is required when it is more likely than not that all or some portion of the deferred tax assets will not be realized through generating sufficient future taxable income. Failure to achieve forecasted taxable income in applicable tax jurisdictions could affect the ultimate realization of deferred tax assets and could result in an increase in the Company’s effective tax rate on future earnings. The Company may recognize the tax benefit from an uncertain tax position claimed on a tax return only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The authoritative accounting standards also provide guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. |
Earnings Per Common Share | Earnings Per Common Share Basic earnings per common share attributable to Lannett Company, Inc. is computed by dividing net income attributable to Lannett Company, Inc. common stockholders by the weighted average number of shares outstanding during the period. Diluted earnings per common share attributable to Lannett Company, Inc. is computed by dividing net income attributable to Lannett Company, Inc. common stockholders by the weighted average number of shares outstanding during the period including additional shares that would have been outstanding related to potentially dilutive securities. These potentially dilutive securities consist of stock options, unvested restricted stock and an outstanding warrant. Anti-dilutive securities are excluded from the calculation. Dilutive shares are also excluded in the calculation in periods of net loss because the effect of including such securities would be anti-dilutive. |
Comprehensive Income (Loss) | Comprehensive Income (Loss) Comprehensive income (loss) includes all changes in equity during a period except those that resulted from investments by or distributions to the Company’s stockholders. Other comprehensive income (loss) refers to gains and losses that are included in comprehensive income (loss), but excluded from net income as these amounts are recorded directly as an adjustment to stockholders’ equity. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The authoritative guidance is effective for annual reporting periods beginning after December 15, 2017. Based on a preliminary review of the contracts representing a substantial portion of our revenues, the Company does not expect the guidance to have a material impact on the timing and recognition of our revenues. The Company is still evaluating the adoption method it will elect upon implementation. In July 2015, the FASB issued ASU 2015-11, Inventory — Simplifying the Measurement of Inventory . ASU 2015-11 requires inventory to be subsequently measured using the lower of cost and net realizable value, thereby eliminating the market value approach. Net realizable value is defined as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.” ASU 2015-11 is effective for reporting periods beginning after December 15, 2016 and is applied prospectively. The adoption of ASU 2015-11 did not result in a material impact on the consolidated financial statements. In November 2015, the FASB issued ASU 2015-17, Income Taxes — Balance Sheet Classification of Deferred Taxes. ASU 2015-17 requires all deferred tax assets and liabilities to be classified as noncurrent on the balance sheet. The guidance may be applied either prospectively or retrospectively. ASU 2015-17 is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016. Early adoption is permitted. The Company does not believe this guidance will have a material impact on the consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases. ASU 2016-02 requires an entity to recognize right-of-use assets and liabilities on its balance sheet for all leases with terms longer than 12 months. Lessees and lessors are required to disclose quantitative and qualitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period and requires a modified retrospective application, with early adoption permitted. The Company is currently in the process of assessing the impact this guidance will have on the consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Compensation — Stock Compensation: Improvements to Employee Share-Based Payment Accounting . ASU 2016-09 clarifies several aspects of accounting for share-based compensation including the accounting for excess tax benefits and deficiencies, accounting for forfeitures and the classification of excess tax benefits on the cash flow statement. The Company has elected to early adopt this ASU in the fourth quarter of Fiscal 2017 which did not result in a material impact on the consolidated financial statements. As a result of our election to early adopt, all excess tax benefits are now reflected in the provision for income taxes rather than paid-in capital. The Company has also elected to continue to estimate forfeitures related to share-based payment awards at the time of grant. In addition, the Company has elected to apply the presentation requirements for cash flows related to excess tax benefits prospectively. As such, all tax-related cash flows resulting from share-based payments in Fiscal 2017 are reflected as operating activities on the statement of cash flows. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows — Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017. The Company is currently in the process of assessing the impact this guidance will have on the consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles — Goodwill and Other — Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test which previously required measurement of any goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying value and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; without exceeding the total amount of goodwill allocated to that reporting unit. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company has elected to early adopt this guidance in the fourth quarter of Fiscal 2017 and will apply it on a prospective basis. The Company does not believe that the adoption will have a material impact on its consolidated financial statements. |
Summary of Significant Accoun33
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Summary of Significant Accounting Policies | |
Schedule of the Company's net sales by medical indication | (In thousands) Fiscal Year Ended June 30, Medical Indication 2017 2016 2015 Antibiotic $ $ $ Anti-Psychosis Cardiovascular Central Nervous System — Gallstone Gastrointestinal — Glaucoma Migraine Muscle Relaxant Obesity Pain Management Respiratory — Thyroid Deficiency Urinary Other Contract manufacturing revenue — Net sales Settlement agreement ) ) — Total net sales $ $ $ |
Summary of products which accounted for at least 10% of total net sales | June 30, June 30, June 30, Product 1 % % % Product 2 % % % Product 3 % % % |
Summary of customers which accounted for at least 10% of total net sales | June 30, June 30, June 30, Customer A % % % Customer B % % % |
Acquisitions (Tables)
Acquisitions (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
KUPI | |
Acquisitions | |
Summary of fair value of total consideration transferred | The following table summarizes the fair value of total consideration transferred to KUPI shareholders at the acquisition date of November 25, 2015: (In thousands) Cash purchase price paid to KUPI shareholders $ Working capital adjustment ) Certain amounts reimbursed by UCB ) Total cash consideration transferred to KUPI shareholders 12.0% Senior Notes issued to UCB Acquisition-related contingent consideration Warrant issued to UCB Total consideration to KUPI shareholders $ |
Schedule of purchase price allocated to assets acquired and liabilities assumed | (In thousands) Purchase Cash and cash equivalents $ Accounts receivable, net of revenue-related reserves Inventories Other current assets Property, plant and equipment Product rights Trade name Other intangible assets In-process research and development Goodwill Deferred tax assets Other assets Total assets acquired Accounts payable ) Accrued expenses ) Accrued payroll and payroll-related expenses ) Rebates payable ) Royalties payable ) Other liabilities ) Total net assets acquired $ |
Schedule of unaudited pro forma information | For the fiscal year ended (In thousands, except per share data) 2016 2015 Total net sales $ $ Net income attributable to Lannett Company, Inc. Earnings per common share attributable to Lannett Company, Inc.: Basic $ $ Diluted $ $ |
Silarx | |
Acquisitions | |
Schedule of purchase price allocated to assets acquired and liabilities assumed | (In thousands) Cash $ Accounts receivable, net of revenue-related reserves Inventories Other current assets Property, plant and equipment Product rights In-process research and development Goodwill Other current assets Total assets acquired Accounts payable ) Income taxes payable ) Total net assets acquired $ |
Restructuring Charges (Tables)
Restructuring Charges (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Restructuring Charges | |
Schedule of restructuring charges associated with restructuring program | (In thousands) Twelve Twelve Employee separation costs $ $ Contract termination costs — Facility closure costs Total $ $ |
Schedule of reconciliation of changes in restructuring liabilities associated with restructuring program | (In thousands) Employee Contract Facility Closure Total Balance at June 30, 2015 $ — $ — $ — $ — Restructuring Charges Payments ) ) ) ) Balance at June 30, 2016 — Restructuring Charges — Payments ) ) ) ) Balance at June 30, 2017 $ $ — $ — $ |
Accounts Receivable (Tables)
Accounts Receivable (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Accounts Receivable | |
Schedule of accounts receivable | (In thousands) June 30, June 30, Gross accounts receivable $ $ Less Chargebacks reserve ) ) Less Rebates reserve ) ) Less Returns reserve ) ) Less Other deductions ) ) Less Allowance for doubtful accounts ) ) Accounts receivable, net $ $ |
Inventories (Tables)
Inventories (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Inventories | |
Schedule of Inventories | (In thousands) June 30, June 30, Raw Materials $ $ Work-in-process Finished Goods Total $ $ |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Property, Plant and Equipment | |
Schedule of property, plant and equipment | (In thousands) Useful Lives June 30, June 30, Land — $ $ Building and improvements 10 - 39 years Machinery and equipment 5 - 10 years Furniture and fixtures 5 - 7 years Less accumulated depreciation ) ) Construction in progress Property, plant and equipment, net $ $ |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Fair Value Measurements | |
Schedule of financial assets and liabilities measured at fair value on recurring basis | June 30, 2017 (In thousands) Level 1 Level 2 Level 3 Total Assets Equity securities $ $ — $ — $ Total Assets $ $ — $ — $ June 30, 2016 (In thousands) Level 1 Level 2 Level 3 Total Assets Equity securities $ $ — $ — $ Total Assets $ $ — $ — $ Liabilities Acquisition-related contingent consideration $ — $ — $ $ Total Liabilities $ — $ — $ $ |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Goodwill and Intangible Assets | |
Schedule of changes in the carrying amount of goodwill | (In thousands) Generic Balance at June 30, 2015 $ Goodwill acquired Balance at June 30, 2016 Measurement-period adjustments Balance at June 30, 2017 $ |
Summary of intangible assets, net | Weighted Gross Carrying Amount Accumulated Amortization Intangible Assets, Net (In thousands) Avg. Life June 30, June 30, June 30, June 30, June 30, June 30, Definite-lived: Cody Labs import license 15 $ $ $ ) $ ) $ $ KUPI product rights 15 ) ) KUPI trade name 2 ) ) KUPI other intangible assets 15 ) ) Silarx product rights 15 ) ) Other product rights 14 ) ) Total definite-lived $ $ $ ) $ ) $ $ Indefinite-lived: KUPI in-process research and development — $ $ $ — $ — $ $ Silarx in-process research and development — — — Other product rights — — — Total indefinite-lived — — Total intangible assets, net $ $ $ ) $ ) $ $ |
Summary of future annual amortization expense | (In thousands) Annual Amortization Expense 2018 $ 2019 2020 2021 2022 Thereafter $ |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Long-Term Debt | |
Summary of long-term debt, net | June 30, June 30, (In thousands) 2017 2016 Term Loan A due 2020 $ Unamortized discount and other debt issuance costs ) ) Term Loan A, net Term Loan B due 2022 Unamortized discount and other debt issuance costs ) ) Term Loan B, net Revolving Credit Facility due 2020 — Other Total debt, net Less short-term borrowings and current portion of long-term debt ) ) Total long-term debt, net $ $ |
Summary of long-term debt amounts due | Amounts Payable (In thousands) to Institutions 2018 $ 2019 2020 2021 2022 Thereafter Total $ |
Commitments (Tables)
Commitments (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Commitments | |
Schedule of future minimum lease payments under noncancelable operating leases | (In thousands) Amounts Due 2018 $ 2019 2020 2021 2022 Thereafter Total $ |
Accumulated Other Comprehensi43
Accumulated Other Comprehensive Loss (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Accumulated Other Comprehensive Loss | |
Schedule of Accumulated Other Comprehensive Loss | (In thousands) June 30, June 30, Foreign Currency Translation Beginning Balance $ ) $ ) Net (loss) on foreign currency translation (net of tax of $0 and $0) — Reclassifications to net income (net of tax of $0 and $0) — — Other comprehensive (loss), net of tax — — Ending Balance ) ) Total Accumulated Other Comprehensive Loss $ ) $ ) |
Earnings (Loss) Per Common Sh44
Earnings (Loss) Per Common Share (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Earnings (Loss) Per Common Share | |
Summary of reconciliation of the Company's basic and diluted earnings per common share | For Fiscal Year Ended June 30, (In thousands, except share and per share data) 2017 2016 2015 Net income (loss) attributable to Lannett Company, Inc. $ ) $ $ Basic weighted average common shares outstanding Effect of potentially dilutive options and restricted stock awards — Diluted weighted average common shares outstanding Earnings (loss) per common share attributable to Lannett Company, Inc.: Basic $ ) $ $ Diluted $ ) $ $ |
Share-based Compensation (Table
Share-based Compensation (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Share-based Compensation | |
Schedule of weighted average assumptions used to estimate fair values of the stock options granted and the estimated annual forfeiture rates used to recognize the associated compensation expense and the weighted average fair value of the options granted | June 30, June 30, June 30, Risk-free interest rate % % % Expected volatility % % % Expected dividend yield — — — Forfeiture rate % % % Expected term 5.2 years 5.2 years 5.5 years Weighted average fair value $ $ $ |
Summary of stock option award activity | Weighted Weighted- Average Average Aggregate Remaining Exercise Intrinsic Contractual (In thousands, except for weighted average price and life data) Awards Price Value Life (yrs.) Outstanding at June 30, 2014 Granted Exercised ) $ Forfeited, expired or repurchased ) Outstanding at June 30, 2015 Granted Exercised ) $ Forfeited, expired or repurchased ) Outstanding at June 30, 2016 $ $ Granted Exercised ) $ Forfeited, expired or repurchased ) Outstanding at June 30, 2017 $ $ Vested and expected to vest at June 30, 2017 $ $ Exercisable at June 30, 2017 $ $ |
Summary of nonvested restricted stock awards | (In thousands) Awards Weighted Aggregate Non-vested at June 30, 2014 Granted Vested ) $ Forfeited ) Non-vested at June 30, 2015 Granted Vested ) $ Forfeited ) Non-vested at June 30, 2016 $ Granted Vested ) $ Forfeited ) Non-vested at June 30, 2017 $ |
Schedule of allocation of share-based compensation costs recognized in the Consolidated Statements of Operations by financial statement line item | For Fiscal Year Ended June 30, (In thousands) 2017 2016 2015 Selling, general and administrative expenses $ $ $ Research and development expenses Cost of sales Total $ $ $ Tax benefit at statutory rate $ $ $ |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Income Taxes | |
Schedule of provision for income taxes | (In thousands) June 30, June 30, June 30, Current Income Tax Expense (Benefit) Federal $ $ $ State and Local Total Current Income Tax Expense Deferred Income Tax Expense (Benefit) Federal ) ) ) State and Local ) Total Deferred Income Tax Benefit ) ) ) Total Income Tax Expense $ $ $ |
Schedule of reconciliation of the differences between the effective rates and federal statutory rates | June 30, June 30, June 30, Federal income tax at statutory rate % % % State and local income tax, net % )% % Nondeductible expenses % % — Foreign rate differential % % % Income tax credits )% )% )% Domestic production activity deduction — )% )% Change in tax laws — — % Excess tax benefits on share-based compensation )% — — Other % )% )% Effective income tax rate % % % |
Schedule of differences which give rise to deferred tax assets and liabilities | (In thousands) June 30, June 30, Deferred tax assets: Accrued expenses $ $ Share-based compensation expense Reserve for returns Reserves for rebates Reserves for accounts receivable and inventory Intangible impairment Federal net operating loss State net operating loss Impairment on Cody note receivable Accumulated amortization on intangible assets Settlement Liability Foreign net operating loss Other Total deferred tax asset Valuation allowance ) ) Total deferred tax asset less valuation allowance Deferred tax liabilities: Prepaid expenses Property, plant and equipment Other Total deferred tax liability Net deferred tax asset $ $ |
Schedule of reconciliation of the beginning and ending amount of unrecognized tax benefits | (In thousands) Balance Balance at June 30, 2015 $ Additions for tax positions of the current year Additions for tax positions of prior years Additions from acquisitions Reductions for tax positions of prior years — Settlements — Lapse of statute of limitations ) Balance at June 30, 2016 $ Additions for tax positions of the current year Additions for tax positions of prior years Additions from acquisitions — Reductions for tax positions of prior years — Settlements — Lapse of statute of limitations ) Balance at June 30, 2017 $ |
Quarterly Financial Informati47
Quarterly Financial Information (Unaudited) (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Quarterly Financial Information (Unaudited) | |
Schedule of quarterly consolidated results of operations | Fourth Third Second First (In thousands, except per share data) Quarter Quarter Quarter Quarter Fiscal 2017 Net sales $ $ $ $ Settlement agreement — ) — — Total net sales Cost of sales Gross profit Operating expenses Operating income (loss) ) Other loss ) ) ) ) Income tax expense (benefit) ) Less: Net income attributable to noncontrolling interest — — Net income (loss) attributable to Lannett Company, Inc. $ $ $ $ ) Earnings (loss) per common share attributable to Lannett Company Inc. (1) Basic $ $ $ $ ) Diluted $ $ $ $ ) Fourth Third Second First (In thousands, except per share data) Quarter Quarter Quarter Quarter Fiscal 2016 Net sales $ $ $ $ Settlement agreement — ) — — Total net sales Cost of sales Gross profit Operating expenses Operating income Other loss ) ) ) ) Income tax expense (benefit) ) ) Less: Net income attributable to noncontrolling interest Net income (loss) attributable to Lannett Company, Inc. $ $ ) $ $ Earnings (loss) per common share attributable to Lannett Company Inc. (1) Basic $ $ ) $ $ Diluted $ $ ) $ $ Fourth Third Second First (In thousands, except per share data) Quarter Quarter Quarter Quarter Fiscal 2015 Net sales $ $ $ $ Cost of sales Gross profit Operating expenses Operating income Other income (loss) ) Income tax expense Less: Net income attributable to noncontrolling interest Net income attributable to Lannett Company, Inc. $ $ $ $ Earnings per common share attributable to Lannett Company Inc. (1) Basic $ $ $ $ Diluted $ $ $ $ (1) Due to differences in weighted average common shares outstanding, quarterly earnings per share may not add up to the totals reported for the full fiscal year. |
Summary of Significant Accoun48
Summary of Significant Accounting Policies (Details) | Nov. 30, 2016 | Nov. 30, 2016 | Jun. 30, 2017 |
Minimum | |||
Intangible assets | |||
Estimated useful lives | 10 years | ||
Maximum | |||
Intangible assets | |||
Estimated useful lives | 15 years | ||
Cody LCI Realty, LLC | |||
Principles of consolidation | |||
Ownership interest (in percent) | 50.00% | ||
Additional ownership acquired (in percent) | 50.00% |
Summary of Significant Accoun49
Summary of Significant Accounting Policies - Segment Information (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||||||
Jun. 30, 2017USD ($) | Mar. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Sep. 30, 2016USD ($) | Jun. 30, 2016USD ($) | Mar. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Sep. 30, 2015USD ($) | Jun. 30, 2015USD ($) | Mar. 31, 2015USD ($) | Dec. 31, 2014USD ($) | Sep. 30, 2014USD ($) | Jun. 30, 2017USD ($)segment | Jun. 30, 2016USD ($) | Jun. 30, 2015USD ($) | |
Medical Indication Information | |||||||||||||||
Contract manufacturing revenue | $ 17,442 | $ 22,043 | |||||||||||||
Net sales | $ 139,118 | $ 165,720 | $ 170,944 | $ 161,559 | $ 168,887 | $ 163,712 | $ 127,059 | $ 106,433 | 637,341 | 566,091 | $ 406,837 | ||||
Settlement agreement | (4,000) | (23,598) | (4,000) | (23,598) | |||||||||||
Total net sales | $ 139,118 | $ 161,720 | $ 170,944 | $ 161,559 | $ 168,887 | $ 140,114 | $ 127,059 | $ 106,433 | $ 99,276 | $ 99,352 | $ 114,822 | $ 93,387 | $ 633,341 | 542,493 | 406,837 |
Segment information | |||||||||||||||
Number of Reportable Segments | segment | 1 | ||||||||||||||
Antibiotic | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | $ 16,748 | 14,558 | 12,306 | ||||||||||||
Anti-Psychosis | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 58,625 | 5,462 | 2,260 | ||||||||||||
Cardiovascular | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 50,628 | 53,541 | 55,166 | ||||||||||||
Central Nervous System | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 39,451 | 36,291 | |||||||||||||
Gallstone | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 48,600 | 67,348 | 65,262 | ||||||||||||
Gastrointestinal | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 71,887 | 52,699 | |||||||||||||
Glaucoma | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 18,763 | 25,336 | 21,145 | ||||||||||||
Migraine | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 29,014 | 21,776 | 25,729 | ||||||||||||
Muscle Relaxant | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 13,636 | 5,403 | 8,779 | ||||||||||||
Obesity | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 3,956 | 3,809 | 4,004 | ||||||||||||
Pain Management | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 26,135 | 29,804 | 27,461 | ||||||||||||
Respiratory | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 10,516 | 9,982 | |||||||||||||
Thyroid Deficiency | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 174,005 | 162,411 | 153,460 | ||||||||||||
Urinary | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 14,695 | 17,398 | 212 | ||||||||||||
Other | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | $ 43,240 | $ 38,230 | $ 31,053 |
Summary of Significant Accoun50
Summary of Significant Accounting Policies - Customer, Supplier and Product Concentration (Details) - USD ($) $ in Thousands | Nov. 25, 2015 | Mar. 31, 2017 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 |
Net Sales Adjustments | |||||
Reserves, net of accounts receivable | $ 175,800 | $ 176,100 | |||
Rebates payable | $ 44,593 | 21,894 | |||
Contingent Consideration | |||||
Acquisition related contingent consideration | $ 35,000 | ||||
KUPI | |||||
Contingent Consideration | |||||
Split of additional tax liabilities (in percent) | 50.00% | ||||
Acquisition related contingent consideration | $ 35,000 | ||||
Payments for tax liability | $ 35,000 | ||||
Net sales | Products | Product 1 | |||||
Concentration risk | |||||
Concentration risk (as a percent) | 27.00% | 30.00% | 38.00% | ||
Net sales | Products | Product 2 | |||||
Concentration risk | |||||
Concentration risk (as a percent) | 8.00% | 12.00% | 16.00% | ||
Net sales | Products | Product 3 | |||||
Concentration risk | |||||
Concentration risk (as a percent) | 2.00% | 4.00% | 12.00% | ||
Net sales | Customers | Customer A | |||||
Concentration risk | |||||
Concentration risk (as a percent) | 28.00% | 25.00% | 30.00% | ||
Net sales | Customers | Customer B | |||||
Concentration risk | |||||
Concentration risk (as a percent) | 21.00% | 16.00% | 11.00% | ||
Inventory purchases | Suppliers | JSP | |||||
Concentration risk | |||||
Concentration risk (as a percent) | 36.00% | 52.00% | 68.00% |
Acquisitions (Details)
Acquisitions (Details) - USD ($) $ / shares in Units, $ in Thousands | Nov. 25, 2015 | Jun. 01, 2015 | Mar. 31, 2017 | Sep. 30, 2016 | Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2017 |
Fair value of total consideration transferred: | |||||||
Acquisition-related contingent consideration | $ 35,000 | ||||||
Debt instrument, stated percentage | 12.00% | ||||||
Purchase price allocation of the assets acquired and liabilities assumed | |||||||
Goodwill | $ 333,611 | $ 141 | $ 339,566 | ||||
KUPI | |||||||
Acquisitions | |||||||
Percentage of outstanding equity interest | 100.00% | ||||||
Fair value of total consideration transferred: | |||||||
Cash purchase price paid to KUPI shareholders | $ 1,030,000 | ||||||
Working capital adjustment | (41,605) | ||||||
Certain amounts reimbursed by UCB | (37,340) | ||||||
Total cash consideration transferred to KUPI shareholders | 951,055 | ||||||
12% Senior Notes Issued to UCB | 200,000 | ||||||
Acquisition-related contingent consideration | 35,000 | ||||||
Warrant issued to UCB | 29,920 | ||||||
Total consideration to KUPI shareholders | $ 1,215,975 | ||||||
Debt instrument, stated percentage | 12.00% | ||||||
Split of additional tax liabilities (in percent) | 50.00% | ||||||
Cash on hand to purchase acquisition | $ 94,600 | ||||||
Payments for tax liability | $ 35,000 | ||||||
Purchase price allocation of the assets acquired and liabilities assumed | |||||||
Cash and cash equivalents | 16,877 | ||||||
Accounts receivable, net of revenue-related reserves | 129,408 | ||||||
Inventories | 84,009 | ||||||
Other current assets | 11,238 | ||||||
Property, plant and equipment | 111,849 | ||||||
In-process research and development | 125,000 | ||||||
Goodwill | 339,425 | ||||||
Deferred tax assets | 4,186 | ||||||
Other assets | 10,218 | ||||||
Total assets acquired | 1,281,130 | ||||||
Accounts payable | (19,249) | ||||||
Accrued expenses | (6,079) | ||||||
Accrued payroll and payroll-related expenses | (21,040) | ||||||
Rebates payable | (9,816) | ||||||
Royalties payable | (3,602) | ||||||
Other liabilities | (5,369) | ||||||
Total net assets acquired | 1,215,975 | ||||||
Measurement-period adjustment to returns reserve | $ 6,000 | ||||||
Indemnification assets acquired | 20,700 | ||||||
Compensation related payments | 10,400 | ||||||
Unrecognized tax benefits | 4,900 | ||||||
Chargeback and rebate-related items | 5,400 | ||||||
Inventory fair value step-up adjustments | 19,100 | ||||||
Unaudited Pro Forma Financial Results | |||||||
Total net Sales | 689,754 | 809,379 | |||||
Net income attributable to Lannett Company, Inc. | $ 61,916 | $ 116,119 | |||||
Earnings per common share attributable to Lannett Company, Inc.: | |||||||
Basic (in dollars per share) | $ 1.70 | $ 3.24 | |||||
Diluted (in dollars per share) | $ 1.66 | $ 3.13 | |||||
Acquisition-related expenses | $ 28,900 | $ 28,900 | |||||
KUPI | Acquisition costs incurred by acquirer | |||||||
Earnings per common share attributable to Lannett Company, Inc.: | |||||||
Acquisition-related expenses | 21,500 | 21,500 | |||||
KUPI | Acquisition costs incurred by acquiree | |||||||
Earnings per common share attributable to Lannett Company, Inc.: | |||||||
Acquisition-related expenses | 7,400 | 7,400 | |||||
KUPI | Fair value set-up adjustment | |||||||
Purchase price allocation of the assets acquired and liabilities assumed | |||||||
Inventory fair value step-up adjustments | $ 17,000 | $ 18,900 | |||||
Silarx | |||||||
Acquisitions | |||||||
Percentage of outstanding equity interest | 100.00% | ||||||
Fair value of total consideration transferred: | |||||||
Total consideration to KUPI shareholders | $ 42,500 | ||||||
Purchase price allocation of the assets acquired and liabilities assumed | |||||||
Cash and cash equivalents | 664 | ||||||
Accounts receivable, net of revenue-related reserves | 4,396 | ||||||
Inventories | 2,705 | ||||||
Other current assets | 467 | ||||||
Property, plant and equipment | 7,247 | ||||||
Product rights | 10,000 | ||||||
In-process research and development | 18,000 | ||||||
Goodwill | 141 | ||||||
Other assets | 9 | ||||||
Total assets acquired | 43,629 | ||||||
Accounts payable | (711) | ||||||
Income taxes payable | (392) | ||||||
Total net assets acquired | $ 42,526 | ||||||
Senior Notes due 2023 | KUPI | |||||||
Fair value of total consideration transferred: | |||||||
Aggregate principal amount | $ 250,000 | ||||||
Debt instrument, stated percentage | 12.00% | ||||||
Revolving Credit Facility | |||||||
Fair value of total consideration transferred: | |||||||
Aggregate principal amount | $ 125,000 | ||||||
Revolving Credit Facility | KUPI | |||||||
Fair value of total consideration transferred: | |||||||
Aggregate principal amount | 22,800 | ||||||
Term loans | KUPI | |||||||
Fair value of total consideration transferred: | |||||||
Aggregate principal amount | 910,000 | ||||||
Product rights | KUPI | |||||||
Purchase price allocation of the assets acquired and liabilities assumed | |||||||
Product rights | 427,000 | ||||||
Product rights | Silarx | |||||||
Purchase price allocation of the assets acquired and liabilities assumed | |||||||
Estimated useful lives | 15 years | ||||||
Trade name | KUPI | |||||||
Purchase price allocation of the assets acquired and liabilities assumed | |||||||
Product rights | 2,920 | ||||||
Other Intangible Assets | KUPI | |||||||
Purchase price allocation of the assets acquired and liabilities assumed | |||||||
Product rights | $ 19,000 |
Restructuring Charges (Details)
Restructuring Charges (Details) - USD ($) $ in Thousands | Feb. 01, 2016 | Jun. 30, 2017 | Jun. 30, 2016 |
Restructuring Charges | |||
Restructuring Charges | $ 7,168 | $ 7,166 | |
Reconciliation of the changes in restructuring liabilities | |||
Restructuring Charges | 7,168 | 7,166 | |
2016 Restructuring Program | |||
Restructuring Charges | |||
Aggregate total estimated restructuring charges | $ 21,000 | ||
Restructuring Charges | 7,168 | 7,166 | |
Reconciliation of the changes in restructuring liabilities | |||
Beginning balance for the period | 4,130 | ||
Restructuring Charges | 7,168 | 7,166 | |
Payments | (5,867) | (3,036) | |
Ending balance for the period | 5,431 | 4,130 | |
2016 Restructuring Program | Employee separation costs | |||
Restructuring Charges | |||
Aggregate total estimated restructuring charges | 12,000 | ||
Restructuring Charges | 3,486 | 5,789 | |
Reconciliation of the changes in restructuring liabilities | |||
Beginning balance for the period | 3,833 | ||
Restructuring Charges | 3,486 | 5,789 | |
Payments | (1,888) | (1,956) | |
Ending balance for the period | 5,431 | 3,833 | |
2016 Restructuring Program | Contract termination costs | |||
Restructuring Charges | |||
Aggregate total estimated restructuring charges | 1,000 | ||
Restructuring Charges | 701 | ||
Reconciliation of the changes in restructuring liabilities | |||
Beginning balance for the period | 297 | ||
Restructuring Charges | 701 | ||
Payments | (297) | (404) | |
Ending balance for the period | 297 | ||
2016 Restructuring Program | Facility closure costs | |||
Restructuring Charges | |||
Aggregate total estimated restructuring charges | $ 8,000 | ||
Restructuring Charges | 3,682 | 676 | |
Reconciliation of the changes in restructuring liabilities | |||
Restructuring Charges | 3,682 | 676 | |
Payments | $ (3,682) | $ (676) |
Accounts Receivable (Details)
Accounts Receivable (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Accounts receivable | |||
Gross accounts receivable | $ 380,653 | $ 388,460 | |
Less: reserve | (175,800) | (176,100) | |
Less: Allowance for doubtful accounts | (796) | (610) | |
Accounts receivable, net | 204,066 | 211,722 | |
Chargebacks | |||
Accounts receivable | |||
Less: reserve | (79,537) | (86,495) | |
Provision for rebates, chargebacks, returns and other deductions | 881,300 | 646,900 | $ 338,700 |
Rebates | |||
Accounts receivable | |||
Less: reserve | (43,023) | (32,189) | |
Provision for rebates, chargebacks, returns and other deductions | 297,000 | 189,200 | 83,400 |
Returns | |||
Accounts receivable | |||
Less: reserve | (42,135) | (40,593) | |
Provision for rebates, chargebacks, returns and other deductions | 25,400 | 21,300 | 17,700 |
Other | |||
Accounts receivable | |||
Less: reserve | (11,096) | (16,851) | |
Provision for rebates, chargebacks, returns and other deductions | $ 53,400 | $ 50,000 | $ 30,700 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Inventories, net of reserves | |||
Raw materials | $ 57,442 | $ 47,881 | |
Work-in-process | 15,676 | 20,207 | |
Finished goods | 49,486 | 46,816 | |
Net inventory | 122,604 | 114,904 | |
Write-downs for excess and obsolete inventory | 10,400 | 9,400 | $ 6,700 |
Inventory reduction | $ 4,500 | $ 6,900 |
Property, Plant and Equipment55
Property, Plant and Equipment (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Property, Plant and Equipment | |||
Less accumulated depreciation | $ (71,461) | $ (53,598) | |
Property, plant and equipment, net before construction in progress | 188,499 | 179,265 | |
Property, plant and equipment, net | 243,148 | 216,638 | |
Depreciation expense | 21,800 | 13,900 | $ 5,400 |
Impairment expenses | 0 | 0 | $ 0 |
Held in foreign countries | |||
Property, Plant and Equipment | |||
Property, plant and equipment, net | 1,000 | 1,000 | |
Land | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | 6,191 | 6,191 | |
Building and improvements | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | $ 108,730 | 103,496 | |
Building and improvements | Minimum | |||
Property, Plant and Equipment | |||
Useful Lives | 10 years | ||
Building and improvements | Maximum | |||
Property, Plant and Equipment | |||
Useful Lives | 39 years | ||
Machinery and equipment | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | $ 142,086 | 120,272 | |
Machinery and equipment | Minimum | |||
Property, Plant and Equipment | |||
Useful Lives | 5 years | ||
Machinery and equipment | Maximum | |||
Property, Plant and Equipment | |||
Useful Lives | 10 years | ||
Furniture and fixtures | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | $ 2,953 | 2,904 | |
Furniture and fixtures | Minimum | |||
Property, Plant and Equipment | |||
Useful Lives | 5 years | ||
Furniture and fixtures | Maximum | |||
Property, Plant and Equipment | |||
Useful Lives | 7 years | ||
Construction in progress | |||
Property, Plant and Equipment | |||
Property, plant and equipment, net | $ 54,649 | $ 37,373 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Jun. 30, 2016 |
Assets | ||
Total Assets | $ 27,091 | $ 14,094 |
Liabilities | ||
Acquisition-related contingent consideration | 35,000 | |
Total Liabilities | 35,000 | |
Equity securities | ||
Assets | ||
Total Assets | 27,091 | 14,094 |
Level 1 | ||
Assets | ||
Total Assets | 27,091 | 14,094 |
Level 1 | Equity securities | ||
Assets | ||
Total Assets | $ 27,091 | 14,094 |
Level 3 | ||
Liabilities | ||
Acquisition-related contingent consideration | 35,000 | |
Total Liabilities | $ 35,000 |
Investment Securities (Details)
Investment Securities (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Gain (loss) on investments | |||
Gain (loss) on investment securities | $ 2,914 | $ (11) | $ 705 |
Unrealized gain (loss) related to securities still held | $ 964 | $ (51) | $ (1,100) |
Goodwill and Intangible Asset58
Goodwill and Intangible Assets - Generic (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Schedule of changes in the carrying amount of goodwill | ||
Goodwill, beginning balance | $ 333,611 | $ 141 |
Goodwill acquired | 333,470 | |
Measurement-period adjustments | 5,955 | |
Goodwill, ending balance | $ 339,566 | $ 333,611 |
Goodwill and Intangible Asset59
Goodwill and Intangible Assets - Segments (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Intangible Assets | ||
Gross Carrying Amount, Definite-lived Intangible Assets | $ 467,155 | $ 460,155 |
Accumulated Amortization | (49,743) | (20,101) |
Definite-lived Intangible Assets, Net | 417,412 | 440,054 |
Indefinite-lived assets, net | 36,449 | 135,449 |
Total intangible assets, Net | 453,861 | 575,503 |
Total intangible assets - Gross Carrying Amount, | 503,604 | 595,604 |
Other product rights | ||
Intangible Assets | ||
Indefinite-lived assets, net | 449 | 449 |
In-process research and development | KUPI | ||
Intangible Assets | ||
Indefinite-lived assets, net | 18,000 | 117,000 |
In-process research and development | Silarx | ||
Intangible Assets | ||
Indefinite-lived assets, net | 18,000 | 18,000 |
Cody Labs import license | ||
Intangible Assets | ||
Gross Carrying Amount, Definite-lived Intangible Assets | 582 | 582 |
Accumulated Amortization | (347) | (309) |
Definite-lived Intangible Assets, Net | $ 235 | 273 |
Weighted Avg. Life (Yrs.) | 15 years | |
Silarx product rights | ||
Intangible Assets | ||
Gross Carrying Amount, Definite-lived Intangible Assets | $ 10,000 | 10,000 |
Accumulated Amortization | (1,389) | (722) |
Definite-lived Intangible Assets, Net | $ 8,611 | 9,278 |
Weighted Avg. Life (Yrs.) | 15 years | |
Other product rights | ||
Intangible Assets | ||
Gross Carrying Amount, Definite-lived Intangible Assets | $ 653 | 653 |
Accumulated Amortization | (355) | (311) |
Definite-lived Intangible Assets, Net | $ 298 | 342 |
Weighted Avg. Life (Yrs.) | 14 years | |
Product rights | KUPI | ||
Intangible Assets | ||
Gross Carrying Amount, Definite-lived Intangible Assets | $ 434,000 | 427,000 |
Accumulated Amortization | (43,286) | (17,119) |
Definite-lived Intangible Assets, Net | $ 390,714 | 409,881 |
Weighted Avg. Life (Yrs.) | 15 years | |
Trade name | KUPI | ||
Intangible Assets | ||
Gross Carrying Amount, Definite-lived Intangible Assets | $ 2,920 | 2,920 |
Accumulated Amortization | (2,338) | (878) |
Definite-lived Intangible Assets, Net | $ 582 | 2,042 |
Weighted Avg. Life (Yrs.) | 2 years | |
Other Intangible Assets | KUPI | ||
Intangible Assets | ||
Gross Carrying Amount, Definite-lived Intangible Assets | $ 19,000 | 19,000 |
Accumulated Amortization | (2,028) | (762) |
Definite-lived Intangible Assets, Net | $ 16,972 | $ 18,238 |
Weighted Avg. Life (Yrs.) | 15 years |
Goodwill and Intangible Asset60
Goodwill and Intangible Assets - Future Annual Amortization Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||||
Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Intangible Assets | ||||||
Amortization expense | $ 33,600 | $ 19,500 | $ 137 | |||
Impairment charges | $ 65,100 | |||||
Annual Amortization Expense | ||||||
2,018 | 31,530 | |||||
2,019 | 30,946 | |||||
2,020 | 30,938 | |||||
2,021 | 30,938 | |||||
2,022 | 30,938 | |||||
Thereafter | 262,122 | |||||
Intangible assets, net | $ 440,054 | $ 417,412 | $ 440,054 | |||
In-process research and development | ||||||
Intangible Assets | ||||||
Impairment charges | $ 23,000 | $ 8,000 | ||||
Value assigned, abandoned project | $ 23,000 |
Long-Term Debt- Credit (Details
Long-Term Debt- Credit (Details) - USD ($) $ in Thousands | Jun. 17, 2016 | Apr. 08, 2016 | Nov. 25, 2015 | Jun. 30, 2017 | Mar. 31, 2017 | Jun. 30, 2016 | Jun. 30, 2016 |
Long-term debt | |||||||
Debt instrument, stated percentage | 12.00% | 12.00% | |||||
Loss on extinguishment of debt | $ 3,000 | $ 3,009 | |||||
KUPI | |||||||
Long-term debt | |||||||
Debt instrument, stated percentage | 12.00% | ||||||
Revolving Credit Facility | |||||||
Long-term debt | |||||||
Aggregate principal amount | $ 125,000 | ||||||
Draw down of revolving credit facility | $ 125,000 | ||||||
Payment against outstanding revolving credit facility | $ 25,000 | $ 100,000 | |||||
Balance outstanding | $ 0 | ||||||
Effective interest rate (as a percent) | 4.75% | ||||||
Unused commitment, fee rate (as a percent) | 0.50% | ||||||
Minimum percentage of commitments under secured credit facility (as a percent) | 30.00% | ||||||
Senior secured leverage ratio from and after 2015 | 4.25% | ||||||
Senior secured leverage ratio from and after 2017 | 3.75% | ||||||
Senior secured leverage ratio from and after 2019 | 3.25% | ||||||
Revolving Credit Facility | KUPI | |||||||
Long-term debt | |||||||
Aggregate principal amount | $ 22,800 | ||||||
Term Loan A Facility due 2020 | |||||||
Long-term debt | |||||||
Aggregate principal amount | $ 275,000 | ||||||
Contribution percentage of term loan on secured credit facility through 2017 (as a percent) | 1.25% | ||||||
Contribution percentage of term loan on secured credit facility from 2018 to 2020 (as a percent) | 2.50% | ||||||
Effective interest rate (as a percent) | 4.75% | ||||||
Senior secured leverage ratio from and after 2015 | 4.25% | ||||||
Senior secured leverage ratio from and after 2017 | 3.75% | ||||||
Senior secured leverage ratio from and after 2019 | 3.25% | ||||||
Term Loan B Facility due 2022 | |||||||
Long-term debt | |||||||
Aggregate principal amount | $ 635,000 | ||||||
Contribution percentage of term loan on secured credit facility on maturity (as a percent) | 1.25% | ||||||
Effective interest rate (as a percent) | 5.375% | ||||||
Incremental Term Loan | |||||||
Long-term debt | |||||||
Aggregate principal amount | $ 150,000 | ||||||
Term Loan A and Term Loan B | |||||||
Long-term debt | |||||||
Spread rate (as a percent) | 1.00% | ||||||
Amortization of deferred financing fees | 2,200 | $ 32,700 | |||||
Initial purchaser's discount | 72,100 | ||||||
Initial purchaser's discount capitalized | 14,000 | ||||||
Senior Notes due 2023 | KUPI | |||||||
Long-term debt | |||||||
Aggregate principal amount | $ 250,000 | ||||||
Outstanding principal repurchased | $ 250,000 | ||||||
Debt instrument, stated percentage | 12.00% | ||||||
Loss on extinguishment of debt | $ 3,000 |
Long-Term Debt - Net (Details)
Long-Term Debt - Net (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Jun. 30, 2016 |
Long-term debt | ||
Long-term Debt, Gross | $ 982,991 | |
Other | 735 | $ 874 |
Total debt, net | 903,647 | 1,061,848 |
Less short-term borrowings and current portion of long-term debt | (60,117) | (178,236) |
Total long-term debt, net | 843,530 | 883,612 |
Revolving Credit Facility | ||
Long-term debt | ||
Long-term Debt, Gross | 125,000 | |
Term Loan A Facility due 2020 | ||
Long-term debt | ||
Long-term Debt, Gross | 254,375 | 268,125 |
Unamortized discount and other debt issuance costs | (16,238) | (22,104) |
Total debt, net | 238,137 | 246,021 |
Term Loan B Facility due 2022 | ||
Long-term debt | ||
Long-term Debt, Gross | 727,881 | 767,226 |
Unamortized discount and other debt issuance costs | (63,106) | (77,273) |
Total debt, net | $ 664,775 | $ 689,953 |
Long-Term Debt - Due (Details)
Long-Term Debt - Due (Details) $ in Thousands | Jun. 30, 2017USD ($) |
Debt maturities | |
2,018 | $ 60,117 |
2,019 | 66,999 |
2,020 | 67,006 |
2,021 | 218,263 |
2,022 | 39,451 |
Thereafter | 531,155 |
Total debt, gross | $ 982,991 |
Legal, Regulatory Matters and64
Legal, Regulatory Matters and Contingencies (Details) $ in Thousands | Jul. 28, 2017 | Nov. 30, 2016USD ($) | Apr. 16, 2013a | Dec. 31, 2016company | Nov. 30, 2016item | Sep. 30, 2014lawsuit | Jul. 31, 2014lawsuitpatent | Dec. 31, 2016customer | Jun. 30, 2017USD ($)lawsuitDistributoritempatent | Nov. 24, 2015USD ($) |
Contingencies | ||||||||||
Purchase of remaining noncontrolling interest | $ 1,500 | |||||||||
Richard Asherman | ||||||||||
Contingencies | ||||||||||
Severance compensation, period | 18 months | |||||||||
Amount of value sought of land (as a percent) | 50.00% | |||||||||
Area of land | a | 1.66 | |||||||||
Purchase of remaining noncontrolling interest | $ 1,500 | |||||||||
Government Pricing | ||||||||||
Contingencies | ||||||||||
Number of government entity customers for whom the Company completed a contract compliance review | customer | 1 | |||||||||
Best estimate of liability | $ 9,300 | |||||||||
Indemnification asset | $ 8,300 | |||||||||
Private Antitrust and Consumer Protection Litigation | ||||||||||
Contingencies | ||||||||||
Number of generic pharmaceutical manufacturers and distributors | Distributor | 50 | |||||||||
Number of generic drugs | item | 18 | |||||||||
Private Antitrust and Consumer Protection Litigation | Minimum | ||||||||||
Contingencies | ||||||||||
Number of lawsuits | lawsuit | 100 | |||||||||
Shareholder Litigation | ||||||||||
Contingencies | ||||||||||
Number of officers | item | 2 | |||||||||
Patent Infringement (Paragraph IV Certification) | ||||||||||
Contingencies | ||||||||||
Number of lawsuits | lawsuit | 1 | 2 | ||||||||
Patents allegedly invalid, number | patent | 2 | |||||||||
Patents allegedly invalid, unenforceable and/or not infringed, number | patent | 15 | |||||||||
Number of another entity allegedly infringed | patent | 2 | |||||||||
Braintree's response period for counterclaims | 30 days | |||||||||
Connecticut Attorney General Inquiry | ||||||||||
Contingencies | ||||||||||
Number of companies | company | 6 |
Commitments (Details)
Commitments (Details) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017USD ($) | Jun. 30, 2017USD ($)item | |
Future minimum lease payments | ||
2,018 | $ 1,159 | |
2,019 | 1,080 | |
2,020 | 1,080 | |
2,021 | 1,080 | |
2,022 | 1,080 | |
Thereafter | 5,238 | |
Total | 10,717 | |
Revolving loan | ||
Future minimum lease payments | ||
Maximum contractual obligation agreed upon agreement | $ 15,000 | |
Minimum amount to be considered for conversion of loan to ownership interest | $ 7,500 | |
Ownership interest for conversion (in percentage) | 50.00% | |
Contractual obligation, Outstanding | $ 977 | |
Number of members in the board of the entity | item | 5 | |
Number of employees in members of the board of the entity | item | 2 |
Accumulated Other Comprehensi66
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Foreign Currency Translation | ||
Beginning Balance | $ (295) | $ (295) |
Net (loss) on foreign currency translation (net of tax of $0 and $0) | 73 | |
Net (loss) on foreign currency translation, tax | 0 | 0 |
Reclassifications to net income, tax | 0 | 0 |
Ending Balance | (222) | (295) |
Total Accumulated Other Comprehensive Loss | $ (222) | $ (295) |
Earnings (Loss) Per Common Sh67
Earnings (Loss) Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||||||
Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Earnings (Loss) Per Common Share | |||||||||||||||
Net income (loss) attributable to Lannett Company, Inc | $ 5,726 | $ 14,929 | $ 8,172 | $ (29,408) | $ 3,571 | $ (5,490) | $ 13,520 | $ 33,181 | $ 33,943 | $ 36,233 | $ 44,811 | $ 34,932 | $ (581) | $ 44,782 | $ 149,919 |
Basic weighted average common shares outstanding | 36,812,524 | 36,442,782 | 35,827,167 | ||||||||||||
Effect of potentially dilutive options and restricted stock awards | 946,663 | 1,299,950 | |||||||||||||
Diluted weighted average common shares outstanding | 36,812,524 | 37,389,445 | 37,127,117 | ||||||||||||
Earnings (loss) per common share attributable to Lannett Company, Inc.: | |||||||||||||||
Basic (in dollars per share) | $ 0.16 | $ 0.41 | $ 0.22 | $ (0.80) | $ 0.10 | $ (0.15) | $ 0.37 | $ 0.91 | $ 0.94 | $ 1.01 | $ 1.26 | $ 0.98 | $ (0.02) | $ 1.23 | $ 4.18 |
Diluted (in dollars per share) | $ 0.15 | $ 0.40 | $ 0.22 | $ (0.80) | $ 0.10 | $ (0.15) | $ 0.36 | $ 0.89 | $ 0.91 | $ 0.97 | $ 1.21 | $ 0.94 | $ (0.02) | $ 1.20 | $ 4.04 |
Anti-dilutive shares excluded in the computation of diluted earnings per share | 4,300,000 | 3,000,000 | 83,000 |
Warrant (Details)
Warrant (Details) - USD ($) $ / shares in Units, $ in Thousands, shares in Millions | Nov. 25, 2015 | Jun. 30, 2016 |
Class of Warrant or Right | ||
Warrant issued | $ 29,920 | |
KUPI | Warrant issued to UCB | ||
Class of Warrant or Right | ||
Number of common stock to be purchased under the warrant | 2.5 | |
Warrants expiration period | 3 years | |
warrants exercise price | $ 48.90 | |
Warrant issued | $ 29,900 |
Share-based Compensation (Detai
Share-based Compensation (Details) shares in Millions, $ in Millions | 12 Months Ended |
Jun. 30, 2017USD ($)itemshares | |
Stock-based Compensation | |
Number of share-based employee compensation plans | item | 2 |
Aggregate number of shares authorized for issuance | 4.5 |
Shares for future issuances | 2.1 |
Maximum | |
Other disclosures | |
Share-based compensation awards vesting period | 3 years |
Share-based compensation awards maximum contractual term | 10 years |
Restricted stock | |
Other disclosures | |
Total unrecognized compensation cost related to non-vested share-based compensation awards granted under the Plans | $ | $ 6.5 |
Weighted average period during which the cost is expected to be recognized | 1 year 9 months 18 days |
Share-based Compensation - Opti
Share-based Compensation - Options (Details) - Stock options - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Weighted average assumptions used to estimate fair values of the stock options granted and the estimated annual forfeiture rates used to recognize the associated compensation expense and the weighted average fair value of the options granted | |||
Risk-free interest rate (as a percent) | 1.10% | 1.70% | 1.70% |
Expected volatility (as a percent) | 55.60% | 48.30% | 52.10% |
Forfeiture rate (as a percent) | 6.50% | 6.50% | 6.50% |
Expected term (in years) | 5 years 2 months 12 days | 5 years 2 months 12 days | 5 years 6 months |
Weighted average fair value (in dollars per share) | $ 15.33 | $ 26.24 | $ 17.73 |
Awards | |||
Outstanding at the beginning of the period (in shares) | 1,730 | 1,975 | 2,205 |
Granted (in shares) | 11 | 58 | 513 |
Exercised (in shares) | (234) | (254) | (665) |
Forfeited, expired or repurchased (in shares) | (32) | (49) | (78) |
Outstanding at the end of the period (in shares) | 1,475 | 1,730 | 1,975 |
Vested and expected to vest, Awards (in shares) | 1,473 | ||
Exercisable at the end of year (in shares) | 1,328 | ||
Stock options, Weighted-Average Exercise Price | |||
Outstanding at the beginning of the period (in dollars per share) | $ 16.77 | $ 15.39 | $ 7.84 |
Granted (in dollars per share) | 31.30 | 59.20 | 36.71 |
Exercised (in dollars per share) | 7.38 | 12.62 | 6.47 |
Forfeited, expired or repurchased (in dollars per share) | 33.04 | 32.66 | 18.33 |
Outstanding at the end of the period (in dollars per share) | 18.02 | $ 16.77 | $ 15.39 |
Vested and expected to vest, Weighted-Average Exercise Price (in dollars per share) | 17.98 | ||
Exercisable at the end of the period (in dollars per share) | $ 15.69 | ||
Aggregate Intrinsic Value | |||
Exercised (in dollars) | $ 4,849 | $ 6,168 | $ 33,201 |
Outstanding at the end of the period (in dollars) | 12,212 | $ 19,524 | $ 86,983 |
Vested and expected to vest, Aggregate Intrinsic Value | 12,212 | ||
Exercisable at the end of the period (in dollars) | $ 12,212 | ||
Weighted Average Remaining Contractual Life (yrs.) | |||
Outstanding at the end of the period (in years) | 5 years 8 months 12 days | 6 years 3 months 18 days | 7 years 2 months 12 days |
Vested and expected to vest, Weighted Average Remaining Contractual Life | 5 years 8 months 12 days | ||
Exercisable at the end of the period (in years) | 5 years 8 months 12 days |
Share-based Compensation - RSU
Share-based Compensation - RSU & ESPP (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Employee Stock Purchase Plan | |||
Company's common stock authorized for issuance under the ESPP (in shares) | 4,500 | ||
Restricted stock | |||
Stock Options and Restricted Stock | |||
Annual forfeiture rate used to calculate compensation expense (as a percent) | 6.50% | 6.50% | 6.50% |
Awards | |||
Non-vested at the beginning of the period (in shares) | 167 | 98 | 16 |
Granted (in shares) | 298 | 147 | 103 |
Vested (in shares) | (86) | (66) | (14) |
Forfeited (in shares) | (45) | (12) | (7) |
Non-vested at the end of the period (in shares) | 334 | 167 | 98 |
Weighted Average Grant-date Fair Value | |||
Non-vested at the beginning of the period (in dollars per share) | $ 48.22 | $ 37.83 | $ 34.01 |
Granted (in dollars per share) | 24.73 | 54.64 | 37.97 |
Vested (in dollars per share) | 42.60 | 47.11 | 36.06 |
Forfeited (in dollars per share) | 32.90 | 47.67 | 36.59 |
Non-vested at the end of the period (in dollars per share) | $ 30.71 | $ 48.22 | $ 37.83 |
Aggregate Intrinsic Value | |||
Vested | $ 2,564 | $ 3,511 | $ 664 |
Employee stock purchase plan | |||
Employee Stock Purchase Plan | |||
Purchase price lower of the fair market value of the common stock on the first day of the calendar quarter or the last day of the calendar quarter (as a percent) | 85.00% | ||
Percentage of the compensation authorized by the employee to be withheld | 10.00% | ||
Company's common stock authorized for issuance under the ESPP (in shares) | 1,100 | ||
Shares issued under the ESPP (in shares) | 57 | 47 | 12 |
Cumulative shares issued under the ESPP (in shares) | 542 |
Share-based Compensation - Cost
Share-based Compensation - Costs (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Share-based compensation costs recognized in the entity's Consolidated Statements of Operations | |||
Share based compensation | $ 7,719 | $ 11,562 | $ 6,397 |
Tax benefit at statutory rate | 2,818 | 4,220 | 2,159 |
Selling, general and administrative | |||
Share-based compensation costs recognized in the entity's Consolidated Statements of Operations | |||
Share based compensation | 5,855 | 9,529 | 5,145 |
Research and development | |||
Share-based compensation costs recognized in the entity's Consolidated Statements of Operations | |||
Share based compensation | 661 | 760 | 523 |
Cost of sales | |||
Share-based compensation costs recognized in the entity's Consolidated Statements of Operations | |||
Share based compensation | $ 1,203 | $ 1,273 | $ 729 |
Employee Benefit Plan (Details)
Employee Benefit Plan (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Employee Benefit Plan | |||
Company matching contributions equal to each employee's contribution (as a percent) | 50.00% | ||
Maximum contribution by the company as a percentage of employee's compensation for the Plan year | 4.00% | ||
Contributions to the Plan | $ 2,100 | $ 1,600 | $ 855 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||||||||||||||
Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | Apr. 10, 2007 | |
Current Income Tax Expense (Benefit) | ||||||||||||||||
Federal | $ 764 | $ 34,932 | $ 80,124 | |||||||||||||
State and Local | 638 | 1,887 | 572 | |||||||||||||
Total Current Income Tax Expense | 1,402 | 36,819 | 80,696 | |||||||||||||
Deferred Income Tax Expense (Benefit) | ||||||||||||||||
Federal | (2,210) | (17,529) | (5,245) | |||||||||||||
State and Local | 1,905 | (1,968) | 1,979 | |||||||||||||
Total Deferred Income Tax Benefit | (305) | (19,497) | (3,266) | |||||||||||||
Total Income Tax Expense | $ 3,100 | $ 7,337 | $ 3,542 | $ (12,882) | $ (2,948) | $ (2,743) | $ 5,958 | $ 17,055 | $ 17,222 | $ 17,973 | $ 22,435 | $ 19,800 | $ 1,097 | $ 17,322 | $ 77,430 | |
Reconciliation of the company's federal statutory tax rate to its effective rate | ||||||||||||||||
Federal income tax at statutory rate (as a percent) | 35.00% | 35.00% | 35.00% | |||||||||||||
State and local income tax, net (as a percent) | 293.60% | (0.10%) | 0.10% | |||||||||||||
Nondeductible expenses (as a percent) | 45.40% | 0.80% | ||||||||||||||
Foreign rate differential (as a percent) | 49.90% | 0.50% | 0.10% | |||||||||||||
Income tax credits (as a percent) | (160.90%) | (3.00%) | (0.40%) | |||||||||||||
Domestic production activity deduction (as a percent) | (5.20%) | (1.30%) | ||||||||||||||
Change in tax laws (as a percent) | 0.60% | |||||||||||||||
Excess tax benefits on share-based compensation | (134.30%) | |||||||||||||||
Other (as a percent) | 70.80% | (0.10%) | (0.10%) | |||||||||||||
Effective income tax rate (as a percent) | 199.50% | 27.90% | 34.00% | |||||||||||||
Deferred tax assets: | ||||||||||||||||
Accrued expenses | 1,869 | 1,636 | $ 1,869 | $ 1,636 | ||||||||||||
Share-based compensation expense | 6,031 | 5,074 | 6,031 | 5,074 | ||||||||||||
Reserve for returns | 15,032 | 14,583 | 15,032 | 14,583 | ||||||||||||
Reserves for rebates | 11,194 | 19,235 | 11,194 | 19,235 | ||||||||||||
Reserves for accounts receivable and inventory | 2,026 | 6,305 | 2,026 | 6,305 | ||||||||||||
Intangible impairment | 2,176 | 3,312 | 2,176 | 3,312 | ||||||||||||
Federal net operating loss | 736 | 736 | 736 | 736 | ||||||||||||
State net operating loss | 2,944 | 1,469 | 2,944 | 1,469 | ||||||||||||
Impairment on Cody note receivable | 1,913 | 1,941 | 1,913 | 1,941 | ||||||||||||
Accumulated amortization on intangible assets | 25,505 | 5,301 | 25,505 | 5,301 | ||||||||||||
Settlement Liability | 6,019 | 7,014 | 6,019 | 7,014 | ||||||||||||
Foreign net operating loss | 736 | 579 | 736 | 579 | ||||||||||||
Other | 290 | 901 | 290 | 901 | ||||||||||||
Total deferred tax asset | 76,471 | 68,086 | 76,471 | 68,086 | ||||||||||||
Valuation allowance | (6,391) | (3,927) | (6,391) | (3,927) | ||||||||||||
Total deferred tax asset less valuation allowance | 70,080 | 64,159 | 70,080 | 64,159 | ||||||||||||
Deferred tax liabilities: | ||||||||||||||||
Prepaid expenses | 267 | 263 | 267 | 263 | ||||||||||||
Property, plant and equipment | 16,807 | 11,381 | 16,807 | 11,381 | ||||||||||||
Other | 253 | 67 | 253 | 67 | ||||||||||||
Total deferred tax liability | 17,327 | 11,711 | 17,327 | 11,711 | ||||||||||||
Net deferred tax asset | $ 52,753 | $ 52,448 | $ 52,753 | $ 52,448 | ||||||||||||
Cody Laboratories, Inc. | ||||||||||||||||
Deferred tax assets: | ||||||||||||||||
Total deferred tax asset | $ 3,800 | |||||||||||||||
Net operating loss (NOL) carry forwards with the IRS at the date of acquisition, expiring in 2026 | Cody Laboratories, Inc. | ||||||||||||||||
Deferred tax assets: | ||||||||||||||||
Total deferred tax asset | 1,900 | |||||||||||||||
Net operating loss (NOL) carry forwards with the IRS at the date of acquisition, expiring in 2027 | Cody Laboratories, Inc. | ||||||||||||||||
Deferred tax assets: | ||||||||||||||||
Total deferred tax asset | $ 1,900 |
Income Taxes - Reconciliation (
Income Taxes - Reconciliation (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Reconciliation of the beginning and ending amount of gross unrecognized tax benefits | |||
Balance at the beginning of the period | $ 6,244 | $ 578 | |
Additions for tax positions of the current year | 168 | 742 | |
Additions for tax positions of prior years | 16 | 109 | |
Additions from acquisitions | 4,858 | ||
Lapse of statute of limitations | (486) | (43) | |
Balance at the end of the period | 5,942 | 6,244 | $ 578 |
Unrecognized tax benefits that if recognized, would impact the tax expense and effective tax rate | 4,200 | 4,400 | $ 578 |
Unrecognized tax benefits cumulative interest and penalties recorded | 0 | $ 0 | |
KUPI | |||
Reconciliation of the beginning and ending amount of gross unrecognized tax benefits | |||
Additions from acquisitions | $ 3,000 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Chairman of the Board | |||
Related Party Transactions | |||
Sales to a generic distributor | $ 3,700 | $ 3,100 | $ 1,900 |
Amounts due from the related party | $ 751 | $ 682 | |
Sales to related party (as a percent) | 0.60% | 0.60% | 0.50% |
Board Member | |||
Related Party Transactions | |||
Sales to a generic distributor | $ 1,700 | ||
Amounts due from the related party | $ 606 | ||
Sales to related party (as a percent) | 0.30% |
Material Contracts with Suppl77
Material Contracts with Suppliers (Details) - JSP shares in Millions, $ in Millions | Aug. 19, 2013USD ($)shares | Aug. 19, 2013item | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 |
Material Contracts with Suppliers | |||||
Number of shares of common stock issued in exchange for exclusive distribution rights | 1.5 | ||||
Number of products under the exclusive distribution agreement | item | 3 | ||||
Extension term of the agreement | 5 years | ||||
Second extension term of the agreement | 5 years | ||||
Number of shares of common stock issued in exchange for extension of exclusive distribution rights agreement | 1.5 | ||||
Period from notice within which if breach is not cured, non-breaching party has right to terminate contract | 30 days | ||||
Cost of sales | |||||
Material Contracts with Suppliers | |||||
Fair value of shares | $ | $ 20.1 | ||||
Inventory purchases | Suppliers | |||||
Material Contracts with Suppliers | |||||
Purchases of finished goods inventory from JSP as a percentage of the company's inventory purchases | 36.00% | 52.00% | 68.00% |
Settlement Agreement (Details)
Settlement Agreement (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | ||||
Mar. 31, 2017USD ($) | Mar. 31, 2016USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Mar. 07, 2016customer | |
Settlement agreement | ||||||
Reduction in net sales | $ 4,000 | $ 23,598 | $ 4,000 | $ 23,598 | ||
Settlement Agreement | Settled litigation | ||||||
Settlement agreement | ||||||
Number of customers involved in litigation settlement agreement | customer | 1 | |||||
Settlement in cash | 8,000 | 8,000 | $ 8,000 | |||
Settlement in credit memorandum | $ 10,000 | $ 10,000 | ||||
Settlement Agreement | Settled litigation | Forecast | ||||||
Settlement agreement | ||||||
Settlement in cash | $ 10,000 | |||||
Settlement in credit memorandum | $ 12,000 |
Quarterly Financial Informati79
Quarterly Financial Information (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||||||
Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Quarterly Financial Information (Unaudited) | |||||||||||||||
Net sales | $ 139,118 | $ 165,720 | $ 170,944 | $ 161,559 | $ 168,887 | $ 163,712 | $ 127,059 | $ 106,433 | $ 637,341 | $ 566,091 | $ 406,837 | ||||
Settlement agreement | (4,000) | (23,598) | (4,000) | (23,598) | |||||||||||
Total net sales | 139,118 | 161,720 | 170,944 | 161,559 | 168,887 | 140,114 | 127,059 | 106,433 | $ 99,276 | $ 99,352 | $ 114,822 | $ 93,387 | 633,341 | 542,493 | 406,837 |
Cost of sales | 80,240 | 89,290 | 82,891 | 79,707 | 88,957 | 82,623 | 55,414 | 29,006 | 27,326 | 23,714 | 27,621 | 21,820 | 300,030 | 237,371 | 100,344 |
Gross profit | 58,878 | 72,430 | 88,053 | 81,852 | 79,930 | 57,491 | 71,645 | 77,427 | 71,950 | 75,638 | 87,201 | 71,567 | 301,213 | 286,493 | 306,356 |
Operating expenses | 30,069 | 28,793 | 53,747 | 102,158 | 49,535 | 38,874 | 41,320 | 26,006 | 20,932 | 21,363 | 20,658 | 16,916 | 214,767 | 155,735 | 79,869 |
Operating income | 28,809 | 43,637 | 34,306 | (20,306) | 30,395 | 18,617 | 30,325 | 51,421 | 51,018 | 54,275 | 66,543 | 54,651 | 86,446 | 130,758 | 226,487 |
Other | (19,983) | (21,371) | (22,578) | (21,964) | (29,752) | (26,830) | (10,827) | (1,170) | 165 | (42) | 713 | 99 | (244) | (1) | 12 |
Income tax expense | 3,100 | 7,337 | 3,542 | (12,882) | (2,948) | (2,743) | 5,958 | 17,055 | 17,222 | 17,973 | 22,435 | 19,800 | 1,097 | 17,322 | 77,430 |
Less: Net income attributable to noncontrolling interest | 14 | 20 | 20 | 20 | 20 | 15 | 18 | 27 | 10 | 18 | 34 | 75 | 73 | ||
Net income (loss) attributable to Lannett Company, Inc. | $ 5,726 | $ 14,929 | $ 8,172 | $ (29,408) | $ 3,571 | $ (5,490) | $ 13,520 | $ 33,181 | $ 33,943 | $ 36,233 | $ 44,811 | $ 34,932 | $ (581) | $ 44,782 | $ 149,919 |
Earnings (loss) per common share attributable to Lannett Company, Inc.: | |||||||||||||||
Basic (in dollars per share) | $ 0.16 | $ 0.41 | $ 0.22 | $ (0.80) | $ 0.10 | $ (0.15) | $ 0.37 | $ 0.91 | $ 0.94 | $ 1.01 | $ 1.26 | $ 0.98 | $ (0.02) | $ 1.23 | $ 4.18 |
Diluted (in dollars per share) | $ 0.15 | $ 0.40 | $ 0.22 | $ (0.80) | $ 0.10 | $ (0.15) | $ 0.36 | $ 0.89 | $ 0.91 | $ 0.97 | $ 1.21 | $ 0.94 | $ (0.02) | $ 1.20 | $ 4.04 |
Quarterly Financial Informati80
Quarterly Financial Information (Unaudited) - Other Disclosures (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||||||
Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Other disclosures | ||||||||
Settlement agreement provision | $ 4,000 | $ 23,598 | $ 4,000 | $ 23,598 | ||||
Impairment charge related to intangible assets | $ 65,100 | |||||||
Additional rebates to state medicaid programs | $ 5,700 | $ 4,500 | ||||||
Loss on extinguishment of debt | $ (3,000) | $ (3,009) | ||||||
In-process research and development | ||||||||
Other disclosures | ||||||||
Impairment charge related to intangible assets | $ 23,000 | $ 8,000 |