PR Newswire | Feb 3, 2021 04:16PM EST

Expectations

02/03 15:15 CST

Lannett Announces Fiscal 2021 Second-Quarter Financial Results In Line Or Above ExpectationsQ2 Financial and Business Highlights:- Net Sales of $134 Million- Adjusted EBITDA of $24 Million- Paid Off, In Full, Term A Loans- Established New $30 Million Revolving Credit Facility PHILADELPHIA, Feb. 3, 2021

PHILADELPHIA, Feb. 3, 2021 /PRNewswire/ -- Lannett Company, Inc. (NYSE: LCI) today reported financial results for its fiscal 2021 second quarter ended December 31, 2020.

"For the fiscal 2021 second quarter, net sales exceeded our expectations, and adjusted earnings per share and adjusted EBITDA were in line with our estimates," said Tim Crew, chief executive officer of Lannett. "We accomplished these results even though we continued to see new competitive approvals on certain key products and experienced certain out of the ordinary items, which negatively impacted our gross margin. Of course, there has also been an overall decline of total prescriptions related to the ongoing pandemic, which we expect will reverse in time. Further, our potentially durable, high-value pipeline assets in our portfolio continue to progress. So, while these immediate competitive pressures, along with the discontinuation of certain product lines noted below, have caused us to revise down our full-year guidance, we remain optimistic for our mid- and longer term growth prospects.

"Turning to our balance sheet, in November we used a portion of our existing cash to pay down, in full, our Term A Loans, which will lower our annual interest expense and principal payments, going forward. In December, we established a new $30 million revolving credit facility, further enhancing our financial flexibility.

"At quarter end, as previously disclosed, we made the decision to rationalize our product offering by discontinuing certain lower margin product lines. As a result, when combined with declines in key products, our expectation for the second half of fiscal 2021 compared with the first half is for our net sales to decrease but gross margin percentage to remain approximately the same."

For the fiscal 2021 second quarter on a GAAP basis, net sales were $133.9 million compared with $136.1 million for the second quarter of fiscal 2020. Gross profit of $0.8 million, or 1% of net sales, included a $16.6 million inventory write down associated with the discontinued product lines and $5.0 million to fully expense the cost to renew a product distribution contract. This compares with gross profit for the prior-year second quarter of $41.3 million, or 30% of net sales. During the fiscal 2021 second quarter, the company recorded non-cash, asset impairment charges of $198.0 million, primarily related to the write down of intangible assets associated with the acquisition of Kremers Urban Pharmaceuticals. Net loss was $171.9 million, or $4.36 per share, compared to net income of $5.1 million, or $0.13 per diluted share, for the second quarter of fiscal 2020.

For the fiscal 2021 second quarter reported on a Non-GAAP basis, net sales were $133.9 million compared with $136.1 million for the second quarter of fiscal 2020. Adjusted gross profit was $31.1 million, or 23% of net sales, compared with $50.2 million, or 37% of net sales, for the prior-year second quarter. Adjusted interest expense decreased to $10.5 million compared with $13.1 million for the second quarter of fiscal 2020. Adjusted net income was $3.2 million, or $0.08 per diluted share, compared with $11.7 million, or $0.27 per diluted share, for the fiscal 2020 second quarter. Adjusted EBITDA for the fiscal 2021 second quarter was $24.0 million.

Guidance for Fiscal 2021Based on its current outlook, the company revised guidance for fiscal year 2021, as follows:

GAAP Adjusted**

$480 million to $500 million, $480 million to $500 million, Net sales down from $520 million to $545 down from $520 million to $545 million million

Gross margin Approximately 14% to 16%, down Approximately 24% to 26%, down % from approximately 23% to 25% from approximately 29% to 31%

$26 million to $28 million, $26 million to $28 million, R&D expense down from $29 million to $32 down from $29 million to $32 million million

$58 million to $60 million, $52 million to $54 million, SG&A expense down from $59 million to $62 down from $55 million to $58 million million

Restructuring$4 million $-- expense

Asset impairment $198 million $-- charges

Interest and $53 million to $54 million, $41 million to $42 million, other unchanged unchanged

Effective taxApproximately 27% to 28% Approximately 26% to 27% rate

Adjusted $75 million to $85 million, EBITDA* N/A down from $100 million to $110 million

Capital $10 million to $15 million, $10 million to $15 million, expenditures down from $15 million to $20 down from $15 million to $20 million million

**A reconciliation of Adjusted amounts to most directly comparable GAAP amountscan be found in the attached financial tables.

Conference Call Information and Forward-Looking StatementsLater today, the company will host a conference call at 4:30 p.m. ET to review its results of operations for its fiscal 2021 second quarter ended December 31, 2020. The conference call will be available to interested parties by dialing 800-447-0521 from the U.S. or Canada, or 847-413-3238 from international locations, passcode 50088413. The call will be broadcast via the Internet at www.lannett.com. Listeners are encouraged to visit the website at least 10 minutes prior to the start of the scheduled presentation to register, download and install any necessary audio software. A playback of the call will be archived and accessible on the same website for at least three months.

Discussion during the conference call may include forward-looking statements regarding such topics as, but not limited to, the company's financial status and performance, regulatory and operational developments, and any comments the company may make about its future plans or prospects in response to questions from participants on the conference call.

Use of Non-GAAP Financial MeasuresThis news release contains references to Non-GAAP financial measures, including Adjusted EBITDA, which are financial measures that are not prepared in conformity with United States generally accepted accounting principles (U.S. GAAP). Management uses these measures internally for evaluating its operating performance. The Company's management believes that the presentation of Non-GAAP financial measures provides useful supplementary information regarding operational performance, because it enhances an investor's overall understanding of the financial results for the Company's core business. Additionally, it provides a basis for the comparison of the financial results for the Company's core business between current, past and future periods. The Company also believes that including Adjusted EBITDA is appropriate to provide additional information to investors. Non-GAAP financial measures should be considered only as a supplement to, and not as a substitute for or as a superior measure to, financial measures prepared in accordance with U.S. GAAP.

Detailed reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included with this release.

Non-GAAP financial measures exclude, among others, the effects of (1) amortization of purchased intangibles and other purchase accounting entries, (2) restructuring expenses, (3) non-cash interest expense, as well as (4) certain other items considered unusual or non-recurring in nature.

*Adjusted EBITDA excludes the same adjustments discussed above, as well as additional adjustments permitted under the company's existing Credit Agreement.

About Lannett Company, Inc.:Lannett Company, founded in 1942, develops, manufactures, packages, markets and distributes generic pharmaceutical products for a wide range of medical indications - see financial schedule below for net sales by medical indication. For more information, visit the company's website at www.lannett.com.

This news release contains certain statements of a forward-looking nature relating to future events or future business performance. Any such statements, including, but not limited to, successfully commercializing recently introduced products and launching and successfully commercializing additional products in fiscal 2021, achieving cost savings from the recently announced restructuring and cost savings plan, the potential material impact of COVID-19 on future financial results, and achieving the financial metrics stated in the company's revised guidance for fiscal 2021, whether expressed or implied, are subject to risks and uncertainties which can cause actual results to differ materially from those currently anticipated due to a number of factors which include, but are not limited to, the difficulty in predicting the timing or outcome of FDA or other regulatory approvals or actions, the ability to successfully commercialize products upon approval, including acquired products, and Lannett's estimated or anticipated future financial results, future inventory levels, future competition or pricing, future levels of operating expenses, product development efforts or performance, and other risk factors discussed in the company's Form 10-K and other documents filed with the Securities and Exchange Commission from time to time. These forward-looking statements represent the company's judgment as of the date of this news release. The company disclaims any intent or obligation to update these forward-looking statements.

FINANCIAL SCHEDULES FOLLOW

LANNETT COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

December 31, 2020 June 30, 2020

ASSETS

Current assets:

Cash and cash equivalents $ 34,224 $ 144,329

Accounts receivable, net 160,131 125,688

Inventories 122,204 142,867

Income taxes receivable 64,570 14,419

Assets held for sale 2,678 2,678

Other current assets 23,993 13,227

Total current assets 407,800 443,208

Property, plant and 173,157 179,518equipment, net

Intangible assets, net 163,488 374,735

Operating lease right-of-use 8,650 9,343asset

Deferred tax assets 132,409 117,890

Other assets 14,767 11,861

TOTAL ASSETS $ 900,271 $ 1,136,555

LIABILITIES

Current liabilities:

Accounts payable $ 42,670 $ 32,535

Accrued expenses 4,092 14,962

Accrued payroll and 8,946 16,304payroll-related expenses

Rebates payable 43,791 38,175

Royalties payable 20,782 20,863

Restructuring liability 161 27

Current operating lease 2,115 1,097liabilities

Short-term borrowings andcurrent portion of long-term 39,345 88,189debt

Other current liabilities 1,770 2,713

Total current liabilities 163,672 214,865

Long-term debt, net 578,483 592,940

Long-term operating lease 9,233 9,844liabilities

Other liabilities 19,625 16,010

TOTAL LIABILITIES 771,013 833,659

STOCKHOLDERS' EQUITY

Common stock($0.001 parvalue, 100,000,000 sharesauthorized; 40,832,843 and39,963,127 shares issued;

39,504,777 and 38,798,787shares outstanding at 41 40December 31, 2020 and June30, 2020, respectively)

Additional paid-in capital 326,939 321,164

Accumulated deficit (179,738) (1,291)

Accumulated other (595) (627)comprehensive loss

Treasury stock(1,328,066 and1,164,340 shares at December (17,389) (16,390)31, 2020 and June 30, 2020,respectively)

Total stockholders' equity 129,258 302,896

TOTAL LIABILITIES AND $ 900,271 $ 1,136,555STOCKHOLDERS' EQUITY

LANNETT COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands, except share and per share data)

Three months ended Six months ended

December 31, December 31,

2020 2019 2020 2019

Net sales $ 133,920 $ 136,110 $ 260,399 $ 263,452

Cost of sales 124,488 86,663 216,675 164,319

Amortization 8,657 8,153 17,246 15,181of intangibles

Gross profit 775 41,294 26,478 83,952

Operatingexpenses:

Research anddevelopment 5,644 6,906 12,183 15,846expenses

Selling,general and 13,730 17,421 28,866 38,729administrativeexpenses

Restructuring - 192 4,043 1,580expenses

Assetimpairment 198,000 - 198,000 1,618charges

Totaloperating 217,374 24,519 243,092 57,773expenses

Operating (216,599) 16,775 (216,614) 26,179income (loss)

Other income(loss):

Loss onextinguishment - - - (2,145)of debt

Investment 43 430 88 1,159income

Interest (13,496) (16,694) (27,982) (35,986)expense

Other 28 (735) 5 199

Total other (13,425) (16,999) (27,889) (36,773)loss

Loss before (230,024) (224) (244,503) (10,594)income tax

Income tax (58,076) (5,308) (66,056) (3,521)benefit

Net income $ (171,948) $ 5,084 $ (178,447) $ (7,073)(loss)

Earnings(loss) percommon share:

Basic $ (4.36) $ 0.13 $ (4.55) $ (0.18)

Diluted $ (4.36) $ 0.13 $ (4.55) $ (0.18)(1)

Weightedaverage commonsharesoutstanding:

Basic 39,443,441 38,605,052 39,257,211 38,457,159

Diluted 39,443,441 40,557,503 39,257,211 38,457,159(1)

(1) Effective with the 4.5% Senior Convertible Note issued on September 27,2019, the diluted earnings per share was calculated based on the "if-converted"method.

LANNETT COMPANY, INC.

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)

(In thousands, except percentages, share and per share data)

Three months ended December 31, 2020

Income Diluted Amortization Gross Gross R&D SG&A Asset impairment Operating (loss) Income Net income earnings Net sales Cost of sales of intangibles Profit Margin expenses expenses charges income Other loss before tax benefit (loss) (loss) per % (loss) income tax share (j)

GAAP Reported $ 133,920 $ 124,488 $ 8,657 $ 775 1% $ 5,644 $ 13,730 $ 198,000 $ (216,599) $ (13,425) $ (230,024) $ (58,076) $ (171,948) $ (4.36)

Adjustments:

Amortization of intangibles (a) - - (8,657) 8,657 - - - 8,657 - 8,657 - 8,657

Cody API business (b) - (84) - 84 (3) (28) - 115 - 115 - 115

Depreciation on capitalized software costs (c) - - - - - (1,051) - 1,051 - 1,051 - 1,051

Asset impairment charges (d) - - - - - - (198,000) 198,000 - 198,000 - 198,000

Write-downs for excess and obsolete inventory (e) - (16,623) - 16,623 - - - 16,623 - 16,623 - 16,623

Distribution agreement renewal costs (f) - (4,966) - 4,966 - - - 4,966 - 4,966 - 4,966

Non-cash interest (g) - - - - - - - - 2,973 2,973 - 2,973

Other (h) - - - - - (553) - 553 - 553 - 553

Tax adjustments (i) - - - - - - - - - - 57,784 (57,784)

Non-GAAP Adjusted $ 133,920 $ 102,815 $ - $ 31,105 23% $ 5,641 $ 12,098 $ - $ 13,366 $ (10,452) $ 2,914 $ (292) $ 3,206 $ 0.08

(a) To exclude amortization of purchased intangible assets primarily related to the acquisition of KUPI

(b) To exclude the operating results of the ceased Cody API business

(c) To exclude depreciation on previously capitalized software integration costs associated with the KUPI acquisition

(d) To exclude asset impairment charges primarily related to the KUPI product rights intangible assets

(e) To exclude write-downs for excess and obsolete inventory related to the discontinuance of certain product lines

(f) To exclude the consideration recorded to renew the Company's distribution agreement with Recro Gainesville LLC

(g) To exclude non-cash interest expense associated with debt issuance costs

(h) To primarily exclude the reimbursement of legal costs associated with a distribution agreement

(i) To exclude the tax effect of the pre-tax adjustments included above at applicable tax rates

The weighted average share number for the three months ended December 31, 2020(j) is 39,443,441 for GAAP and 41,074,706 for the non-GAAP earnings (loss) per share calculations

LANNETT COMPANY, INC.

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)

(In thousands, except percentages, share and per share data)

Three months ended December 31, 2019

Amortization Gross Gross R&D SG&A Restructuring Operating Other income Income (loss) Income tax Net Diluted Net sales Cost of sales of intangibles Profit Margin expense expense expenses income (loss) before expense income earnings % income tax (benefit) per share (i)

GAAP Reported $ 136,110 $ 86,663 $ 8,153 $ 41,294 30% $ 6,906 $ 17,421 $ 192 $ 16,775 $ (16,999) $ (224) $ (5,308) $ 5,084 $ 0.13

Adjustments:

Amortization of intangibles (a) - - (8,153) 8,153 - - - 8,153 - 8,153 - 8,153

Cody API business (b) - (206) - 206 (85) (161) - 452 - 452 - 452

Depreciation on capitalized software costs (c) - - - - - (1,058) - 1,058 - 1,058 - 1,058

Decommissioning of Philadelphia sites (d) - (303) - 303 - - - 303 - 303 - 303

Restructuring expenses (e) - - - - - - (192) 192 - 192 - 192

Non-cash interest (f) - - - - - - - - 3,563 3,563 - 3,563

Other (g) - (209) - 209 - (135) - 344 630 974 - 974

Tax adjustments (h) - - - - - - - - - - 8,111 (8,111)

Non-GAAP Adjusted $ 136,110 $ 85,945 $ - $ 50,165 37% $ 6,821 $ 16,067 $ - $ 27,277 $ (12,806) $ 14,471 $ 2,803 $ 11,668 $ 0.27

(a) To exclude amortization of purchased intangible assets primarily related to the acquisitions of KUPI and Silarx Pharmaceuticals, Inc.

(b) To exclude the operating results of the ceased Cody API business

(c) To exclude depreciation on previously capitalized software integration costs associated with the KUPI acquisition

(d) To exclude the costs related to the decommissioning and shutdown of the Philadelphia manufacturing and distribution sites

(e) To exclude expenses associated with the Cody API Restructuring Plan

(f) To exclude non-cash interest expense associated with debt issuance costs

(g) To primarily exclude a settlement related to a shareholder derivative lawsuit against certain current and former officers and directors of the Company

(h) To exclude the tax effect of the pre-tax adjustments included above at applicable tax rates

The weighted average share number for the three months ended December 31, 2019 is 40,557,503 for GAAP and 46,198,445 for the non-GAAP earnings per share(i) calculations. Effective with the 4.5% Senior Convertible Note issued on September 27, 2019, the diluted earnings per share was calculated based on the "if-converted" method.

LANNETT COMPANY, INC.

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)

(In thousands, except percentages, share and per share data)

Six months ended December 31, 2020

Gross Asset Operating Income Income tax Net Diluted Net sales Cost of sales Amortization Gross Margin R&D SG&A Restructuring impairment income Other loss (loss) before expense income earnings of intangibles Profit % expenses expenses expenses charges (loss) income tax (benefit) (loss) (loss) per share (k)

GAAP Reported $ 260,399 $ 216,675 $ 17,246 $ 26,478 10% $ 12,183 $ 28,866 $ 4,043 $ 198,000 $ (216,614) $ (27,889) $ (244,503) $ (66,056) $ (178,447) $ (4.55)

Adjustments:

Amortization of intangibles (a) - - (17,246) 17,246 - - - - 17,246 - 17,246 - 17,246

Cody API business (b) - (158) - 158 (5) (455) - - 618 - 618 - 618

Depreciation on capitalized software costs (c) - - - - - (2,102) - - 2,102 - 2,102 - 2,102

Restructuring expenses (d) - - - - - - (4,043) - 4,043 - 4,043 - 4,043

Asset impairment charges (e) - - - - - - - (198,000) 198,000 - 198,000 - 198,000

Write-downs for excess and obsolete inventory (f) - (16,623) - 16,623 - - - - 16,623 - 16,623 - 16,623

Distribution agreement renewal costs (g) - (4,966) - 4,966 - - - - 4,966 - 4,966 - 4,966

Non-cash interest (h) - - - - - - - - - 6,250 6,250 - 6,250

Other (i) - - - - - (1,504) - - 1,504 - 1,504 - 1,504

Tax adjustments (j) - - - - - - - - - - - 67,453 (67,453)

Non-GAAP Adjusted $ 260,399 $ 194,928 $ - $ 65,471 25% $ 12,178 $ 24,805 $ - $ - $ 28,488 $ (21,639) $ 6,849 $ 1,397 $ 5,452 $ 0.13

(a) To exclude amortization of purchased intangible assets primarily related to the acquisition of KUPI

(b) To exclude the operating results of the ceased Cody API business

(c) To exclude depreciation on previously capitalized software integration costs associated with the KUPI acquisition

(d) To exclude expenses associated with the 2020 Restructuring Plan

(e) To exclude asset impairment charges primarily related to the KUPI product rights intangible assets

(f) To exclude write-downs for excess and obsolete inventory related to the discontinuance of certain product lines

(g) To exclude the consideration recorded to renew the Company's distribution agreement with Recro Gainesville LLC

(h) To exclude non-cash interest expense associated with debt issuance costs

(i) To primarily exclude the reimbursement of legal costs associated with a distribution agreement

(j) To exclude the tax effect of the pre-tax adjustments included above at applicable tax rates

The weighted average share number for the six months ended December 31, 2020 is(k) 39,257,211 for GAAP and 40,915,504 for the non-GAAP earnings (loss) per share calculations

LANNETT COMPANY, INC.

RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION

(In thousands, except percentages, share and per share data)

Six months ended December 31, 2019

Amortization Gross Gross SG&A Restructuring Asset Operating Other Income Income tax Net income Diluted Net sales Cost of sales of intangibles Profit Margin R&D expense expense expenses impairment income income (loss) before expense (loss) earnings (loss) % charges (loss) income tax (benefit) per share (k)

GAAP Reported $ 263,452 $ 164,319 $ 15,181 $ 83,952 32% $ 15,846 $ 38,729 $ 1,580 $ 1,618 $ 26,179 $ (36,773) $ (10,594) $ (3,521) $ (7,073) $ (0.18)

Adjustments:

Amortization of intangibles (a) - - (15,181) 15,181 - - - - 15,181 - 15,181 - 15,181

Cody API business (b) - (1,928) - 1,928 (505) (375) - - 2,808 - 2,808 - 2,808

Depreciation on capitalized software costs (c) - - - - - (2,117) - - 2,117 - 2,117 - 2,117

Decommissioning of Philadelphia sites (d) - (1,292) - 1,292 - - - - 1,292 - 1,292 - 1,292

Restructuring expenses (e) - - - - - - (1,580) - 1,580 - 1,580 - 1,580

Asset impairment charges (f) - - - - - - - (1,618) 1,618 - 1,618 - 1,618

Non-cash interest (g) - - - - - - - - - 7,571 7,571 - 7,571

Loss on extinguishment of debt (h) - - - - - - - - - 2,145 2,145 - 2,145

Other (i) - (417) - 417 - (2,224) - - 2,641 (336) 2,305 - 2,305

Tax adjustments (j) - - - - - - - - - - - 9,110 (9,110)

Non-GAAP Adjusted $ 263,452 $ 160,682 $ - $ 102,770 39% $ 15,341 $ 34,013 $ - $ - $ 53,416 $ (27,393) $ 26,023 $ 5,589 $ 20,434 $ 0.49

(a) To exclude amortization of purchased intangible assets primarily related to the acquisitions of KUPI and Silarx Pharmaceuticals, Inc.

(b) To exclude the operating results of the ceased Cody API business

(c) To exclude depreciation on previously capitalized software integration costs associated with the KUPI acquisition

(d) To exclude the costs related to the decommissioning and shutdown of the Philadelphia manufacturing and distribution sites

(e) To exclude expenses associated with the Cody API Restructuring Plan

(f) To exclude impairment charges primarily associated with an operating lease right-of-use asset

(g) To exclude non-cash interest expense associated with debt issuance costs

(h) To exclude the loss on extinguishment of debt primarily related to the partial repayment of the outstanding Term Loan A balance

To primarily exclude accrued separation costs related to the Company's former(i) Chief Financial Officer as well as gains on sales of assets previously held for sale, partially offset by legal settlements

(j) To exclude the tax effect of the pre-tax adjustments included above at applicable tax rates

The weighted average share number for the six months ended December 31, 2019 is 38,457,159 for GAAP and 43,723,412 for the non-GAAP earnings (loss) per share(k) calculations. Effective with the 4.5% Senior Convertible Note issued on September 27, 2019, the diluted earnings per share was calculated based on the "if-converted" method.

LANNETT COMPANY, INC.

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA (UNAUDITED)

($ in thousands)

Three months ended

December 31, 2020

Net loss $ (171,948)

Interest expense 13,496

Depreciation and amortization 14,375

Income tax benefit (58,076)

EBITDA (202,153)

Share-based compensation 1,991

Inventory write-down (a) 20,609

Asset impairment charges (b) 198,000

Investment income (43)

Other non-operating loss (28)

Distribution agreement renewal costs 4,966 (c)

Other(d) 668

Adjusted EBITDA (Non-GAAP) $ 24,010

(a) To exclude write-downs for excess and obsolete inventory primarily related to the discontinuance of certain product lines

(b) To exclude asset impairment charges primarily related to the KUPI product rights intangible assets

(c) To exclude the consideration recorded to renew the Company's distribution agreement with Recro Gainesville LLC

To primarily exclude the reimbursement of legal costs associated with a(d) distribution agreement, as well as the operating results of the ceased Cody API business

LANNETT COMPANY, INC.

RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED INFORMATION (UNAUDITED)

($ in millions)

Fiscal Year 2021 Guidance

Non-GAAP

GAAP Adjustments Adjusted

Net sales $480 - $500 - $480 - $500

Gross margin percentage approx. 14% to 16% 10% (a) approx. 24% to 26%

R&D expense $26 - $28 - $26 - $28

SG&A expense $58 - $60 ($6) (b) $52 - $54

Restructuring expense $4 ($4) (c) -

Asset impairment charges $198 ($198) (d) -

Interest and other $53 - $54 ($12) (e) $41 - $42

Effective tax rate approx. 27% to 28% (1%) (f) approx. 26% to 27%

Adjusted EBITDA N/A N/A $75 - $85

Capital expenditures $10 - $15 - $10 - $15

The adjustment primarily reflects amortization of purchased intangible assets related to the acquisition of Kremers Urban Pharmaceuticals, Inc.(a) ("KUPI"), write-downs for excess and obsolete inventory related to the discontinuance of certain product lines, and consideration recorded to renew the Company's distribution agreement with Recro Gainesville LLC

(b) The adjustment primarily excludes depreciation on previously capitalized software integration costs associated with the KUPI acquisition

(c) To exclude expenses associated with the 2020 Restructuring Plan

(d) To exclude asset impairment charges primarily related to the KUPI product rights intangible assets

(e) The adjustment primarily reflects non-cash interest expense associated with debt issuance costs

The adjustment reflects the impact of tax credits and deductions relate to(f) expected annual pre-tax income (loss) as well as the impact of the CARES Act, which allows the Company to carryback the expected taxable loss into a prior fiscal year, where the statutory tax rate was 35%

LANNETT COMPANY, INC.

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA (UNAUDITED)

($ in millions)

Fiscal Year 2021 Guidance

Low High

Net loss $ (197.6) $ (189.1)

Interest expense 53.0 54.0

Depreciation and amortization 55.0 55.0

Income taxes (73.4) (73.9)

EBITDA (163.0) (154.0)

Share-based compensation 9.0 9.0

Inventory write-down 27.0 28.0

Asset impairment charges 198.0 198.0

Restructuring expenses 4.0 4.0

Adjusted EBITDA (Non-GAAP) $ 75.0 $ 85.0

LANNETT COMPANY, INC.

NET SALES BY MEDICAL INDICATION

Three months ended Six months ended

($ in thousands) December 31, December 31,

Medical Indication 2020 2019 2020 2019

Analgesic $ 3,572 $ 2,111 $ 6,692 $ 3,995

Anti-Psychosis 13,317 22,697 26,345 50,730

Cardiovascular 16,336 23,972 36,050 45,579

Central Nervous System 24,614 19,331 47,139 38,588

Endocrinology 9,496 - 12,729 -

Gastrointestinal 18,575 18,313 35,675 35,275

Infectious Disease 23,044 18,078 44,976 29,973

Migraine 6,083 10,878 15,773 20,021

Respiratory/Allergy/Cough/Cold 2,267 3,075 3,693 5,781

Urinary 1,361 1,233 2,819 1,668

Other 8,410 9,934 16,044 19,796

Contract Manufacturing revenue 6,845 6,488 12,464 12,046

Net Sales $ 133,920 $ 136,110 $ 260,399 $ 263,452

Contact: Robert Jaffe

Robert Jaffe Co., LLC

(424) 288-4098

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SOURCE Lannett Company, Inc.