Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Jun. 30, 2018 | Jul. 31, 2018 | Dec. 31, 2017 | |
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, 2018 | ||
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 | $ 661,533,778 | ||
Entity Common Stock, Shares Outstanding | 38,901,532 | ||
Document Fiscal Year Focus | 2,018 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2018 | Jun. 30, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 98,586 | $ 117,737 |
Investment securities | 27,091 | |
Accounts receivable, net | 252,651 | 204,066 |
Inventories | 141,635 | 122,604 |
Prepaid income taxes | 15,159 | 16,703 |
Assets held for sale | 13,976 | |
Other current assets | 4,863 | 6,592 |
Total current assets | 526,870 | 494,793 |
Property, plant and equipment, net | 233,247 | 243,148 |
Intangible assets, net | 424,425 | 453,861 |
Goodwill | 339,566 | 339,566 |
Deferred tax assets | 22,063 | 52,753 |
Other assets | 29,133 | 19,191 |
TOTAL ASSETS | 1,575,304 | 1,603,312 |
Current liabilities: | ||
Accounts payable | 56,767 | 44,720 |
Accrued expenses | 7,425 | 12,499 |
Accrued payroll and payroll-related expenses | 7,819 | 4,833 |
Rebates payable | 49,400 | 44,593 |
Royalties payable | 5,955 | 3,015 |
Restructuring liability | 6,706 | 5,431 |
Settlement liability | 17,000 | |
Short-term borrowings and current portion of long-term debt | 66,845 | 60,117 |
Total current liabilities | 200,917 | 192,208 |
Long-term debt, net | 772,425 | 843,530 |
Other liabilities | 3,047 | 6,452 |
TOTAL LIABILITIES | 976,389 | 1,042,190 |
Commitments and Contingencies (Note 11 and 12) | ||
STOCKHOLDERS' EQUITY | ||
Common stock ($0.001 par value, 100,000,000 shares authorized; 38,256,839 and 37,528,450 shares issued; 37,380,517 and 36,919,296 shares outstanding at June 30, 2018 and 2017, respectively) | 38 | 37 |
Additional paid-in capital | 306,817 | 292,780 |
Retained earnings | 306,464 | 277,774 |
Accumulated other comprehensive loss | (515) | (222) |
Treasury stock (876,322 and 609,154 shares at June 30, 2018 and 2017, respectively) | (13,889) | (9,247) |
Total Lannett Company, Inc. stockholders' equity | 598,915 | 561,122 |
Total stockholders' equity | 598,915 | 561,122 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 1,575,304 | $ 1,603,312 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2018 | Jun. 30, 2017 |
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 | 38,256,839 | 37,528,450 |
Common stock, outstanding shares | 37,380,517 | 36,919,296 |
Treasury stock, shares | 876,322 | 609,154 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | |||
Net sales | $ 684,563 | $ 637,341 | $ 566,091 |
Settlement agreement | (4,000) | (23,598) | |
Total net sales | 684,563 | 633,341 | 542,493 |
Cost of sales | 363,729 | 300,030 | 237,371 |
Amortization of intangibles | 32,128 | 32,098 | 18,629 |
Gross profit | 288,706 | 301,213 | 286,493 |
Operating expenses: | |||
Research and development expenses | 29,196 | 42,073 | 45,054 |
Selling, general and administrative expenses | 82,196 | 73,477 | 68,325 |
Acquisition and integration-related expenses | 83 | 3,965 | 27,190 |
Restructuring expenses | 7,061 | 7,168 | 7,166 |
Loss on sale of intangible asset | 15,514 | ||
Asset impairment charges | 24,960 | 88,084 | 8,000 |
Total operating expenses | 159,010 | 214,767 | 155,735 |
Operating income | 129,696 | 86,446 | 130,758 |
Other income (loss): | |||
Loss on extinguishment of debt | (3,009) | ||
Investment income | 4,753 | 3,768 | 368 |
Interest expense | (85,634) | (89,420) | (65,937) |
Other | 2,278 | (244) | (1) |
Total other loss | (78,603) | (85,896) | (68,579) |
Income before income taxes | 51,093 | 550 | 62,179 |
Income tax expense | 22,403 | 1,097 | 17,322 |
Net income (loss) | 28,690 | (547) | 44,857 |
Less: Net income attributable to noncontrolling interest | 34 | 75 | |
Net income (loss) attributable to Lannett Company, Inc. | $ 28,690 | $ (581) | $ 44,782 |
Earnings (loss) per common share attributable to Lannett Company, Inc.: | |||
Basic (in dollars per share) | $ 0.77 | $ (0.02) | $ 1.23 |
Diluted (in dollars per share) | $ 0.75 | $ (0.02) | $ 1.20 |
Weighted average common shares outstanding: | |||
Basic (in shares) | 37,127,306 | 36,812,524 | 36,442,782 |
Diluted (in shares) | 38,162,514 | 36,812,524 | 37,389,445 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | |||
Net income (loss) | $ 28,690 | $ (547) | $ 44,857 |
Other comprehensive income (loss), before taxes: | |||
Foreign currency translation gain (loss) | (293) | 73 | |
Total other comprehensive income (loss), net of taxes | (293) | 73 | |
Comprehensive income (loss) | 28,397 | (474) | 44,857 |
Less: Total comprehensive income attributable to noncontrolling interest | 34 | 75 | |
Comprehensive income (loss) attributable to Lannett Company, Inc. | $ 28,397 | $ (508) | $ 44,782 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (loss) | Treasury Stock | Stockholders' Equity Attributable to Lannett Co., Inc | Noncontrolling Interest | Total |
Balance at Jun. 30, 2015 | $ 37 | $ 236,178 | $ 233,573 | $ (295) | $ (6,080) | $ 463,413 | $ 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 | $ 37 | 283,301 | 278,355 | (295) | (7,349) | 554,049 | 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 , net of income tax | 73 | 73 | 73 | |||||
Net income (loss) | (581) | (581) | $ 34 | (547) | ||||
Balance at Jun. 30, 2017 | $ 37 | 292,780 | 277,774 | (222) | (9,247) | 561,122 | 561,122 | |
Balance (in shares) at Jun. 30, 2017 | 37,528 | |||||||
Increase (Decrease) in Shareholders' Equity | ||||||||
Shares issued in connection with share-based compensation plans | $ 1 | 4,141 | 4,142 | 4,142 | ||||
Shares issued in connection with share-based compensation plans (in shares) | 729 | |||||||
Share-based compensation | 9,896 | 9,896 | 9,896 | |||||
Purchase of treasury stock | (4,642) | (4,642) | (4,642) | |||||
Other comprehensive income , net of income tax | (293) | (293) | (293) | |||||
Net income (loss) | 28,690 | 28,690 | 28,690 | |||||
Balance at Jun. 30, 2018 | $ 38 | $ 306,817 | $ 306,464 | $ (515) | $ (13,889) | $ 598,915 | $ 598,915 | |
Balance (in shares) at Jun. 30, 2018 | 38,257 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
OPERATING ACTIVITIES: | |||
Net income (loss) | $ 28,690 | $ (547) | $ 44,857 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||
Depreciation and amortization | 55,115 | 55,340 | 33,433 |
Deferred income tax expense (benefit) | 30,690 | (305) | (19,497) |
Share-based compensation | 9,896 | 7,719 | 11,562 |
Excess tax benefits on share-based compensation awards | (1,507) | ||
Asset impairment charges | 24,960 | 88,084 | 8,000 |
Loss on sale/disposal of assets | 848 | 290 | 92 |
Loss (gain) on investment securities | (3,313) | (2,914) | 11 |
Loss on extinguishment of debt | 3,009 | ||
Loss on sale of intangible asset | 15,514 | ||
Amortization of debt discount and other debt issuance costs | 21,866 | 20,577 | 12,484 |
Other noncash expenses | 5 | 1,889 | 523 |
Changes in assets and liabilities which provided (used) cash: net of acquisitions: | |||
Accounts receivable, net | (48,585) | 1,701 | 15,149 |
Inventories | (19,031) | (7,700) | 15,296 |
Prepaid income taxes/Income taxes payable | 2,174 | (17,748) | 1,717 |
Other assets | (2,287) | 1,916 | 7,719 |
Rebates payable | 4,807 | 14,369 | 4,525 |
Royalties payable | 2,940 | (2,112) | 1,524 |
Restructuring liability | 1,275 | 1,301 | 4,130 |
Settlement liability | 1,000 | 18,598 | |
Accounts payable | (4,953) | 5,000 | (3,723) |
Accrued expenses | (5,074) | 3,252 | (1,760) |
Accrued payroll and payroll-related expenses | 2,986 | (5,739) | (20,865) |
Net cash provided by operating activities | 118,523 | 165,373 | 135,277 |
INVESTING ACTIVITIES: | |||
Purchases of property, plant and equipment | (52,316) | (48,694) | (24,267) |
Proceeds from sale of property, plant and equipment | 28 | 112 | 16 |
Advance to variable interest entity | (10,254) | ||
Purchases of intangible assets | (19,038) | ||
Acquisitions, net of cash acquired | (934,178) | ||
Proceeds from sale of investment securities | 94,047 | 67,828 | 39,895 |
Purchase of investment securities | (63,643) | (77,911) | (40,533) |
Net cash used in investing activities | (51,176) | (58,665) | (959,067) |
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 | (85,705) | (178,233) | (295,033) |
Purchase of noncontrolling interest | (1,500) | ||
Acquisition-related contingent consideration | (35,000) | ||
Proceeds from issuance of stock | 4,142 | 2,818 | 4,134 |
Payment of debt issuance costs | (34,710) | ||
Excess tax benefits on share-based compensation awards | 1,507 | ||
Purchase of treasury stock | (4,642) | (1,898) | (1,269) |
Distributions to noncontrolling shareholders | (20) | ||
Net cash provided by (used in) financing activities | (86,205) | (213,813) | 848,219 |
Effect on cash and cash equivalents of changes in foreign exchange rates | (293) | 73 | |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (19,151) | (107,032) | 24,429 |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 117,737 | 224,769 | 200,340 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | 98,586 | 117,737 | 224,769 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||
Interest paid (net of amounts capitalized of $1.6 million, $1.3 million and $0 for the years ended June 30, 2018, 2017 and 2016, respectively) | 63,563 | 67,115 | 52,916 |
Income taxes paid (refunded) | (6,559) | 19,150 | 35,141 |
Credits issued pursuant to Settlement Agreement | $ 17,000 | $ 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) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
Capitalized interest, net | $ 1.6 | $ 1.3 | $ 0 |
Interest rate | 12.00% |
The Business and Nature of Oper
The Business and Nature of Operations | 12 Months Ended |
Jun. 30, 2018 | |
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”) primarily 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. 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, 2018 | |
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 former 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. In December 2017, the Company legally dissolved Realty. 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 and share-based compensation. 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 consisted 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). In May 2018, the Company liquidated the remainder of the investment securities portfolio. As of June 30, 2018, the Company does not own investment securities. 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 or net realizable value by the first-in, first-out method. Inventories are regularly reviewed and write-downs for excess and obsolete inventory are recorded based primarily on current inventory levels, expiration date 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 flows 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 triggering events 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 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 lives of the related assets. 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 triggering events indicate that the asset might be impaired. The Company utilizes a quantitative assessment to determine the fair value of our reporting unit (generic pharmaceuticals). If the carrying 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, 2018, 2017 and 2016: (In thousands) Fiscal Year Ended June 30, Medical Indication 2018 2017 2016 Antibiotic $ $ $ Anti-Psychosis Cardiovascular Central Nervous System Gallstone Gastrointestinal Glaucoma Migraine Muscle Relaxant 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, 2018, 2017 and 2016, 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 % % % The following table presents the percentage of total net sales, for the fiscal years ended June 30, 2018, 2017 and 2016, 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 goods inventory supplier is Jerome Stevens Pharmaceuticals, Inc. (“JSP”), in Bohemia, New York. Purchases of finished goods inventory from JSP accounted for 37%, 36% and 52% of the Company’s inventory purchases in fiscal years 2018, 2017 and 2016, respectively. See Note 20 “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 estimated 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 $249.2 million and $175.8 million at June 30, 2018 and 2017, respectively. Rebates payable at June 30, 2018 and 2017 totaled $49.4 million and $44.6 million, respectively, which is comprised of certain rebate programs, primarily related to Medicare Part D, and Medicaid as well as 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 Expenses 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 for litigation-related matters are expensed as incurred and included in the Consolidated Statements of Operations under the Selling, general and administrative expense line item. 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, the stock price on the grant date to value restricted stock and the Monte-Carlo simulation model to determine the fair value of performance-based shares. The Black-Scholes valuation and Monte-Carlo simulation models include various assumptions, including the expected volatility, the expected life of the award, dividend yield and the risk-free interest rate as well as performance assumptions of peer companies. 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 consolidated 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 its 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 was not material to the consolidated financial position of the Company as of June 30, 2018 and 2017. 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. On December 22, 2017, President Trump signed the Tax Cut and Jobs Act legislation (“2017 Tax Reform”) into law, which included a broad range of tax reform provisions affecting businesses, including corporate tax rates, business deductions and international tax provisions. Many of these provisions significantly differ from current U.S. tax law, resulting in pervasive financial reporting implications. As a result of the new law, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of 2017 Tax Reform. SAB 118 requires registrants to report the tax effects of 2017 Tax Reform, inclusive of provisional amounts for which the accounting is incomplete but a reasonable estimate can be determined. SAB 118 also allows for a measurement period of up to one year in cases where a registrant reports a provisional amount or is unable to reasonably estimate the impact of 2017 Tax Reform. Earnings (Loss) Per Common Share Basic earnings (loss) per common share attributable to the Company 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 (loss) per common share attributable to the Company 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, performance-based shares 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 Financial Accounting Standards Board (“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 review of the contracts representing a substantial portion of our revenues, the Company does not expect the guidance to have a material impact on our disclosures or the timing and recognition of our revenues. The majority of the Company’s revenues is generated from product sales and based on the Company’s initial assessment, it currently does not anticipate a material impact to the revenue and disclosures related to these arrangements. Under the new standard, the Company will need to estimate certain amounts as variable consideration at the point of product sale in future periods. The Company does not anticipate a material impact on revenue related to these variable amounts which need to be estimated and recorded earlier under the new standard. The new revenue standard will also impact the timing of the Company’s revenue recognition by requiring recognition of certain contract manufacturing arrangements to move from upon shipment or delivery to over time. However, the recognition of these arrangements over time is not expected to have a material impact on the Company’s consolidated results of operations or financial position. The Company is finalizing the establishment and documentation of key accounting policies, conducting training and education throughout the organization, and evaluating impacts on business processes, information technology, and controls resulting from the adoption of this new standard. The Company also continues to accumulate the necessary information to determine the cumulative effects of the accounting change to be recorded upon adoption of the guidance, but the magnitude of this adjustment is not expected to be material. The Company intends to use the modified retrospective approach upon implementation with the cumulative effect of applying the standard recognized at the date of initial application. 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. The guidance became effective for the Company in the first quarter of Fiscal 2018. Accordingly, the Company currently presents all deferred tax assets and liabilities as noncurrent on the balance sheet. All prior period amounts have also been reclassified to conform with the current year presentation. 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 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. |
Restructuring Charges
Restructuring Charges | 12 Months Ended |
Jun. 30, 2018 | |
Restructuring Charges | |
Restructuring Charges | Note 3. Restructuring Charges Cody Restructuring Program On June 29, 2018, the Company announced a restructuring plan with respect to Cody Labs (the “Cody Restructuring Plan”). The plan focuses on a more select set of opportunities which will result in streamlined operations, improved efficiencies and a reduced cost structure. The Company currently estimates that it will incur approximately $5.0 million of total costs to implement the Cody Restructuring Plan, comprised primarily of approximately $3.5 million of severance and employee-related costs, of which approximately $3.1 million was recorded in the quarter ended June 30, 2018. In addition, the Company recorded a $21.5 million non-cash impairment charge in connection with the Cody Restructuring Plan relating to the facility, equipment and other plant-related assets primarily associated with the expansion project at Cody Labs. See Note 6 “Property, Plant and Equipment” for more information. The expenses associated with the Cody Restructuring Plan included in restructuring expenses during the fiscal year ended June 30, 2018 were as follows: (In thousands) Twelve Employee separation costs $ Facility closure costs — Total $ A reconciliation of the changes in restructuring liabilities associated with the Cody Restructuring Plan from June 30, 2017 through June 30, 2018 is set forth in the following table: (In thousands) Employee Facility Closure Total Balance at June 30, 2017 $ — $ — $ — Restructuring Charges — Payments — — — Balance at June 30, 2018 $ — $ 2016 Restructuring Plan 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 $19.0 million in restructuring charges for actions that have been announced or communicated since the 2016 Restructuring Program began. Of this amount, approximately $10.0 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, 2018 and 2017 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, 2016 through June 30, 2018 is set forth in the following table: (In thousands) Employee Contract Facility Closure Total Balance at June 30, 2016 $ $ $ — $ Restructuring Charges — Payments ) ) ) ) Balance at June 30, 2017 — — Restructuring Charges — Payments ) — ) ) Balance at June 30, 2018 $ $ — $ — $ |
Accounts Receivable
Accounts Receivable | 12 Months Ended |
Jun. 30, 2018 | |
Accounts Receivable | |
Accounts Receivable | Note 4. Accounts Receivable Accounts receivable consisted of the following components at June 30, 2018 and 2017: (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, 2018, the Company recorded a provision for chargebacks, rebates, returns and other deductions of $1.1 billion, $296.8 million, $24.0 million and $69.9 million, respectively. 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. |
Inventories
Inventories | 12 Months Ended |
Jun. 30, 2018 | |
Inventories | |
Inventories | Note 5. Inventories Inventories at June 30, 2018 and 2017 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, 2018, 2017 and 2016, the Company recorded write-downs to net realizable value for excess and obsolete inventory of $12.2 million, $10.4 million and $9.4 million, respectively. At June 30, 2018 and 2017, inventory balances were written-down by $11.9 million and $4.5 million, respectively, for excess and obsolete inventory amounts. |
Property, Plant and Equipment
Property, Plant and Equipment | 12 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment | |
Property, Plant and Equipment | Note 6. Property, Plant and Equipment Property, plant and equipment at June 30, 2018 and 2017 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, 2018, 2017 and 2016 was $22.4 million, $21.8 million and $13.9 million, respectively. During the fiscal year ended June 30, 2018, the Company recorded impairment charges totaling approximately $25.0 million, of which $21.5 million relates to the Cody Restructuring Plan and $3.5 million resulting from the consolidation of the Company’s manufacturing activities with respect to plant-related assets located at the Company’s Townsend Road facility. The impairment charges were based on the appraised fair values of the property, plant and equipment at each of these sites. See Note 3 “Restructuring Charges” for more information. The Company had no impairment charges for the fiscal years ended June 30, 2017 and 2016. Property, plant and equipment, net included amounts held in foreign countries in the amount of $1.1 million and $1.0 million at June 30, 2018 and June 30, 2017, respectively. |
Fair Value Measurements
Fair Value Measurements | 12 Months Ended |
Jun. 30, 2018 | |
Fair Value Measurements | |
Fair Value Measurements | Note 7. 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 fair values utilized to calculate the impairment charges related to the Cody Restructuring Plan and the Townsend Road facility were based on third-party appraisals, which are Level 3 inputs. See Note 6 “Property, Plant and Equipment” for more information. The Company’s financial assets measured at fair value at June 30, 2018 and June 30, 2017 were as follows: June 30, 2018 (In thousands) Level 1 Level 2 Level 3 Total Assets Equity securities $ — $ — $ — $ — Total Assets $ — $ — $ — $ — June 30, 2017 (In thousands) Level 1 Level 2 Level 3 Total Assets Equity securities $ $ — $ — $ Total Assets $ $ — $ — $ In May 2018, the Company liquidated the remainder of its equity securities portfolio. As of June 30, 2018, the Company does not own any equity securities. |
Investment Securities
Investment Securities | 12 Months Ended |
Jun. 30, 2018 | |
Investment Securities | |
Investment Securities | Note 8. 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 $3.3 million during the fiscal year ended June 30, 2018. 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. |
Intangible Assets
Intangible Assets | 12 Months Ended |
Jun. 30, 2018 | |
Intangible Assets | |
Intangible Assets | Note 9. Intangible Assets Intangible assets, net as of June 30, 2018 and June 30, 2017, 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 $ $ $ ) $ ) $ $ In the third quarter of Fiscal 2018, the Company sold an intangible asset related to a product right acquired as part of the KUPI acquisition. In connection with the transaction, the Company recorded a $15.5 million loss on sale of the intangible asset, which had a carrying value of $15.8 million at the time of sale. In February 2018, the Company completed the acquisition of five products from UCB for $5.0 million which is included within the “Other product rights” category of intangible assets. In May 2018, the Company also completed the acquisition of over 20 products from a subsidiary of Endo International plc for an upfront payment of $12.0 million and future milestone payments, which is also included within the “Other product rights” category. 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 Abbreviated New Drug Applications (“ANDAs”). 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. For the fiscal years ended June 30, 2018, 2017 and 2016, the Company recorded amortization expense of $32.7 million, $33.6 million and $19.5 million, respectively. Future annual amortization expense consists of the following: (In thousands) Annual Amortization Expense 2019 $ 2020 2021 2022 2023 Thereafter $ |
Long-Term Debt
Long-Term Debt | 12 Months Ended |
Jun. 30, 2018 | |
Long-Term Debt | |
Long-Term Debt | Note 10. Long-Term Debt Long-term debt, net consisted of the following: June 30, June 30, (In thousands) 2018 2017 Term Loan A due 2020; 6.84% as of June 30, 2018 $ $ Unamortized discount and other debt issuance costs ) ) Term Loan A, net Term Loan B due 2022; 7.47% as of June 30, 2018 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 $ $ During the third quarter of Fiscal 2018, the Company made a voluntary payment of $25.0 million against its outstanding Term Loan A and Term Loan B debt. As a result of the prepayment, the Company wrote off a proportionate amount of the related debt issuance costs totaling $2.6 million which was included in interest expense. Long-term debt amounts due, for the twelve month periods ending June 30 were as follows: Amounts Payable (In thousands) to Institutions 2019 $ 2020 2021 2022 2023 Thereafter — Total $ The outstanding debt amounts above are guaranteed by all of Lannett’s significant wholly-owned domestic subsidiaries and is collateralized by substantially all present and future assets of the Company. |
Legal, Regulatory Matters and C
Legal, Regulatory Matters and Contingencies | 12 Months Ended |
Jun. 30, 2018 | |
Legal, Regulatory Matters and Contingencies | |
Legal, Regulatory Matters and Contingencies | Note 11. Legal, Regulatory Matters and Contingencies 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 Attorneys 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 complaint was later transferred for pretrial purposes to the United States District Court for the Eastern District of Pennsylvania as part of a multidistrict litigation captioned In re: Generic Pharmaceuticals Pricing Antitrust Litigation. On October 31, 2017, the state Attorneys General filed a motion in the District Court for leave to amend their complaint to add numerous additional defendants, including the Company, and claims relating to 13 additional drugs. The claim relating to Lannett involves alleged price-fixing for one drug, doxycycline monohydrate, but does not involve the pricing for digoxin. The state Attorneys General also allege that all defendants were part of an overarching, industry-wide conspiracy to allocate markets and fix prices generally. The Court granted that motion on June 5, 2018. The state Attorneys General filed their amended complaint on June 15, 2018. None of the defendants, including the Company, has responded yet to the amended complaint. The Company maintains that it acted in compliance with all applicable laws and regulations and continues to cooperate with the Connecticut Attorney General investigation. Federal Investigation into the Generic Pharmaceutical Industry The Company and certain affiliated individuals and customers have been served with grand jury subpoenas 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. The Company received a Civil Investigative Demand (“CID”) from the Department of Justice on May 14, 2018. The CID requests information regarding allegations that the generic pharmaceutical industry engaged in market allocation, price fixing, payment of illegal remuneration and submission of false claims. The CID requests information from 2009-present. The Company is in the process of responding to the CID. 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, 2018 and June 30, 2017, the Company’s best estimate of the liability for potential overcharges was 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. 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. 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 over 30 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 (the “JPML”) 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 Consolidated Amended Complaints (“CACs”) against the Company and the other defendants on August 15, 2017. The CACs naming the Company as a defendant involve generic digoxin, levothyroxine, ursodiol and baclofen. Pursuant to a court-ordered schedule grouping the 18 different drug cases into three separate tranches, the Company and other generic pharmaceutical manufacturer defendants on October 6, 2017 filed joint and individual motions to dismiss the CACs involving the six drugs in the first tranche, including digoxin. Those motions are pending. On January 22, 2018, three opt-out direct purchasers filed a complaint alleging an overarching conspiracy and individual conspiracies on behalf of the Company and numerous other defendants to fix the prices of and allocate markets for at least 30 different drugs, including digoxin, doxycycline, levothyroxine, ursodiol and baclofen. On August 3, 2018, another opt-out direct purchaser filed a complaint alleging an overarching conspiracy and individual conspiracies on behalf of the Company and numerous other defendants to fix the prices of and allocate markets for 16 different drugs, including digoxin, doxycycline, levothyroxine, ursodiol and baclofen. None of the defendants, including the Company, has responded yet to the opt-out complaints. In addition to the lawsuits brought by private plaintiffs, the Attorneys General of 45 states, the District of Columbia and Puerto Rico have filed parens patriae lawsuits alleging price-fixing conspiracies by various generic pharmaceutical manufacturers. The JPML has consolidated the suits by the state Attorneys General in the Eastern District of Pennsylvania as part of the multidistrict litigation. The original lawsuits did not name the Company, but the state Attorneys General on October 31, 2017 filed a motion with the District Court for leave to amend their complaint to add numerous additional defendants, including the Company, and claims relating to 13 additional drugs. The claim relating to Lannett involves alleged price-fixing for one drug, doxycycline monohydrate, although the state Attorneys General allege that all defendants were part of an overarching, industry-wide conspiracy to allocate markets and fix prices generally. The Court granted that motion on June 5, 2018. The state Attorneys General filed their amended complaint on June 15, 2018. None of the defendants, including the Company, has responded yet to the amended complaint. Following the lead of the state Attorneys General, the Direct Purchaser Plaintiffs, End Payer Plaintiffs and Indirect Reseller Plaintiffs have filed their own complaints also alleging an overarching conspiracy, making similar allegations to those contained in the state Attorneys General complaint, relating to 14 generic drugs in the End Payer complaint and 15 generic drugs in the Indirect Reseller complaint. The End Payer Plaintiffs filed their complaint on June 7, 2018, the Indirect Reseller Plaintiffs filed their complaint on June 18, 2018, and the Direct Purchaser Plaintiffs filed their complaint on June 22, 2018. Although the complaints allege an overarching conspiracy with respect to all of the drugs identified, the specific allegations related to drugs Lannett makes involve acetazolamide and doxycycline monohydrate. None of the defendants, including the Company, has responded yet to these complaints. 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. Shareholder Litigation In November 2016, a putative class action lawsuit was filed against the Company and two of its officers claiming that the Company damaged the purported class by including in its securities filings false and misleading statements regarding the Company’s drug pricing methodologies and internal controls. An amended complaint was filed in May 2017, and the Company filed a motion to dismiss the amended complaint in September 2017. In December 2017, counsel for the putative class filed a second amended complaint, and the Court denied as moot the Company’s motion to dismiss the first amended complaint. The Company filed a motion to dismiss the second amended complaint in February 2018. In July 2018, the court granted the Company’s motion to dismiss the second amended complaint and granted the putative lead plaintiffs twenty-one days to file an amended complaint. The Company cannot reasonably predict the outcome of the suit at this time. In July 2018, a shareholder derivative complaint was filed against the Company and certain of its current and former directors and executives in the United States District Court for the Eastern District of Pennsylvania. The derivative complaint alleges that the Company engaged in an illegal conspiracy to fix generic drug prices and that the Company’s directors and executives violated their fiduciary duties by allowing the Company to violate the applicable laws and regulations and failing to take any action to curtail management’s deliberate price-fixing scheme. The derivative complaint includes causes of action for violation of Section 10(b) of the Exchange Act, violation of Section 14(a) of the Exchange Act, violation of Section 29(a) of the Exchange Act, and for breach of fiduciary duty. 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 FDA 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. All briefing to the appellate court has been submitted, and oral argument before the appellate court was conducted on April 5, 2018. The appellate court issued an opinion on June 28, 2018, upholding the decision of the District Court. The Company requested a rehearing by the appellate court on August 13, 2018. Thalomid® The Company filed with the FDA 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 settlement agreement was reached and the Court dismissed the lawsuit in October 2017. Pursuant to the settlement agreement, the Company entered into a license agreement that permits Lannett to manufacture and market in the U.S. its generic thalidomide product as of August 1, 2019 or earlier under certain circumstances. SUPREP® The Company filed ANDA No. 209941 with the FDA 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. In March 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. 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 opposed the motion and has alternatively requested that the Court delay its decision on the motion until discovery is taken. The Company opposed Braintree’s request to delay the decision. While the motions were pending, the parties agreed to resolve this dispute. The parties signed a confidential settlement agreement and filed a Stipulation of Dismissal Without Prejudice on December 13, 2017. On December 17, 2017, the Court granted the parties’ Stipulation of Dismissal Without Prejudice. In connection with the settlement agreement, the Company received $3.5 million, which is included in Other Income within the Consolidated Statements of Operations. Although the Company cannot currently predict the length or outcome of any 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. 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, 2018 | |
Commitments | |
Commitments | Note 12. 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 2019 $ 2020 2021 2022 2023 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, which expires in seven years and bears interest at 2.0%, 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, 2018, $11.2 million was outstanding under the revolving loan, which is included in Other Assets on the Consolidated Balance Sheet. 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, 2018 | |
Accumulated Other Comprehensive Loss | |
Accumulated Other Comprehensive Loss | Note 13. Accumulated Other Comprehensive Loss The Company’s Accumulated Other Comprehensive Loss was comprised of the following components as of June 30, 2018 and 2017: (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, 2018 | |
Earnings (Loss) Per Common Share | |
Earnings (Loss) Per Common Share | Note 14. Earnings (Loss) Per Common Share A dual presentation of basic and diluted earnings (loss) 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 (loss) 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 (loss) per common share is computed using the treasury stock method and includes the effect of potential dilution from the exercise of outstanding stock options, a warrant and treats unvested restricted stock and performance-based shares as if they 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 (loss) per common share was as follows: For Fiscal Year Ended June 30, (In thousands, except share and per share data) 2018 2017 2016 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, 2018, 2017 and 2016 were 3.0 million, 4.3 million and 3.0 million, respectively. |
Warrant
Warrant | 12 Months Ended |
Jun. 30, 2018 | |
Warrant | |
Warrant | Note 15. 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, 2018 | |
Share-based Compensation | |
Share-based Compensation | Note 16. Share-based Compensation At June 30, 2018, 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 1.5 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, 2018, there was $8.3 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 2.1 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 5.4 years 5.2 years 5.2 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, 2018, 2017 and 2016 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, 2015 $ $ Granted Exercised ) $ Forfeited, expired or repurchased ) Outstanding at June 30, 2016 $ $ Granted Exercised ) $ Forfeited, expired or repurchased ) Outstanding at June 30, 2017 $ $ Granted Exercised ) $ Forfeited, expired or repurchased ) Outstanding at June 30, 2018 $ $ Vested and expected to vest at June 30, 2018 $ $ Exercisable at June 30, 2018 $ $ 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 5.7%, 6.5% and 6.5% for fiscal years ended June 30, 2018, 2017 and 2016, respectively. A summary of restricted stock awards as of June 30, 2018, 2017 and 2016 and changes during the fiscal years then ended, is presented below: (In thousands) Awards Weighted Aggregate Non-vested at June 30, 2015 $ Granted Vested ) $ Forfeited ) Non-vested at June 30, 2016 $ Granted Vested ) $ Forfeited ) Non-vested at June 30, 2017 $ Granted Vested ) $ Forfeited ) Non-vested at June 30, 2018 $ Performance-Based Shares On September 22, 2017, the Company approved and granted performance-based awards to certain key executives. The stock-settled awards will cliff vest based on relative Total Shareholder Return (“TSR”) over a three-year period. The Company measures share-based compensation cost for TSR awards using a Monte-Carlo simulation model. A summary of performance-based share awards as of June 30, 2018 and changes during the current fiscal year, is presented below: (In thousands, except for weighted average price and life data) Awards Weighted Aggregate Non-vested at June 30, 2017 — $ — Granted $ Vested ) $ $ Forfeited — $ — Non-vested at June 30, 2018 $ In connection with the termination of the employment of Arthur P. Bedrosian and Kevin Smith, the Company’s former Chief Executive Officer and Senior Vice President of Sales, respectively, the Company entered into separation agreements which each individual pursuant to which both individuals received certain benefits including, among others, accelerated vesting of their outstanding equity awards. 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, 2018, 2017 and 2016, 66 thousand shares, 57 thousand shares and 47 thousand shares were issued under the ESPP, respectively. As of June 30, 2018, 608 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) 2018 2017 2016 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, 2018 | |
Employee Benefit Plan | |
Employee Benefit Plan | Note 17. 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, 2018, 2017 and 2016 were $2.3 million, $2.1 million and $1.6 million, respectively. |
Income Taxes
Income Taxes | 12 Months Ended |
Jun. 30, 2018 | |
Income Taxes | |
Income Taxes | Note 18. Income Taxes On December 22, 2017, the 2017 Tax Reform was enacted into law, which significantly revised the Internal Revenue Code of 1986, as amended. The 2017 Tax Reform includes, among other items, permanent reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%; and modifying or repealing many other business deductions and credits. The Company has assessed the impacts of the changes from the 2017 Tax Reform and recorded a provisional non-cash net tax charge of $13.1 million for the year ended June 30, 2018. This provisional tax charge consists primarily of a re-measurement of the net U.S. deferred tax assets to the lower enacted U.S. corporate tax rate of 21%. While we have completed our provisional analysis of the income tax effects of the 2017 Tax Reform, the related tax charge may differ, possibly materially, due to further refinement of our calculations, changes in interpretations and assumptions that we have made, additional guidance that may be issued by regulatory bodies, and actions and related accounting policy decisions we may take as a result of the new legislation. We will complete our analysis during the one-year measurement period from the enactment of the law as provided for by SAB 118, and any adjustments during this measurement period will be included in net earnings from continuing operations as an adjustment to income tax expense in the reporting period when such adjustments are determined. 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 (Benefit) ) Deferred Income Tax Expense (Benefit) Federal ) ) State and Local ) ) Total Deferred Income Tax Expense (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 )% — )% Unrecognized tax benefits )% — — 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, 2018 and 2017, 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, 2018 and 2017 is reduced by a valuation allowance of $8.1 million and $6.4 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 2018 primarily related to an increase of state deferred tax assets. 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, 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 $ 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, 2018 $ The amount of unrecognized tax benefits at June 30, 2018, 2017 and 2016 was $2.5 million, $5.9 million and $6.2 million respectively, of which $2.3 million, $4.2 million and $4.4 million 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, 2018, 2017 and 2016 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, 2018 and 2017. The Company will recognize interest accrued on unrecognized tax benefits in interest expense and any related penalties in operating expenses. The Company files income tax returns in the United States federal jurisdiction and various states. The Company’s tax returns for Fiscal Year 2014 and prior generally are no longer subject to review as such years generally are closed. The Company’s Fiscal Year 2016 federal return is currently under examination by the Internal Revenue Service (“IRS”). The Company cannot reasonably predict the outcome of the examination at this time. In July 2018, the Company was notified that the IRS will also expand their examination to include the Company’s Fiscal 2015 and Fiscal 2017 federal returns. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Jun. 30, 2018 | |
Related Party Transactions | |
Related Party Transactions | Note 19. Related Party Transactions The Company had sales of $3.9 million, $3.7 million and $3.1 million during the fiscal years ended June 30, 2018, 2017 and 2016, respectively, to a generic distributor, Auburn Pharmaceutical Company (“Auburn”). Jeffrey Farber, a current board member, is the owner of Auburn. Accounts receivable includes amounts due from Auburn of $585 thousand and $751 thousand at June 30, 2018 and 2017, respectively. The Company also had net sales of $1.9 million and $1.7 million during the fiscal years ended June 30, 2018 and 2017 to a generic distributor, KeySource Medical (“KeySource”). Albert Paonessa, a current board member, was appointed the CEO of KeySource in May 2017. Accounts receivable includes amounts due from KeySource of $514 thousand and $606 thousand as of June 30, 2018 and 2017. The Company incurred expenses totaling $332 thousand during the fiscal year ended June 30, 2018 for online medical benefit services provided by a subsidiary of a variable interest entity. See Note 12. “Commitments” for more information. Accounts payable includes amounts due to the variable interest entity of $58 thousand as of June 30, 2018. |
Material Contracts with Supplie
Material Contracts with Suppliers | 12 Months Ended |
Jun. 30, 2018 | |
Material Contracts with Suppliers | |
Material Contracts with Suppliers | Note 20. 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 37%, 36% and 52% of the Company’s inventory purchases in the fiscal year ending June 30, 2018, 2017 and 2016, 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 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. On August 20, 2018, the Company announced that the JSP Distribution Agreement which expires on March 23, 2019 will not be renewed. See Note 22. “Subsequent Events” for more information. |
Acquisitions
Acquisitions | 12 Months Ended |
Jun. 30, 2018 | |
Acquisitions | |
Acquisitions | Note 21. Acquisitions 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. 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 year ended June 30, 2016. 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: (In thousands, except per share data) For the fiscal year 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. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Jun. 30, 2018 | |
Subsequent Events | |
Subsequent Events | Note 22. Subsequent Events Sale of buildings On July 13, 2018, the Company completed the sale of real property located at 11501 Roosevelt Boulevard and 11601 Roosevelt Boulevard in Philadelphia, Pennsylvania for total consideration of $14.6 million before fees and selling costs. The carrying value of the property was included within the Assets Held for Sale line of the Consolidated Balance Sheet as of June 30, 2018. License Agreement with Andor Pharmaceuticals On July 30, 2018, the Company entered into a license agreement (the “License Agreement”) with Andor Pharmaceuticals, LLC (“Andor”), pursuant to which Andor granted the Company an exclusive license (the “License”) with respect to all rights and interests of Andor in and to the ANDA Application for Methylphenidate Hydrochloride (the “Products”). As consideration for the grant of the License, the Company has agreed to pay Andor (a) $1,500,000 in cash, of which $500,000 was paid at closing on August 3, 2018, and $1,000,000 will be paid upon approval by the United States FDA of an AB rating with respect to the Products (the “AB Rating Approval”), and (b) royalties based upon the net profits realized from the sale of the Products by the Company. The License Agreement, as amended by Amendment No. 1 to License Agreement dated August 2, 2018, by and between the Company and Andor (the “Amendment”), requires the Company to make minimum royalty payments to Andor during the initial four year period following the first commercial sale of the Products by the Company of $16,000,000 (the “Royalty Guaranty”). The amount of the Royalty Guaranty will be reduced by $4,000,000 for each application, if any, by a third party with respect to the Products that both receives regulatory approval from the FDA and is commercially launched after February 2, 2019 and prior to the receipt of the AB Rating Approval. JSP Distribution Agreement After the close of business on August 17, 2018, JSP notified the Company that it will not extend or renew the JSP Distribution Agreement when the current term expires on March 23, 2019. Because products covered by the JSP Distribution Agreement generate a significant portion of our revenues and gross profits, JSP’s decision not to renew or extend its distribution agreement with us will materially adversely affect our future operating results and cash flows beginning in the fourth quarter of Fiscal 2019. Net sales of JSP products totaled $253.1 million in fiscal year 2018. Of that amount, Levothyroxine Sodium Tablets USP net sales totaled $245.9 million, with gross margins of approximately 60%, in fiscal year 2018. When announced on August 20, 2018, this resulted in a significant decline in the Company’s market capitalization. The Company has determined that such nonrenewal represents a “triggering event” under U.S. GAAP and, accordingly, will perform an analysis to determine the potential for any impairment of goodwill and certain long-lived assets of the Company in the first quarter of Fiscal 2019. In management’s opinion, the impairment assessment will likely result in a material impairment of goodwill and may result in an impairment of certain long-lived assets; however, at this time the Company cannot estimate the amount or a reasonable range of amounts of such impairment. As of June 30, 2018, the carrying value of goodwill was $339.6 million. Any impairment would result in a noncash charge to earnings in the first quarter of Fiscal 2019. As noted above, JSP’s decision not to renew or extend its distribution agreement with us will materially adversely affect our future operating results, liquidity and cash flows, which could impact our ability to comply with the financial and other covenants in our Amended Senior Secured Credit Facility. As of June 30, 2018, the Company was in compliance with its financial covenants. As of June 30, 2018, cash and cash equivalents totaled $98.6 million in addition to availability under our undrawn Revolver totaling $125.0 million. Based on its projections for Fiscal 2019 excluding revenue and related gross profits generated by the products distributed under the JSP Distribution Agreement subsequent to March 23, 2019 and without further analysis of potential restructuring and/or refinancing, the Company expects to have sufficient liquidity and cashflows to meet its operating and debt service requirements for at least the next twelve months from the issuance of the June 30, 2018 consolidated financial statements. The Company also expects to be in compliance with its financial covenants for Fiscal 2019. Class Action Lawsuit In August 2018, a putative class action lawsuit was filed against the Company and two of its officers claiming that the Company damaged the purported class by including in its securities filings false and misleading statements regarding the sustainability of the Company’s revenues and/or by failing to disclose material adverse facts regarding the risk of the loss of a particular distribution agreement. The Company has not been served with a copy of the complaint. The Company cannot reasonably predict the outcome of the suit at this time. |
Quarterly Financial Information
Quarterly Financial Information (Unaudited) | 12 Months Ended |
Jun. 30, 2018 | |
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 2018 Net sales $ $ $ $ Cost of sales Gross profit Operating expenses Operating income Other loss ) ) ) ) Income tax expense (benefit) ) ) 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 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 $ $ ) $ $ (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 increase in net sales and gross profit in the second quarter of Fiscal 2018 is primarily due to a temporary disruption of our competitor’s supplies in the Thyroid Deficiency and Migraine medical indications. The declines in operating income in the third and fourth quarters of Fiscal 2018 were primarily related to a loss on sale of an intangible asset and asset impairment charges as a result of the Cody Restructuring Plan as well as other activities related to the consolidation of the Company’s manufacturing facilities. Income tax expense in the second quarter of Fiscal 2018 was negatively impacted due to the adoption of 2017 Tax Reform which resulted in a revaluation of the Company’s net long term deferred tax assets. 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. 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. |
Summary of Significant Accoun32
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Jun. 30, 2018 | |
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 former 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. In December 2017, the Company legally dissolved Realty. 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 and share-based compensation. 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 consisted 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). In May 2018, the Company liquidated the remainder of the investment securities portfolio. As of June 30, 2018, the Company does not own investment securities. |
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 or net realizable value by the first-in, first-out method. Inventories are regularly reviewed and write-downs for excess and obsolete inventory are recorded based primarily on current inventory levels, expiration date 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 flows 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 triggering events 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 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 lives of the related assets. 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 triggering events indicate that the asset might be impaired. The Company utilizes a quantitative assessment to determine the fair value of our reporting unit (generic pharmaceuticals). If the carrying 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, 2018, 2017 and 2016: (In thousands) Fiscal Year Ended June 30, Medical Indication 2018 2017 2016 Antibiotic $ $ $ Anti-Psychosis Cardiovascular Central Nervous System Gallstone Gastrointestinal Glaucoma Migraine Muscle Relaxant 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, 2018, 2017 and 2016, 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 % % % The following table presents the percentage of total net sales, for the fiscal years ended June 30, 2018, 2017 and 2016, 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 goods inventory supplier is Jerome Stevens Pharmaceuticals, Inc. (“JSP”), in Bohemia, New York. Purchases of finished goods inventory from JSP accounted for 37%, 36% and 52% of the Company’s inventory purchases in fiscal years 2018, 2017 and 2016, respectively. See Note 20 “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 estimated 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 $249.2 million and $175.8 million at June 30, 2018 and 2017, respectively. Rebates payable at June 30, 2018 and 2017 totaled $49.4 million and $44.6 million, respectively, which is comprised of certain rebate programs, primarily related to Medicare Part D, and Medicaid as well as 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 Expenses | Research and Development Expenses 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 for litigation-related matters are expensed as incurred and included in the Consolidated Statements of Operations under the Selling, general and administrative expense line item. |
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, the stock price on the grant date to value restricted stock and the Monte-Carlo simulation model to determine the fair value of performance-based shares. The Black-Scholes valuation and Monte-Carlo simulation models include various assumptions, including the expected volatility, the expected life of the award, dividend yield and the risk-free interest rate as well as performance assumptions of peer companies. 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 consolidated 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 its 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 was not material to the consolidated financial position of the Company as of June 30, 2018 and 2017. |
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. On December 22, 2017, President Trump signed the Tax Cut and Jobs Act legislation (“2017 Tax Reform”) into law, which included a broad range of tax reform provisions affecting businesses, including corporate tax rates, business deductions and international tax provisions. Many of these provisions significantly differ from current U.S. tax law, resulting in pervasive financial reporting implications. As a result of the new law, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of 2017 Tax Reform. SAB 118 requires registrants to report the tax effects of 2017 Tax Reform, inclusive of provisional amounts for which the accounting is incomplete but a reasonable estimate can be determined. SAB 118 also allows for a measurement period of up to one year in cases where a registrant reports a provisional amount or is unable to reasonably estimate the impact of 2017 Tax Reform. |
Earnings (Loss) Per Common Share | Earnings (Loss) Per Common Share Basic earnings (loss) per common share attributable to the Company 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 (loss) per common share attributable to the Company 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, performance-based shares 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 Financial Accounting Standards Board (“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 review of the contracts representing a substantial portion of our revenues, the Company does not expect the guidance to have a material impact on our disclosures or the timing and recognition of our revenues. The majority of the Company’s revenues is generated from product sales and based on the Company’s initial assessment, it currently does not anticipate a material impact to the revenue and disclosures related to these arrangements. Under the new standard, the Company will need to estimate certain amounts as variable consideration at the point of product sale in future periods. The Company does not anticipate a material impact on revenue related to these variable amounts which need to be estimated and recorded earlier under the new standard. The new revenue standard will also impact the timing of the Company’s revenue recognition by requiring recognition of certain contract manufacturing arrangements to move from upon shipment or delivery to over time. However, the recognition of these arrangements over time is not expected to have a material impact on the Company’s consolidated results of operations or financial position. The Company is finalizing the establishment and documentation of key accounting policies, conducting training and education throughout the organization, and evaluating impacts on business processes, information technology, and controls resulting from the adoption of this new standard. The Company also continues to accumulate the necessary information to determine the cumulative effects of the accounting change to be recorded upon adoption of the guidance, but the magnitude of this adjustment is not expected to be material. The Company intends to use the modified retrospective approach upon implementation with the cumulative effect of applying the standard recognized at the date of initial application. 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. The guidance became effective for the Company in the first quarter of Fiscal 2018. Accordingly, the Company currently presents all deferred tax assets and liabilities as noncurrent on the balance sheet. All prior period amounts have also been reclassified to conform with the current year presentation. 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 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. |
Summary of Significant Accoun33
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Summary of Significant Accounting Policies | |
Schedule of the Company's net sales by medical indication | (In thousands) Fiscal Year Ended June 30, Medical Indication 2018 2017 2016 Antibiotic $ $ $ Anti-Psychosis Cardiovascular Central Nervous System Gallstone Gastrointestinal Glaucoma Migraine Muscle Relaxant 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 % % % |
Summary of customers which accounted for at least 10% of total net sales | June 30, June 30, June 30, Customer A % % % Customer B % % % |
Restructuring Charges (Tables)
Restructuring Charges (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Cody Restructuring Plan | |
Schedule of restructuring charges associated with restructuring program | (In thousands) Twelve Employee separation costs $ Facility closure costs — Total $ |
Schedule of reconciliation of changes in restructuring liabilities associated with restructuring program | (In thousands) Employee Facility Closure Total Balance at June 30, 2017 $ — $ — $ — Restructuring Charges — Payments — — — Balance at June 30, 2018 $ — $ |
2016 Restructuring Plan | |
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, 2016 $ $ $ — $ Restructuring Charges — Payments ) ) ) ) Balance at June 30, 2017 — — Restructuring Charges — Payments ) — ) ) Balance at June 30, 2018 $ $ — $ — $ |
Accounts Receivable (Tables)
Accounts Receivable (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
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, 2018 | |
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, 2018 | |
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, 2018 | |
Fair Value Measurements | |
Schedule of financial assets and liabilities measured at fair value on recurring basis | June 30, 2018 (In thousands) Level 1 Level 2 Level 3 Total Assets Equity securities $ — $ — $ — $ — Total Assets $ — $ — $ — $ — June 30, 2017 (In thousands) Level 1 Level 2 Level 3 Total Assets Equity securities $ $ — $ — $ Total Assets $ $ — $ — $ |
Intangible Assets (Tables)
Intangible Assets (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Intangible Assets | |
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 2019 $ 2020 2021 2022 2023 Thereafter $ |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Long-Term Debt | |
Summary of long-term debt, net | June 30, June 30, (In thousands) 2018 2017 Term Loan A due 2020; 6.84% as of June 30, 2018 $ $ Unamortized discount and other debt issuance costs ) ) Term Loan A, net Term Loan B due 2022; 7.47% as of June 30, 2018 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 2019 $ 2020 2021 2022 2023 Thereafter — Total $ |
Commitments (Tables)
Commitments (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Commitments | |
Schedule of future minimum lease payments under noncancelable operating leases | (In thousands) Amounts Due 2019 $ 2020 2021 2022 2023 Thereafter Total $ |
Accumulated Other Comprehensi42
Accumulated Other Comprehensive Loss (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
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 Sh43
Earnings (Loss) Per Common Share (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Earnings (Loss) Per Common Share | |
Summary of reconciliation of the Company's basic and diluted earnings (loss) per common share | For Fiscal Year Ended June 30, (In thousands, except share and per share data) 2018 2017 2016 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, 2018 | |
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 5.4 years 5.2 years 5.2 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, 2015 $ $ Granted Exercised ) $ Forfeited, expired or repurchased ) Outstanding at June 30, 2016 $ $ Granted Exercised ) $ Forfeited, expired or repurchased ) Outstanding at June 30, 2017 $ $ Granted Exercised ) $ Forfeited, expired or repurchased ) Outstanding at June 30, 2018 $ $ Vested and expected to vest at June 30, 2018 $ $ Exercisable at June 30, 2018 $ $ |
Summary of nonvested restricted stock awards | (In thousands) Awards Weighted Aggregate Non-vested at June 30, 2015 $ Granted Vested ) $ Forfeited ) Non-vested at June 30, 2016 $ Granted Vested ) $ Forfeited ) Non-vested at June 30, 2017 $ Granted Vested ) $ Forfeited ) Non-vested at June 30, 2018 $ |
Schedule of nonvested performance-based shares | (In thousands, except for weighted average price and life data) Awards Weighted Aggregate Non-vested at June 30, 2017 — $ — Granted $ Vested ) $ $ Forfeited — $ — Non-vested at June 30, 2018 $ |
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) 2018 2017 2016 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, 2018 | |
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 (Benefit) ) Deferred Income Tax Expense (Benefit) Federal ) ) State and Local ) ) Total Deferred Income Tax Expense (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 )% — )% Unrecognized tax benefits )% — — 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, 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 $ 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, 2018 $ |
Acquisitions (Tables)
Acquisitions (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Acquisitions | |
Schedule of unaudited pro forma financial results | (In thousands, except per share data) For the fiscal year Total net sales $ Net income attributable to Lannett Company, Inc. Earnings per common share attributable to Lannett Company, Inc.: Basic $ Diluted $ |
Quarterly Financial Informati47
Quarterly Financial Information (Unaudited) (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
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 2018 Net sales $ $ $ $ Cost of sales Gross profit Operating expenses Operating income Other loss ) ) ) ) Income tax expense (benefit) ) ) 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 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 $ $ ) $ $ (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 - Consolidation (Details) - Realty | Nov. 30, 2016 | Nov. 30, 2016 |
Principles of consolidation | ||
Ownership interest (in percent) | 50.00% | |
Additional ownership interest acquired (in percent) | 50.00% |
Summary of Significant Accoun49
Summary of Significant Accounting Policies - Intangibles (Details) | 12 Months Ended |
Jun. 30, 2018 | |
Minimum | |
Finite-Lived Intangible Assets | |
Estimated useful lives | 10 years |
Maximum | |
Finite-Lived Intangible Assets | |
Estimated useful lives | 15 years |
Summary of Significant Accoun50
Summary of Significant Accounting Policies - Segment Information (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||||||
Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Sep. 30, 2017USD ($) | 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, 2018USD ($)segment | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | |
Medical Indication Information | |||||||||||||||
Contract manufacturing revenue | $ 19,835 | $ 17,442 | $ 22,043 | ||||||||||||
Net sales | $ 170,911 | $ 174,386 | $ 184,305 | $ 154,961 | $ 139,118 | $ 165,720 | $ 170,944 | $ 161,559 | $ 168,887 | $ 163,712 | $ 127,059 | $ 106,433 | 684,563 | 637,341 | 566,091 |
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 | $ 684,563 | 633,341 | 542,493 | ||||
Segment information | |||||||||||||||
Number of reportable segments | segment | 1 | ||||||||||||||
Antibiotic | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | $ 14,509 | 16,748 | 14,558 | ||||||||||||
Anti-Psychosis | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 59,557 | 58,625 | 5,462 | ||||||||||||
Cardiovascular | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 64,011 | 50,628 | 53,541 | ||||||||||||
Central Nervous System | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 31,789 | 39,451 | 36,291 | ||||||||||||
Gallstone | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 20,280 | 48,600 | 67,348 | ||||||||||||
Gastrointestinal | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 60,294 | 71,887 | 52,699 | ||||||||||||
Glaucoma | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 6,540 | 18,763 | 25,336 | ||||||||||||
Migraine | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 54,015 | 29,014 | 21,776 | ||||||||||||
Muscle Relaxant | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 13,496 | 13,636 | 5,403 | ||||||||||||
Pain Management | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 23,036 | 26,135 | 29,804 | ||||||||||||
Respiratory | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 7,891 | 10,516 | 9,982 | ||||||||||||
Thyroid Deficiency | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 245,929 | 174,005 | 162,411 | ||||||||||||
Urinary | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | 8,661 | 14,695 | 17,398 | ||||||||||||
Other | |||||||||||||||
Medical Indication Information | |||||||||||||||
Net sales | $ 54,720 | $ 47,196 | $ 42,039 |
Summary of Significant Accoun51
Summary of Significant Accounting Policies - Customer, Supplier and Product Concentration (Details) | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Net sales | Products | Product 1 | |||
Concentration risk | |||
Concentration risk (as a percent) | 36.00% | 27.00% | 30.00% |
Net sales | Products | Product 2 | |||
Concentration risk | |||
Concentration risk (as a percent) | 3.00% | 8.00% | 12.00% |
Net sales | Customers | Customer A | |||
Concentration risk | |||
Concentration risk (as a percent) | 29.00% | 28.00% | 25.00% |
Net sales | Customers | Customer B | |||
Concentration risk | |||
Concentration risk (as a percent) | 17.00% | 21.00% | 16.00% |
Inventory purchases | Suppliers | JSP | |||
Concentration risk | |||
Concentration risk (as a percent) | 37.00% | 36.00% | 52.00% |
Summary of Significant Accoun52
Summary of Significant Accounting Policies - Net Sales Adjustments (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Jun. 30, 2017 |
Summary of Significant Accounting Policies | ||
Reserves, net of accounts receivable | $ 249,200 | $ 175,800 |
Rebates payable | $ 49,400 | $ 44,593 |
Restructuring Charges - Cody Re
Restructuring Charges - Cody Restructuring Program (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 29, 2018 | |
Restructuring Charges | ||||
Restructuring expenses | $ 7,061 | $ 7,168 | $ 7,166 | |
Impairment charges | 25,000 | $ 0 | $ 0 | |
Cody Restructuring Plan | ||||
Restructuring Charges | ||||
Estimated restructuring charges | $ 5,000 | |||
Restructuring expenses | 3,092 | |||
Impairment charges | 21,500 | |||
Cody Restructuring Plan | Employee separation costs | ||||
Restructuring Charges | ||||
Estimated restructuring charges | $ 3,500 | |||
Restructuring expenses | $ 3,092 |
Restructuring Charges - 2016 Re
Restructuring Charges - 2016 Restructuring Plan (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | Feb. 01, 2016 | |
Restructuring Charges | ||||
Restructuring expenses | $ 7,061 | $ 7,168 | $ 7,166 | |
2016 Restructuring Plan | ||||
Restructuring Charges | ||||
Estimated restructuring charges | $ 19,000 | |||
Restructuring expenses | 3,969 | 7,168 | ||
2016 Restructuring Plan | Employee separation costs | ||||
Restructuring Charges | ||||
Estimated restructuring charges | 10,000 | |||
Restructuring expenses | 246 | 3,486 | ||
2016 Restructuring Plan | Contract termination costs | ||||
Restructuring Charges | ||||
Estimated restructuring charges | 1,000 | |||
2016 Restructuring Plan | Facility closure costs | ||||
Restructuring Charges | ||||
Estimated restructuring charges | $ 8,000 | |||
Restructuring expenses | $ 3,723 | $ 3,682 |
Restructuring Charges - Changes
Restructuring Charges - Changes in restructuring liabilities - (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Reconciliation of the changes in restructuring liabilities | |||
Restructuring Charges | $ 7,061 | $ 7,168 | $ 7,166 |
Cody Restructuring Plan | |||
Reconciliation of the changes in restructuring liabilities | |||
Restructuring Charges | 3,092 | ||
Ending balance for the period | 3,092 | ||
Cody Restructuring Plan | Employee separation costs | |||
Reconciliation of the changes in restructuring liabilities | |||
Restructuring Charges | 3,092 | ||
Ending balance for the period | 3,092 | ||
2016 Restructuring Plan | |||
Reconciliation of the changes in restructuring liabilities | |||
Beginning balance for the period | 5,431 | 4,130 | |
Restructuring Charges | 3,969 | 7,168 | |
Payments | (5,786) | (5,867) | |
Ending balance for the period | 3,614 | 5,431 | 4,130 |
2016 Restructuring Plan | Employee separation costs | |||
Reconciliation of the changes in restructuring liabilities | |||
Beginning balance for the period | 5,431 | 3,833 | |
Restructuring Charges | 246 | 3,486 | |
Payments | (2,063) | (1,888) | |
Ending balance for the period | 3,614 | 5,431 | 3,833 |
2016 Restructuring Plan | Contract termination costs | |||
Reconciliation of the changes in restructuring liabilities | |||
Beginning balance for the period | 297 | ||
Payments | (297) | ||
Ending balance for the period | $ 297 | ||
2016 Restructuring Plan | Facility closure costs | |||
Reconciliation of the changes in restructuring liabilities | |||
Restructuring Charges | 3,723 | 3,682 | |
Payments | $ (3,723) | $ (3,682) |
Accounts Receivable (Details)
Accounts Receivable (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Jun. 30, 2017 |
Accounts receivable | ||
Gross accounts receivable | $ 503,175 | $ 380,653 |
Less: reserve | (249,200) | (175,800) |
Less: Allowance for doubtful accounts | (1,308) | (796) |
Accounts receivable, net | 252,651 | 204,066 |
Chargebacks | ||
Accounts receivable | ||
Less: reserve | (153,034) | (79,537) |
Rebates | ||
Accounts receivable | ||
Less: reserve | (33,102) | (43,023) |
Returns | ||
Accounts receivable | ||
Less: reserve | (43,059) | (42,135) |
Other | ||
Accounts receivable | ||
Less: reserve | $ (20,021) | $ (11,096) |
Accounts Receivable - Provision
Accounts Receivable - Provisions (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Chargebacks | |||
Accounts receivable | |||
Provisions | $ 1,100 | $ 881.3 | $ 646.9 |
Rebates | |||
Accounts receivable | |||
Provisions | 296.8 | 297 | 189.2 |
Returns | |||
Accounts receivable | |||
Provisions | 24 | 25.4 | 21.3 |
Other | |||
Accounts receivable | |||
Provisions | $ 69.9 | $ 53.4 | $ 50 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Inventories: | |||
Raw Materials | $ 64,647 | $ 57,442 | |
Work-in-process | 19,983 | 15,676 | |
Finished Goods | 57,005 | 49,486 | |
Net inventory | 141,635 | 122,604 | |
Excess and Obsolete | |||
Inventories: | |||
Inventory write-downs to net realizable value | 12,200 | 10,400 | $ 9,400 |
Inventories written-down | $ 11,900 | $ 4,500 |
Property, Plant and Equipment59
Property, Plant and Equipment (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Property, Plant and Equipment | |||
Less: accumulated depreciation | $ (89,996) | $ (71,461) | |
Property, plant and equipment, net before construction in progress | 196,032 | 188,499 | |
Property, plant and equipment, net | 233,247 | 243,148 | |
Depreciation expense | 22,400 | 21,800 | $ 13,900 |
Impairment charges | 25,000 | 0 | $ 0 |
Cody Restructuring Plan | |||
Property, Plant and Equipment | |||
Impairment charges | 21,500 | ||
Plant-related assets located in Townsend Road facility | |||
Property, Plant and Equipment | |||
Impairment charges | 3,500 | ||
Held in foreign countries | |||
Property, Plant and Equipment | |||
Property, plant and equipment, net | 1,100 | 1,000 | |
Land | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | 2,900 | 6,191 | |
Building and improvements | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | 105,041 | 108,730 | |
Machinery and equipment | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | 173,988 | 142,086 | |
Furniture and fixtures | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | 4,099 | 2,953 | |
Construction in progress | |||
Property, Plant and Equipment | |||
Property, plant and equipment, net | $ 37,215 | $ 54,649 |
Property, Plant and Equipment -
Property, Plant and Equipment - Useful Lives (Details) | 12 Months Ended |
Jun. 30, 2018 | |
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 | Minimum | |
Property, Plant and Equipment | |
Useful Lives | 5 years |
Machinery and equipment | Maximum | |
Property, Plant and Equipment | |
Useful Lives | 10 years |
Furniture and fixtures | Minimum | |
Property, Plant and Equipment | |
Useful Lives | 5 years |
Furniture and fixtures | Maximum | |
Property, Plant and Equipment | |
Useful Lives | 7 years |
Fair Value Measurements (Detail
Fair Value Measurements (Details) $ in Thousands | Jun. 30, 2017USD ($) |
Assets | |
Total Assets | $ 27,091 |
Equity securities | |
Assets | |
Total Assets | 27,091 |
Level 1 | |
Assets | |
Total Assets | 27,091 |
Level 1 | Equity securities | |
Assets | |
Total Assets | $ 27,091 |
Investment Securities (Details)
Investment Securities (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Investment Securities | |||
Net gain on investment securities | $ 3,313 | $ 2,914 | $ (11) |
Unrealized gain (loss) investment securities | $ 964 | $ (51) |
Intangible Assets - Components
Intangible Assets - Components (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Jun. 30, 2018 | May 31, 2018 | Feb. 28, 2018 | Jun. 30, 2017 | |
Intangible Assets | ||||
Gross Carrying Amount, Definite-lived | $ 468,348 | $ 467,155 | ||
Accumulated Amortization | (80,372) | (49,743) | ||
Definite-lived Intangible Assets, Net | 387,976 | 417,412 | ||
Indefinite-lived assets, net | 36,449 | 36,449 | ||
Total intangible assets - Gross Carrying Amount, | 504,797 | 503,604 | ||
Total intangible assets, Net | 424,425 | 453,861 | ||
Other product rights | ||||
Intangible Assets | ||||
Indefinite-lived assets, net | 449 | 449 | ||
Total intangible assets, Net | $ 12,000 | $ 5,000 | ||
In-process research and development | KUPI | ||||
Intangible Assets | ||||
Indefinite-lived assets, net | 18,000 | 18,000 | ||
In-process research and development | Silarx | ||||
Intangible Assets | ||||
Indefinite-lived assets, net | 18,000 | 18,000 | ||
ANDOR Pharmaceuticals, LLC license agreement | ||||
Intangible Assets | ||||
Gross Carrying Amount, Definite-lived | 581 | 582 | ||
Accumulated Amortization | (386) | (347) | ||
Definite-lived Intangible Assets, Net | $ 195 | 235 | ||
Weighted Avg. Life (Yrs.) | 15 years | |||
Product rights | KUPI | ||||
Intangible Assets | ||||
Gross Carrying Amount, Definite-lived | $ 416,154 | 434,000 | ||
Accumulated Amortization | (69,840) | (43,286) | ||
Definite-lived Intangible Assets, Net | $ 346,314 | 390,714 | ||
Weighted Avg. Life (Yrs.) | 15 years | |||
Product rights | Silarx | ||||
Intangible Assets | ||||
Gross Carrying Amount, Definite-lived | $ 10,000 | 10,000 | ||
Accumulated Amortization | (2,056) | (1,389) | ||
Definite-lived Intangible Assets, Net | $ 7,944 | 8,611 | ||
Weighted Avg. Life (Yrs.) | 15 years | |||
Trade name | KUPI | ||||
Intangible Assets | ||||
Gross Carrying Amount, Definite-lived | $ 2,920 | 2,920 | ||
Accumulated Amortization | $ (2,920) | (2,338) | ||
Definite-lived Intangible Assets, Net | 582 | |||
Weighted Avg. Life (Yrs.) | 2 years | |||
Other Intangible Assets | KUPI | ||||
Intangible Assets | ||||
Gross Carrying Amount, Definite-lived | $ 19,000 | 19,000 | ||
Accumulated Amortization | (3,295) | (2,028) | ||
Definite-lived Intangible Assets, Net | $ 15,705 | 16,972 | ||
Weighted Avg. Life (Yrs.) | 15 years | |||
Other product rights | Other product rights | ||||
Intangible Assets | ||||
Gross Carrying Amount, Definite-lived | $ 19,693 | 653 | ||
Accumulated Amortization | (1,875) | (355) | ||
Definite-lived Intangible Assets, Net | $ 17,818 | $ 298 | ||
Weighted Avg. Life (Yrs.) | 14 years |
Intangible Assets - Additional
Intangible Assets - Additional Information (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||||||
May 31, 2018USD ($)product | Feb. 28, 2018USD ($)product | Mar. 31, 2018USD ($) | Dec. 31, 2016USD ($) | Sep. 30, 2016USD ($) | Jun. 30, 2016USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | |
Intangible Assets | |||||||||
Loss on sale of intangible asset | $ (15,514) | ||||||||
Intangible assets, net | 424,425 | $ 453,861 | |||||||
Impairment charges | $ 65,100 | ||||||||
Amortization expense | $ 32,700 | $ 33,600 | $ 19,500 | ||||||
KUPI | |||||||||
Intangible Assets | |||||||||
Loss on sale of intangible asset | $ (15,500) | ||||||||
Intangible asset, carrying value at the time of sale | $ 15,800 | ||||||||
Other product rights | |||||||||
Intangible Assets | |||||||||
Intangible assets, net | $ 12,000 | $ 5,000 | |||||||
Number of products acquired | product | 20 | 5 | |||||||
In-process research and development | |||||||||
Intangible Assets | |||||||||
Value assigned, abandoned project | $ 23,000 | ||||||||
Impairment charges | $ 23,000 | $ 8,000 |
Intangible Assets - Future Annu
Intangible Assets - Future Annual Amortization Expense (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Jun. 30, 2017 |
Future annual amortization expense: | ||
2,019 | $ 31,723 | |
2,020 | 30,882 | |
2,021 | 30,882 | |
2,022 | 30,882 | |
2,023 | 30,882 | |
Thereafter | 232,725 | |
Intangible assets, net | $ 387,976 | $ 417,412 |
Long-Term Debt - Net (Details)
Long-Term Debt - Net (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | |
Long-term debt | |||
Debt, gross | $ 897,287 | ||
Other | $ 735 | ||
Total debt, net | 839,270 | 903,647 | |
Less short-term borrowings and current portion of long-term debt | (66,845) | (60,117) | |
Total long-term debt, net | $ 772,425 | 843,530 | |
Debt instrument, stated percentage | 12.00% | ||
Voluntary payment against long-term debt | $ 25,000 | ||
Write-off related to debt issuance costs | $ 2,600 | ||
Term Loan A due 2020 | |||
Long-term debt | |||
Debt, gross | $ 227,276 | 254,375 | |
Unamortized discount and other debt issuance costs | (10,178) | (16,238) | |
Total debt, net | $ 217,098 | 238,137 | |
Debt instrument, stated percentage | 6.84% | ||
Term Loan B due 2022 | |||
Long-term debt | |||
Debt, gross | $ 670,011 | 727,881 | |
Unamortized discount and other debt issuance costs | (47,839) | (63,106) | |
Total debt, net | $ 622,172 | $ 664,775 | |
Debt instrument, stated percentage | 7.47% |
Long-Term Debt - Due (Details)
Long-Term Debt - Due (Details) $ in Thousands | Jun. 30, 2018USD ($) |
Debt maturities | |
2,019 | $ 66,845 |
2,020 | 66,845 |
2,021 | 211,621 |
2,022 | 39,345 |
2,023 | 512,631 |
Total | $ 897,287 |
Legal, Regulatory Matters and68
Legal, Regulatory Matters and Contingencies (Details) $ in Thousands | Jan. 22, 2018itemproduct | Dec. 17, 2017USD ($) | Jul. 31, 2018 | Nov. 30, 2016item | Sep. 30, 2014lawsuit | Jul. 31, 2014lawsuitpatent | Dec. 31, 2016customer | Jun. 30, 2018USD ($)Distributorlawsuittrancheproductpatent | Jun. 30, 2017USD ($) | Jun. 18, 2018product | Jun. 07, 2018product | Oct. 31, 2017stateproduct | Oct. 06, 2017product | Nov. 24, 2015USD ($) |
Legal, Regulatory Matters and Contingencies | ||||||||||||||
Number of drugs | product | 30 | 18 | 13 | 6 | ||||||||||
Compliance reviews, number of customers | customer | 1 | |||||||||||||
Liability estimate | $ | $ 9,300 | $ 9,300 | ||||||||||||
Indemnification asset | $ | $ 8,300 | |||||||||||||
Number of lawsuits | lawsuit | 1 | 2 | ||||||||||||
Number of manufacturers and distributors | Distributor | 30 | |||||||||||||
Number of tranches | tranche | 3 | |||||||||||||
Purchase of noncontrolling interest | $ | $ 1,500 | |||||||||||||
Number of States | state | 45 | |||||||||||||
Number of Days Granted to Punitive Lead Plaintiff to File Amended Complaint | 21 days | |||||||||||||
Patents allegedly invalid | patent | 2 | |||||||||||||
Patents allegedly infringed | patent | 2 | |||||||||||||
Opt-out purchasers, number | item | 3 | |||||||||||||
End Payer complaint | ||||||||||||||
Legal, Regulatory Matters and Contingencies | ||||||||||||||
Number of drugs | product | 14 | |||||||||||||
Indirect Reseller complaint | ||||||||||||||
Legal, Regulatory Matters and Contingencies | ||||||||||||||
Number of drugs | product | 15 | |||||||||||||
Other Income | ||||||||||||||
Legal, Regulatory Matters and Contingencies | ||||||||||||||
Amount received from settlement agreement | $ | $ 3,500 | |||||||||||||
Officers | ||||||||||||||
Legal, Regulatory Matters and Contingencies | ||||||||||||||
Number of officers | item | 2 | |||||||||||||
Doxycycline Monohydrate | ||||||||||||||
Legal, Regulatory Matters and Contingencies | ||||||||||||||
Number of drugs | product | 1 | |||||||||||||
Minimum | ||||||||||||||
Legal, Regulatory Matters and Contingencies | ||||||||||||||
Number of lawsuits | lawsuit | 100 |
Commitments (Details)
Commitments (Details) $ in Thousands | Jun. 30, 2018USD ($) |
Future minimum lease payments | |
2,019 | $ 1,835 |
2,020 | 1,855 |
2,021 | 1,406 |
2,022 | 1,080 |
2,023 | 1,080 |
Thereafter | 4,158 |
Total | $ 11,414 |
Commitments - Other Commitment
Commitments - Other Commitment (Details) $ in Millions | 3 Months Ended | |
Mar. 31, 2017USD ($)itememployee | Jun. 30, 2018USD ($) | |
Commitments | ||
Interest rate | 12.00% | |
Revolving loans | ||
Commitments | ||
Amount of potential loans offered | $ 15 | |
Interest rate | 2.00% | |
Expiration period | 7 years | |
Members in the board of the entity | item | 5 | |
Lannett employees as members of the board of the entity | employee | 2 | |
Revolving loans | Other Assets | ||
Commitments | ||
Current amount due from outstanding loan | $ 11.2 | |
Revolving loans | If loan balance is equal to or greater than $7.5 million | ||
Commitments | ||
Minimum Amount to be Considered for Conversion of Loan to Ownership Interest | $ 7.5 | |
Ownership interest for conversion (in percentage) | 50.00% |
Accumulated Other Comprehensi71
Accumulated Other Comprehensive Loss - Foreign Currency Translation (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Accumulated Other Comprehensive Loss | ||
Beginning Balance | $ (222) | $ (295) |
Net gain (loss) on foreign currency translation (net of tax of $0 and $0) | (293) | 73 |
Other comprehensive income (loss), net of tax | (293) | 73 |
Ending Balance | (515) | (222) |
Total Accumulated Other Comprehensive Loss | (515) | (222) |
Net gain (loss) on foreign currency translation, tax | 0 | 0 |
Reclassifications to net income, tax | $ 0 | $ 0 |
Earnings (Loss) Per Common Sh72
Earnings (Loss) Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||||||
Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | 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, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Earnings (Loss) Per Common Share | |||||||||||||||
Net income (loss) attributable to Lannett Company, Inc | $ (11,359) | $ 12,770 | $ 14,022 | $ 13,257 | $ 5,726 | $ 14,929 | $ 8,172 | $ (29,408) | $ 3,571 | $ (5,490) | $ 13,520 | $ 33,181 | $ 28,690 | $ (581) | $ 44,782 |
Basic weighted average common shares outstanding | 37,127,306 | 36,812,524 | 36,442,782 | ||||||||||||
Effect of potentially dilutive stock options, warrants and restricted stock awards | 1,035,208 | 946,663 | |||||||||||||
Diluted weighted average common shares outstanding | 38,162,514 | 36,812,524 | 37,389,445 | ||||||||||||
Earnings (loss) per common share attributable to Lannett Company, Inc.: | |||||||||||||||
Basic (in dollars per share) | $ (0.30) | $ 0.34 | $ 0.38 | $ 0.36 | $ 0.16 | $ 0.41 | $ 0.22 | $ (0.80) | $ 0.10 | $ (0.15) | $ 0.37 | $ 0.91 | $ 0.77 | $ (0.02) | $ 1.23 |
Diluted (in dollars per share) | $ (0.30) | $ 0.33 | $ 0.37 | $ 0.35 | $ 0.15 | $ 0.40 | $ 0.22 | $ (0.80) | $ 0.10 | $ (0.15) | $ 0.36 | $ 0.89 | $ 0.75 | $ (0.02) | $ 1.20 |
Anti-dilutive shares excluded in the computation of diluted earnings per share | 3,000,000 | 4,300,000 | 3,000,000 |
Warrant (Details)
Warrant (Details) - USD ($) $ / shares in Units, $ in Thousands, shares in Millions | Nov. 25, 2015 | Jun. 30, 2016 |
Class of Warrant or Right | ||
Issuance of a warrant to finance KUPI acquisition | $ 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 | |
Issuance of a warrant to finance KUPI acquisition | $ 29,900 |
Share-Based Compensation (Detai
Share-Based Compensation (Details) shares in Millions, $ in Millions | 12 Months Ended |
Jun. 30, 2018USD ($)ShareBasedCompensationPlanshares | |
Stock-based Compensation | |
Number of share-based employee compensation plans | ShareBasedCompensationPlan | 2 |
Aggregate number of shares authorized for issuance | 4.5 |
Shares for future issuances | 1.5 |
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 | $ | $ 8.3 |
Weighted average period during which the cost is expected to be recognized | 2 years 1 month 6 days |
Share-Based Compensation - Opti
Share-Based Compensation - Options Valuation (Details) - Stock options - $ / shares | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Assumptions used to estimate fair values | |||
Risk-free interest rate (as a percent) | 2.10% | 1.10% | 1.70% |
Expected volatility (as a percent) | 57.60% | 55.60% | 48.30% |
Forfeiture rate (as a percent) | 6.50% | 6.50% | 6.50% |
Expected term (in years) | 5 years 4 months 24 days | 5 years 2 months 12 days | 5 years 2 months 12 days |
Weighted average fair value (in dollars per share) | $ 11.25 | $ 15.33 | $ 26.24 |
Share-Based Compensation - Op76
Share-Based Compensation - Options Rollforward (Details) - Stock options - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2015 | |
Awards | ||||
Outstanding at the beginning of the period (in shares) | 1,475 | 1,730 | 1,975 | |
Granted (in shares) | 50 | 11 | 58 | |
Exercised (in shares) | (445) | (234) | (254) | |
Forfeited, expired or repurchased (in shares) | (23) | (32) | (49) | |
Outstanding at the end of the period (in shares) | 1,057 | 1,475 | 1,730 | 1,975 |
Vested and expected to vest, Awards (in shares) | 1,053 | |||
Exercisable at the end of year (in shares) | 1,006 | |||
Stock options, Weighted-Average Exercise Price | ||||
Outstanding at the beginning of the period (in dollars per share) | $ 18.02 | $ 16.77 | $ 15.39 | |
Granted (in dollars per share) | 21.43 | 31.30 | 59.20 | |
Exercised (in dollars per share) | 7.23 | 7.38 | 12.62 | |
Forfeited, expired or repurchased (in dollars per share) | 30.83 | 33.04 | 32.66 | |
Outstanding at the end of the period (in dollars per share) | 22.46 | $ 18.02 | $ 16.77 | $ 15.39 |
Vested and expected to vest, Weighted-Average Exercise Price (in dollars per share) | 22.46 | |||
Exercisable at the end of the period (in dollars per share) | $ 22.25 | |||
Aggregate Intrinsic Value | ||||
Exercised (in dollars) | $ 4,243 | $ 4,849 | $ 6,168 | |
Outstanding at the end of the period (in dollars) | 2,584 | $ 12,212 | $ 19,524 | $ 86,983 |
Vested and expected to vest, Aggregate Intrinsic Value | 2,584 | |||
Exercisable at the end of the period (in dollars) | $ 2,584 | |||
Weighted Average Remaining Contractual Life (yrs.) | ||||
Outstanding at the end of the period (in years) | 5 years 4 months 24 days | 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 4 months 24 days | |||
Exercisable at the end of the period (in years) | 5 years 2 months 12 days |
Share-Based Compensation - Rest
Share-Based Compensation - Restricted Stock (Details) - Restricted stock - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Stock-based Compensation | |||
Annual forfeiture rate used to calculate compensation expense (as a percent) | 5.70% | 6.50% | 6.50% |
Awards | |||
Non-vested at the beginning of the period (in shares) | 334 | 167 | 98 |
Granted (in shares) | 641 | 298 | 147 |
Vested (in shares) | (191) | (86) | (66) |
Forfeited (in shares) | (80) | (45) | (12) |
Non-vested at the end of the period (in shares) | 704 | 334 | 167 |
Weighted Average Grant-date Fair Value | |||
Non-vested at the beginning of the period (in dollars per share) | $ 30.71 | $ 48.22 | $ 37.83 |
Granted (in dollars per share) | 18.01 | 24.73 | 54.64 |
Vested (in dollars per share) | 31.30 | 42.60 | 47.11 |
Forfeited (in dollars per share) | 20.95 | 32.90 | 47.67 |
Non-vested at the end of the period (in dollars per share) | $ 20.06 | $ 30.71 | $ 48.22 |
Aggregate Intrinsic Value | |||
Vested | $ 4,104 | $ 2,564 | $ 3,511 |
Share-Based Compensation - Perf
Share-Based Compensation - Performance-Based Shares (Details) - Performance-Based Shares $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended |
Jun. 30, 2018USD ($)$ / sharesshares | |
Performance-Based Shares | |
Share-based compensation awards vesting period | 3 years |
Awards | |
Granted (in shares) | shares | 47 |
Vested (in shares) | shares | (27) |
Non-vested at the end of the period (in shares) | shares | 20 |
Weighted Average Grant-date Fair Value | |
Granted (in dollars per share) | $ / shares | $ 25.58 |
Vested (in dollars per share) | $ / shares | 25.58 |
Non-vested at the end of the period (in dollars per share) | $ / shares | $ 25.58 |
Aggregate Intrinsic Value | |
Vested | $ | $ 574 |
Share-Based Compensation - Empl
Share-Based Compensation - Employee Stock Purchase Plan (Details) - shares shares in Thousands | 12 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | Apr. 01, 2003 | |
Stock-based Compensation | ||||
Shares authorized for issuance (in shares) | 4,500 | |||
Employee Stock Purchase Plan | ||||
Stock-based Compensation | ||||
Purchase price of stock as percent of market fair value (in percent) | 85.00% | |||
Compensation authorized by the employee to be withheld for stock purchase (in percent) | 10.00% | |||
Shares authorized for issuance (in shares) | 1,100 | |||
Shares issued (in shares) | 66 | 57 | 47 | |
Cumulative shares issued (in shares) | 608 |
Share-Based Compensation - Cost
Share-Based Compensation - Cost (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Share-based compensation costs | |||
Share based compensation | $ 9,896 | $ 7,719 | $ 11,562 |
Tax benefit at statutory rate | 2,919 | 2,818 | 4,220 |
Selling, general and administrative | |||
Share-based compensation costs | |||
Share based compensation | 7,570 | 5,855 | 9,529 |
Research and development | |||
Share-based compensation costs | |||
Share based compensation | 680 | 661 | 760 |
Cost of sales | |||
Share-based compensation costs | |||
Share based compensation | $ 1,646 | $ 1,203 | $ 1,273 |
Employee Benefit Plan (Details)
Employee Benefit Plan (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
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 | $ 2.3 | $ 2.1 | $ 1.6 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||||||||||
Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | 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, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Income Taxes | ||||||||||||||||
Provisional non-cash net tax charge | $ 13,100 | |||||||||||||||
Current Income Tax Expense (Benefit) | ||||||||||||||||
Federal | (9,439) | $ 764 | $ 34,932 | |||||||||||||
State and Local | 1,152 | 638 | 1,887 | |||||||||||||
Total Current Income Tax Expense (Benefit) | (8,287) | 1,402 | 36,819 | |||||||||||||
Deferred Income Tax Expense (Benefit) | ||||||||||||||||
Federal | 31,263 | (2,210) | (17,529) | |||||||||||||
State and Local | (573) | 1,905 | (1,968) | |||||||||||||
Total Deferred Income Tax Expense (Benefit) | 30,690 | (305) | (19,497) | |||||||||||||
Federal, state and local income tax (benefit)/expense | $ (883) | $ (2,275) | $ 18,138 | $ 7,423 | $ 3,100 | $ 7,337 | $ 3,542 | $ (12,882) | $ (2,948) | $ (2,743) | $ 5,958 | $ 17,055 | $ 22,403 | $ 1,097 | $ 17,322 | |
Reconciliation of the company's federal statutory tax rate to its effective rate | ||||||||||||||||
Federal income tax at statutory rate (as a percent) | 21.00% | 28.10% | 35.00% | 35.00% | ||||||||||||
State and local income tax, net (as a percent) | 0.60% | 293.60% | (0.10%) | |||||||||||||
Nondeductible expenses (as a percent) | 0.20% | 45.40% | 0.80% | |||||||||||||
Foreign rate differential (as a percent) | 0.40% | 49.90% | 0.50% | |||||||||||||
Income tax credits (as a percent) | (1.40%) | (160.90%) | (3.00%) | |||||||||||||
Domestic production activity deduction (as a percent) | (1.50%) | (5.20%) | ||||||||||||||
Unrecognized tax benefits | (6.70%) | |||||||||||||||
Change in tax laws (as a percent) | 25.60% | |||||||||||||||
Excess tax benefits on share-based compensation | (0.30%) | (134.30%) | ||||||||||||||
Other (as a percent) | (1.20%) | 70.80% | (0.10%) | |||||||||||||
Effective income tax rate (as a percent) | 43.80% | 199.50% | 27.90% | |||||||||||||
Deferred tax assets: | ||||||||||||||||
Accrued expenses | 1,085 | 1,869 | $ 1,085 | $ 1,085 | $ 1,869 | |||||||||||
Share-based compensation expense | 4,158 | 6,031 | 4,158 | 4,158 | 6,031 | |||||||||||
Reserve for returns | 9,342 | 15,032 | 9,342 | 9,342 | 15,032 | |||||||||||
Reserves for rebates | 11,194 | 11,194 | ||||||||||||||
Reserves for accounts receivable and inventory | 5,425 | 2,026 | 5,425 | 5,425 | 2,026 | |||||||||||
Intangible impairment | 1,337 | 2,176 | 1,337 | 1,337 | 2,176 | |||||||||||
Federal net operating loss | 402 | 736 | 402 | 402 | 736 | |||||||||||
State net operating loss | 4,495 | 2,944 | 4,495 | 4,495 | 2,944 | |||||||||||
Impairment on Cody note receivable | 1,175 | 1,913 | 1,175 | 1,175 | 1,913 | |||||||||||
Accumulated amortization on intangible assets | 10,868 | 25,505 | 10,868 | 10,868 | 25,505 | |||||||||||
Settlement Liability | 6,019 | 6,019 | ||||||||||||||
Foreign net operating loss | 880 | 736 | 880 | 880 | 736 | |||||||||||
Other | 404 | 290 | 404 | 404 | 290 | |||||||||||
Total deferred tax asset | 39,571 | 76,471 | 39,571 | 39,571 | 76,471 | |||||||||||
Valuation allowance | (8,120) | (6,391) | (8,120) | (8,120) | (6,391) | |||||||||||
Total deferred tax asset less valuation allowance | 31,451 | 70,080 | 31,451 | 31,451 | 70,080 | |||||||||||
Deferred tax liabilities: | ||||||||||||||||
Prepaid expenses | 118 | 267 | 118 | 118 | 267 | |||||||||||
Property, plant and equipment | 9,231 | 16,807 | 9,231 | 9,231 | 16,807 | |||||||||||
Other | 39 | 253 | 39 | 39 | 253 | |||||||||||
Total deferred tax liability | 9,388 | 17,327 | 9,388 | 9,388 | 17,327 | |||||||||||
Net deferred tax asset | $ 22,063 | $ 52,753 | $ 22,063 | $ 22,063 | $ 52,753 |
Income Taxes - Unrecognized ben
Income Taxes - Unrecognized benefits (Details) - USD ($) $ in Thousands | 12 Months Ended | |||||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Income Taxes | ||||||
Unrecognized Tax Benefits | $ 5,942 | $ 6,244 | $ 6,244 | $ 2,537 | $ 5,942 | $ 6,244 |
Unrecognized tax benefits that if recognized, would impact the tax expense and effective tax rate | 2,300 | 4,200 | 4,400 | |||
Unrecognized tax benefits cumulative interest and penalties recorded | $ 0 | $ 0 | $ 0 | |||
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | ||||||
Balance at the beginning of the period | 5,942 | 6,244 | ||||
Additions for tax positions of the current year | 294 | 168 | ||||
Additions for tax positions of prior years | 700 | 16 | ||||
Lapse of statute of limitations | (4,399) | (486) | ||||
Balance at the end of the period | $ 2,537 | $ 5,942 | $ 6,244 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Subsidiary of variable interest entity | |||
Related Party Transactions | |||
Expenses incurred for online medical benefit services | $ 332 | ||
Accounts payable to related party | 58 | ||
Board Member | Auburn | |||
Related Party Transactions | |||
Sales to related party | 3,900 | $ 3,700 | $ 3,100 |
Accounts receivable related party | 585 | 751 | |
Board Member | KeySource | |||
Related Party Transactions | |||
Sales to related party | 1,900 | 1,700 | |
Accounts receivable related party | $ 514 | $ 606 |
Material Contracts with Suppl85
Material Contracts with Suppliers (Details) - JSP shares in Millions, $ in Millions | Aug. 19, 2013item | Aug. 19, 2013USD ($)shares | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 |
Material Contracts with Suppliers | |||||
Number of shares of common stock issued in exchange for exclusive distribution rights | shares | 1.5 | ||||
Number of products under the exclusive distribution agreement | item | 3 | ||||
Extension term of the agreement | 5 years | ||||
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 | 37.00% | 36.00% | 52.00% |
Acquisitions (Details)
Acquisitions (Details) - KUPI $ / shares in Units, $ in Thousands | 12 Months Ended |
Jun. 30, 2016USD ($)$ / shares | |
Unaudited Pro Forma Financial Results | |
Total net Sales | $ 689,754 |
Net income attributable to Lannett Company, Inc. | $ 61,916 |
Earnings per common share attributable to Lannett Company, Inc.: | |
Basic (in dollars per share) | $ / shares | $ 1.70 |
Diluted (in dollars per share) | $ / shares | $ 1.66 |
Acquisition-related expenses | $ 28,900 |
Acquisition costs incurred by acquirer | |
Earnings per common share attributable to Lannett Company, Inc.: | |
Acquisition-related expenses | 21,500 |
Acquisition costs incurred by acquiree | |
Earnings per common share attributable to Lannett Company, Inc.: | |
Acquisition-related expenses | 7,400 |
Fair value set-up adjustment | |
Earnings per common share attributable to Lannett Company, Inc.: | |
Inventory fair value step-up adjustments | $ 17,000 |
Subsequent Events (Details)
Subsequent Events (Details) | Aug. 03, 2018USD ($) | Jul. 30, 2018USD ($) | Jul. 13, 2018USD ($) | Aug. 31, 2018item | Jun. 30, 2017USD ($) | Mar. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Sep. 30, 2016USD ($) | Jun. 30, 2016USD ($) | Mar. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Sep. 30, 2015USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Jun. 30, 2015USD ($) |
Subsequent Events | ||||||||||||||||
Net sales | $ 139,118,000 | $ 161,720,000 | $ 170,944,000 | $ 161,559,000 | $ 168,887,000 | $ 140,114,000 | $ 127,059,000 | $ 106,433,000 | $ 684,563,000 | $ 633,341,000 | $ 542,493,000 | |||||
Goodwill | 339,566,000 | 339,566,000 | 339,566,000 | |||||||||||||
Cash and cash equivalents | $ 117,737,000 | $ 224,769,000 | 98,586,000 | $ 117,737,000 | $ 224,769,000 | $ 200,340,000 | ||||||||||
Available borrowing capacity | 125,000,000 | |||||||||||||||
JSP | ||||||||||||||||
Subsequent Events | ||||||||||||||||
Net sales | 253,100,000 | |||||||||||||||
JSP | Levothyroxine Sodium Tablets | ||||||||||||||||
Subsequent Events | ||||||||||||||||
Net sales | $ 245,900,000 | |||||||||||||||
Gross Margin Percent | 60.00% | |||||||||||||||
Subsequent event | ||||||||||||||||
Subsequent Events | ||||||||||||||||
Total consideration of sale of real property | $ 14,600,000 | |||||||||||||||
Number of officers claiming damaged | item | 2 | |||||||||||||||
Subsequent event | ANDOR Pharmaceuticals, LLC license agreement | ||||||||||||||||
License Agreement | ||||||||||||||||
Agreed amount of license | $ 1,500,000 | |||||||||||||||
License amount paid | $ 500,000 | |||||||||||||||
Amount to be paid upon approval by FDA | $ 1,000,000 | |||||||||||||||
Minimum royalty term | 4 years | |||||||||||||||
Royalty guaranty amount | $ 16,000,000 | |||||||||||||||
Reduction in the amount of royalty guaranty | $ 4,000,000 |
Quarterly Financial Informati88
Quarterly Financial Information (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||||||
Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | 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, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Quarterly Financial Information (Unaudited) | |||||||||||||||
Net sales | $ 170,911 | $ 174,386 | $ 184,305 | $ 154,961 | $ 139,118 | $ 165,720 | $ 170,944 | $ 161,559 | $ 168,887 | $ 163,712 | $ 127,059 | $ 106,433 | $ 684,563 | $ 637,341 | $ 566,091 |
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 | 684,563 | 633,341 | 542,493 | ||||
Cost of sales | 104,383 | 107,329 | 96,855 | 87,290 | 80,240 | 89,290 | 82,891 | 79,707 | 88,957 | 82,623 | 55,414 | 29,006 | 363,729 | 300,030 | 237,371 |
Amortization of intangible assets | 32,128 | 32,098 | 18,629 | ||||||||||||
Gross profit | 66,528 | 67,057 | 87,450 | 67,671 | 58,878 | 72,430 | 88,053 | 81,852 | 79,930 | 57,491 | 71,645 | 77,427 | 288,706 | 301,213 | 286,493 |
Operating expenses | 57,926 | 33,777 | 40,315 | 26,992 | 30,069 | 28,793 | 53,747 | 102,158 | 49,535 | 38,874 | 41,320 | 26,006 | 159,010 | 214,767 | 155,735 |
Operating income | 8,602 | 33,280 | 47,135 | 40,679 | 28,809 | 43,637 | 34,306 | (20,306) | 30,395 | 18,617 | 30,325 | 51,421 | 129,696 | 86,446 | 130,758 |
Other | (20,844) | (22,785) | (14,975) | (19,999) | (19,983) | (21,371) | (22,578) | (21,964) | (29,752) | (26,830) | (10,827) | (1,170) | 2,278 | (244) | (1) |
Income tax expense | (883) | (2,275) | 18,138 | 7,423 | 3,100 | 7,337 | 3,542 | (12,882) | (2,948) | (2,743) | 5,958 | 17,055 | 22,403 | 1,097 | 17,322 |
Less: Net income attributable to noncontrolling interest | 14 | 20 | 20 | 20 | 20 | 15 | 34 | 75 | |||||||
Net income (loss) attributable to Lannett Company, Inc. | $ (11,359) | $ 12,770 | $ 14,022 | $ 13,257 | $ 5,726 | $ 14,929 | $ 8,172 | $ (29,408) | $ 3,571 | $ (5,490) | $ 13,520 | $ 33,181 | $ 28,690 | $ (581) | $ 44,782 |
Earnings (loss) per common share attributable to Lannett Company, Inc.: | |||||||||||||||
Basic (in dollars per share) | $ (0.30) | $ 0.34 | $ 0.38 | $ 0.36 | $ 0.16 | $ 0.41 | $ 0.22 | $ (0.80) | $ 0.10 | $ (0.15) | $ 0.37 | $ 0.91 | $ 0.77 | $ (0.02) | $ 1.23 |
Diluted (in dollars per share) | $ (0.30) | $ 0.33 | $ 0.37 | $ 0.35 | $ 0.15 | $ 0.40 | $ 0.22 | $ (0.80) | $ 0.10 | $ (0.15) | $ 0.36 | $ 0.89 | $ 0.75 | $ (0.02) | $ 1.20 |
Quarterly Financial Informati89
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 |