Contact:

Robert Jaffe

Robert Jaffe Co., LLC

(424) 288-4098

·

Q2 Net Sales Higher than Expected, Up Solidly from Q1

·

Commenced Marketing Eight Products in FY20 First Half, Approximately 10 Additional Product Introductions Anticipated in Second Half

·

Launch Imminent for Numbrino®, Company’s Branded Topical Anesthetic

GAAP

Adjusted**

Net sales

$530 million to $550 million, up from $525 million to $545 million

$530 million to $550 million, up from $525 million to $545 million

Gross margin % 

Approximately 32.5% to 34.5%, down from approximately 33.5% to 35.5%

Approximately 39% to 41%, down from approximately 40% to 42%

R&D expense

$34 million to $36 million, unchanged

$34 million to $36 million, unchanged

SG&A expense

$69 million to $72 million, unchanged

$63 million to $66 million, unchanged

Restructuring expense

$2 million to $3 million, down from $2 million to $4 million

$—

Asset impairment charges

$2 million

$—

Interest and other

$67 million to $69 million, down from $70 million to $72 million

$51 million to $53 million, down from $54 million to $56 million

Effective tax rate

Approximately 16% to 17%, unchanged

Approximately 21% to 22%, down from approximately 22% to 23%

Adjusted EBITDA*

N/A

$145 million to $160 million, unchanged

Capital expenditures

$20 million to $25 million, unchanged

$20 million to $25 million, unchanged

(Unaudited)

December 31, 2019

June 30, 2019

ASSETS

Current assets:

Cash and cash equivalents

$

119,176

$

140,249

Accounts receivable, net

158,498

164,752

Inventories

152,090

143,971

Prepaid income taxes

6,949

 —

Assets held for sale

3,757

9,671

Other current assets

8,709

13,606

Total current assets

449,179

472,249

Property, plant and equipment, net

183,631

186,670

Intangible assets, net

422,849

411,229

Operating lease right-of-use assets

6,015

 —

Deferred tax assets

111,514

109,305

Other assets

7,896

7,960

TOTAL ASSETS

$

1,181,084

$

1,187,413

LIABILITIES

Current liabilities:

Accounts payable

$

30,883

$

13,493

Accrued expenses

10,750

5,805

Accrued payroll and payroll-related expenses

12,238

19,924

Rebates payable

48,447

46,175

Royalties payable

20,298

16,215

Restructuring liability

515

2,315

Income taxes payable

 —

2,198

Current operating lease liabilities

1,848

 —

Short-term borrowings and current portion of long-term debt

101,939

66,845

Other current liabilities

2,851

3,652

Total current liabilities

229,769

176,622

Long-term debt, net

606,073

662,203

Long-term operating lease liabilities

5,358

 —

Other liabilities

14,712

14,547

TOTAL LIABILITIES

855,912

853,372

Commitments (Note 12)

STOCKHOLDERS’ EQUITY

Common stock ($0.001 par value, 100,000,000 shares authorized; 39,851,828 and 38,969,518 shares issued; 38,698,403 and 38,010,714 shares outstanding at December 31, 2019 and June 30, 2019, respectively)

40

39

Additional paid-in capital 

317,012

317,023

Retained earnings 

25,002

32,075

Accumulated other comprehensive loss 

(578)

(615)

Treasury stock (1,153,425 and 958,804 shares at December 31, 2019 and June 30, 2019, respectively)

(16,304)

(14,481)

Total stockholders’ equity

325,172

334,041

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

1,181,084

$

1,187,413

Three Months Ended

Six Months Ended

December 31, 

December 31, 

2019

2018

2019

2018

Net sales

$

136,110

$

193,718

$

263,452

$

348,772

Cost of sales

86,663

115,751

164,319

203,441

Amortization of intangibles

8,153

8,157

15,181

16,380

Gross profit

41,294

69,810

83,952

128,951

Operating expenses:

Research and development expenses

6,906

9,723

15,846

19,533

Selling, general and administrative expenses

17,421

23,197

38,729

43,785

Restructuring expenses

192

213

1,580

1,235

Asset impairment charges

 —

 —

1,618

369,499

Total operating expenses

24,519

33,133

57,773

434,052

Operating income (loss)

16,775

36,677

26,179

(305,101)

Other income (loss):

Loss on extinguishment of debt

 —

 —

(2,145)

 —

Investment income

430

556

1,159

935

Interest expense

(16,694)

(21,512)

(35,986)

(42,945)

Other

(735)

(712)

199

(1,008)

Total other loss

(16,999)

(21,668)

(36,773)

(43,018)

Income (loss) before income tax

(224)

15,009

(10,594)

(348,119)

Income tax expense (benefit)

(5,308)

2,647

(3,521)

(72,953)

Net income (loss)

$

5,084

$

12,362

$

(7,073)

$

(275,166)

Earnings (loss) per common share:

Basic

$

0.13

$

0.33

$

(0.18)

$

(7.30)

Diluted (1)

$

0.13

$

0.32

$

(0.18)

$

(7.30)

Weighted average common shares outstanding:

Basic

38,605,052

37,761,176

38,457,159

37,674,200

Diluted (1)

40,557,503

39,112,547

38,457,159

37,674,200

Income (loss)

Diluted

Cost of

Amortization

Gross

Gross

R&D

SG&A

Restructuring

Operating

Other

before

Income tax

earnings per

Net sales

sales

of intangibles

Profit

Margin %

expense

expense

expenses

income

income (loss)

income tax

expense (benefit)

Net income

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

(i)

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 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.

Diluted

Cost of

Amortization

Gross

Gross

R&D

SG&A

Restructuring

Operating

Other income

Income before

Income tax

earnings per

Net sales

sales

of intangibles

Profit

Margin %

expense

expense

expenses

income

(loss)

 income tax

expense

Net income

share (k)

GAAP Reported

$

193,718

$

115,751

$

8,157

$

69,810

36

%  

$

9,723

$

23,197

$

213

$

36,677

$

(21,668)

$

15,009

$

2,647

$

12,362

$

0.32

Adjustments:

Depreciation of Fixed Assets step-up (a)

 —

(1,124)

 —

1,124

 —

 —

 —

1,124

 —

1,124

 —

1,124

Amortization of intangibles (b)

 —

 —

(8,157)

8,157

 —

 —

 —

8,157

 —

8,157

 —

8,157

Cody API business Held for Sale (c)

 —

(3,486)

 —

3,486

(862)

34

 —

4,314

 —

4,314

 —

4,314

Depreciation on capitalized software costs (d)

 —

 —

 —

 —

 —

(1,058)

 —

1,058

 —

1,058

 —

1,058

Legal and financial advisory costs (e)

 —

 —

 —

 —

 —

(2,430)

 —

2,430

 —

2,430

 —

2,430

Decommissioning of Philadelphia sites (f)

 —

(2,265)

 —

2,265

 —

 —

 —

2,265

583

2,848

 —

2,848

Restructuring expenses (g)

 —

 —

 —

 —

 —

 —

(213)

213

 —

213

 —

213

Non-cash interest (h)

 —

 —

 —

 —

 —

 —

 —

 —

4,396

4,396

 —

4,396

Other (i)

 —

(1,126)

 —

1,126

(210)

(2,318)

 —

3,654

285

3,939

 —

3,939

Tax adjustments (j)

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

7,199

(7,199)

Non-GAAP Adjusted

$

193,718

$

107,750

$

 —

$

85,968

44

%  

$

8,651

$

17,425

$

 —

$

59,892

$

(16,404)

$

43,488

$

9,846

$

33,642

$

0.86

(a)

To exclude depreciation of a fair value step-up in property, plant and equipment related to the acquisition of Kremers Urban Pharmaceuticals, Inc. ("KUPI")

(b)

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

(c)

To exclude the operating results of the Cody API business Held for Sale which was classified as Held for Sale as of September 30, 2018

(d)

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

(e)

To exclude legal and financial advisory costs primarily related to exploring and evaluating debt and capital structure alternatives, including the December 2018 amendment to our Credit Agreement

(f)

To exclude the costs associated with the decommissioning and shutdown of the Philadelphia manufacturing and distribution sites

(g)

To exclude expenses associated with the 2016 Restructuring Plan as well as the Cody Restructuring Plan

(h)

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

(i)

To primarily exclude separation costs related to the Company's cost reduction plan, as well as a special recognition incentive payment

(j)

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

(k)

The weighted average share number for the three months ended December 31, 2018 is 39,112,547 for both the GAAP and the non-GAAP earnings per share calculations