Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Jun. 30, 2019 | Jul. 31, 2019 | Dec. 31, 2018 | |
Document and Entity Information | |||
Document Type | 10-K | ||
Document Period End Date | Jun. 30, 2019 | ||
Entity Registrant Name | LANNETT CO INC | ||
Amendment Flag | false | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 155,045,696 | ||
Entity Common Stock, Shares Outstanding | 40,405,663 | ||
Entity Central Index Key | 0000057725 | ||
Current Fiscal Year End Date | --06-30 | ||
Document Fiscal Year Focus | 2019 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2019 | Jun. 30, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 140,249 | $ 98,586 |
Accounts receivable, net | 164,752 | 252,651 |
Inventories | 143,971 | 141,635 |
Prepaid income taxes | 15,159 | |
Assets held for sale | 9,671 | 13,976 |
Other current assets | 13,606 | 4,863 |
Total current assets | 472,249 | 526,870 |
Property, plant and equipment, net | 186,670 | 233,247 |
Intangible assets, net | 411,229 | 424,425 |
Goodwill | 339,566 | |
Deferred tax assets | 109,305 | 22,063 |
Other assets | 7,960 | 29,133 |
TOTAL ASSETS | 1,187,413 | 1,575,304 |
Current liabilities: | ||
Accounts payable | 13,493 | 56,767 |
Accrued expenses | 5,805 | 7,425 |
Accrued payroll and payroll-related expenses | 19,924 | 7,819 |
Rebates payable | 46,175 | 49,400 |
Royalties payable | 16,215 | 5,955 |
Restructuring liability | 2,315 | 6,706 |
Other current liabilities | 3,652 | |
Income tax payable | 2,198 | |
Short-term borrowings and current portion of long-term debt | 66,845 | 66,845 |
Total current liabilities | 176,622 | 200,917 |
Long-term debt, net | 662,203 | 772,425 |
Other liabilities | 14,547 | 3,047 |
TOTAL LIABILITIES | 853,372 | 976,389 |
Commitments and contingencies (Note 11 and 12) | ||
STOCKHOLDERS' EQUITY | ||
Common stock ($0.001 par value, 100,000,000 shares authorized; 38,969,518 and 38,256,839 shares issued; 38,010,714 and 37,380,517 shares outstanding at June 30, 2019 and 2018, respectively) | 39 | 38 |
Additional paid-in capital | 317,023 | 306,817 |
Retained earnings | 32,075 | 306,464 |
Accumulated other comprehensive loss | (615) | (515) |
Treasury stock (958,804 and 876,322 shares at June 30, 2019 and 2018, respectively) | (14,481) | (13,889) |
Total stockholders' equity | 334,041 | 598,915 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 1,187,413 | $ 1,575,304 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2019 | Jun. 30, 2018 |
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 | 38,969,518 | 38,256,839 |
Common stock, outstanding shares | 38,010,714 | 37,380,517 |
Treasury stock, shares | 958,804 | 876,322 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | |||
Net sales | $ 655,407 | $ 684,563 | $ 637,341 |
Settlement agreement | (4,000) | ||
Total net sales | 655,407 | 684,563 | 633,341 |
Cost of sales | 379,601 | 363,729 | 300,030 |
Amortization of intangibles | 32,196 | 32,128 | 32,098 |
Gross profit | 243,610 | 288,706 | 301,213 |
Operating expenses: | |||
Research and development expenses | 38,807 | 29,196 | 42,073 |
Selling, general and administrative expenses | 87,648 | 82,196 | 73,477 |
Acquisition and integration-related expenses | 83 | 3,965 | |
Restructuring expenses | 4,095 | 7,061 | 7,168 |
Loss on sale of intangible asset | 15,514 | ||
Asset impairment charges | 375,381 | 24,960 | 88,084 |
Total operating expenses | 505,931 | 159,010 | 214,767 |
Operating income (loss) | (262,321) | 129,696 | 86,446 |
Other income (loss): | |||
Loss on extinguishment of debt | (448) | ||
Investment income | 3,166 | 4,753 | 3,768 |
Interest expense | (84,624) | (85,634) | (89,420) |
Other | (2,018) | 2,278 | (244) |
Total other loss | (83,924) | (78,603) | (85,896) |
Income (loss) before income taxes | (346,245) | 51,093 | 550 |
Income tax expense (benefit) | (74,138) | 22,403 | 1,097 |
Net income (loss) | (272,107) | 28,690 | (547) |
Less: Net income attributable to noncontrolling interest | 34 | ||
Net income (loss) attributable to Lannett Company, Inc. | $ (272,107) | $ 28,690 | $ (581) |
Earnings (loss) per common share attributable to Lannett Company, Inc.: | |||
Basic (in dollars per share) | $ (7.20) | $ 0.77 | $ (0.02) |
Diluted (in dollars per share) | $ (7.20) | $ 0.75 | $ (0.02) |
Weighted average common shares outstanding: | |||
Basic (in shares) | 37,779,812 | 37,127,306 | 36,812,524 |
Diluted (in shares) | 37,779,812 | 38,162,514 | 36,812,524 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | |||
Net income (loss) | $ (272,107) | $ 28,690 | $ (547) |
Other comprehensive income (loss), before tax: | |||
Foreign currency translation gain (loss) | (100) | (293) | 73 |
Total other comprehensive income (loss), net of taxes | (100) | (293) | 73 |
Comprehensive income (loss) | (272,207) | 28,397 | (474) |
Less: Total comprehensive income attributable to noncontrolling interest | 34 | ||
Comprehensive income (loss) attributable to Lannett Company, Inc. | $ (272,207) | $ 28,397 | $ (508) |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands | Stockholders' Equity Attributable to Lannett Co., Inc | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (loss) | Treasury Stock | Noncontrolling Interest | Total |
Balance at Jun. 30, 2016 | $ 554,049 | $ 37 | $ 283,301 | $ 278,355 | $ (295) | $ (7,349) | $ 408 | $ 554,457 |
Balance (in shares) at Jun. 30, 2016 | 37,150 | |||||||
Increase (Decrease) in Shareholders' Equity | ||||||||
Shares issued in connection with share-based compensation plans | 2,818 | 2,818 | 2,818 | |||||
Shares issued in connection with share-based compensation plans (in shares) | 378 | |||||||
Share-based compensation | 7,719 | 7,719 | 7,719 | |||||
Purchase of noncontrolling interest | (1,058) | (1,058) | (442) | (1,500) | ||||
Purchase of treasury stock | (1,898) | (1,898) | (1,898) | |||||
Other comprehensive income (loss), net of income tax | 73 | 73 | 73 | |||||
Net income (loss) | (581) | (581) | $ 34 | (547) | ||||
Balance at Jun. 30, 2017 | 561,122 | $ 37 | 292,780 | 277,774 | (222) | (9,247) | 561,122 | |
Balance (in shares) at Jun. 30, 2017 | 37,528 | |||||||
Increase (Decrease) in Shareholders' Equity | ||||||||
Shares issued in connection with share-based compensation plans | 4,142 | $ 1 | 4,141 | 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 (loss), net of income tax | (293) | (293) | (293) | |||||
Net income (loss) | 28,690 | 28,690 | 28,690 | |||||
Balance at Jun. 30, 2018 | 598,915 | $ 38 | 306,817 | 306,464 | (515) | (13,889) | 598,915 | |
Balance (in shares) at Jun. 30, 2018 | 38,257 | |||||||
Increase (Decrease) in Shareholders' Equity | ||||||||
Shares issued in connection with share-based compensation plans | 1,180 | $ 1 | 1,179 | 1,180 | ||||
Shares issued in connection with share-based compensation plans (in shares) | 713 | |||||||
Share-based compensation | 9,027 | 9,027 | 9,027 | |||||
Purchase of treasury stock | (592) | (592) | (592) | |||||
Other comprehensive income (loss), net of income tax | (100) | (100) | (100) | |||||
Net income (loss) | (272,107) | (272,107) | (272,107) | |||||
Balance at Jun. 30, 2019 | 334,041 | $ 39 | $ 317,023 | 32,075 | $ (615) | $ (14,481) | 334,041 | |
Balance (in shares) at Jun. 30, 2019 | 38,970 | |||||||
Increase (Decrease) in Shareholders' Equity | ||||||||
ASC 606 adjustment | ASU 2014-09 | $ (2,282) | $ (2,282) | $ (2,282) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
OPERATING ACTIVITIES: | |||
Net income (loss) | $ (272,107) | $ 28,690 | $ (547) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||
Depreciation and amortization | 55,594 | 55,115 | 55,340 |
Deferred income tax expense (benefit) | (87,242) | 30,690 | (305) |
Share-based compensation | 9,027 | 9,896 | 7,719 |
Asset impairment charges | 375,381 | 24,960 | 88,084 |
Loss on sale/disposal of assets | 1,559 | 848 | 290 |
Loss (gain) on investment securities | (3,313) | (2,914) | |
Loss on extinguishment of debt | 448 | ||
Loss on sale of intangible asset | 15,514 | ||
Amortization of debt discount and other debt issuance costs | 17,641 | 21,866 | 20,577 |
Other noncash expenses | 2,579 | 5 | 1,889 |
Changes in assets and liabilities which provided (used) cash, net of acquisitions: | |||
Accounts receivable, net | 84,949 | (48,585) | 1,701 |
Inventories | (2,336) | (19,031) | (7,700) |
Prepaid income taxes/Income taxes payable | 18,319 | 2,174 | (17,748) |
Other assets | 2,643 | (2,287) | 1,916 |
Rebates payable | (3,225) | 4,807 | 14,369 |
Royalties payable | 10,260 | 2,940 | (2,112) |
Restructuring liability | (4,391) | 1,275 | 1,301 |
Settlement liability | 1,000 | ||
Accounts payable | (43,274) | (4,953) | 5,000 |
Accrued expenses | (1,620) | (5,074) | 3,252 |
Accrued payroll and payroll-related expenses | 12,105 | 2,986 | (5,739) |
Net cash provided by operating activities | 176,310 | 118,523 | 165,373 |
INVESTING ACTIVITIES: | |||
Purchases of property, plant and equipment | (24,340) | (52,316) | (48,694) |
Proceeds from sale of property, plant and equipment | 14,450 | 28 | 112 |
Proceeds from sale of outstanding loan to Variable Interest Entity ("VIE") | 5,600 | ||
Advance to VIE | (10,254) | ||
Purchases of intangible asset | (3,000) | (19,038) | |
Proceeds from sale of investment securities | 94,047 | 67,828 | |
Purchase of investment securities | (63,643) | (77,911) | |
Net cash used in investing activities | (7,290) | (51,176) | (58,665) |
FINANCING ACTIVITIES: | |||
Repayments of short-term borrowings and long-term debt | (126,743) | (85,705) | (178,233) |
Purchase of noncontrolling interest | (1,500) | ||
Acquisition-related contingent consideration | (35,000) | ||
Proceeds from issuance of stock | 1,180 | 4,142 | 2,818 |
Payment of debt issuance costs | (1,102) | ||
Purchase of treasury stock | (592) | (4,642) | (1,898) |
Net cash used in financing activities | (127,257) | (86,205) | (213,813) |
Effect on cash and cash equivalents of changes in foreign exchange rates | (100) | (293) | 73 |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 41,663 | (19,151) | (107,032) |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 98,586 | 117,737 | 224,769 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | 140,249 | 98,586 | 117,737 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||
Interest paid (net of amounts capitalized of $00, $1.6 million and $1.3 million for the years ended June 30, 2019, 2018 and 2017, respectively) | 66,750 | 63,563 | 67,115 |
Income taxes paid (refunded) | (4,641) | (6,559) | 19,150 |
Credits issued pursuant to a Settlement Agreement | 17,000 | 5,000 | |
Andor Pharmaceuticals, LLC ("Andor") License Agreement acquisition | 16,000 | ||
Accrued purchases of property, plant and equipment | $ 765 | $ 3,572 | $ 446 |
CONSOLIDATED STATEMENTS OF CA_2
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
Capitalized interest, net | $ 0 | $ 1.6 | $ 1.3 |
The Business and Nature of Oper
The Business and Nature of Operations | 12 Months Ended |
Jun. 30, 2019 | |
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. The Company operates pharmaceutical manufacturing plants in 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. In the second quarter of Fiscal 2019, the Company ceased manufacturing functions at its State Road facility in Philadelphia, Pennsylvania. The Company discontinued distribution from its Townsend Road facility in Philadelphia, Pennsylvania as of January 31, 2019. The Company has entered into an agreement to sell its Townsend Road facility and expects to finalize the sale in the first quarter of Fiscal 2020. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Jun. 30, 2019 | |
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. 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 specifically for variable consideration related to 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, 2019 and 2018, the Company did 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. Repairs and maintenance costs that do not extend the useful life of the asset are expensed as incurred. 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 which commences upon shipment of the product, 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 other than Goodwill 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 utilized 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, 2019, 2018 and 2017: (In thousands) Fiscal Year Ended June 30, Medical Indication 2019 2018 2017 Antibiotic $ 15,391 $ 14,509 $ 16,748 Anti-Psychosis 73,453 59,557 58,625 Cardiovascular 101,467 64,011 50,628 Central Nervous System 34,170 31,789 39,451 Gallstone 9,604 20,280 48,600 Gastrointestinal 48,566 60,294 71,887 Glaucoma 3,021 6,540 18,763 Migraine 41,592 54,015 29,014 Muscle Relaxant 12,344 13,496 13,636 Pain Management 28,210 23,036 26,135 Respiratory 3,418 7,891 10,516 Thyroid Deficiency 197,522 245,929 174,005 Urinary 6,783 8,661 14,695 Other 56,507 54,720 47,196 Contract manufacturing revenue 23,359 19,835 17,442 Net sales 655,407 684,563 637,341 Settlement agreement — — (4,000) Total net sales $ 655,407 $ 684,563 $ 633,341 Customer, Supplier and Product Concentration The following table presents the percentage of total net sales, for the fiscal years ended June 30, 2019, 2018 and 2017, 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, 2019 2018 2017 Product 1 30 % 36 % 27 % Product 2 10 % 8 % 9 % The following table presents the percentage of total net sales, for the fiscal years ended June 30, 2019, 2018 and 2017, 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, 2019 2018 2017 Customer A 21 % 29 % 28 % Customer B 18 % 17 % 21 % Customer C 12 % — % — % Customer D 10 % 5 % 6 % The Company’s primary finished goods inventory supplier through March 23, 2019 was Jerome Stevens Pharmaceuticals, Inc. (“JSP”), in Bohemia, New York. Purchases of finished goods inventory from JSP accounted for 29%, 37% and 36% of the Company’s inventory purchases in fiscal years 2019, 2018 and 2017, respectively. See Note 20 “Material Contracts with Suppliers” for more information. Revenue Recognition On July 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, which superseded ASC Topic 605, Revenue Recognition. Under ASC 606, the Company recognizes revenue when (or as) we satisfy our performance obligations by transferring a promised good or service to a customer at an amount that reflects the consideration the Company is expected to be entitled. Our revenue consists almost entirely of sales of our pharmaceutical products to customers, whereby we ship product to a customer pursuant to a purchase order. Revenue contracts such as these do not generally give rise to contract assets or contract liabilities because: (i) the underlying contracts generally have only a single performance obligation and (ii) we do not generally receive consideration until the performance obligation is fully satisfied. The new revenue standard impacts the timing of the Company’s revenue recognition by requiring recognition of certain contract manufacturing arrangements to change from “upon shipment or delivery” to “over time.” However, the recognition of these arrangements over time does not currently have a material impact on the Company’s consolidated results of operations or financial position. The Company adopted ASC 606 using the modified retrospective method. Refer to the “Recent Accounting Pronouncements” section of this footnote for further discussion of the impact of the adoption. 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. Provisions for chargebacks, rebates, returns and other adjustments require varying degrees of subjectivity. While rebates generally are based on contractual terms and require minimal estimation, chargebacks and returns require management to make more subjective assumptions. Each major category is discussed in detail below: Chargebacks The provision for chargebacks is the most significant and complex estimate used in the recognition of revenue. The Company sells its products directly to wholesale distributors, generic distributors, retail pharmacy chains and mail-order pharmacies. The Company also sells its products indirectly to independent pharmacies, managed care organizations, hospitals, nursing homes and group purchasing organizations, collectively referred to as “indirect customers.” The Company enters into agreements with its indirect customers to establish pricing for certain products. The indirect customers then independently select a wholesaler from which to purchase the products. If the price paid by the indirect customers is lower than the price paid by the wholesaler, the Company will provide a credit, called a chargeback, to the wholesaler for the difference between the contractual price with the indirect customers and the wholesaler purchase price. The provision for chargebacks is based on expected sell-through levels by the Company’s wholesale customers to the indirect customers and estimated wholesaler inventory levels. As sales to the large wholesale customers, such as Cardinal Health, AmerisourceBergen and McKesson increase (decrease), the reserve for chargebacks will also generally increase (decrease). However, the size of the increase (decrease) depends on product mix and the amount of sales made to indirect customers with which the Company has specific chargeback agreements. The Company continually monitors the reserve for chargebacks and makes adjustments when management believes that expected chargebacks may differ from the actual chargeback reserve. Rebates Rebates are offered to the Company’s key chain drug store, distributor and wholesaler customers to promote customer loyalty and increase product sales. These rebate programs provide customers with credits upon attainment of pre-established volumes or attainment of net sales milestones for a specified period. Other promotional programs are incentive programs offered to the customers. Additionally, as a result of the Patient Protection and Affordable Care Act (“PPACA”) enacted in the U.S. in March 2010, the Company participates in a new cost-sharing program for certain Medicare Part D beneficiaries designed primarily for the sale of brand drugs and certain generic drugs if their Food and Drug Administration (“FDA”) approval was granted under a New Drug Application (“NDA”) or 505(b) NDA versus an Abbreviated New Drug application (“ANDA’). Because our drugs used for the treatment of thyroid deficiency and our Morphine Sulfate Oral Solution product were both approved by the FDA as 505(b)(2) NDAs, they are considered “brand” drugs for purposes of the PPACA. Drugs purchased within the Medicare Part D coverage gap (commonly referred to as the “donut hole”) result in additional rebates. The Company estimates the reserve for rebates and other promotional credit programs based on the specific terms in each agreement when revenue is recognized. The reserve for rebates increases (decreases) as sales to certain wholesale and retail customers increase (decrease). However, since these rebate programs are not identical for all customers, the size of the reserve will depend on the mix of sales to customers that are eligible to receive rebates. Returns Consistent with industry practice, the Company has a product returns policy that allows customers to return product within a specified time period prior to and subsequent to the product’s expiration date in exchange for a credit to be applied to future purchases. The Company’s policy requires that the customer obtain pre-approval from the Company for any qualifying return. The Company estimates its provision for returns based on historical experience, changes to business practices, credit terms and any extenuating circumstances known to management. While historical experience has allowed for reasonable estimations in the past, future returns may or may not follow historical trends. The Company continually monitors the reserve for returns and makes adjustments when management believes that actual product returns may differ from the established reserve. Generally, the reserve for returns increases as net sales increase. Other Adjustments Other adjustments consist primarily of “price adjustments,” also known as “shelf-stock adjustments” and “price protections,” which are both credits issued to reflect increases or decreases in the invoice or contract prices of the Company’s products. In the case of a price decrease, a credit is given for product remaining in customer’s inventories at the time of the price reduction. Contractual price protection results in a similar credit when the invoice or contract prices of the Company’s products increase, effectively allowing customers to purchase products at previous prices for a specified period of time. Amounts recorded for estimated shelf-stock adjustments and price protections are based upon specified terms with direct customers, estimated changes in market prices and estimates of inventory held by customers. The Company regularly monitors these and other factors and evaluates the reserve as additional information becomes available. Other adjustments also include prompt payment discounts and “failure-to-supply” adjustments. If the Company is unable to fulfill certain customer orders, the customer can purchase products from our competitors at their prices and charge the Company for any difference in our contractually agreed upon prices. 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, 2019 and 2018. 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 required 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 allowed 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. In the second quarter of Fiscal 2019, the Company finalized the provisional amounts without any further adjustments, in accordance with the expiration of the SAB 118 measurement period. Earnings (Loss) Per Common Share Basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares outstanding during the period. Diluted earnings (loss) computed by dividing net income (loss) by the weighted average number of shares outstanding during the period including additional shares that would have been outstanding related to potentially dilutive securities. These potentially dilutive securities consist of stock options, unvested restricted stock and performance-based shares. 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, which created ASC Topic 606 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, which is primarily generated from product sales, the Company determined that the updated guidance does not have a material impact on our disclosures or the timing and recognition of our revenues. Under the new standard, the Company estimates certain amounts as variable consideration, specifically any “failure-to-supply” adjustments at the point of product sale in future periods. The new revenue standard also impacts the timing of the Company’s revenue recognition by requiring recognition of certain contract manufacturing arrangements to change from “upon shipment or delivery” to “over time.” However, the recognition of these arrangements over time does not currently have a material impact on the Company’s consolidated results of operations or financial position. The cumulative impact of the adoption of ASC 606 resulted in a $2.3 million adjustment, net of tax, to opening retained earnings on July 1, 2018. 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. In December 2018, the FASB issued ASU 2018-20, Leases — Narrow Scope Improvements for lessors, which allows entities to choose an additional transition method of adoption, under which an entity initially applies the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company is in the process of finalizing the analysis of its lease portfolio and updating its accounting policies to comply with this standard. Upon adoption, the Company expects to recognize an initial right-of-use asset and lease liability on its consolidated balance sheet of approximately $6 million to $8 million as of July 1, 2019. 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. The standard was adopted on July 1, 2018 and did not have an impact on the Company’s consolidated financial statements. |
Restructuring Charges
Restructuring Charges | 12 Months Ended |
Jun. 30, 2019 | |
Restructuring Charges | |
Restructuring Charges | Note 3. Restructuring Charges Cody Restructuring Program On June 29, 2018, the Company announced a restructuring plan related to the future of Cody Laboratories, Inc. and the Company’s operations (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 incurred approximately $2.5 million of severance and employee-related costs under this plan. 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. The expenses associated with the Cody Restructuring Plan included in restructuring expenses during the fiscal year ended June 30, 2019 were as follows: Fiscal Year Ended (In thousands) June 30, 2019 Employee separation costs $ (585) Facility closure costs — Total $ (585) A reconciliation of the changes in restructuring liabilities associated with the Cody Restructuring Plan from June 30, 2018 through June 30, 2019 is set forth in the following table: Employee Facility Closure (In thousands) Separation Costs Costs Total Balance at June 30, 2018 $ 3,092 $ — $ 3,092 Restructuring Charges (585) — (585) Payments (2,399) — (2,399) Balance at June 30, 2019 $ 108 — $ 108 Cody API Restructuring Plan In September 2018, the Company approved a plan to sell the active pharmaceutical ingredient manufacturing distribution business of Cody Labs (the “Cody API business”). The Company was unable to sell the Cody API business as an ongoing operation and now intends to sell the real estate utilized by the Cody API business upon receiving approval of the Company’s cocaine hydrochloride solution Section 505(b)(2) NDA application and to have Cody Labs cease all operations. In June 2019, the Company approved the Cody API Restructuring Plan. In connection with the Cody API Restructuring Plan, there has been a reduction of almost 70 positions at Cody Labs. The Company expects that the actions contemplated under the Cody API Restructuring Plan will be substantially completed by September 30, 2019. In July 2019, the Company completed the sale of the equipment associated with the Cody API business for approximately $3.0 million. The Company currently estimates that it will incur approximately $6.0 million of total costs to implement the Cody API Restructuring Plan, including approximately $3.5 million of severance and employee-related costs and approximately $2.0 million of contract termination costs, as well as approximately $0.5 million of costs to be incurred in connection with moving equipment and other property to other Company-owned facilities that were originally anticipated to be incurred in connection with the Cody Restructuring Plan announced in June 2018 but that have not yet been incurred thereunder. The expenses associated with the Cody API Restructuring Plan included in restructuring expenses during the fiscal year ended June 30, 2019 were as follows: Fiscal Year Ended (In thousands) June 30, 2019 Employee separation costs $ 2,430 Facility closure costs — Total $ 2,430 A reconciliation of the changes in restructuring liabilities associated with the Cody API Restructuring Plan from June 30, 2018 through June 30, 2019 is set forth in the following table: Contract Employee Termination Facility Closure (In thousands) Separation Costs Costs Costs Total Balance at June 30, 2018 $ — $ — $ — $ — Restructuring Charges 2,430 — — 2,430 Payments (223) — — (223) Balance at June 30, 2019 $ 2,207 $ — — $ 2,207 2016 Restructuring Program On February 1, 2016, in connection with the acquisition of KUPI, the Company announced a plan related to the future integration of KUPI and the Company’s operations (the “2016 Restructuring Program”). The plan focused on the closure of KUPI’s corporate functions and the consolidation of manufacturing, sales, research and development and distribution functions. The restructuring activities under the 2016 Restructuring Program were completed as of March 31, 2019. The Company incurred an aggregate of approximately $21.0 million in restructuring charges for actions that have been announced or communicated since the 2016 Restructuring Program began. Of this amount, approximately $11.0 million related to employee separation costs, approximately $1.0 million relates to contract termination costs and approximately $9.0 million related to facility closure costs and other actions. The expenses associated with the restructuring program included in restructuring expenses during the fiscal years ended June 30, 2019 and 2018 were as follows: Fiscal Year Ended Fiscal Year Ended (In thousands) June 30, 2019 June 30, 2018 Employee separation costs $ 1,084 $ 246 Contract termination costs — — Facility closure costs 1,166 3,723 Total $ 2,250 $ 3,969 A reconciliation of the changes in restructuring liabilities associated with the 2016 Restructuring Program from June 30, 2017 through June 30, 2019 is set forth in the following table: Contract Employee Termination Facility Closure (In thousands) Separation Costs Costs Costs Total Balance at June 30, 2017 $ 5,431 $ — $ — $ 5,431 Restructuring Charges 246 — 3,723 3,969 Payments (2,063) — (3,723) (5,786) Balance at June 30, 2018 3,614 — — 3,614 Restructuring Charges 1,084 — 1,166 2,250 Payments (4,698) — (1,166) (5,864) Balance at June 30, 2019 $ — $ — $ — $ — |
Accounts Receivable
Accounts Receivable | 12 Months Ended |
Jun. 30, 2019 | |
Accounts Receivable | |
Accounts Receivable | Note 4. Accounts Receivable Accounts receivable consisted of the following components at June 30, 2019 and 2018: June 30, June 30, (In thousands) 2019 2018 Gross accounts receivable $ 361,323 $ 503,175 Less Chargebacks reserve (89,567) (153,034) Less Rebates reserve (32,099) (33,102) Less Returns reserve (55,554) (43,059) Less Other deductions (18,128) (20,021) Less Allowance for doubtful accounts (1,223) (1,308) Accounts receivable, net $ 164,752 $ 252,651 For the fiscal year ended June 30, 2019, the Company recorded a provision for chargebacks, rebates, returns and other deductions of $1.0 billion, $250.6 million, $42.0 million and $67.3 million, respectively. 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. The following table identifies the activity and ending balances of each major category of revenue-related reserve for fiscal years 2019, 2018 and 2017: Reserve Category (In thousands) Chargebacks Rebates Returns Other Total Balance at June 30, 2016 $ 86,495 $ 54,084 $ 40,593 $ 16,851 $ 198,023 Additions related to the KUPI acquisition — 8,329 5,955 — 14,284 Current period provision 881,283 297,050 25,416 53,398 1,257,147 Credits issued during the period (888,241) (271,847) (29,829) (59,153) (1,249,070) Balance at June 30, 2017 79,537 87,616 42,135 11,096 220,384 Current period provision 1,141,995 296,784 24,024 69,898 1,532,701 Credits issued during the period (1,068,498) (301,898) (23,100) (60,973) (1,454,469) Balance at June 30, 2018 153,034 82,502 43,059 20,021 298,616 Adjustment related to adoption of ASC 606 — — — 3,536 3,536 Current period provision 1,047,192 250,555 41,982 67,344 1,407,073 Credits issued during the period (1,110,659) (254,783) (29,487) (72,773) (1,467,702) Balance at June 30, 2019 $ 89,567 $ 78,274 $ 55,554 $ 18,128 $ 241,523 For the fiscal years ended June 30, 2019, 2018 and 2017, as a percentage of gross sales the provision for chargebacks was 51.4%, 52.0% and 47.0%, respectively, the provision for rebates was 12.3%, 13.5% and 15.8%, respectively, the provision for returns was 2.1%, 1.1% and 1.4%, respectively and the provision for other adjustments was 3.3%, 3.2% and 2.8%, respectively. On July 1, 2018, the Company adopted ASC 606 which resulted in a $3.2 million pre-tax adjustment to opening retained earnings and accounts receivable, of which $3.5 million related to “failure-to-supply” reserves offset by $0.3 million related to the timing of recognition of certain contract manufacturing arrangements. The decrease in total reserves from June 30, 2018 to June 30, 2019 was primarily due to the expiration of the JSP Distribution Agreement, which resulted in lower Levothyroxine-related chargebacks at June 30, 2019 as compared to June 30, 2018. Increased customer orders in June 2018 in advance of a mid-week holiday as well as a related maintenance shutdown of the Company’s Seymour, Indiana manufacturing facility in the first week of July 2018 also contributed to the decrease in the chargebacks reserve. The activity in the “Other” category includes shelf-stock, shipping and other sales adjustments including prompt payment discounts and “failure-to-supply” adjustments. Historically, we have not recorded any material amounts in the current period related to reversals or additions of prior period reserves. If the Company were to record a material reversal or addition of any prior period reserve amount, it would be separately disclosed. |
Inventories
Inventories | 12 Months Ended |
Jun. 30, 2019 | |
Inventories | |
Inventories | Note 5. Inventories Inventories at June 30, 2019 and 2018 consisted of the following: June 30, June 30, (In thousands) 2019 2018 Raw Materials $ 56,740 $ 64,647 Work-in-process 18,988 19,983 Finished Goods 68,243 57,005 Total $ 143,971 $ 141,635 Inventory balances were written-down by $20.7 million and $11.9 million at June 30, 2019 and 2018, respectively, for excess and obsolete inventory amounts. During the fiscal years ended June 30, 2019, 2018 and 2017, the Company recorded write-downs to net realizable value for excess and obsolete inventory of $21.8 million, $12.2 million and $10.4 million, respectively. |
Property, Plant and Equipment
Property, Plant and Equipment | 12 Months Ended |
Jun. 30, 2019 | |
Property, Plant and Equipment | |
Property, Plant and Equipment | Note 6. Property, Plant and Equipment Property, plant and equipment at June 30, 2019 and 2018 consisted of the following: June 30, June 30, (In thousands) Useful Lives 2019 2018 Land — $ 1,783 $ 2,900 Building and improvements - years 87,609 105,041 Machinery and equipment - years 156,166 173,988 Furniture and fixtures - years 3,105 4,099 Less accumulated depreciation (83,424) (89,996) 165,239 196,032 Construction in progress 21,431 37,215 Property, plant and equipment, net $ 186,670 $ 233,247 Depreciation expense for the fiscal years ended June 30, 2019, 2018 and 2017 was $23.4 million, $22.4 million and $21.8 million, respectively. In the first quarter of Fiscal 2019, the Company approved a plan to sell the Cody API business. The Company was unable to sell the Cody API business as an ongoing operation and intends to sell the equipment and real estate utilized by the Cody API business and to have Cody Labs cease all operations. As such, all assets, including property, plant and equipment totaling $6.7 million, are recorded in the assets held for sale caption in the Consolidated Balance Sheet as of June 30, 2019. In addition, as part of the held for sale classification, the Company is required to record the assets of the Cody API business at fair value less costs to sell. The Company performed a fair value analysis which resulted in a $2.9 million impairment of the Cody API property, plant and equipment assets in the fourth quarter of Fiscal 2019, which is in addition to the $29.9 million impairment recorded in the first quarter of Fiscal 2019. See Note 21 “Assets Held for Sale” for more information. In the fourth quarter of Fiscal 2019, the Company recorded additional impairment charges totaling $3.0 million primarily related to obsolete equipment and computer software related to the consolidation of manufacturing functions and shutdown of the Company’s Townsend Road facility. Property, plant and equipment, net included amounts held in foreign countries in the amount of $1.0 million and $1.1 million at June 30, 2019 and June 30, 2018, respectively. |
Fair Value Measurements
Fair Value Measurements | 12 Months Ended |
Jun. 30, 2019 | |
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, 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 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. Financial Instruments Disclosed, But Not Reported, at Fair Value The fair value of our long-term debt was approximately $724 million and $893 million as of June 30, 2019 and June 30, 2018, respectively. We estimate the fair value of our debt utilizing market quotations for debt that have quoted prices in active markets. Since our debt does not trade on a daily basis in an active market, the fair value estimates are based on market observable inputs based on borrowing rates currently available for debt with similar terms and average maturities (Level 2). |
Investment Securities
Investment Securities | 12 Months Ended |
Jun. 30, 2019 | |
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. In May 2018, the Company liquidated the remainder of its equity securities portfolio. As of June 30, 2019 and June 30, 2018, the Company does not own any equity securities. 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 $1.0 million. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 12 Months Ended |
Jun. 30, 2019 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | Note 9. Goodwill and Intangible Assets The changes in the carrying amount of goodwill for the fiscal year ended June 30, 2019 are as follows: Generic (In thousands) Pharmaceuticals Balance at June 30, 2018 $ 339,566 Goodwill acquired — Impairment (339,566) Balance at June 30, 2019 $ — On August 17, 2018, JSP notified the Company that it would not extend or renew the JSP Distribution Agreement when the current term expired on March 23, 2019. The Company determined that JSP’s decision represented a triggering event under U.S. GAAP to perform an analysis to determine the potential for impairment of goodwill. On October 4, 2018, the Company completed the analysis based on market data and concluded a full impairment of goodwill was required. Intangible assets, net as of June 30, 2019 and June 30, 2018, consisted of the following: Weighted Gross Carrying Amount Accumulated Amortization Intangible Assets, Net Avg. Life June 30, June 30, June 30, June 30, June 30, June 30, (In thousands) (Yrs.) 2019 2018 2019 2018 2019 2018 Definite-lived: Cody Labs import license 15 $ 581 $ 581 $ (424) $ (386) $ 157 $ 195 KUPI product rights 15 416,154 416,154 (97,583) (69,840) 318,571 346,314 KUPI trade name 2 2,920 2,920 (2,920) (2,920) — — KUPI other intangible assets 15 19,000 19,000 (4,562) (3,295) 14,438 15,705 Silarx product rights 15 10,000 10,000 (2,722) (2,056) 7,278 7,944 Other product rights 14 38,579 19,693 (4,243) (1,875) 34,336 17,818 Total definite-lived $ 487,234 $ 468,348 $ (112,454) $ (80,372) $ 374,780 $ 387,976 Indefinite-lived: KUPI in-process research and development — $ 18,000 $ 18,000 $ — $ — $ 18,000 $ 18,000 Silarx in-process research and development — 18,000 18,000 — — 18,000 18,000 Other product rights — 449 449 — — 449 449 Total indefinite-lived 36,449 36,449 — — 36,449 36,449 Total intangible assets, net $ 523,683 $ 504,797 $ (112,454) $ (80,372) $ 411,229 $ 424,425 In the fourth quarter of Fiscal 2019, the Company commenced shipping of an AB-rated Methylphenidate Hydrochloride product under a perpetual license agreement with Andor. Andor will receive consideration for the license totaling $17.0 million, of which $1.0 million was paid in the fourth quarter and the remaining $16.0 million will be paid based on the timing of Methylphenidate sales over the next four years from the date shipping commenced. The Company believes approximately $3.7 million will be due over the next twelve months and accordingly recorded this amount within Other Current Liabilities on the Consolidated Balance Sheet with the remainder recorded within Other long-term liabilities. 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 Fiscal 2017. In 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, 2019, 2018 and 2017, the Company recorded amortization expense of $32.2 million, $32.7 million and $33.6 million, respectively. Future annual amortization expense consists of the following: (In thousands) Annual Amortization Fiscal Year Ending June 30, Expense 2020 $ 32,396 2021 32,396 2022 32,396 2023 32,396 2024 32,059 Thereafter 213,137 $ 374,780 |
Long-Term Debt
Long-Term Debt | 12 Months Ended |
Jun. 30, 2019 | |
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) 2019 2018 Term Loan A due 2020; 7.40% as of June 30, 2019 $ 153,933 $ 227,276 Unamortized discount and other debt issuance costs (4,722) (10,178) Term Loan A, net 149,211 217,098 Term Loan B due 2022; 7.78% as of June 30, 2019 614,468 670,011 Unamortized discount and other debt issuance costs (34,631) (47,839) Term Loan B, net 579,837 622,172 Revolving Credit Facility due 2020 — — Total debt, net 729,048 839,270 Less short-term borrowings and current portion of long-term debt (66,845) (66,845) Total long-term debt, net $ 662,203 $ 772,425 On December 10, 2018, the Company entered into an amendment to the Senior Secured Credit Facility and the Credit and Guaranty Agreement. Pursuant to the amendment, the Secured Net Leverage Ratio applicable to the financial leverage ratio covenant was increased from 3:25:1.00 to 4.25:1.00 as of December 31, 2019 and prior to September 30, 2020, and then to 4:00:1:00 as of September 30, 2020. In exchange, the Company agreed to include a minimum liquidity covenant of $75 million, a 25-basis point increase to the interest rate margin paid on the Term A Loans and pay a consent fee equal to 50 basis points, paid only to consenting lenders. In Fiscal 2019, the Company completed the purchase of an aggregate $62.0 million principal amount of its Term Loans. The purchases comprised $45.8 million and $16.2 million of the Term A Loans and Term B Loans, respectively. As a result of the purchases, the Company recorded a loss on extinguishment of debt of $0.4 million on the Consolidated Statement of Operations. Long-term debt amounts due, for the twelve month periods ending June 30 were as follows: Amounts Payable (In thousands) to Institutions 2020 $ 66,845 2021 165,778 2022 39,345 2023 496,433 Total $ 768,401 The outstanding debt amount above is 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, 2019 | |
Legal, Regulatory Matters and Contingencies | |
Legal, Regulatory Matters and Contingencies | Note 11. Legal, Regulatory Matters and Contingencies State Attorneys General Inquiry into the Generic Pharmaceutical Industry In July 2014, the Company received interrogatories and a 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 pursuant to the federal investigation described below. 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. 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 Court granted that motion on June 5, 2018. The State Attorneys General filed their amended complaint on June 18, 2018. 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. On August 15, 2019, the Court denied the defendants' joint motion to dismiss the overarching conspiracy claims, but has yet to decide an individual motion filed by the Company to dismiss the overreaching conspiracy claims as to it. On May 10, 2019, the State Attorneys General filed a new lawsuit naming the Company, and one of its employees as defendants, along with 33 other corporations and individuals. The new complaint again alleges an overarching conspiracy and contains claims for price fixing and market allocation under the Sherman Act and related state laws. The complaint focuses on the conduct of another generic pharmaceutical company, and the relationships that company had with other generic companies and their employees. The specific allegations in the new complaint against Lannett relate to the Company’s sales of baclofen and levothyroxine. The new complaint also names another current employee as a defendant, however the allegations pertain to conduct that occurred prior to their employment by Lannett. The Company has not responded to the new complaint as of the date of this report. Based on internal investigations performed to date, the Company currently believes that it has acted in compliance with all applicable laws and regulations. Federal Investigation into the Generic Pharmaceutical Industry In November and December 2014, the Company and certain affiliated individuals and customers were 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 internal investigations performed to date, the Company believes that it has acted in compliance with all applicable laws and regulations. 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. In December 2018, KUPI and the State of Texas settled the allegations for the sum of $8.0 million, which was fully indemnified by UCB. UCB forwarded the $8.0 million to KUPI in December 2018 and, following its receipt of the fully executed settlement agreement, KUPI forwarded the settlement funds to the State of Texas in January 2019. 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. For the period January 1, 2012 through November 24, 2015 (“the pre-acquisition period”), the Company is fully indemnified per the Stock Purchase Agreement. On May 22, 2019, the Department of Veterans Affairs issued a Contracting Officer’s Final Decision and Demand for Payment, assessing the sum of $9.4 million for overpayments by the Veteran’s Administration for the period of January 1, 2012 through June 30, 2016. On June 26, 2019, the Department of Veterans Affairs sent the Company a Bill of Collection requesting payment in the amount of $9.4 million. On May 22, 2019, the Company sent a notice to UCB seeking indemnification pursuant to the Stock Purchase Agreement, for all assessed overcharges during the period preceding the acquisition of KUPI in the amount of $8.1 million. 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. On October 16, 2018, the Court (with one exception) denied defendants’ motions to dismiss plaintiffs’ Sherman Act claims with respect to the drugs in the first tranche. On March 15, 2019, the Company and other defendants filed answers to the Sherman Act claims. In addition, on February 15, 2019, the Court granted defendants’ motions to dismiss certain of the plaintiffs’ state law claims brought under the laws of Illinois, Rhode Island, Georgia, South Carolina, Montana, West Virginia, Alabama, New Jersey, Michigan and Nevada, but denied the remainder of defendants’ motions to dismiss. The Court set a deadline of April 1, 2019 for certain plaintiffs to amend their existing complaints to reflect the rulings set forth in the Court’s February 15, 2019 ruling on the state law motions to dismiss. Those plaintiffs amended their complaints, but further motions to dismiss the state-law claims have been deferred until the Court decides pending motions to dismiss with respect to the plaintiffs’ various overarching-conspiracy claims. On January 22, 2018, three opt-out direct purchasers filed a complaint alleging an overarching conspiracy and individual conspiracies against 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 against 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. On February 21, 2019, the Company and the other defendants filed motions to dismiss the overarching conspiracy claims. On August 15, 2019, the Court denied the defendants' joint motion to dismiss the overarching conspiracy claims, but has yet to decide an individual motion filed by the Company to dismiss the overarching conspiracy claims as to it. On January 16, 2019, 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 the 30 different drugs, including digoxin, doxycycline, levothyroxine, ursodiol, baclofen and acetazolamide. None of the defendants, including the Company, has responded yet to this particular complaint. On July 29, 2019, a group of insurance company opt-out plaintiffs commenced an action against the Company and numerous other defendants by filing a writ of summons in the Court of Common Pleas of Philadelphia County, Pennsylvania, but have yet to file a complaint. In addition to the lawsuits brought by private plaintiffs, the Attorneys General of 48 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 filed an amended complaint on June 18, 2018 to add numerous additional defendants, including the Company, and claims relating to 13 additional drugs. The claim relating to the Company 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. On February 21, 2019, the Company and the other defendants filed motions to dismiss the overarching conspiracy claims. On August 15, 2019, the Court denied the defendants' joint motion to dismiss the overarching conspiracy claims, but has yet to decide an individual motion filed by the Company to dismiss the overarching conspiracy claims as to it. Additionally, on May 5, 2019, the state Attorneys General filed a new complaint in Connecticut alleging price-fixing conspiracies by the Company and various generic pharmaceutical manufacturers and individuals relating to more than 40 additional drugs. The complaint has since been added to the multidistrict litigation in the Eastern District of Pennsylvania. The additional claims relating to the Company involve baclofen and levothyroxine, although the state Attorneys General allege that all defendants were part of an overarching, industry-wide conspiracy to allocate markets and fix prices generally. None of the defendants, including the Company, has responded yet to this particular 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 manufactures involve acetazolamide and doxycycline monohydrate. On February 21, 2019, the Company and the other defendants filed motions to dismiss the overarching conspiracy claims. On August 15, 2019, the Court denied the defendants' joint motion to dismiss the overarching conspiracy claims, but has yet to decide an individual motion filed by the Company to dismiss the overarching conspiracy claims as to it. On September 25, 2018, two other alleged direct purchasers filed a purported class action complaint alleging an overreaching, industry-wide horizontal and vertical conspiracy involving the company, numerous other generic pharmaceutical manufacturers, and various pharmaceutical distributors to allocate markets and fix prices generally for a variety of generic drugs. The case has been added to the multidistrict litigation. On December 21, 2018, the plaintiffs filed an amended complaint. On February 21, 2019, the Company and the other defendants filed motions to dismiss the overarching conspiracy claims. On August 15, 2019, the Court denied the defendants' joint motion to dismiss the overarching conspiracy claims, but has yet to decide an individual motion filed by the Company to dismiss the overarching conspiracy claims as to it. 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 and plans to vigorously defend itself from these claims. Shareholder Litigation In November 2016, a putative class action lawsuit was filed against the Company and two of its officers in the federal court for the Eastern District of Pennsylvania, alleging 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 . In September 2018, counsel for the putative class filed a third amended complaint. The Company filed a motion to dismiss the third amended complaint in November 2018. In May 2019, the court denied the Company’s motion to dismiss the third amended complaint. In July 2019, the Company filed an answer to the third amended complaint. The Company believes it acted in compliance with all applicable laws and plans to vigorously defend itself from these claims. The Company cannot reasonably predict the outcome of the suit at this time. In October 2018, a putative class action lawsuit was filed against the Company and two of its officers in the federal court for the Eastern District of Pennsylvania, alleging that the Company, its Chief Executive Officer and its Chief Financial Officer damaged the purported class by making false and misleading statements in connection with the possible renewal of the JSP Distribution Agreement. In December 2018, counsel for the putative class filed an amended complaint. The Company moved to dismiss the amended complaint in January 2019. In March 2019, the Court granted in part and denied in part the Company’s motion to dismiss. In May 2019, the Company filed an answer to the amended complaint. During May and June 2019, the parties negotiated a proposed settlement and agreed to settle the litigation, by which the Company agreed to pay the sum of $300,000 without an admission of liability and subject to the negotiation of the terms of a stipulation of settlement and approval by the Court. In July 2019, counsel for the putative class filed a motion for preliminary approval of the proposed settlement and on July 31, 2019, the Court issued an Order granting the motion and scheduling a hearing for final approval of the settlement for February 7, 2020. In December 2018, the Chairman of the Company’s Board of Directors received a letter sent on behalf of two purported shareholders demanding that the Company’s Board of Directors investigate and commence legal proceedings against certain former and/or current directors, officers, and agents of the Company relating to alleged breaches of fiduciary duties, corporate waste, and unjust enrichment. In January 2019, the Company’s Board of Directors formed a special committee to investigate the allegations made in the demand letter. The special committee retained independent counsel to assist it in connection with its investigation, which is ongoing. At this time the Company cannot reasonably predict what outcome, if any, will follow from the Company and the Company’s Board of Director’s receipt of the demand letter and ongoing internal investigation. In May 2019, a shareholder derivative lawsuit was filed against certain of the Company’s current and former officers and certain of the current and former members of the Company’s Board of Directors in the federal court for the District of Delaware. The Company was also named as a nominal defendant in the suit. The suit alleges that the defendants breached their fiduciary duties as directors and/or officers of the Company, that certain of the defendants caused the Company to issue false and misleading proxy statements in violation of Section 14(a) of the Securities Exchange Act of 1934, that the defendants were unjustly enriched at the expense of the Company, and that the defendants wasted corporate assets belonging to the Company. The Company cannot reasonably predict the outcome of the suit at this time. In June 2019, the Chairman of the Company’s Board of Directors received letters sent on behalf of a purported shareholder demanding to inspect certain of the Company’s books and records. The purported shareholder sought to access the books and records in question in order to investigate alleged potential wrongdoing, alleged mismanagement, and alleged breaches of fiduciary duties by members of the Company’s management and Board of Directors relating to the Company’s alleged participation in a conspiracy to fix prices, allocate markets, and rig bids for a number of generic pharmaceuticals. In July 2019, the Company agreed to make available to the purported shareholders certain documents demanded in the June 2019 inspection demand letters. In July 2019, counsel to the purported shareholders indicated that the purported shareholders may file a shareholder derivative suit against certain of the Company’s current and former executives and officers and certain of the current and former members of the Company’s Board of Directors; the Company may also be named as a nominal defendant in such a suit. At this time the Company cannot reasonably predict what outcome, if any, will follow from the Company and the Company’s Board of Director’s receipt of the inspection demand letters. Genus Life Sciences In December 2018, Genus Lifesciences, Inc. (“Genus”) sued the Company, Cody Labs, and others in California federal court, alleging violations of the Lanham Act, Sherman Act, and California false advertising law. Genus received FDA approval for a cocaine hydrochloride product in December 2018, and its claims are premised in part on allegations that the Company falsely advertises its unapproved cocaine hydrochloride solution product. The Company denies that it is falsely advertising its cocaine hydrochloride solution product and continues to market its unapproved product relying on the Guidance for FDA Staff and Industry, Marketed Unapproved Drugs — Compliance Policy Guide, pending approval of its Section 505(b)(2) application. In June 2019, the Company filed a motion to dismiss the complaint. On May 3, 2019, the Court issued a written decision granting in part and denying in part the motion to dismiss. On June 6, 2019, Genus filed an Amended Complaint. On June 27, 2019, the Company filed a motion to dismiss the amended complaint. The Company believes it acted in compliance with all applicable laws and regulations and plans to vigorously defend itself from these claims. Discovery is ongoing and the Company cannot reasonably predict the outcome of this suit at this time. Other Litigation Matters The Company is also subject to various legal proceedings arising out of the normal course of its business including, but not limited to, product liability, intellectual property, patent infringement claims and antitrust matters. It is not possible to predict the outcome of these various proceedings. An adverse determination in any of these proceedings in the future could have a significant impact on the financial position, results of operations and cash flows of the Company. |
Commitments
Commitments | 12 Months Ended |
Jun. 30, 2019 | |
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 for the fiscal years ended June 30, 2019, 2018 and 2017 were $2.8 million, $2.9 million and $2.7 million, respectively. 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 2020 $ 1,898 2021 1,450 2022 1,123 2023 1,123 2024 1,123 Thereafter 3,839 Total $ 10,556 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. Prior to the first quarter of Fiscal 2019, the Company had the option to convert the first $7.5 million into a 50% ownership interest in the entity. The board of the entity is comprised of five members, one of which is an employee of the Company. In the first quarter of Fiscal 2019, the Company sold 50% of the outstanding loan to a third party for $5.6 million and, in addition to assigning 50% of all right, title and interest in the loan and loan documents, the Company relinquished its right to convert a portion of the outstanding loan balance to an equity interest in the entity. As of June 30, 2019, $5.8 million was outstanding under the revolving loan and is included in other assets. 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, 2019 | |
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, 2019 and 2018: June 30, June 30, (In thousands) 2019 2018 Foreign Currency Translation Beginning Balance $ (515) $ (222) Net (loss) on foreign currency translation (net of tax of $0 and $0) (100) (293) Reclassifications to net income (net of tax of $0 and $0) — — Other comprehensive (loss), net of tax (100) (293) Ending Balance (615) (515) Total Accumulated Other Comprehensive Loss $ (615) $ (515) |
Earnings (Loss) Per Common Shar
Earnings (Loss) Per Common Share | 12 Months Ended |
Jun. 30, 2019 | |
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, 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) 2019 2018 2017 Net income (loss) attributable to Lannett Company, Inc. $ (272,107) $ 28,690 $ (581) Basic weighted average common shares outstanding 37,779,812 37,127,306 36,812,524 Effect of potentially dilutive options and restricted stock awards — 1,035,208 — Diluted weighted average common shares outstanding 37,779,812 38,162,514 36,812,524 Earnings (loss) per common share attributable to Lannett Company, Inc.: Basic $ (7.20) $ 0.77 $ (0.02) Diluted $ (7.20) $ 0.75 $ (0.02) 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, 2019, 2018 and 2017 were 1.9 million, 3.0 million and 4.3 million, respectively. |
Warrant
Warrant | 12 Months Ended |
Jun. 30, 2019 | |
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 had 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 had 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 was classified as an equity instrument. On November 25, 2018, the Warrant expired and was not exercised. |
Share-based Compensation
Share-based Compensation | 12 Months Ended |
Jun. 30, 2019 | |
Share-based Compensation | |
Share-based Compensation | Note 16. Share-based Compensation At June 30, 2019, 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. On January 23, 2019, the shareholders of the Company approved an Amendment to and Restatement of the 2014 LTIP to increase the number of shares authorized to be issued by 2.0 million shares. As of June 30, 2019, the plans have a total of 2.8 million shares available for future issuances. Historically, the Company issued share-based compensation awards with a vesting period ranging up to 3 years and a maximum contractual term of 10 years. Beginning in Fiscal 2020, the Company extended the vesting period of new share-based compensation awards to 4 years. The Company issues new shares of stock when stock options are exercised. As of June 30, 2019, there was $10.2 million of total unrecognized compensation cost related to non-vested share-based compensation awards. That cost is expected to be recognized over a weighted average period of 1.8 years. Stock Options The Company measures share-based compensation cost for options using the Black-Scholes option pricing model. The following table presents the weighted average assumptions used to estimate fair values of the stock options granted, the estimated annual forfeiture rates used to recognize the associated compensation expense and the weighted average fair value of the options granted during the fiscal years ended June 30: June 30, June 30, June 30, 2019 2018 2017 Risk-free interest rate 2.9 % 2.1 % 1.1 % Expected volatility 58.4 % 57.6 % 55.6 % Expected dividend yield — — — Forfeiture rate 6.5 % 6.5 % 6.5 % Expected term 5.3 years 5.4 years 5.2 years Weighted average fair value $ 6.52 $ 11.25 $ 15.33 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 summary as of June 30, 2019, 2018 and 2017 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, 2016 1,730 $ 16.77 $ 19,524 6.3 Granted 11 31.30 Exercised (234) 7.38 $ 4,849 Forfeited, expired or repurchased (32) 33.04 Outstanding at June 30, 2017 1,475 $ 18.02 $ 12,212 5.7 Granted 50 21.43 Exercised (445) 7.23 $ 4,243 Forfeited, expired or repurchased (23) 30.83 Outstanding at June 30, 2018 1,057 $ 22.46 $ 2,584 5.4 Granted 73 12.20 Exercised (94) 4.06 $ 311 Forfeited, expired or repurchased (464) 30.61 Outstanding at June 30, 2019 572 $ 17.56 $ 273 5.0 Vested and expected to vest at June 30, 2019 566 $ 17.59 $ 273 5.0 Exercisable at June 30, 2019 469 $ 18.09 $ 273 4.2 Restricted Stock The Company measures restricted stock compensation costs based on the stock price at the grant date less an estimate for expected forfeitures. The annual forfeiture rate used to calculate compensation expense was 6.5%, 5.7% and 6.5% for fiscal years ended June 30, 2019, 2018 and 2017, respectively. A summary of restricted stock awards as of June 30, 2019, 2018 and 2017 and changes during the fiscal years then ended, is presented below: Weighted Average Grant - Aggregate (In thousands) Awards date Fair Value Intrinsic Value Non-vested at June 30, 2016 167 $ 48.22 Granted 298 24.73 Vested (86) 42.60 $ 2,564 Forfeited (45) 32.90 Non-vested at June 30, 2017 334 $ 30.71 Granted 641 18.01 Vested (191) 31.30 $ 4,104 Forfeited (80) 20.95 Non-vested at June 30, 2018 704 $ 20.06 Granted 1,176 9.90 Vested (434) 19.75 $ 4,107 Forfeited (158) 14.00 Non-vested at June 30, 2019 1,288 $ 11.63 Performance-Based Shares On September 22, 2017, the Company approved a plan to begin granting performance-based awards to certain key executives. The stock-settled awards will cliff vest based on relative Total Shareholder Return (“TSR”) compared to a pharmaceutical industry index over a three-year performance 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, 2019 and 2018 and changes during the current fiscal years then ended, is presented below: Weighted Average Grant - Aggregate (In thousands, except for weighted average price and life data) Awards date Fair Value Intrinsic Value Non-vested at June 30, 2017 — — Granted 47 25.58 Vested (27) 25.58 $ 574 Forfeited — — Non-vested at June 30, 2018 20 $ 25.58 Granted 52 $ 17.69 Vested — $ — $ — Forfeited — $ — Non-vested at June 30, 2019 72 $ 19.92 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, 2019, 2018 and 2017, 185 thousand shares, 66 thousand shares and 57 thousand shares were issued under the ESPP, respectively. As of June 30, 2019, 792 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) 2019 2018 2017 Selling, general and administrative expenses $ 5,715 $ 7,570 $ 5,855 Research and development expenses 750 680 661 Cost of sales 2,562 1,646 1,203 Total $ 9,027 $ 9,896 $ 7,719 Tax benefit at statutory rate $ 2,031 $ 2,919 $ 2,818 |
Employee Benefit Plan
Employee Benefit Plan | 12 Months Ended |
Jun. 30, 2019 | |
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, 2019, 2018 and 2017 were $2.3 million, $2.3 million and $2.1 million, respectively. |
Income Taxes
Income Taxes | 12 Months Ended |
Jun. 30, 2019 | |
Income Taxes | |
Income Taxes | Note 18. Income Taxes The Company uses the liability method to account for 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. 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 following table summarizes the components of the provision for income taxes for the fiscal years ended June 30: June 30, June 30, June 30, (In thousands) 2019 2018 2017 Current Income Tax Expense (Benefit) Federal $ 13,185 $ (9,439) $ 764 State and Local (81) 1,152 638 Total Current Income Tax Expense (Benefit) 13,104 (8,287) 1,402 Deferred Income Tax Expense (Benefit) Federal (85,022) 31,263 (2,210) State and Local (2,220) (573) 1,905 Total Deferred Income Tax Expense (Benefit) (87,242) 30,690 (305) Total Income Tax Expense (Benefit) $ (74,138) $ 22,403 $ 1,097 A reconciliation of the differences between the effective rates and federal statutory rates was as follows: June 30, June 30, June 30, 2019 2018 2017 Federal income tax at statutory rate 21.0 % 28.1 % 35.0 % State and local income tax, net 0.5 % 0.6 % 293.6 % Nondeductible expenses (0.1) % 0.2 % 45.4 % Foreign rate differential (0.4) % 0.4 % 49.9 % Income tax credits 0.5 % (1.4) % (160.9) % Domestic production activity deduction — % (1.5) % — % Unrecognized tax benefits 0.1 % (6.7) % — % Change in tax laws — % 25.6 % — % Excess tax benefits on share-based compensation (0.3) % (0.3) % (134.3) % Other 0.1 % (1.2) % 70.8 % Effective income tax rate 21.4 % 43.8 % 199.5 % 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, 2019 and 2018, temporary differences which give rise to deferred tax assets and liabilities were as follows: June 30, June 30, (In thousands) 2019 2018 Deferred tax assets: Accrued expenses $ — $ 1,085 Share-based compensation expense 4,134 4,158 Reserve for returns 12,014 9,342 Reserves for rebates — — Reserves for accounts receivable and inventory 8,208 5,425 Intangible impairment — 1,337 Federal net operating loss 324 402 State net operating loss 6,479 4,495 Impairment on Cody note receivable 1,161 1,175 Accumulated amortization on intangible assets 76,401 10,868 Settlement Liability — — Foreign net operating loss 1,792 880 Interest Carryforward 11,008 — Other 2,506 404 Total deferred tax asset 124,027 39,571 Valuation allowance (13,549) (8,120) Total deferred tax asset less valuation allowance 110,478 31,451 Deferred tax liabilities: Prepaid expenses 182 118 Property, plant and equipment 991 9,231 Other — 39 Total deferred tax liability 1,173 9,388 Net deferred tax asset $ 109,305 $ 22,063 The net deferred tax asset as of June 30, 2019 and 2018 is reduced by a valuation allowance of $13.5 million and $8.1 million, respectively, which are primarily related to deferred tax assets for various states and foreign net operating losses.The federal and state and local tax deferred tax assets begin to expire in fiscal years 2026 and 2036, respectively. The Company increased the valuation allowance in Fiscal 2019 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, 2017 $ 5,942 Additions for tax positions of the current year 294 Additions for tax positions of prior years 700 Lapse of statute of limitations (4,399) Balance at June 30, 2018 $ 2,537 Additions for tax positions of the current year 244 Additions for tax positions of prior years 36 Lapse of statute of limitations (618) Balance at June 30, 2019 $ 2,199 The amount of unrecognized tax benefits at June 30, 2019, 2018 and 2017 was $2.2 million, $2.5 million and $5.9 million respectively, of which $2.1 million, $2.3 million and $4.2 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, 2019, 2018 and 2017 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, 2019 and 2018. 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. In October 2018, the Company was notified that the Commonwealth of Pennsylvania will conduct a routine field audit of the Company’s Fiscal 2016 and Fiscal 2017 corporate tax returns. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Jun. 30, 2019 | |
Related Party Transactions | |
Related Party Transactions | Note 19. Related Party Transactions The Company had sales of $3.8 million, $3.9 million and $3.7 million during the fiscal years ended June 30, 2019, 2018 and 2017, respectively, to a generic distributor, Auburn Pharmaceutical Company (“Auburn ”), which is a member of the Premier Buying Group. Jeffrey Farber, a current board member, is the owner of Auburn. Accounts receivable includes amounts due from Auburn of $1.2 million and $0.6 million at June 30, 2019 and 2018, respectively. The Company also had net sales of $2.4 million and $1.9 million during the fiscal years ended June 30, 2019 and 2018 to a generic distributor, KeySource Medical (“KeySource ”), which is a member of the OptiSource Buying Group. Albert Paonessa, a current board member, was appointed the CEO of KeySource in May 2017. Accounts receivable includes amounts due from KeySource of $0.7 million and $0.5 million as of June 30, 2019 and 2018. The Company incurred expenses totaling $0.4 million and $0.3 million during the fiscal years ended June 30, 2019 and June 30, 2018 , respectively, for online medical benefit services provided by a subsidiary of a variable interest entity. See Note 12. “Commitments” for more information. There were no amounts due to the variable interest entity as of June 30, 2019 . The liability was not material to the financial position of the Company as of June 30,2018. |
Material Contracts with Supplie
Material Contracts with Suppliers | 12 Months Ended |
Jun. 30, 2019 | |
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 through March 23, 2019 was JSP, in Bohemia, New York. Purchases of finished goods inventory from JSP accounted for 29%, 37% and 36% of the Company’s inventory purchases in the fiscal years ending June 30, 2019, 2018 and 2017, 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 extended the initial contract, which was due to expire on March 22, 2014, for five years through March 2019. On March 23, 2019, the JSP Distribution Agreement expired and was not renewed or extended. |
Assets Held for Sale
Assets Held for Sale | 12 Months Ended |
Jun. 30, 2019 | |
Assets Held for Sale | |
Assets held for Sale | Note 21. Assets Held for Sale Cody API Business In the first quarter of Fiscal 2019, the Company approved a plan to sell the Cody API business, which includes the manufacturing and distribution of active pharmaceutical ingredients for use in finished goods production. As a result of the plan, the Company recorded the assets of the Cody API business at fair value less costs to sell. The Company performed a fair value analysis which resulted in a $29.9 million impairment of the Cody Labs long-lived assets in Fiscal 2019. The Company was unable to sell the Cody API business as an ongoing operation and intends to sell the equipment utilized by the Cody API business as well as the real estate upon receiving approval of the Company’s cocaine hydrochloride solution Section 505(b)(2) NDA application and to have Cody Labs cease all operations. As such, all property, plant and equipment associated with the Cody API business, totaling $6.7 million, are recorded in the assets held for sale caption in the Consolidated Balance Sheet as of June 30, 2019. The Company performed an additional fair value analysis which resulted in an additional $2.9 million impairment of the Cody API long-lived assets in the fourth quarter of Fiscal 2019. In July 2019, the Company completed the sale of the equipment associated with the Cody API business for approximately $3.0 million. The following table summarizes the financial results of the Cody API business for the fiscal years ended June 30, 2019 and 2018: Fiscal Year Ended June 30, (In thousands) 2019 2018 Net sales $ 3,139 $ 2,696 Pretax loss attributable to Cody API business (51,509) (42,112) The pretax loss attributable to the Cody API business during the fiscal year ended June 30, 2019 includes impairment charges totaling $32.8 million to adjust the long-lived assets to their fair value less costs to sell. Townsend Road Facility In Fiscal 2019, the Company entered into an agreement to sell the Townsend Road facility located in Philadelphia, Pennsylvania for $4.4 million. The carrying value of the property is included within the Assets Held for Sale line of the Consolidated Balance Sheet as of June 30, 2019. The Company discontinued distribution from its Townsend Road facility in January 2019. The Company intends to finalize the sale in the first quarter of Fiscal 2020. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Jun. 30, 2019 | |
Subsequent Events | |
Subsequent Events | Note 22. Subsequent Events Levothyroxine Sodium Tablets USP Distribution Agreement In July 2019, the Company entered into an agreement with Cediprof for the exclusive right, commencing no later than August 1,2022, to market and supply Levothyroxine Sodium Tablets USP manufactured by Cediprof in the United States of America and its territories and possessions, with the exception of Puerto Rico and the Virgin Islands. The Company made an up-front payment to Cediprof in the amount of $20.0 million upon entering into the agreement. Posaconazole Distribution Agreement In August 2019, the Company entered into a distribution and supply agreement with Sinotherapeutics Inc. to be the exclusive distributor of Posaconazole Delayed-Release Tablets 100mg (the “Product”), which is an AB-rated generic equivalent of Merck & Co., Inc.’s Noxafil® Delayed-Release Tablets. On August 21, 2019, Sinotherapeutics received final approval from the FDA of its ANDA for the Product, and is currently the sole company to receive ANDA approval for the Product. As a result of Sinotherapeutics’ receiving approval of its ANDA application, the Company will commence marketing the Product. The Company will also be required to pay Sinotherapeutics a portion of the net profits the Company receives from the sale of Products plus an earn out payment based on aggregate net profits of the Product that can vary based on market dynamics. |
Quarterly Financial Information
Quarterly Financial Information (Unaudited) | 12 Months Ended |
Jun. 30, 2019 | |
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 2019 Net sales $ 133,841 $ 172,794 $ 193,718 $ 155,054 Cost of sales 84,499 107,477 123,908 95,913 Gross profit 49,342 65,317 69,810 59,141 Operating expenses 39,940 31,939 33,133 400,919 Operating income (loss) 9,402 33,378 36,677 (341,778) Other loss (19,532) (21,374) (21,668) (21,350) Income tax expense (benefit) (2,544) 1,359 2,647 (75,600) Net income (loss) $ (7,586) $ 10,645 $ 12,362 $ (287,528) Earnings (loss) per common share (1) Basic $ (0.20) $ 0.28 $ 0.33 $ (7.65) Diluted $ (0.20) $ 0.27 $ 0.32 $ (7.65) Fourth Third Second First (In thousands, except per share data) Quarter Quarter Quarter Quarter Fiscal 2018 Net sales $ 170,911 $ 174,386 $ 184,305 $ 154,961 Cost of sales 104,383 107,329 96,855 87,290 Gross profit 66,528 67,057 87,450 67,671 Operating expenses 57,926 33,777 40,315 26,992 Operating income 8,602 33,280 47,135 40,679 Other loss (20,844) (22,785) (14,975) (19,999) Income tax expense (benefit) (883) (2,275) 18,138 7,423 Net income (loss) $ (11,359) $ 12,770 $ 14,022 $ 13,257 Earnings (loss) per common share (1) Basic $ (0.30) $ 0.34 $ 0.38 $ 0.36 Diluted $ (0.30) $ 0.33 $ 0.37 $ 0.35 Fourth Third Second First (In thousands, except per share data) Quarter Quarter Quarter Quarter Fiscal 2017 Net sales $ 139,118 $ 165,720 $ 170,944 $ 161,559 Settlement agreement — (4,000) — — Total net sales 139,118 161,720 170,944 161,559 Cost of sales 80,240 89,290 82,891 79,707 Gross profit 58,878 72,430 88,053 81,852 Operating expenses 30,069 28,793 53,747 102,158 Operating income (loss) 28,809 43,637 34,306 (20,306) Other loss (19,983) (21,371) (22,578) (21,964) Income tax expense (benefit) 3,100 7,337 3,542 (12,882) Less: Net income attributable to noncontrolling interest — — 14 20 Net income (loss) attributable to Lannett Company, Inc. $ 5,726 $ 14,929 $ 8,172 $ (29,408) Earnings (loss) per common share attributable to Lannett Company Inc. (1) Basic $ 0.16 $ 0.41 $ 0.22 $ (0.80) Diluted $ 0.15 $ 0.40 $ 0.22 $ (0.80) (1) The increase in net sales and gross profit in the second and third quarters of Fiscal 2019 is primarily due to increased sales of Levothyroxine as customer demand increased in anticipation of the transition of the product to Amneal. The subsequent decrease in net sales and gross profit in the fourth quarter of Fiscal 2019 is primarily due to the expiration of the JSP Distribution Agreement on March 23, 2019. The significant operating loss in the first quarter of Fiscal 2019 was mainly attributable to the full impairment of goodwill totaling $339.6 million as a result of JSP’s decision not to renew the JSP Distribution Agreement. 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. |
Schedule II - Valuation and Qua
Schedule II - Valuation and Qualifying Accounts 10 | 12 Months Ended |
Jun. 30, 2019 | |
Schedule II - Valuation and Qualifying Accounts | |
Schedule II - Valuation and Qualifying Accounts | Lannett Company, Inc. Schedule II - Valuation and Qualifying Accounts For the years ended June 30: Balance at Charged to Balance at Description Beginning of (Reduction of) End of Fiscal (In thousands) Fiscal Year Expense Deductions Year Allowance for Doubtful Accounts 2019 $ 1,308 $ 869 $ (955) $ 1,222 2018 796 1,560 (1,048) 1,308 2017 610 186 — 796 Deferred Tax Asset Valuation Allowance 2019 $ 8,120 $ 5,429 $ — $ 13,549 2018 6,391 1,729 — 8,120 2017 3,927 2,464 — 6,391 |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Jun. 30, 2019 | |
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. 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 specifically for variable consideration related to 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, 2019 and 2018, the Company did 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. Repairs and maintenance costs that do not extend the useful life of the asset are expensed as incurred. |
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 which commences upon shipment of the product, 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 other than Goodwill | Valuation of Long-Lived Assets, including Intangible Assets other than Goodwill 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 utilized 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, 2019, 2018 and 2017: (In thousands) Fiscal Year Ended June 30, Medical Indication 2019 2018 2017 Antibiotic $ 15,391 $ 14,509 $ 16,748 Anti-Psychosis 73,453 59,557 58,625 Cardiovascular 101,467 64,011 50,628 Central Nervous System 34,170 31,789 39,451 Gallstone 9,604 20,280 48,600 Gastrointestinal 48,566 60,294 71,887 Glaucoma 3,021 6,540 18,763 Migraine 41,592 54,015 29,014 Muscle Relaxant 12,344 13,496 13,636 Pain Management 28,210 23,036 26,135 Respiratory 3,418 7,891 10,516 Thyroid Deficiency 197,522 245,929 174,005 Urinary 6,783 8,661 14,695 Other 56,507 54,720 47,196 Contract manufacturing revenue 23,359 19,835 17,442 Net sales 655,407 684,563 637,341 Settlement agreement — — (4,000) Total net sales $ 655,407 $ 684,563 $ 633,341 |
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, 2019, 2018 and 2017, 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, 2019 2018 2017 Product 1 30 % 36 % 27 % Product 2 10 % 8 % 9 % The following table presents the percentage of total net sales, for the fiscal years ended June 30, 2019, 2018 and 2017, 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, 2019 2018 2017 Customer A 21 % 29 % 28 % Customer B 18 % 17 % 21 % Customer C 12 % — % — % Customer D 10 % 5 % 6 % The Company’s primary finished goods inventory supplier through March 23, 2019 was Jerome Stevens Pharmaceuticals, Inc. (“JSP”), in Bohemia, New York. Purchases of finished goods inventory from JSP accounted for 29%, 37% and 36% of the Company’s inventory purchases in fiscal years 2019, 2018 and 2017, respectively. See Note 20 “Material Contracts with Suppliers” for more information. |
Revenue Recognition | Revenue Recognition On July 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, which superseded ASC Topic 605, Revenue Recognition. Under ASC 606, the Company recognizes revenue when (or as) we satisfy our performance obligations by transferring a promised good or service to a customer at an amount that reflects the consideration the Company is expected to be entitled. Our revenue consists almost entirely of sales of our pharmaceutical products to customers, whereby we ship product to a customer pursuant to a purchase order. Revenue contracts such as these do not generally give rise to contract assets or contract liabilities because: (i) the underlying contracts generally have only a single performance obligation and (ii) we do not generally receive consideration until the performance obligation is fully satisfied. The new revenue standard impacts the timing of the Company’s revenue recognition by requiring recognition of certain contract manufacturing arrangements to change from “upon shipment or delivery” to “over time.” However, the recognition of these arrangements over time does not currently have a material impact on the Company’s consolidated results of operations or financial position. The Company adopted ASC 606 using the modified retrospective method. Refer to the “Recent Accounting Pronouncements” section of this footnote for further discussion of the impact of the adoption. 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. Provisions for chargebacks, rebates, returns and other adjustments require varying degrees of subjectivity. While rebates generally are based on contractual terms and require minimal estimation, chargebacks and returns require management to make more subjective assumptions. Each major category is discussed in detail below: Chargebacks The provision for chargebacks is the most significant and complex estimate used in the recognition of revenue. The Company sells its products directly to wholesale distributors, generic distributors, retail pharmacy chains and mail-order pharmacies. The Company also sells its products indirectly to independent pharmacies, managed care organizations, hospitals, nursing homes and group purchasing organizations, collectively referred to as “indirect customers.” The Company enters into agreements with its indirect customers to establish pricing for certain products. The indirect customers then independently select a wholesaler from which to purchase the products. If the price paid by the indirect customers is lower than the price paid by the wholesaler, the Company will provide a credit, called a chargeback, to the wholesaler for the difference between the contractual price with the indirect customers and the wholesaler purchase price. The provision for chargebacks is based on expected sell-through levels by the Company’s wholesale customers to the indirect customers and estimated wholesaler inventory levels. As sales to the large wholesale customers, such as Cardinal Health, AmerisourceBergen and McKesson increase (decrease), the reserve for chargebacks will also generally increase (decrease). However, the size of the increase (decrease) depends on product mix and the amount of sales made to indirect customers with which the Company has specific chargeback agreements. The Company continually monitors the reserve for chargebacks and makes adjustments when management believes that expected chargebacks may differ from the actual chargeback reserve. Rebates Rebates are offered to the Company’s key chain drug store, distributor and wholesaler customers to promote customer loyalty and increase product sales. These rebate programs provide customers with credits upon attainment of pre-established volumes or attainment of net sales milestones for a specified period. Other promotional programs are incentive programs offered to the customers. Additionally, as a result of the Patient Protection and Affordable Care Act (“PPACA”) enacted in the U.S. in March 2010, the Company participates in a new cost-sharing program for certain Medicare Part D beneficiaries designed primarily for the sale of brand drugs and certain generic drugs if their Food and Drug Administration (“FDA”) approval was granted under a New Drug Application (“NDA”) or 505(b) NDA versus an Abbreviated New Drug application (“ANDA’). Because our drugs used for the treatment of thyroid deficiency and our Morphine Sulfate Oral Solution product were both approved by the FDA as 505(b)(2) NDAs, they are considered “brand” drugs for purposes of the PPACA. Drugs purchased within the Medicare Part D coverage gap (commonly referred to as the “donut hole”) result in additional rebates. The Company estimates the reserve for rebates and other promotional credit programs based on the specific terms in each agreement when revenue is recognized. The reserve for rebates increases (decreases) as sales to certain wholesale and retail customers increase (decrease). However, since these rebate programs are not identical for all customers, the size of the reserve will depend on the mix of sales to customers that are eligible to receive rebates. Returns Consistent with industry practice, the Company has a product returns policy that allows customers to return product within a specified time period prior to and subsequent to the product’s expiration date in exchange for a credit to be applied to future purchases. The Company’s policy requires that the customer obtain pre-approval from the Company for any qualifying return. The Company estimates its provision for returns based on historical experience, changes to business practices, credit terms and any extenuating circumstances known to management. While historical experience has allowed for reasonable estimations in the past, future returns may or may not follow historical trends. The Company continually monitors the reserve for returns and makes adjustments when management believes that actual product returns may differ from the established reserve. Generally, the reserve for returns increases as net sales increase. Other Adjustments Other adjustments consist primarily of “price adjustments,” also known as “shelf-stock adjustments” and “price protections,” which are both credits issued to reflect increases or decreases in the invoice or contract prices of the Company’s products. In the case of a price decrease, a credit is given for product remaining in customer’s inventories at the time of the price reduction. Contractual price protection results in a similar credit when the invoice or contract prices of the Company’s products increase, effectively allowing customers to purchase products at previous prices for a specified period of time. Amounts recorded for estimated shelf-stock adjustments and price protections are based upon specified terms with direct customers, estimated changes in market prices and estimates of inventory held by customers. The Company regularly monitors these and other factors and evaluates the reserve as additional information becomes available. Other adjustments also include prompt payment discounts and “failure-to-supply” adjustments. If the Company is unable to fulfill certain customer orders, the customer can purchase products from our competitors at their prices and charge the Company for any difference in our contractually agreed upon prices. |
Cost of Sales, including Amortization of Intangibles | Cost of Sales, including Amortization of Intangibles Cost of sales includes all costs related to bringing products to their final selling destination, which includes direct and indirect costs, such as direct material, labor and overhead expenses. Additionally, cost of sales includes product royalties, depreciation, amortization and costs to renew or extend recognized intangible assets, freight charges and other shipping and handling expenses. |
Research and Development | Research and Development 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, 2019 and 2018. |
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 required 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 allowed 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. In the second quarter of Fiscal 2019, the Company finalized the provisional amounts without any further adjustments, in accordance with the expiration of the SAB 118 measurement period. |
Earnings (Loss) Per Common Share | Earnings (Loss) Per Common Share Basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares outstanding during the period. Diluted earnings (loss) computed by dividing net income (loss) by the weighted average number of shares outstanding during the period including additional shares that would have been outstanding related to potentially dilutive securities. These potentially dilutive securities consist of stock options, unvested restricted stock and performance-based shares. 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, which created ASC Topic 606 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, which is primarily generated from product sales, the Company determined that the updated guidance does not have a material impact on our disclosures or the timing and recognition of our revenues. Under the new standard, the Company estimates certain amounts as variable consideration, specifically any “failure-to-supply” adjustments at the point of product sale in future periods. The new revenue standard also impacts the timing of the Company’s revenue recognition by requiring recognition of certain contract manufacturing arrangements to change from “upon shipment or delivery” to “over time.” However, the recognition of these arrangements over time does not currently have a material impact on the Company’s consolidated results of operations or financial position. The cumulative impact of the adoption of ASC 606 resulted in a $2.3 million adjustment, net of tax, to opening retained earnings on July 1, 2018. 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. In December 2018, the FASB issued ASU 2018-20, Leases — Narrow Scope Improvements for lessors, which allows entities to choose an additional transition method of adoption, under which an entity initially applies the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company is in the process of finalizing the analysis of its lease portfolio and updating its accounting policies to comply with this standard. Upon adoption, the Company expects to recognize an initial right-of-use asset and lease liability on its consolidated balance sheet of approximately $6 million to $8 million as of July 1, 2019. 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. The standard was adopted on July 1, 2018 and did not have an impact on the Company’s consolidated financial statements. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Summary of Significant Accounting Policies | |
Schedule of the Company's net sales by medical indication | (In thousands) Fiscal Year Ended June 30, Medical Indication 2019 2018 2017 Antibiotic $ 15,391 $ 14,509 $ 16,748 Anti-Psychosis 73,453 59,557 58,625 Cardiovascular 101,467 64,011 50,628 Central Nervous System 34,170 31,789 39,451 Gallstone 9,604 20,280 48,600 Gastrointestinal 48,566 60,294 71,887 Glaucoma 3,021 6,540 18,763 Migraine 41,592 54,015 29,014 Muscle Relaxant 12,344 13,496 13,636 Pain Management 28,210 23,036 26,135 Respiratory 3,418 7,891 10,516 Thyroid Deficiency 197,522 245,929 174,005 Urinary 6,783 8,661 14,695 Other 56,507 54,720 47,196 Contract manufacturing revenue 23,359 19,835 17,442 Net sales 655,407 684,563 637,341 Settlement agreement — — (4,000) Total net sales $ 655,407 $ 684,563 $ 633,341 |
Summary of products which accounted for at least 10% of total net sales | June 30, June 30, June 30, 2019 2018 2017 Product 1 30 % 36 % 27 % Product 2 10 % 8 % 9 % |
Summary of customers which accounted for at least 10% of total net sales | June 30, June 30, June 30, 2019 2018 2017 Customer A 21 % 29 % 28 % Customer B 18 % 17 % 21 % Customer C 12 % — % — % Customer D 10 % 5 % 6 % |
Restructuring Charges (Tables)
Restructuring Charges (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Cody Restructuring Plan | |
Schedule of restructuring charges associated with restructuring program | Fiscal Year Ended (In thousands) June 30, 2019 Employee separation costs $ (585) Facility closure costs — Total $ (585) |
Schedule of reconciliation of changes in restructuring liabilities associated with restructuring program | Employee Facility Closure (In thousands) Separation Costs Costs Total Balance at June 30, 2018 $ 3,092 $ — $ 3,092 Restructuring Charges (585) — (585) Payments (2,399) — (2,399) Balance at June 30, 2019 $ 108 — $ 108 |
Cody API Restructuring Plan | |
Schedule of restructuring charges associated with restructuring program | Fiscal Year Ended (In thousands) June 30, 2019 Employee separation costs $ 2,430 Facility closure costs — Total $ 2,430 |
Schedule of reconciliation of changes in restructuring liabilities associated with restructuring program | Contract Employee Termination Facility Closure (In thousands) Separation Costs Costs Costs Total Balance at June 30, 2018 $ — $ — $ — $ — Restructuring Charges 2,430 — — 2,430 Payments (223) — — (223) Balance at June 30, 2019 $ 2,207 $ — — $ 2,207 |
2016 Restructuring Program | |
Schedule of restructuring charges associated with restructuring program | Fiscal Year Ended Fiscal Year Ended (In thousands) June 30, 2019 June 30, 2018 Employee separation costs $ 1,084 $ 246 Contract termination costs — — Facility closure costs 1,166 3,723 Total $ 2,250 $ 3,969 |
Schedule of reconciliation of changes in restructuring liabilities associated with restructuring program | Contract Employee Termination Facility Closure (In thousands) Separation Costs Costs Costs Total Balance at June 30, 2017 $ 5,431 $ — $ — $ 5,431 Restructuring Charges 246 — 3,723 3,969 Payments (2,063) — (3,723) (5,786) Balance at June 30, 2018 3,614 — — 3,614 Restructuring Charges 1,084 — 1,166 2,250 Payments (4,698) — (1,166) (5,864) Balance at June 30, 2019 $ — $ — $ — $ — |
Accounts Receivable (Tables)
Accounts Receivable (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Accounts Receivable | |
Schedule of accounts receivable | June 30, June 30, (In thousands) 2019 2018 Gross accounts receivable $ 361,323 $ 503,175 Less Chargebacks reserve (89,567) (153,034) Less Rebates reserve (32,099) (33,102) Less Returns reserve (55,554) (43,059) Less Other deductions (18,128) (20,021) Less Allowance for doubtful accounts (1,223) (1,308) Accounts receivable, net $ 164,752 $ 252,651 |
Schedule of major category of revenue-related reserves | Reserve Category (In thousands) Chargebacks Rebates Returns Other Total Balance at June 30, 2016 $ 86,495 $ 54,084 $ 40,593 $ 16,851 $ 198,023 Additions related to the KUPI acquisition — 8,329 5,955 — 14,284 Current period provision 881,283 297,050 25,416 53,398 1,257,147 Credits issued during the period (888,241) (271,847) (29,829) (59,153) (1,249,070) Balance at June 30, 2017 79,537 87,616 42,135 11,096 220,384 Current period provision 1,141,995 296,784 24,024 69,898 1,532,701 Credits issued during the period (1,068,498) (301,898) (23,100) (60,973) (1,454,469) Balance at June 30, 2018 153,034 82,502 43,059 20,021 298,616 Adjustment related to adoption of ASC 606 — — — 3,536 3,536 Current period provision 1,047,192 250,555 41,982 67,344 1,407,073 Credits issued during the period (1,110,659) (254,783) (29,487) (72,773) (1,467,702) Balance at June 30, 2019 $ 89,567 $ 78,274 $ 55,554 $ 18,128 $ 241,523 |
Inventories (Tables)
Inventories (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Inventories | |
Schedule of Inventories | June 30, June 30, (In thousands) 2019 2018 Raw Materials $ 56,740 $ 64,647 Work-in-process 18,988 19,983 Finished Goods 68,243 57,005 Total $ 143,971 $ 141,635 |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Property, Plant and Equipment | |
Schedule of property, plant and equipment | June 30, June 30, (In thousands) Useful Lives 2019 2018 Land — $ 1,783 $ 2,900 Building and improvements - years 87,609 105,041 Machinery and equipment - years 156,166 173,988 Furniture and fixtures - years 3,105 4,099 Less accumulated depreciation (83,424) (89,996) 165,239 196,032 Construction in progress 21,431 37,215 Property, plant and equipment, net $ 186,670 $ 233,247 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Goodwill and Intangible Assets | |
Schedule of changes in the carrying amount of goodwill | Generic (In thousands) Pharmaceuticals Balance at June 30, 2018 $ 339,566 Goodwill acquired — Impairment (339,566) Balance at June 30, 2019 $ — |
Summary of intangible assets, net | Weighted Gross Carrying Amount Accumulated Amortization Intangible Assets, Net Avg. Life June 30, June 30, June 30, June 30, June 30, June 30, (In thousands) (Yrs.) 2019 2018 2019 2018 2019 2018 Definite-lived: Cody Labs import license 15 $ 581 $ 581 $ (424) $ (386) $ 157 $ 195 KUPI product rights 15 416,154 416,154 (97,583) (69,840) 318,571 346,314 KUPI trade name 2 2,920 2,920 (2,920) (2,920) — — KUPI other intangible assets 15 19,000 19,000 (4,562) (3,295) 14,438 15,705 Silarx product rights 15 10,000 10,000 (2,722) (2,056) 7,278 7,944 Other product rights 14 38,579 19,693 (4,243) (1,875) 34,336 17,818 Total definite-lived $ 487,234 $ 468,348 $ (112,454) $ (80,372) $ 374,780 $ 387,976 Indefinite-lived: KUPI in-process research and development — $ 18,000 $ 18,000 $ — $ — $ 18,000 $ 18,000 Silarx in-process research and development — 18,000 18,000 — — 18,000 18,000 Other product rights — 449 449 — — 449 449 Total indefinite-lived 36,449 36,449 — — 36,449 36,449 Total intangible assets, net $ 523,683 $ 504,797 $ (112,454) $ (80,372) $ 411,229 $ 424,425 |
Summary of future annual amortization expense | (In thousands) Annual Amortization Fiscal Year Ending June 30, Expense 2020 $ 32,396 2021 32,396 2022 32,396 2023 32,396 2024 32,059 Thereafter 213,137 $ 374,780 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Long-Term Debt | |
Summary of long-term debt, net | June 30, June 30, (In thousands) 2019 2018 Term Loan A due 2020; 7.40% as of June 30, 2019 $ 153,933 $ 227,276 Unamortized discount and other debt issuance costs (4,722) (10,178) Term Loan A, net 149,211 217,098 Term Loan B due 2022; 7.78% as of June 30, 2019 614,468 670,011 Unamortized discount and other debt issuance costs (34,631) (47,839) Term Loan B, net 579,837 622,172 Revolving Credit Facility due 2020 — — Total debt, net 729,048 839,270 Less short-term borrowings and current portion of long-term debt (66,845) (66,845) Total long-term debt, net $ 662,203 $ 772,425 |
Summary of long-term debt amounts due | Amounts Payable (In thousands) to Institutions 2020 $ 66,845 2021 165,778 2022 39,345 2023 496,433 Total $ 768,401 |
Commitments (Tables)
Commitments (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Commitments | |
Schedule of future minimum lease payments under noncancelable operating leases | (In thousands) Amounts Due 2020 $ 1,898 2021 1,450 2022 1,123 2023 1,123 2024 1,123 Thereafter 3,839 Total $ 10,556 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Loss (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Accumulated Other Comprehensive Loss | |
Schedule of Accumulated Other Comprehensive Loss | June 30, June 30, (In thousands) 2019 2018 Foreign Currency Translation Beginning Balance $ (515) $ (222) Net (loss) on foreign currency translation (net of tax of $0 and $0) (100) (293) Reclassifications to net income (net of tax of $0 and $0) — — Other comprehensive (loss), net of tax (100) (293) Ending Balance (615) (515) Total Accumulated Other Comprehensive Loss $ (615) $ (515) |
Earnings (Loss) Per Common Sh_2
Earnings (Loss) Per Common Share (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
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) 2019 2018 2017 Net income (loss) attributable to Lannett Company, Inc. $ (272,107) $ 28,690 $ (581) Basic weighted average common shares outstanding 37,779,812 37,127,306 36,812,524 Effect of potentially dilutive options and restricted stock awards — 1,035,208 — Diluted weighted average common shares outstanding 37,779,812 38,162,514 36,812,524 Earnings (loss) per common share attributable to Lannett Company, Inc.: Basic $ (7.20) $ 0.77 $ (0.02) Diluted $ (7.20) $ 0.75 $ (0.02) |
Share-based Compensation (Table
Share-based Compensation (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
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, 2019 2018 2017 Risk-free interest rate 2.9 % 2.1 % 1.1 % Expected volatility 58.4 % 57.6 % 55.6 % Expected dividend yield — — — Forfeiture rate 6.5 % 6.5 % 6.5 % Expected term 5.3 years 5.4 years 5.2 years Weighted average fair value $ 6.52 $ 11.25 $ 15.33 |
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, 2016 1,730 $ 16.77 $ 19,524 6.3 Granted 11 31.30 Exercised (234) 7.38 $ 4,849 Forfeited, expired or repurchased (32) 33.04 Outstanding at June 30, 2017 1,475 $ 18.02 $ 12,212 5.7 Granted 50 21.43 Exercised (445) 7.23 $ 4,243 Forfeited, expired or repurchased (23) 30.83 Outstanding at June 30, 2018 1,057 $ 22.46 $ 2,584 5.4 Granted 73 12.20 Exercised (94) 4.06 $ 311 Forfeited, expired or repurchased (464) 30.61 Outstanding at June 30, 2019 572 $ 17.56 $ 273 5.0 Vested and expected to vest at June 30, 2019 566 $ 17.59 $ 273 5.0 Exercisable at June 30, 2019 469 $ 18.09 $ 273 4.2 |
Summary of non-vested restricted stock awards | Weighted Average Grant - Aggregate (In thousands) Awards date Fair Value Intrinsic Value Non-vested at June 30, 2016 167 $ 48.22 Granted 298 24.73 Vested (86) 42.60 $ 2,564 Forfeited (45) 32.90 Non-vested at June 30, 2017 334 $ 30.71 Granted 641 18.01 Vested (191) 31.30 $ 4,104 Forfeited (80) 20.95 Non-vested at June 30, 2018 704 $ 20.06 Granted 1,176 9.90 Vested (434) 19.75 $ 4,107 Forfeited (158) 14.00 Non-vested at June 30, 2019 1,288 $ 11.63 |
Schedule of non-vested performance-based shares | Weighted Average Grant - Aggregate (In thousands, except for weighted average price and life data) Awards date Fair Value Intrinsic Value Non-vested at June 30, 2017 — — Granted 47 25.58 Vested (27) 25.58 $ 574 Forfeited — — Non-vested at June 30, 2018 20 $ 25.58 Granted 52 $ 17.69 Vested — $ — $ — Forfeited — $ — Non-vested at June 30, 2019 72 $ 19.92 |
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) 2019 2018 2017 Selling, general and administrative expenses $ 5,715 $ 7,570 $ 5,855 Research and development expenses 750 680 661 Cost of sales 2,562 1,646 1,203 Total $ 9,027 $ 9,896 $ 7,719 Tax benefit at statutory rate $ 2,031 $ 2,919 $ 2,818 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Income Taxes | |
Schedule of provision for income taxes | June 30, June 30, June 30, (In thousands) 2019 2018 2017 Current Income Tax Expense (Benefit) Federal $ 13,185 $ (9,439) $ 764 State and Local (81) 1,152 638 Total Current Income Tax Expense (Benefit) 13,104 (8,287) 1,402 Deferred Income Tax Expense (Benefit) Federal (85,022) 31,263 (2,210) State and Local (2,220) (573) 1,905 Total Deferred Income Tax Expense (Benefit) (87,242) 30,690 (305) Total Income Tax Expense (Benefit) $ (74,138) $ 22,403 $ 1,097 |
Schedule of reconciliation of the differences between the effective rates and federal statutory rates | June 30, June 30, June 30, 2019 2018 2017 Federal income tax at statutory rate 21.0 % 28.1 % 35.0 % State and local income tax, net 0.5 % 0.6 % 293.6 % Nondeductible expenses (0.1) % 0.2 % 45.4 % Foreign rate differential (0.4) % 0.4 % 49.9 % Income tax credits 0.5 % (1.4) % (160.9) % Domestic production activity deduction — % (1.5) % — % Unrecognized tax benefits 0.1 % (6.7) % — % Change in tax laws — % 25.6 % — % Excess tax benefits on share-based compensation (0.3) % (0.3) % (134.3) % Other 0.1 % (1.2) % 70.8 % Effective income tax rate 21.4 % 43.8 % 199.5 % |
Schedule of differences which give rise to deferred tax assets and liabilities | June 30, June 30, (In thousands) 2019 2018 Deferred tax assets: Accrued expenses $ — $ 1,085 Share-based compensation expense 4,134 4,158 Reserve for returns 12,014 9,342 Reserves for rebates — — Reserves for accounts receivable and inventory 8,208 5,425 Intangible impairment — 1,337 Federal net operating loss 324 402 State net operating loss 6,479 4,495 Impairment on Cody note receivable 1,161 1,175 Accumulated amortization on intangible assets 76,401 10,868 Settlement Liability — — Foreign net operating loss 1,792 880 Interest Carryforward 11,008 — Other 2,506 404 Total deferred tax asset 124,027 39,571 Valuation allowance (13,549) (8,120) Total deferred tax asset less valuation allowance 110,478 31,451 Deferred tax liabilities: Prepaid expenses 182 118 Property, plant and equipment 991 9,231 Other — 39 Total deferred tax liability 1,173 9,388 Net deferred tax asset $ 109,305 $ 22,063 |
Schedule of reconciliation of the beginning and ending amount of unrecognized tax benefits | (In thousands) Balance Balance at June 30, 2017 $ 5,942 Additions for tax positions of the current year 294 Additions for tax positions of prior years 700 Lapse of statute of limitations (4,399) Balance at June 30, 2018 $ 2,537 Additions for tax positions of the current year 244 Additions for tax positions of prior years 36 Lapse of statute of limitations (618) Balance at June 30, 2019 $ 2,199 |
Assets Held for Sale (Tables)
Assets Held for Sale (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Assets Held for Sale | |
Schedule of financial results of the Cody API business | The following table summarizes the financial results of the Cody API business for the fiscal years ended June 30, 2019 and 2018: Fiscal Year Ended June 30, (In thousands) 2019 2018 Net sales $ 3,139 $ 2,696 Pretax loss attributable to Cody API business (51,509) (42,112) |
Quarterly Financial Informati_2
Quarterly Financial Information (Unaudited) (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
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 2019 Net sales $ 133,841 $ 172,794 $ 193,718 $ 155,054 Cost of sales 84,499 107,477 123,908 95,913 Gross profit 49,342 65,317 69,810 59,141 Operating expenses 39,940 31,939 33,133 400,919 Operating income (loss) 9,402 33,378 36,677 (341,778) Other loss (19,532) (21,374) (21,668) (21,350) Income tax expense (benefit) (2,544) 1,359 2,647 (75,600) Net income (loss) $ (7,586) $ 10,645 $ 12,362 $ (287,528) Earnings (loss) per common share (1) Basic $ (0.20) $ 0.28 $ 0.33 $ (7.65) Diluted $ (0.20) $ 0.27 $ 0.32 $ (7.65) Fourth Third Second First (In thousands, except per share data) Quarter Quarter Quarter Quarter Fiscal 2018 Net sales $ 170,911 $ 174,386 $ 184,305 $ 154,961 Cost of sales 104,383 107,329 96,855 87,290 Gross profit 66,528 67,057 87,450 67,671 Operating expenses 57,926 33,777 40,315 26,992 Operating income 8,602 33,280 47,135 40,679 Other loss (20,844) (22,785) (14,975) (19,999) Income tax expense (benefit) (883) (2,275) 18,138 7,423 Net income (loss) $ (11,359) $ 12,770 $ 14,022 $ 13,257 Earnings (loss) per common share (1) Basic $ (0.30) $ 0.34 $ 0.38 $ 0.36 Diluted $ (0.30) $ 0.33 $ 0.37 $ 0.35 Fourth Third Second First (In thousands, except per share data) Quarter Quarter Quarter Quarter Fiscal 2017 Net sales $ 139,118 $ 165,720 $ 170,944 $ 161,559 Settlement agreement — (4,000) — — Total net sales 139,118 161,720 170,944 161,559 Cost of sales 80,240 89,290 82,891 79,707 Gross profit 58,878 72,430 88,053 81,852 Operating expenses 30,069 28,793 53,747 102,158 Operating income (loss) 28,809 43,637 34,306 (20,306) Other loss (19,983) (21,371) (22,578) (21,964) Income tax expense (benefit) 3,100 7,337 3,542 (12,882) Less: Net income attributable to noncontrolling interest — — 14 20 Net income (loss) attributable to Lannett Company, Inc. $ 5,726 $ 14,929 $ 8,172 $ (29,408) Earnings (loss) per common share attributable to Lannett Company Inc. (1) Basic $ 0.16 $ 0.41 $ 0.22 $ (0.80) Diluted $ 0.15 $ 0.40 $ 0.22 $ (0.80) (1) |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Intangible Assets (Details) | 12 Months Ended |
Jun. 30, 2019 | |
Minimum | |
Intangible Assets | |
Estimated useful lives | 10 years |
Maximum | |
Intangible Assets | |
Estimated useful lives | 15 years |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Segment Information (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||||||
Jun. 30, 2019USD ($) | Mar. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Sep. 30, 2018USD ($) | 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, 2019USD ($)segment | Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | |
Medical Indication Information | |||||||||||||||
Net sales | $ 133,841 | $ 172,794 | $ 193,718 | $ 155,054 | $ 170,911 | $ 174,386 | $ 184,305 | $ 154,961 | $ 139,118 | $ 165,720 | $ 170,944 | $ 161,559 | $ 655,407 | $ 684,563 | $ 637,341 |
Settlement agreement | 4,000 | 4,000 | |||||||||||||
Total net sales | $ 139,118 | $ 161,720 | $ 170,944 | $ 161,559 | $ 655,407 | 684,563 | 633,341 | ||||||||
Segment information | |||||||||||||||
Number of reportable segments | segment | 1 | ||||||||||||||
Antibiotic | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | $ 15,391 | 14,509 | 16,748 | ||||||||||||
Anti-Psychosis | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 73,453 | 59,557 | 58,625 | ||||||||||||
Cardiovascular | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 101,467 | 64,011 | 50,628 | ||||||||||||
Central Nervous System | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 34,170 | 31,789 | 39,451 | ||||||||||||
Gallstone | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 9,604 | 20,280 | 48,600 | ||||||||||||
Gastrointestinal | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 48,566 | 60,294 | 71,887 | ||||||||||||
Glaucoma | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 3,021 | 6,540 | 18,763 | ||||||||||||
Migraine | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 41,592 | 54,015 | 29,014 | ||||||||||||
Muscle Relaxant | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 12,344 | 13,496 | 13,636 | ||||||||||||
Pain Management | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 28,210 | 23,036 | 26,135 | ||||||||||||
Respiratory | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 3,418 | 7,891 | 10,516 | ||||||||||||
Thyroid Deficiency | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 197,522 | 245,929 | 174,005 | ||||||||||||
Urinary | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 6,783 | 8,661 | 14,695 | ||||||||||||
Other | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 56,507 | 54,720 | 47,196 | ||||||||||||
Contract manufacturing revenue | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | $ 23,359 | $ 19,835 | $ 17,442 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Customer, Supplier and Product Concentration (Details) | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Net sales | Products | Product 1 | |||
Concentration risk | |||
Concentration risk (as a percent) | 30.00% | 36.00% | 27.00% |
Net sales | Products | Product 2 | |||
Concentration risk | |||
Concentration risk (as a percent) | 10.00% | 8.00% | 9.00% |
Net sales | Customers | Customer A | |||
Concentration risk | |||
Concentration risk (as a percent) | 21.00% | 29.00% | 28.00% |
Net sales | Customers | Customer B | |||
Concentration risk | |||
Concentration risk (as a percent) | 18.00% | 17.00% | 21.00% |
Net sales | Customers | Customer C | |||
Concentration risk | |||
Concentration risk (as a percent) | 12.00% | ||
Net sales | Customers | Customer D | |||
Concentration risk | |||
Concentration risk (as a percent) | 10.00% | 5.00% | 6.00% |
Inventory purchases | Suppliers | JSP | |||
Concentration risk | |||
Concentration risk (as a percent) | 29.00% | 37.00% | 36.00% |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands | Jul. 01, 2019 | Jun. 30, 2019 | Jul. 01, 2018 |
ASU 2014-09 | |||
Recent Accounting Pronouncements | |||
ASC 606 adjustment, net of tax | $ (2,282) | $ (2,300) | |
ASU 2016-02 | Restatement | |||
Recent Accounting Pronouncements | |||
Right-of-use asset | $ 6,000 | ||
Lease Liability | $ 8,000 |
Restructuring Charges - Cody Re
Restructuring Charges - Cody Restructuring Program (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 29, 2018 | |
Restructuring Charges | ||||
Restructuring expenses | $ 4,095 | $ 7,061 | $ 7,168 | |
Cody Restructuring Plan | ||||
Restructuring Charges | ||||
Impairment charges | 21,500 | |||
Restructuring expenses | (585) | |||
Cody Restructuring Plan | Employee separation costs | ||||
Restructuring Charges | ||||
Estimated restructuring charges | $ 2,500 | |||
Restructuring expenses | $ (585) |
Restructuring Charges - Cody _2
Restructuring Charges - Cody Restructuring Program - Changes in restructuring liabilities (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Reconciliation of the changes in restructuring liabilities | |||
Restructuring charges | $ 4,095 | $ 7,061 | $ 7,168 |
Cody Restructuring Plan | |||
Reconciliation of the changes in restructuring liabilities | |||
Beginning balance for the period | 3,092 | ||
Restructuring charges | (585) | ||
Payments | (2,399) | ||
Ending balance for the period | 108 | 3,092 | |
Cody Restructuring Plan | Employee separation costs | |||
Reconciliation of the changes in restructuring liabilities | |||
Beginning balance for the period | 3,092 | ||
Restructuring charges | (585) | ||
Payments | (2,399) | ||
Ending balance for the period | $ 108 | $ 3,092 |
Restructuring Charges - Cody AP
Restructuring Charges - Cody API Restructuring Plan (Details) $ in Thousands | 1 Months Ended | 12 Months Ended | |||
Jul. 31, 2019USD ($) | Jun. 30, 2019USD ($)employee | Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | |
Restructuring Charges | |||||
Sale of the equipment | $ 14,450 | $ 28 | $ 112 | ||
Restructuring expenses | 4,095 | $ 7,061 | $ 7,168 | ||
Cody API Restructuring Plan | |||||
Restructuring Charges | |||||
Positions eliminated | employee | 70 | ||||
Proceeds from sale of equipment | $ 3,000 | ||||
Estimated restructuring charges | $ 6,000 | 6,000 | |||
Restructuring expenses | 2,430 | ||||
Cody API Restructuring Plan | Employee separation costs | |||||
Restructuring Charges | |||||
Estimated restructuring charges | 3,500 | 3,500 | |||
Restructuring expenses | 2,430 | ||||
Cody API Restructuring Plan | Contract termination costs | |||||
Restructuring Charges | |||||
Estimated restructuring charges | 2,000 | 2,000 | |||
Cody API Restructuring Plan | Facility closure costs | |||||
Restructuring Charges | |||||
Estimated restructuring charges | $ 500 | $ 500 |
Restructuring Charges - Cody _3
Restructuring Charges - Cody API Restructuring Plan - Changes in restructuring liabilities (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Reconciliation of the changes in restructuring liabilities | |||
Restructuring charges | $ 4,095 | $ 7,061 | $ 7,168 |
Cody API Restructuring Plan | |||
Reconciliation of the changes in restructuring liabilities | |||
Restructuring charges | 2,430 | ||
Payments | (223) | ||
Ending balance for the period | 2,207 | ||
Cody API Restructuring Plan | Employee separation costs | |||
Reconciliation of the changes in restructuring liabilities | |||
Restructuring charges | 2,430 | ||
Payments | (223) | ||
Ending balance for the period | $ 2,207 |
Restructuring Charges - 2016 Re
Restructuring Charges - 2016 Restructuring Plan (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | Feb. 01, 2016 | |
Restructuring Charges | ||||
Restructuring expenses | $ 4,095 | $ 7,061 | $ 7,168 | |
2016 Restructuring Program | ||||
Restructuring Charges | ||||
Estimated restructuring charges | $ 21,000 | |||
Restructuring expenses | 2,250 | 3,969 | ||
2016 Restructuring Program | Employee separation costs | ||||
Restructuring Charges | ||||
Estimated restructuring charges | 11,000 | |||
Restructuring expenses | 1,084 | 246 | ||
2016 Restructuring Program | Contract termination costs | ||||
Restructuring Charges | ||||
Estimated restructuring charges | 1,000 | |||
2016 Restructuring Program | Facility closure costs | ||||
Restructuring Charges | ||||
Estimated restructuring charges | $ 9,000 | |||
Restructuring expenses | $ 1,166 | $ 3,723 |
Restructuring Charges - 2016 _2
Restructuring Charges - 2016 Restructuring Plan - Changes in restructuring liabilities - (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Reconciliation of the changes in restructuring liabilities | |||
Restructuring charges | $ 4,095 | $ 7,061 | $ 7,168 |
2016 Restructuring Program | |||
Reconciliation of the changes in restructuring liabilities | |||
Beginning balance for the period | 3,614 | 5,431 | |
Restructuring charges | 2,250 | 3,969 | |
Payments | (5,864) | (5,786) | |
Ending balance for the period | 3,614 | 5,431 | |
2016 Restructuring Program | Employee separation costs | |||
Reconciliation of the changes in restructuring liabilities | |||
Beginning balance for the period | 3,614 | 5,431 | |
Restructuring charges | 1,084 | 246 | |
Payments | (4,698) | (2,063) | |
Ending balance for the period | 3,614 | $ 5,431 | |
2016 Restructuring Program | Facility closure costs | |||
Reconciliation of the changes in restructuring liabilities | |||
Restructuring charges | 1,166 | 3,723 | |
Payments | $ (1,166) | $ (3,723) |
Accounts Receivable (Details)
Accounts Receivable (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Jun. 30, 2018 |
Accounts receivable | ||
Gross accounts receivable | $ 361,323 | $ 503,175 |
Less: Allowance for doubtful accounts | (1,223) | (1,308) |
Accounts receivable, net | 164,752 | 252,651 |
Chargebacks | ||
Accounts receivable | ||
Less: reserve | (89,567) | (153,034) |
Rebates | ||
Accounts receivable | ||
Less: reserve | (32,099) | (33,102) |
Returns | ||
Accounts receivable | ||
Less: reserve | (55,554) | (43,059) |
Other | ||
Accounts receivable | ||
Less: reserve | $ (18,128) | $ (20,021) |
Accounts Receivable - Provision
Accounts Receivable - Provisions (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Chargebacks | |||
Accounts receivable | |||
Provisions | $ 1,000 | $ 1,100 | $ 881.3 |
Rebates | |||
Accounts receivable | |||
Provisions | 250.6 | 296.8 | 297 |
Returns | |||
Accounts receivable | |||
Provisions | 42 | 24 | 25.4 |
Other | |||
Accounts receivable | |||
Provisions | $ 67.3 | $ 69.9 | $ 53.4 |
Accounts Receivable - Revenue R
Accounts Receivable - Revenue Reserve (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Change in revenue related reserves | |||
Balance at the beginning of the period | $ 298,616 | $ 220,384 | $ 198,023 |
Current period provision | 1,407,073 | 1,532,701 | 1,257,147 |
Adjustment related to adoption of ASC 606 | 3,536 | ||
Credits issued during the period | (1,467,702) | (1,454,469) | (1,249,070) |
Balance at the end of the period | 241,523 | 298,616 | 220,384 |
KUPI | |||
Change in revenue related reserves | |||
Additions related to the KUPI acquisition | 14,284 | ||
Chargebacks | |||
Change in revenue related reserves | |||
Balance at the beginning of the period | 153,034 | 79,537 | 86,495 |
Current period provision | 1,047,192 | 1,141,995 | 881,283 |
Credits issued during the period | (1,110,659) | (1,068,498) | (888,241) |
Balance at the end of the period | 89,567 | 153,034 | 79,537 |
Rebates | |||
Change in revenue related reserves | |||
Balance at the beginning of the period | 82,502 | 87,616 | 54,084 |
Current period provision | 250,555 | 296,784 | 297,050 |
Credits issued during the period | (254,783) | (301,898) | (271,847) |
Balance at the end of the period | 78,274 | 82,502 | 87,616 |
Rebates | KUPI | |||
Change in revenue related reserves | |||
Additions related to the KUPI acquisition | 8,329 | ||
Returns | |||
Change in revenue related reserves | |||
Balance at the beginning of the period | 43,059 | 42,135 | 40,593 |
Current period provision | 41,982 | 24,024 | 25,416 |
Credits issued during the period | (29,487) | (23,100) | (29,829) |
Balance at the end of the period | 55,554 | 43,059 | 42,135 |
Returns | KUPI | |||
Change in revenue related reserves | |||
Additions related to the KUPI acquisition | 5,955 | ||
Other | |||
Change in revenue related reserves | |||
Balance at the beginning of the period | 20,021 | 11,096 | 16,851 |
Current period provision | 67,344 | 69,898 | 53,398 |
Adjustment related to adoption of ASC 606 | 3,536 | ||
Credits issued during the period | (72,773) | (60,973) | (59,153) |
Balance at the end of the period | $ 18,128 | $ 20,021 | $ 11,096 |
Accounts Receivable - Revenue_2
Accounts Receivable - Revenue Reserve additional information (Details) - USD ($) $ in Millions | Jul. 01, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 |
ASU 2014-09 | ||||
Accounts receivable | ||||
Net adjustment to opening retained earnings and accounts receivable | $ 3.2 | |||
Failure-to-supply reserves offset | 3.5 | |||
Timing of recognition of contract manufacturing arrangements | $ 0.3 | |||
Chargebacks | ||||
Accounts receivable | ||||
Percentage of provision for rebates, chargebacks, returns and other adjustments on gross sales | 51.40% | 52.00% | 47.00% | |
Rebates | ||||
Accounts receivable | ||||
Percentage of provision for rebates, chargebacks, returns and other adjustments on gross sales | 12.30% | 13.50% | 15.80% | |
Returns | ||||
Accounts receivable | ||||
Percentage of provision for rebates, chargebacks, returns and other adjustments on gross sales | 2.10% | 1.10% | 1.40% | |
Other | ||||
Accounts receivable | ||||
Percentage of provision for rebates, chargebacks, returns and other adjustments on gross sales | 3.30% | 3.20% | 2.80% |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Jun. 30, 2018 |
Inventories: | ||
Raw Materials | $ 56,740 | $ 64,647 |
Work-in-process | 18,988 | 19,983 |
Finished Goods | 68,243 | 57,005 |
Net inventory | $ 143,971 | $ 141,635 |
Inventories - Additional inform
Inventories - Additional information (Details) - Excess and Obsolete - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Inventories: | |||
Inventory adjustments | $ 20.7 | $ 11.9 | |
Write-down to net realizable value | $ 21.8 | $ 12.2 | $ 10.4 |
Property, Plant and Equipment_2
Property, Plant and Equipment (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||
Jun. 30, 2019 | Sep. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Property, Plant and Equipment | |||||
Less: accumulated depreciation | $ (83,424) | $ (83,424) | $ (89,996) | ||
Property, plant and equipment, net before construction in progress | 165,239 | 165,239 | 196,032 | ||
Property, plant and equipment, net | 186,670 | 186,670 | 233,247 | ||
Depreciation expense | 23,400 | 22,400 | $ 21,800 | ||
Disposal group held for sale | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, held for sale | 6,700 | 6,700 | |||
Impairment of long-lived assets | 2,900 | $ 29,900 | 29,900 | ||
Impairment charges | 3,000 | ||||
Held in foreign countries | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, net | 1,000 | 1,000 | 1,100 | ||
Land | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, gross | 1,783 | 1,783 | 2,900 | ||
Building and improvements | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, gross | 87,609 | 87,609 | 105,041 | ||
Machinery and equipment | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, gross | 156,166 | 156,166 | 173,988 | ||
Furniture and fixtures | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, gross | 3,105 | 3,105 | 4,099 | ||
Construction in progress | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, net | $ 21,431 | $ 21,431 | $ 37,215 |
Property, Plant and Equipment -
Property, Plant and Equipment - Useful Lives (Details) | 12 Months Ended |
Jun. 30, 2019 | |
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) - USD ($) $ in Millions | Jun. 30, 2019 | Jun. 30, 2018 |
Fair Value Measurements | ||
Fair value of long-term debt | $ 724 | $ 893 |
Investment Securities (Details)
Investment Securities (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Investment Securities | ||
Net gain on investment securities | $ 3,313 | $ 2,914 |
Unrealized loss on investment securities | $ 1 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets - Goodwill (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Jun. 30, 2019 | |
Schedule of changes in the carrying amount of goodwill | ||
Goodwill, beginning balance | $ 339,566 | $ 339,566 |
Impairment | $ (339,600) | $ (339,566) |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Intangible Assets - Definite (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Finite-Lived Intangible Assets | ||
Gross Carrying Amount | $ 487,234 | $ 468,348 |
Accumulated Amortization | (112,454) | (80,372) |
Intangible Assets, Net | 374,780 | 387,976 |
Cody Labs import license | ||
Finite-Lived Intangible Assets | ||
Gross Carrying Amount | 581 | 581 |
Accumulated Amortization | (424) | (386) |
Intangible Assets, Net | $ 157 | 195 |
Weighted Avg. Life (Yrs.) | 15 years | |
Product rights | ||
Finite-Lived Intangible Assets | ||
Gross Carrying Amount | $ 38,579 | 19,693 |
Accumulated Amortization | (4,243) | (1,875) |
Intangible Assets, Net | $ 34,336 | 17,818 |
Weighted Avg. Life (Yrs.) | 14 years | |
Product rights | KUPI | ||
Finite-Lived Intangible Assets | ||
Gross Carrying Amount | $ 416,154 | 416,154 |
Accumulated Amortization | (97,583) | (69,840) |
Intangible Assets, Net | $ 318,571 | 346,314 |
Weighted Avg. Life (Yrs.) | 15 years | |
Product rights | Silarx | ||
Finite-Lived Intangible Assets | ||
Gross Carrying Amount | $ 10,000 | 10,000 |
Accumulated Amortization | (2,722) | (2,056) |
Intangible Assets, Net | $ 7,278 | 7,944 |
Weighted Avg. Life (Yrs.) | 15 years | |
Trade name | KUPI | ||
Finite-Lived Intangible Assets | ||
Gross Carrying Amount | $ 2,920 | 2,920 |
Accumulated Amortization | $ (2,920) | (2,920) |
Weighted Avg. Life (Yrs.) | 2 years | |
Other Intangible Assets | KUPI | ||
Finite-Lived Intangible Assets | ||
Gross Carrying Amount | $ 19,000 | 19,000 |
Accumulated Amortization | (4,562) | (3,295) |
Intangible Assets, Net | $ 14,438 | $ 15,705 |
Weighted Avg. Life (Yrs.) | 15 years |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets - Indefinite lived (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Jun. 30, 2018 | May 31, 2018 | Feb. 28, 2018 |
Indefinite-lived | ||||
Indefinite-lived assets, net | $ 36,449 | $ 36,449 | ||
Total intangible assets - Gross Carrying Amount, | 523,683 | 504,797 | ||
Accumulated Amortization | (112,454) | (80,372) | ||
Total intangible assets, Net | 411,229 | 424,425 | ||
Other Intangible Assets | ||||
Indefinite-lived | ||||
Indefinite-lived assets, net | 449 | 449 | ||
Total intangible assets, Net | $ 12,000 | $ 5,000 | ||
In-process research and development | KUPI | ||||
Indefinite-lived | ||||
Indefinite-lived assets, net | 18,000 | 18,000 | ||
In-process research and development | Silarx | ||||
Indefinite-lived | ||||
Indefinite-lived assets, net | $ 18,000 | $ 18,000 |
Goodwill and Intangible Asset_5
Goodwill and Intangible Assets - Additional Information (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||||
May 31, 2018USD ($)product | Feb. 28, 2018USD ($)product | Jun. 30, 2019USD ($) | Mar. 31, 2018USD ($) | Dec. 31, 2016USD ($) | Sep. 30, 2016USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | |
License Agreement | ||||||||
Other current liabilities | $ 3,652 | |||||||
Intangible assets, net | 411,229 | $ 424,425 | ||||||
Loss on sale of intangible asset | $ (15,514) | |||||||
Impairment charges | $ 65,100 | $ 65,100 | ||||||
ANDOR | License | ||||||||
License Agreement | ||||||||
Agreed amount of license | 17,000 | |||||||
License amount paid | 1,000 | |||||||
Amount to be paid on timing of Methylphenidate sales | $ 16,000 | |||||||
Term of remaining payment (in years) | 4 years | |||||||
KUPI | ||||||||
License Agreement | ||||||||
Loss on sale of intangible asset | $ (15,500) | |||||||
Intangible asset, carrying value at the time of sale | $ 15,800 | |||||||
Other Intangible Assets | ||||||||
License Agreement | ||||||||
Intangible assets, net | $ 12,000 | $ 5,000 | ||||||
Number of products acquired | product | 20 | 5 | ||||||
In-process research and development | ||||||||
License Agreement | ||||||||
Value assigned, abandoned project | 23,000 | |||||||
Impairment charges | $ 23,000 | $ 23,000 |
Goodwill and Intangible Asset_6
Goodwill and Intangible Assets - Future Annual Amortization Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Goodwill and Intangible Assets | |||
Amortization expense | $ 32,200 | $ 32,700 | $ 33,600 |
Future annual amortization expense: | |||
2020 | 32,396 | ||
2021 | 32,396 | ||
2022 | 32,396 | ||
2023 | 32,396 | ||
2024 | 32,059 | ||
Thereafter | 213,137 | ||
Intangible assets, net | $ 374,780 | $ 387,976 |
Long-Term Debt - Net (Details)
Long-Term Debt - Net (Details) $ in Thousands | Dec. 10, 2018USD ($) | Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) |
Long-term debt | |||
Debt, gross | $ 768,401 | ||
Total debt, net | 729,048 | $ 839,270 | |
Less short-term borrowings and current portion of long-term debt | (66,845) | (66,845) | |
Total long-term debt, net | 662,203 | 772,425 | |
Secured net leverage ratio | 3.25 | ||
Minimum liquidity covenant | $ 75,000 | ||
Increase in interest rate margin (as a percent) | 25.00% | ||
Consent fee (as a percent) | 50.00% | ||
Loss on extinguishment of debt | (448) | ||
Prior to September 30, 2020 | |||
Long-term debt | |||
Secured net leverage ratio | 4.25 | ||
As of September 30, 2020 | |||
Long-term debt | |||
Secured net leverage ratio | 4 | ||
Term Loan A due 2020 | |||
Long-term debt | |||
Debt, gross | 153,933 | 227,276 | |
Unamortized discount and other debt issuance costs | (4,722) | (10,178) | |
Total debt, net | $ 149,211 | 217,098 | |
Debt instrument, stated percentage | 7.40% | ||
Term Loan B due 2022 | |||
Long-term debt | |||
Debt, gross | $ 614,468 | 670,011 | |
Unamortized discount and other debt issuance costs | (34,631) | (47,839) | |
Total debt, net | $ 579,837 | $ 622,172 | |
Debt instrument, stated percentage | 7.78% | ||
Term Loans | |||
Long-term debt | |||
Authorized debt repurchase | $ 62,000 | ||
Term A Loans | |||
Long-term debt | |||
Authorized debt repurchase | 45,800 | ||
Term B Loans | |||
Long-term debt | |||
Authorized debt repurchase | $ 16,200 |
Long-Term Debt - Due (Details)
Long-Term Debt - Due (Details) $ in Thousands | Jun. 30, 2019USD ($) |
Debt maturities | |
2020 | $ 66,845 |
2021 | 165,778 |
2022 | 39,345 |
2023 | 496,433 |
Total | $ 768,401 |
Legal, Regulatory Matters and_2
Legal, Regulatory Matters and Contingencies (Details) $ in Thousands | Jun. 26, 2019USD ($) | May 22, 2019USD ($) | May 10, 2019companyemployee | Jan. 22, 2018itemproduct | Jun. 30, 2019USD ($)product | May 31, 2019USD ($) | Dec. 31, 2018USD ($)item | Oct. 31, 2018item | Nov. 30, 2016item | Dec. 31, 2016customer | Jun. 30, 2019Distributorlawsuittrancheproduct | May 05, 2019product | Jan. 16, 2019product | Jun. 18, 2018product | Jun. 07, 2018product | Oct. 31, 2017product | Oct. 06, 2017product |
State Attorneys General Inquiry into The Generic Pharmaceutical Industry | |||||||||||||||||
Legal, Regulatory Matters and Contingencies | |||||||||||||||||
Number of drugs | product | 40 | 13 | |||||||||||||||
Number of officers | employee | 1 | ||||||||||||||||
Number of manufacturers and distributors | company | 33 | ||||||||||||||||
State Attorneys General Inquiry into The Generic Pharmaceutical Industry | Doxycycline Monohydrate | |||||||||||||||||
Legal, Regulatory Matters and Contingencies | |||||||||||||||||
Number of drugs | product | 1 | ||||||||||||||||
Texas Medicaid Investigation | |||||||||||||||||
Legal, Regulatory Matters and Contingencies | |||||||||||||||||
Litigation settlement amount payable to other party | $ 8,000 | ||||||||||||||||
Payment to litigation settlement | $ 8,000 | ||||||||||||||||
Government Pricing | |||||||||||||||||
Legal, Regulatory Matters and Contingencies | |||||||||||||||||
Payment to litigation settlement | $ 9,400 | ||||||||||||||||
Compliance reviews, number of customers | customer | 1 | ||||||||||||||||
Estimate of possible loss | $ 9,400 | ||||||||||||||||
Damages sought, value | $ 8,100 | ||||||||||||||||
Private Antitrust and Consumer Protection Litigation | |||||||||||||||||
Legal, Regulatory Matters and Contingencies | |||||||||||||||||
Number of drugs | product | 30 | 18 | 18 | 30 | 15 | 14 | 6 | ||||||||||
Number of manufacturers and distributors | Distributor | 30 | ||||||||||||||||
Number of Tranches | tranche | 3 | ||||||||||||||||
Opt-out purchasers, number | item | 3 | ||||||||||||||||
Private Antitrust and Consumer Protection Litigation | Minimum | |||||||||||||||||
Legal, Regulatory Matters and Contingencies | |||||||||||||||||
Number of lawsuits | lawsuit | 100 | ||||||||||||||||
Shareholder Litigation | |||||||||||||||||
Legal, Regulatory Matters and Contingencies | |||||||||||||||||
Number of officers | item | 2 | 2 | |||||||||||||||
Litigation settlement amount payable to other party | $ 300,000 | $ 300,000 | |||||||||||||||
Number of Shareholders | item | 2 |
Commitments (Details)
Commitments (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Future minimum lease payments | |||
2020 | $ 1,898 | ||
2021 | 1,450 | ||
2022 | 1,123 | ||
2023 | 1,123 | ||
2024 | 1,123 | ||
Thereafter | 3,839 | ||
Total | 10,556 | ||
Rental and lease expense | $ 2,800 | $ 2,900 | $ 2,700 |
Commitments - Other Commitment
Commitments - Other Commitment (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Sep. 30, 2018USD ($) | Mar. 31, 2017USD ($)itememployee | Jun. 30, 2019USD ($) | |
Commitments | |||
Proceeds from sale of outstanding loan | $ 5,600 | ||
Revolving loans | |||
Commitments | |||
Amount of potential loans offered | $ 15,000 | ||
Expiration period | 7 years | ||
Interest rate | 2.00% | ||
Members in the board of the entity | item | 5 | ||
Lannett employees as members of the board of the entity | employee | 1 | ||
Percentage of outstanding loan | 50.00% | ||
Proceeds from sale of outstanding loan | $ 5,600 | ||
Current amount due from outstanding loan | $ 5,800 | ||
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 | $ 7,500 | ||
Ownership interest for conversion (in percentage) | 50.00% |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Loss - Foreign Currency Translation (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Accumulated Other Comprehensive Loss | ||
Beginning Balance | $ (515) | $ (222) |
Net (loss) on foreign currency translation (net of tax of $0 and $0) | (100) | (293) |
Other comprehensive (loss), net of tax | (100) | (293) |
Ending Balance | (615) | (515) |
Total Accumulated Other Comprehensive Loss | (615) | (515) |
Net (loss) on foreign currency translation, tax | 0 | 0 |
Reclassifications to net income, tax | $ 0 | $ 0 |
Earnings (Loss) Per Common Sh_3
Earnings (Loss) Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||||||
Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | 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, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Earnings (Loss) Per Common Share | |||||||||||||||
Net income (loss) attributable to Lannett Company, Inc. | $ (7,586) | $ 10,645 | $ 12,362 | $ (287,528) | $ (11,359) | $ 12,770 | $ 14,022 | $ 13,257 | $ 5,726 | $ 14,929 | $ 8,172 | $ (29,408) | $ (272,107) | $ 28,690 | $ (581) |
Basic weighted average common shares outstanding | 37,779,812 | 37,127,306 | 36,812,524 | ||||||||||||
Effect of potentially dilutive options and restricted stock awards | 1,035,208 | ||||||||||||||
Diluted weighted average common shares outstanding | 37,779,812 | 38,162,514 | 36,812,524 | ||||||||||||
Earnings (loss) per common share attributable to Lannett Company, Inc.: | |||||||||||||||
Basic (in dollars per share) | $ (0.20) | $ 0.28 | $ 0.33 | $ (7.65) | $ (0.30) | $ 0.34 | $ 0.38 | $ 0.36 | $ 0.16 | $ 0.41 | $ 0.22 | $ (0.80) | $ (7.20) | $ 0.77 | $ (0.02) |
Diluted (in dollars per share) | $ (0.20) | $ 0.27 | $ 0.32 | $ (7.65) | $ (0.30) | $ 0.33 | $ 0.37 | $ 0.35 | $ 0.15 | $ 0.40 | $ 0.22 | $ (0.80) | $ (7.20) | $ 0.75 | $ (0.02) |
Anti-dilutive shares excluded in the computation of diluted earnings per share | 1,900,000 | 3,000,000 | 4,300,000 |
Warrant (Details)
Warrant (Details) - KUPI - Warrant issued to UCB $ / shares in Units, shares in Millions, $ in Millions | Nov. 25, 2015USD ($)$ / sharesshares |
Class of Warrant or Right | |
Number of common stock to be purchased under the warrant | shares | 2.5 |
Warrants expiration period | 3 years |
Warrants exercise price | $ / shares | $ 48.90 |
Issuance of a warrant to finance KUPI acquisition | $ | $ 29.9 |
Share-based Compensation - Empl
Share-based Compensation - Employee Compensation Plans (Details) shares in Millions, $ in Millions | Jan. 23, 2019shares | Jun. 30, 2019USD ($)ShareBasedCompensationPlanshares |
Stock-based Compensation | ||
Number of share-based employee compensation plans | ShareBasedCompensationPlan | 2 | |
Aggregate number of shares authorized for issuance | 4.5 | |
Increase in aggregate number of shares authorized for issuance | 2 | |
Shares for future issuances | 2.8 | |
Other disclosures | ||
Share-based compensation awards vesting extended term period | 4 years | |
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 | $ | $ 10.2 | |
Weighted average period during which the cost is expected to be recognized | 1 year 9 months 18 days |
Share-based Compensation - Opti
Share-based Compensation - Options Valuation (Details) - Stock options - $ / shares | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Assumptions used to estimate fair values | |||
Risk-free interest rate (as a percent) | 2.90% | 2.10% | 1.10% |
Expected volatility (as a percent) | 58.40% | 57.60% | 55.60% |
Forfeiture rate (as a percent) | 6.50% | 6.50% | 6.50% |
Expected term (in years) | 5 years 3 months 18 days | 5 years 4 months 24 days | 5 years 2 months 12 days |
Weighted average fair value (in dollars per share) | $ 6.52 | $ 11.25 | $ 15.33 |
Share-based Compensation - Op_2
Share-based Compensation - Options Rollforward (Details) - Stock options - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Awards | ||||
Outstanding at the beginning of the period (in shares) | 1,057 | 1,475 | 1,730 | |
Granted (in shares) | 73 | 50 | 11 | |
Exercised (in shares) | (94) | (445) | (234) | |
Forfeited, expired or repurchased (in shares) | (464) | (23) | (32) | |
Outstanding at the end of the period (in shares) | 572 | 1,057 | 1,475 | 1,730 |
Vested and expected to vest, Awards (in shares) | 566 | |||
Exercisable at the end of the period (in shares) | 469 | |||
Weighted-Average Exercise Price | ||||
Outstanding at the beginning of the period (in dollars per share) | $ 22.46 | $ 18.02 | $ 16.77 | |
Granted (in dollars per share) | 12.20 | 21.43 | 31.30 | |
Exercised (in dollars per share) | 4.06 | 7.23 | 7.38 | |
Forfeited, expired or repurchased (in dollars per share) | 30.61 | 30.83 | 33.04 | |
Outstanding at the end of the period (in dollars per share) | 17.56 | $ 22.46 | $ 18.02 | $ 16.77 |
Vested and expected to vest, Weighted-Average Exercise Price (in dollars per share) | 17.59 | |||
Exercisable at the end of the period (in dollars per share) | $ 18.09 | |||
Aggregate Intrinsic Value | ||||
Outstanding at the beginning of the period (in dollars) | $ 2,584 | $ 12,212 | $ 19,524 | |
Exercised (in dollars) | 311 | 4,243 | 4,849 | |
Outstanding at the end of the period (in dollars) | 273 | $ 2,584 | $ 12,212 | $ 19,524 |
Vested and expected to vest, Aggregate Intrinsic Value | 273 | |||
Exercisable at the end of the period (in dollars) | $ 273 | |||
Weighted Average Remaining Contractual Life (yrs.) | ||||
Outstanding at the end of the period (in years) | 5 years | 5 years 4 months 24 days | 5 years 8 months 12 days | 6 years 3 months 18 days |
Vested and expected to vest, Weighted Average Remaining Contractual Life | 5 years | |||
Exercisable at the end of the period (in years) | 4 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, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Stock-based Compensation | |||
Annual forfeiture rate used to calculate compensation expense (as a percent) | 6.50% | 5.70% | 6.50% |
Awards | |||
Non-vested at the beginning of the period (in shares) | 704 | 334 | 167 |
Granted (in shares) | 1,176 | 641 | 298 |
Vested (in shares) | (434) | (191) | (86) |
Forfeited (in shares) | (158) | (80) | (45) |
Non-vested at the end of the period (in shares) | 1,288 | 704 | 334 |
Weighted Average Grant-date Fair Value | |||
Non-vested at the beginning of the period (in dollars per share) | $ 20.06 | $ 30.71 | $ 48.22 |
Granted (in dollars per share) | 9.90 | 18.01 | 24.73 |
Vested (in dollars per share) | 19.75 | 31.30 | 42.60 |
Forfeited (in dollars per share) | 14 | 20.95 | 32.90 |
Non-vested at the end of the period (in dollars per share) | $ 11.63 | $ 20.06 | $ 30.71 |
Aggregate Intrinsic Value | |||
Vested | $ 4,107 | $ 4,104 | $ 2,564 |
Share-based Compensation - Perf
Share-based Compensation - Performance-Based Shares (Details) - Performance-Based Shares - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Performance-Based Shares | ||
Share-based compensation awards vesting period | 3 years | |
Awards | ||
Non-vested at the beginning of the period (in shares) | 20 | |
Granted (in shares) | 52 | 47 |
Vested (in shares) | (27) | |
Non-vested at the end of the period (in shares) | 72 | 20 |
Weighted Average Grant-date Fair Value | ||
Non-vested at the beginning of the period (in dollars per share) | $ 25.58 | |
Granted (in dollars per share) | 17.69 | $ 25.58 |
Vested (in dollars per share) | 25.58 | |
Non-vested at the end of the period (in dollars per share) | $ 19.92 | $ 25.58 |
Aggregate Intrinsic Value | ||
Vested | $ 574 |
Share-based Compensation - Em_2
Share-based Compensation - Employee Stock Purchase Plan (Details) - shares shares in Thousands | 12 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | 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) | 185 | 66 | 57 | |
Cumulative shares issued (in shares) | 792 |
Share-based Compensation - Cost
Share-based Compensation - Cost (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Share-based compensation costs | |||
Share based compensation | $ 9,027 | $ 9,896 | $ 7,719 |
Tax benefit at statutory rate | 2,031 | 2,919 | 2,818 |
Selling, general and administrative | |||
Share-based compensation costs | |||
Share based compensation | 5,715 | 7,570 | 5,855 |
Research and development | |||
Share-based compensation costs | |||
Share based compensation | 750 | 680 | 661 |
Cost of sales | |||
Share-based compensation costs | |||
Share based compensation | $ 2,562 | $ 1,646 | $ 1,203 |
Employee Benefit Plan (Details)
Employee Benefit Plan (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
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 | $ 2.3 | $ 2.1 |
Income Taxes - Federal State an
Income Taxes - Federal State and Local Income Tax Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||||||||||
Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | 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, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Current Income Tax Expense (Benefit) | ||||||||||||||||
Federal | $ 13,185 | $ (9,439) | $ 764 | |||||||||||||
State and Local | (81) | 1,152 | 638 | |||||||||||||
Total Current Income Tax Expense (Benefit) | 13,104 | (8,287) | 1,402 | |||||||||||||
Deferred Income Tax Expense (Benefit) | ||||||||||||||||
Federal | (85,022) | 31,263 | (2,210) | |||||||||||||
State and Local | (2,220) | (573) | 1,905 | |||||||||||||
Total Deferred Income Tax Expense (Benefit) | (87,242) | 30,690 | (305) | |||||||||||||
Total Income Tax Expense (Benefit) | $ (2,544) | $ 1,359 | $ 2,647 | $ (75,600) | $ (883) | $ (2,275) | $ 18,138 | $ 7,423 | $ 3,100 | $ 7,337 | $ 3,542 | $ (12,882) | $ (74,138) | $ 22,403 | $ 1,097 | |
Reconciliation of the company's federal statutory tax rate to its effective rate | ||||||||||||||||
Federal income tax at statutory rate (as a percent) | 21.00% | 21.00% | 28.10% | 35.00% | ||||||||||||
State and local income tax, net (as a percent) | 0.50% | 0.60% | 293.60% | |||||||||||||
Nondeductible expenses (as a percent) | (0.10%) | 0.20% | 45.40% | |||||||||||||
Foreign rate differential (as a percent) | (0.40%) | 0.40% | 49.90% | |||||||||||||
Income tax credits (as a percent) | 0.50% | (1.40%) | (160.90%) | |||||||||||||
Domestic production activity deduction (as a percent) | (1.50%) | |||||||||||||||
Unrecognized tax benefits | 0.10% | (6.70%) | ||||||||||||||
Change in tax laws (as a percent) | 25.60% | |||||||||||||||
Excess tax benefits on share-based compensation (as a percent) | (0.30%) | (0.30%) | (134.30%) | |||||||||||||
Other (as a percent) | 0.10% | (1.20%) | 70.80% | |||||||||||||
Effective income tax rate (as a percent) | 21.40% | 43.80% | 199.50% | |||||||||||||
Deferred tax assets: | ||||||||||||||||
Accrued expenses | 1,085 | $ 1,085 | $ 1,085 | |||||||||||||
Share-based compensation expense | 4,134 | 4,158 | 4,158 | $ 4,134 | 4,158 | |||||||||||
Reserve for returns | 12,014 | 9,342 | 9,342 | 12,014 | 9,342 | |||||||||||
Reserves for accounts receivable and inventory | 8,208 | 5,425 | 5,425 | 8,208 | 5,425 | |||||||||||
Intangible impairment | 1,337 | 1,337 | 1,337 | |||||||||||||
Federal net operating loss | 324 | 402 | 402 | 324 | 402 | |||||||||||
State net operating loss | 6,479 | 4,495 | 4,495 | 6,479 | 4,495 | |||||||||||
Impairment on Cody note receivable | 1,161 | 1,175 | 1,175 | 1,161 | 1,175 | |||||||||||
Accumulated amortization on intangible assets | 76,401 | 10,868 | 10,868 | 76,401 | 10,868 | |||||||||||
Foreign net operating loss | 1,792 | 880 | 880 | 1,792 | 880 | |||||||||||
Interest Carryforward | 11,008 | 11,008 | ||||||||||||||
Other | 2,506 | 404 | 404 | 2,506 | 404 | |||||||||||
Total deferred tax asset | 124,027 | 39,571 | 39,571 | 124,027 | 39,571 | |||||||||||
Valuation allowance | (13,549) | (8,120) | (8,120) | (13,549) | (8,120) | |||||||||||
Total deferred tax asset less valuation allowance | 110,478 | 31,451 | 31,451 | 110,478 | 31,451 | |||||||||||
Deferred tax liabilities: | ||||||||||||||||
Prepaid expenses | 182 | 118 | 118 | 182 | 118 | |||||||||||
Property, plant and equipment | 991 | 9,231 | 9,231 | 991 | 9,231 | |||||||||||
Other | 39 | 39 | 39 | |||||||||||||
Total deferred tax liability | 1,173 | 9,388 | 9,388 | 1,173 | 9,388 | |||||||||||
Net deferred tax asset | $ 109,305 | $ 22,063 | $ 22,063 | $ 109,305 | $ 22,063 |
Income Taxes - Unrecognized Ben
Income Taxes - Unrecognized Benefits (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Income Taxes | |||
Balance at the beginning of the period | $ 2,537 | $ 5,942 | |
Additions for tax positions of the current year | 244 | 294 | |
Additions for tax positions of prior years | 36 | 700 | |
Lapse of statute of limitations | (618) | (4,399) | |
Balance at the end of the period | 2,199 | 2,537 | $ 5,942 |
Unrecognized tax benefits that if recognized, would impact the tax expense and effective tax rate | 2,100 | 2,300 | 4,200 |
Unrecognized tax benefits cumulative interest and penalties recorded | $ 0 | $ 0 | $ 0 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Related Party Transactions | |||
Expenses incurred for online medical benefit services | $ 400 | $ 300 | |
Accounts payable to related party | 0 | ||
Board Member | Auburn | |||
Related Party Transactions | |||
Sales to related party | 3,800 | 3,900 | $ 3,700 |
Accounts receivable related party | 1,200 | 600 | |
Board Member | KeySource | |||
Related Party Transactions | |||
Sales to related party | 2,400 | 1,900 | |
Accounts receivable related party | $ 700 | $ 500 |
Material Contracts with Suppl_2
Material Contracts with Suppliers (Details) - JSP - item | Aug. 19, 2013 | Aug. 19, 2013 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 |
Material Contracts with Suppliers | |||||
Number of products under the exclusive distribution agreement | 3 | ||||
Extension term of the agreement | 5 years | ||||
Inventory purchases | Suppliers | |||||
Material Contracts with Suppliers | |||||
Purchases of finished goods inventory from JSP as a percentage of the company's inventory purchases | 29.00% | 37.00% | 36.00% |
Assets Held for Sale - Summary
Assets Held for Sale - Summary of Financial Results (Details) - Disposal group held for sale - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||
Jul. 31, 2018 | Jun. 30, 2019 | Sep. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Assets Held for Sale | |||||
Impairment of long-lived assets | $ 2,900 | $ 29,900 | $ 29,900 | ||
Property, plant and equipment | $ 6,700 | 6,700 | |||
Proceeds from sale of equipment | $ 3,000 | ||||
Net sales | 3,139 | $ 2,696 | |||
Pretax loss attributable to Cody API business | $ (51,509) | $ (42,112) |
Assets Held for Sale - Townsend
Assets Held for Sale - Townsend Road Facility (Details) $ in Millions | Mar. 31, 2019USD ($) |
Disposal group held for sale | |
Assets Held for Sale | |
Agreement cost ,assets held for sale | $ 4.4 |
Subsequent Events (Details)
Subsequent Events (Details) $ in Millions | 1 Months Ended |
Jul. 31, 2019USD ($) | |
Agreement with Cediprof, Inc. | Subsequent Events | |
Subsequent Events | |
Up-front payment | $ 20 |
Quarterly Financial Informati_3
Quarterly Financial Information (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||||||
Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | 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, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Quarterly Financial Information (Unaudited) | |||||||||||||||
Net sales | $ 133,841 | $ 172,794 | $ 193,718 | $ 155,054 | $ 170,911 | $ 174,386 | $ 184,305 | $ 154,961 | $ 139,118 | $ 165,720 | $ 170,944 | $ 161,559 | $ 655,407 | $ 684,563 | $ 637,341 |
Settlement agreement | (4,000) | (4,000) | |||||||||||||
Total net sales | 139,118 | 161,720 | 170,944 | 161,559 | 655,407 | 684,563 | 633,341 | ||||||||
Cost of sales | 84,499 | 107,477 | 123,908 | 95,913 | 104,383 | 107,329 | 96,855 | 87,290 | 80,240 | 89,290 | 82,891 | 79,707 | 379,601 | 363,729 | 300,030 |
Gross profit | 49,342 | 65,317 | 69,810 | 59,141 | 66,528 | 67,057 | 87,450 | 67,671 | 58,878 | 72,430 | 88,053 | 81,852 | 243,610 | 288,706 | 301,213 |
Operating expenses | 39,940 | 31,939 | 33,133 | 400,919 | 57,926 | 33,777 | 40,315 | 26,992 | 30,069 | 28,793 | 53,747 | 102,158 | 505,931 | 159,010 | 214,767 |
Operating income (loss) | 9,402 | 33,378 | 36,677 | (341,778) | 8,602 | 33,280 | 47,135 | 40,679 | 28,809 | 43,637 | 34,306 | (20,306) | (262,321) | 129,696 | 86,446 |
Other loss | (19,532) | (21,374) | (21,668) | (21,350) | (20,844) | (22,785) | (14,975) | (19,999) | (19,983) | (21,371) | (22,578) | (21,964) | (2,018) | 2,278 | (244) |
Income tax expense (benefit) | (2,544) | 1,359 | 2,647 | (75,600) | (883) | (2,275) | 18,138 | 7,423 | 3,100 | 7,337 | 3,542 | (12,882) | (74,138) | 22,403 | 1,097 |
Less: Net income attributable to noncontrolling interest | 14 | 20 | 34 | ||||||||||||
Net income (loss) attributable to Lannett Company, Inc. | $ (7,586) | $ 10,645 | $ 12,362 | $ (287,528) | $ (11,359) | $ 12,770 | $ 14,022 | $ 13,257 | $ 5,726 | $ 14,929 | $ 8,172 | $ (29,408) | $ (272,107) | $ 28,690 | $ (581) |
Earnings (loss) per common share | |||||||||||||||
Basic (in dollars per share) | $ (0.20) | $ 0.28 | $ 0.33 | $ (7.65) | $ (0.30) | $ 0.34 | $ 0.38 | $ 0.36 | $ 0.16 | $ 0.41 | $ 0.22 | $ (0.80) | $ (7.20) | $ 0.77 | $ (0.02) |
Diluted (in dollars per share) | $ (0.20) | $ 0.27 | $ 0.32 | $ (7.65) | $ (0.30) | $ 0.33 | $ 0.37 | $ 0.35 | $ 0.15 | $ 0.40 | $ 0.22 | $ (0.80) | $ (7.20) | $ 0.75 | $ (0.02) |
Quarterly Financial Informati_4
Quarterly Financial Information (Unaudited) - Other Disclosures (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||
Sep. 30, 2018 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2019 | Jun. 30, 2017 | |
Other disclosures | |||||||
Impairment of goodwill | $ 339,600 | $ 339,566 | |||||
Settlement agreement | $ 4,000 | $ 4,000 | |||||
Impairment charge related to intangible assets | $ 65,100 | 65,100 | |||||
Additional rebates to state medicaid programs | $ 5,700 | $ 4,500 | |||||
In-process research and development | |||||||
Other disclosures | |||||||
Impairment charge related to intangible assets | $ 23,000 | $ 23,000 |
Schedule II - Valuation and Q_2
Schedule II - Valuation and Qualifying Accounts (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Allowance for Doubtful Accounts | |||
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | |||
Valuation Allowances and Reserves, Balance, Beginning Balance | $ 1,308 | $ 796 | $ 610 |
Charged to (Reduction of) Expense | 869 | 1,560 | 186 |
Deductions | (955) | (1,048) | |
Valuation Allowances and Reserves, Balance, Ending Balance | 1,222 | 1,308 | 796 |
Valuation Allowance of Deferred Tax Assets | |||
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | |||
Valuation Allowances and Reserves, Balance, Beginning Balance | 8,120 | 6,391 | 3,927 |
Charged to (Reduction of) Expense | 5,429 | 1,729 | 2,464 |
Valuation Allowances and Reserves, Balance, Ending Balance | $ 13,549 | $ 8,120 | $ 6,391 |