Jefferson J. Gregory Announces Plans to Retire as CEO
And His Intent to Continue as Chairman
BRISTOL, Tenn., Feb. 19 /PRNewswire-FirstCall/ -- King Pharmaceuticals,
Inc. (NYSE: KG) announced today that total revenues increased 41% to
$382.6 million during the fourth quarter ending December 31, 2003, compared to
$272.0 million in the fourth quarter of 2002. Including special items, net
earnings increased to $42.0 million and diluted earnings per share increased
to $0.17 during the fourth quarter of 2003, compared to a net loss of
$31.4 million and a diluted loss per share of $0.13 in the same period the
prior year. Net earnings, excluding special items, increased 14% to
$76.7 million and diluted earnings per share increased 14% to $0.32 during the
fourth quarter ending December 31, 2003, compared to net earnings of
$67.2 million and diluted earnings per share of $0.28 in the fourth quarter of
2002.
For the year ending December 31, 2003, total revenues increased 35% to
$1.521 billion compared to $1.128 billion for 2002. Net earnings, including
special items, decreased 42% to $105.9 million and diluted earnings per share
decreased 41% to $0.44 for the twelve months ending December 31, 2003,
compared to net earnings of $182.5 million and diluted earnings per share of
$0.74 during the prior year. Excluding special items, net earnings increased
13% to $339.3 million and diluted earnings per share increased 14% to
$1.40 for the twelve months ending December 31, 2003, compared to net earnings
of $301.0 million and diluted earnings per share of $1.23 in 2002.
Total revenues for the fourth quarter and year ending December 31, 2003
would have been $18.9 million higher and diluted earnings per share, excluding
special items, would have equaled $0.33 and $1.41, respectively, but for an
increase in the accrual for estimated amounts due under Medicaid and other
governmental pricing programs for the years 1998 through 2002 and the related
accrual for amounts due under the Medicaid pricing program for the period from
1994 through 1997, each of which is based on a recently completed
comprehensive audit, as discussed in greater detail below. The accrual for
amounts due under Medicaid for the period 1998 through 2002 was substantially
offset by reductions in the co-promotion fee due with respect to Altace(R), as
also described below.
King recorded special items during the fourth quarter ending December 31,
2003, the net of which resulted in a charge totaling $56.4 million, or
$34.7 million net of tax. More specifically, special items during the fourth
quarter of 2003 include the following: i) a charge in the amount of
$32.9 million primarily related to an increase in the accrual for Lorabid(R)
(loracarbef) purchase commitments in excess of expected demand; ii) a charge
in the amount of $14.6 million which primarily relates to the write-off of
certain unutilized intangible assets; iii) a charge in the amount of
$6.8 million due to an increase in the valuation allowance for Novavax, Inc.
convertible notes held by the Company resulting from a decrease in the share
price of Novavax common stock during the fourth quarter of 2003; iv) a charge
in the amount of $3.8 million due to professional fees associated with the
previously announced ongoing investigations of the Company by the Securities
and Exchange Commission ("SEC") and the Office of Inspector General of the
Department of Health and Human Services ("OIG"); and v) income in the amount
of $1.7 million resulting from a gain on the sale of certain non-income
producing intangible assets. During the twelve months ending December 31,
2003, King recorded special items totaling $353.8 million, or $233.4 million
net of tax, primarily due to charges for acquired in-process research and
development associated with King's acquisition of the primary care business in
the United States and Puerto Rico of Elan Corporation, plc on June 12, 2003
and Meridian Medical Technologies, Inc. on January 8, 2003, and an intangible
asset impairment charge for Florinef(R) (fludrocortisone acetate).
The increase in King's revenues during the fourth quarter and the twelve
months ending December 31, 2003 in comparison to the same periods of the prior
year is attributable primarily to the acquisition of Sonata(R) (zaleplon) and
Skelaxin(R) (metaxalone) from Elan on June 12, 2003, and the acquisition of
Meridian on January 8, 2003. Additionally, the growth in total revenues for
the year ending December 31, 2003 was due to increased net sales of certain
branded pharmaceutical products, particularly Altace(R) (ramipril) and
Thrombin-JMI(R) (thrombin, topical, bovine, USP).
Net revenue from branded pharmaceuticals, including royalty income,
totaled $348.5 million for the fourth quarter of 2003, a 33% increase over the
fourth quarter of 2002, and equaled $1.369 billion for the year ending
December 31, 2003, a 25% increase over the prior year. Meridian, King's
wholly-owned subsidiary, contributed $25.8 million to the Company's net
revenue in the fourth quarter of 2003, and $124.2 million during the year
ending December 31, 2003. During the fourth quarter and year ending December
31, 2003, net revenue from contract manufacturing and other equaled $8.3
million and $27.9 million, respectively.
Altace(R) net sales equaled $108.1 million in the fourth quarter of 2003,
compared to $109.5 million during the fourth quarter of 2002. Net sales of
Altace(R) grew 17% to $527.1 million during the twelve months ending December
31, 2003 compared to $450.0 million in the prior year, while total
prescriptions grew 19% during the same period of 2003. Net sales of Altace(R)
would have been $11.2 million higher during the fourth quarter and year ending
December 31, 2003 but for an increase in the accrual for estimated amounts due
under Medicaid and other governmental pricing programs for the years 1998
through 2002 and the related accrual for amounts due under the Medicaid
pricing program for the period from 1994 through 1997, each of which is based
on the recently completed comprehensive audit, as discussed in greater detail
below. Prescriptions for Altace(R) continued their record of growth, as total
prescriptions for the product recently achieved a new all-time high based on
the four-week moving average as reported by IMS for the week ending February
6, 2004. Channel inventories of Altace(R) decreased by approximately one
month in the fourth quarter of 2003 according to IMS America Pipeline Data.
King is actively engaged in negotiations with its wholesale customers to
establish inventory management agreements that should facilitate improved
management of inventory levels. In the meantime, King anticipates that
Altace(R) sales during the first quarter of 2004 will be adversely affected as
channel inventory levels continue to decline and in anticipation of entering
into such agreements.
Net sales of Skelaxin(R) totaled $61.4 million and Sonata(R) net sales
equaled $35.8 million during the fourth quarter ending December 31, 2003. For
the twelve months ending December 31, 2003, King and Elan's combined net sales
of Skelaxin(R) and Sonata(R) totaled $239.3 million and $120.7 million,
respectively. King acquired these products from Elan on June 12, 2003.
Levoxyl(R) (levothyroxine sodium tablets, USP) net sales recovered during
the fourth quarter of 2003, totaling $48.6 million, a 15% increase from
$42.1 million during the fourth quarter of 2002. Net sales of Levoxyl(R)
decreased 21% to $134.1 million for the twelve months ending December 2003,
compared to $169.5 million for the year ending 2002. Channel inventories for
the product decreased by approximately 2 weeks during the fourth quarter of
2003 according to IMS America Pipeline Data.
Net sales of Thrombin-JMI(R) totaled $33.5 million during the fourth
quarter of 2003, compared to $33.0 million during the same period of the prior
year. Thrombin-JMI(R) net sales increased 47% to $141.7 million for the
twelve months ending December 31, 2003, compared to $96.5 million during 2002.
Royalty revenues from Adenoscan(R) (adenosine) and Adenocard(R)
(adenosine) increased 18% to $20.5 million during the fourth quarter ending
December 31, 2003, compared to $17.4 million during the fourth quarter of
2002. Likewise, net sales of Adenoscan(R) and Adenocard(R) increased 17% to
$68.4 million for the twelve months ending December 31, 2003, compared to
$58.4 million during the prior year.
King reaffirms its previously announced projected ranges for estimated
total net revenue and diluted earnings per share, excluding special items, for
year-end 2004. King's projected ranges for estimated total net revenue and
estimated diluted earnings per share, excluding special items, for year-end
2004 are as follows (dollars in millions, except EPS):
Projected Ranges for Full Year
2004
Net Revenue $1750 - 1850
Diluted EPS, excluding special items $1.50 - 1.60
As previously reported, in March 2003 the SEC initiated a formal
investigation of King. Upon the recommendation of management and with the
assistance of independent counsel and an independent accounting firm, the
Audit Committee of King's Board of Directors initiated an assessment and
internal review of issues raised by the SEC investigation. In connection with
the conclusion of the internal review on July 29, 2003, King estimated that it
had underpaid amounts due under Medicaid and other governmental pricing
programs, and recorded an adjustment of $46.5 million to net sales and accrued
expenses in the fourth quarter of 2002. This amount represented the Company's
best estimate as of July 2003 of the extent to which it had underpaid amounts
due under Medicaid and other governmental pricing programs during the period
from 1998 through 2002. The July 2003 estimate was based upon an extensive
sample of available data supporting the calculation of Medicaid rebates paid
from 1998 through 2002, and was generated with the assistance of outside
consultants.
Since July 2003, King's outside consultants have undertaken a
comprehensive audit to determine the actual amount of underpayments under
Medicaid during the period from 1998 through 2002. As a result of such
recently completed audit, it was determined that the Company's accrual for
estimated amounts due under Medicaid and other governmental pricing programs
for the period from 1998 through 2002 should be increased by $18.0 million.
In addition, based on the results of the comprehensive audit for the period
from 1998 through 2002, the Company was able to estimate that it underpaid
amounts due Medicaid by $0.9 million during the period from 1994 through 1997.
Accordingly, results for the fourth-quarter and year-end 2003 include an
adjustment reducing net sales and increasing accrued expenses by $18.9 million
each. The resulting effect on net earnings and diluted earnings per share is
substantially offset by a related $15.2 million reduction in the co-promotion
fees paid to King's Altace(R) co-promotion colleague, consisting of i) $9.5
million in fees which relate to the accrual adjustment recorded in the fourth
quarter of 2002 but were not recognized until the fourth quarter of 2003 and
ii) $5.7 million in fees which relate to the accrual adjustment made in the
fourth quarter of 2003.
The Company's accrual is an estimate that could change as a result of
audits by the appropriate agencies. The previously announced SEC and OIG
investigations are continuing. The accrual relates solely to estimated
underpayments and excludes any interest, fines, penalties or other amounts
that might be owed in connection with the underpayments, as the Company cannot
predict or reasonably estimate their likelihood or magnitude at this time.
Jefferson J. Gregory, Chairman and Chief Executive Officer of King,
stated, "King continued its record of growth during 2003. Sales of branded
pharmaceuticals, led by Altace(R), Skelaxin(R), Levoxyl(R) and Thrombin-
JMI(R), equaled over $1.3 billion for the year ending December 31, 2003. We
believe the Company's current product portfolio, particularly Altace(R),
Skelaxin(R), Levoxyl(R) and Sonata(R), provides significant continued
opportunities for growth going forward."
Mr. Gregory observed, "Our research and development programs have also
continued to gain significant momentum. Recent successes include the U.S.
Food and Drug Administration's ('FDA') approval of a supplemental New Drug
Application ('sNDA') covering pediatric and adult formulations of AtroPen(R)
(atropine), a nerve gas antidote, FDA approval of the New Drug Application
('NDA') for Estrasorb(TM) (estradiol topical emulsion), a topical estrogen
therapy in a unique lotion formulation, and the receipt of an approvable
letter from the FDA for Intal(R) HFA (cromolyn sodium), a new formulation of
our currently marketed product Intal(R) which is indicated for the management
of asthma."
Mr. Gregory continued, "Other recent R&D successes include the
commencement of the pivotal Phase III clinical trial program involving
binodenoson, our next generation pharmacologic stress SPECT imaging agent, and
the commencement of the Phase I clinical trial programs for T-62 and MRE0094,
new chemical entities under development for the treatment of neuropathic pain
and chronic diabetic foot ulcers, respectively. At King, we are all very
proud of these accomplishments and look to the future with great eagerness and
confidence in our ability to build on these recent successes while we continue
to develop a strong pipeline of new innovative pharmaceutical products that
enhance the quality of peoples' lives and continue to maximize the long-term
potential of our currently marketed products."
Mr. Gregory announced, "With our continued positive performance during
2003 and successful execution of our growth strategies, a strong portfolio of
differentiated products, and our expanding pipeline of promising new drugs, I
believe King is strategically positioned for sustained future revenue and
earnings growth. I also believe that the completion of our comprehensive
Medicaid audit represents an important milestone in our efforts to resolve the
investigations being conducted by the SEC and by the OIG. With this in mind, I
have asked King's Board of Directors to begin a search for a new Chief
Executive Officer. However, I intend to continue as Chairman of King's Board
of Directors. Also, I plan to remain as CEO until the appointment of a
successor by the board. I am very confident in our Company and its future and
believe that such an orderly process should allow for a very smooth
transition." Mr. Gregory concluded, "As an emerging growth pharmaceutical
company, King has required an extensive amount of time and commitment.
Accordingly, King has been my life for the past ten years. This decision will
provide me with the opportunity to spend more time with my family and pursue
other business ventures."
Kyle P. Macione, President of King, commented, "The continued successful
execution of our growth strategies during 2003 has led to several exciting
recent developments." Mr. Macione explained, "This week, our sales and
marketing team launched a new promotion and marketing campaign to reposition
our currently marketed immediate release formulation of Sonata(R) in the
growing insomnia marketplace. This campaign plans to emphasize that Sonata(R)
10mg helps deliver rapid-onset sleep with sleep duration that is comparable to
zolpidem 10mg. According to the National Sleep Foundation's 2002 "Sleep
America" Poll, 25% of patients reporting transient insomnia symptoms
specifically said that they had difficulty falling asleep. The marketing plan
for the product also stresses that Sonata(R) is the only prescription sleep
medication that can be taken either at bedtime or later, after patients have
tried to fall asleep on their own. Additionally, Sonata(R) allows patients to
wake up alert."
Mr. Macione added, "Moreover, earlier this month we announced that the
Company's Investigational New Drug ('IND') application for an extended release
formulation of Sonata(R) has been allowed by the FDA. The Phase II clinical
trial program, designed to select the most effective extended release
formulation of Sonata(R) utilizing the commercially proven drug delivery
technology of Elan Corporation plc, is anticipated to begin before the end of
April 2004." Mr. Macione emphasized, "This is an important step forward for
King Pharmaceuticals. The successful development of an extended release
formulation of Sonata(R), along with the new promotional campaign planned for
our immediate release formulation of this product, should well position the
Sonata(R) brand within the growing insomnia market. We believe that the
extended release formulation of Sonata(R), once approved, should enable us to
significantly expand upon our opportunities within this market. With U.S.
patent coverage that extends to 2018 and the opportunity to procure additional
potential patents, the extended release formulation should position Sonata(R)
as a long-term cornerstone product for our Company."
Mr. Macione continued, "Additionally, as a result of our growth during
2003, we have a dramatically expanded U.S. field sales force that
significantly enhances our sales and marketing capability and positions us to
compete even more effectively in the primary care marketplace. Moreover,
today's sales force provides the critical mass necessary to strategically
position King to launch new products as they emerge from our growing product
pipeline, while significantly expanding our opportunities to more effectively
promote our key branded products, Altace(R), Skelaxin(R), Levoxyl(R), and
Sonata(R)."
Mr. Macione also observed, "Another recent development that further
leverages the strategies for growth we implemented during 2003 is the issuance
by the U.S. Patent and Trademark Office of a utility patent, patent no.
6,683,102 ('the '102 Patent'), pertaining to Skelaxin(R). The issuance of the
'102 Patent further strengthens the long-term market potential of our
Skelaxin(R) product. King's Skelaxin(R) patent portfolio, which includes the
newly issued '102 Patent and the related U.S. patent no. 6,407,128 ('the '128
Patent'), a method-of-use patent, is very comprehensive and covers various
therapeutic uses of Skelaxin(R). Coverage under '102 Patent and the '128
Patent extends through December 3, 2021."
James R. Lattanzi, Chief Financial Officer of King, commented, "King
continued to achieve solid cash flow growth during 2003. Specifically, cash
from operations totaled approximately $437.0 million during the year ending
December 31, 2003. As of December 31, 2003, cash and cash equivalents, not
including restricted cash, totaled $165.1 million. With our sustained strong
cash flow and solid balance sheet, we believe King is well-positioned for the
continued successful execution of our growth strategies."
Under Generally Accepted Accounting Principles ("GAAP"), "net earnings"
and "diluted earnings per share" include special items. In addition to the
results determined in accordance with GAAP, King provides its net earnings and
diluted earnings per share results for the fourth quarter and twelve months
ending December 31, 2003 and projected ranges for estimated diluted earnings
per share for year-end 2004, excluding special items. These non-GAAP
financial measures exclude special items which are those particular material
income or expense items that King considers to be unrelated to the Company's
ongoing, underlying business, non-recurring, or not generally predictable.
Such items include, but are not limited to, merger and restructuring expenses;
non-capitalized expenses associated with acquisitions, such as in-process
research and development charges and one-time inventory valuation adjustment
charges; charges resulting from the early extinguishment of debt; asset
impairment charges; expenses of drug recalls; and gains and losses resulting
from the divestiture of assets. King believes the identification of special
items enhances an analysis of the Company's ongoing, underlying business and
an analysis of the Company's financial results when comparing those results to
that of a previous or subsequent like period. However, it should be noted
that the determination of whether to classify an item as a special item
involves judgments by King's management. A reconciliation of non-GAAP
financial measures referenced herein and King's financial results determined
in accordance with GAAP is provided below. Since King generally does not
predict the future impact of special items, King cannot reconcile the
Company's year-end 2004 earnings guidance, excluding special items, to GAAP.
Conference Call Information
King will conduct a conference call today to discuss the Company's fourth-
quarter and year-end 2003 results, financial projections, the status of
certain product development projects, and other matters pertaining to the
Company. King will provide a live webcast of its conference call scheduled
for today, Thursday, February 19, 2004, at 1:00 p.m., E.S.T. Interested
persons may listen to the conference call today at 1:00 p.m., E.S.T. at
http://www.firstcallevents.com/service or by dialing 1-800-245-3043 (US only)
or 785-832-1508 (international), pass code KG. If you are unable to
participate during the live webcast, the call will be archived on King's web
site http://www.kingpharm.com for not less than 30 days following the call. A replay
of the conference call will also be available for not less than 30 days
following the call by dialing 1-888-274-8335 (US only) or 402-220-2327
(international).
About King Pharmaceuticals
King, headquartered in Bristol, Tennessee, is a vertically integrated
branded pharmaceutical company. King, an S&P 500 Index company, seeks to
capitalize on opportunities in the pharmaceutical industry through the
development, including through in-licensing arrangements and acquisitions, of
novel branded prescription pharmaceutical products in attractive markets and
the strategic acquisition of branded products that can benefit from focused
promotion and marketing and product life-cycle management.
About Sonata(R)
Sonata(R) is indicated for short-term insomnia treatment. Although
Sonata(R) improved sleep time from baseline in clinical trials, it has not
been shown to increase total time slept or decrease awakenings vs. placebo.
Hypnotics should generally be limited to 7-10 days use, and reevaluation of
patients is recommended if hypnotics are taken more than 2-3 weeks. Sonata(R)
prescriptions should not exceed a 1-month supply. Until patients know how
they will react to sleep agents, they should not engage in activities
requiring mental alertness or motor coordination (e.g. driving or operating
machinery) after taking Sonata(R) or any sleep agent. Psychomotor functions
may be impaired for up to 4 hours. In clinical trials, the most common side
effects were headache, dizziness, and somnolence. As with any
sedative/hypnotic, abrupt treatment discontinuation can produce signs and
symptoms of withdrawal and rebound insomnia.
This release contains forward-looking statements, which reflect
management's current views of future events and operations, including, but not
limited to, statements pertaining to the ability to facilitate improved
management of channel inventory levels; statements pertaining to the Company's
ability to continue to develop a strong pipeline and maximize the long-term
potential of our currently marketed products; statements pertaining to the
growth opportunities provided by the Company's current product portfolio,
particularly Altace(R), Skelaxin(R), Levoxyl(R), and Sonata(R); statements
related to the success and/or commencement of the Sonata(R) extended release
Phase II clinical trial program; statements pertaining to the Company's
ability to reposition Sonata(R) in the insomnia marketplace and expand upon
the opportunities in that market; statements pertaining to the opportunity to
procure additional patents related to an extended release formulation of
Sonata(R); statements pertaining to the continued successful execution of the
Company's growth strategies; and statements pertaining to management's
estimated net revenue and estimated diluted earnings per share, excluding
special items, for year-end 2004. These forward-looking statements involve
certain significant risks and uncertainties, and actual results may differ
materially from the forward-looking statements. Some important factors which
may cause results to differ include: dependence on King's and Wyeth
Pharmaceuticals' ability to successfully market Altace(R) under the co-
promotion agreement between King and Wyeth; dependence on the development and
implementation of successful marketing strategies for Altaceb by King and
Wyeth; dependence on growth of net sales of King's branded pharmaceutical
products, particularly Altace(R), Skelaxin(R), Levoxyl(R), Sonata(R), and
Thrombin-JMI(R), as well as revenue and diluted earnings per share, excluding
special items, at a rate equal to or in excess of management's projections;
dependence on share count projections used in computing projected diluted
earnings per share on a year-end basis for 2004; dependence on the successful
marketing and sales of King's products, including, but not limited to,
Altace(R), Skelaxin(R), Levoxyl(R), and Sonata(R); dependence on royalty
revenues from Adenoscan(R) and Adenocard(R); dependence on King's ability to
reposition Sonata(R) in the insomnia marketplace and expanded upon its
opportunities in that market with an extended release formulation of
Sonata(R); dependence on management of King's growth and integration of its
acquisitions; dependence on the extent to which OIG and other governmental
agencies concur with King's best estimate of the extent to which it underpaid
amounts due under Medicaid and other governmental pricing programs and King's
determination of the reasons for such underpayments; dependence on any
determination or final outcome arising out of the previously announced
investigations of the Company by the SEC and OIG; dependence on whether King
is able to prevail in pending shareholder securities litigation; dependence on
whether any governmental sanctions are imposed due to King's underpayment of
amounts due under Medicaid and other governmental pricing programs; dependence
on the possibility that regulatory authorities may initiate proceedings
against King and/or its officers and directors; dependence on King's ability
to continue to acquire branded products, including products in development;
dependence on King's ability to enter into beneficial inventory management
agreements with its key customers; dependence on the high cost and uncertainty
of research, clinical trials, and other development activities involving
pharmaceutical products, including, but not limited to, King Pharmaceuticals
Research and Development's pre-clinical and clinical pharmaceutical product
development projects, including binodenoson, T-62, and MRE0094; dependence on
FDA approval of King's Abbreviated New Drug Application ("ANDA") now pending
on the Company's diazepam-filled auto-injector and the sNDA for Intal(R) HFA;
dependence on Novavax's ability to successfully manufacture Estrasorb(TM);
dependence on King's and Novavax's ability to successfully launch and market
Estrasorb(TM) as planned; dependence on King's and Elan's ability to
successfully develop new formulations of Sonata(R) and Skelaxin(R); dependence
on the unpredictability of the duration and results of the FDA's review of
INDs, NDAs, sNDAs, and ANDAs and/or the review of other regulatory agencies
worldwide; dependence on King's ability to maintain effective patent
protection for Altace(R) through October 2008, and successfully defend against
any attempt to challenge the enforceability of patents relating to the
product; dependence on King's ability to successfully defend against any
potential or ongoing attempt to challenge the enforceability of the patent
related to Levoxyl(R); dependence on King's ability to timely obtain and, if
issued, maintain additional effective patent protection for Levoxyl(R);
dependence on King's ability to obtain additional patents related to an
extended release formulation of Sonata(R); dependence on King's ability to
successfully defend against any potential or ongoing attempt to challenge the
enforceability any patent related to Skelaxin(R); dependence on King's ability
to maintain effective patent protection for Sonata(R) and Skelaxin(R),
including new formulations of such products, and successfully defend against
any attempt to challenge the enforceability of patents relating to the
products; dependence on the ability of the Company's dedicated field sales
force representatives to successfully market King's branded pharmaceutical
products; dependence on whether our customers order pharmaceutical products in
excess of normal quantities during any quarter which could cause our sales of
branded pharmaceutical products to be lower in a subsequent quarter than they
would otherwise have been; dependence on changes in the share price of Novavax
common stock which is the underlying collateral for the Novavax convertible
notes held by the Company; dependence on King's ability to continue to
successfully execute the Company's proven growth strategies and to continue to
capitalize on strategic opportunities in the future for sustained long-term
growth; dependence on the availability and cost of raw materials; dependence
on no material interruptions in supply by contract manufacturers of King's
products; dependence on the potential effect on sales of our existing branded
pharmaceutical products as a result of the potential development and approval
of a generic substitute for any such product or other new competitive
products; dependence on the potential effect of future acquisitions and other
transactions pursuant to our growth strategies on King's financial and other
projections; dependence on our compliance with FDA and other government
regulations that relate to our business; and dependence on changes in general
economic and business conditions; changes in current pricing levels; changes
in federal and state laws and regulations; and manufacturing capacity
constraints. Other important factors that may cause actual results to differ
materially from the forward-looking statements are discussed in the "Risk
Factors" section and other sections of King's Form 10-K for the year ended
December 31, 2002 and Form 10-Q for the third quarter ended September 30,
2003, which are on file with the SEC. King does not undertake to publicly
update or revise any of its forward-looking statements even if experience or
future changes show that the indicated results or events will not be realized.
KING PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF
OPERATIONS
(in thousands, except per share data)
Three Months Ended Year Ended
December 31 December 31
2003 2002 2003 2002
(Unaudited) (Unaudited)
REVENUES:
Total revenues $382,631 $272,032 $1,521,388 $1,128,335
OPERATING COSTS AND EXPENSES:
Cost of revenues 92,235 63,049 348,345 226,914
Lorabid supply contract 29,959 49,877 29,959 49,877
Inventory contributions/
write-off -- 15,152 -- 15,152
Write off of acquisition
related inventory
step-up/recall -- -- 6,459 3,033
Total cost
of revenues 122,194 128,078 384,763 294,976
Selling, general and
administrative 84,273 48,412 273,000 180,266
Special legal and
professional fees 3,778 -- 25,986 --
Legal settlement fees 2,931 -- 2,931 --
Co-promotion fees 30,301 51,910 193,350 186,657
Total selling, general,
and administrative 121,283 100,322 495,267 366,923
Depreciation and
amortization 41,252 15,554 124,575 59,297
Research and
development 14,591 9,405 44,078 28,184
Research and
development In-process
upon acquisition 1,000 12,000 194,000 12,000
Merger and
restructuring costs -- 5,281 -- 5,911
Intangible asset
impairment 13,646 66,844 124,616 66,844
Gain on sale of
product lines (1,713) -- (12,025) --
Total operating costs
and expenses 312,253 337,484 1,355,274 834,135
OPERATING INCOME 70,378 (65,452) 166,114 294,200
OTHER (EXPENSES) INCOME:
Interest expense (3,259) (3,391) (13,396) (12,419)
Interest income 1,120 4,985 6,849 22,395
Valuation charge -
convertible notes
receivable (6,801) (8,251) 18,151 (35,629)
Other income (expense) (495) 110 (629) (884)
Total other income
(expenses) (9,435) (6,547) 10,975 (26,537)
INCOME BEFORE
INCOME TAXES 60,943 (71,999) 177,089 267,663
Income tax expense
(benefit) 18,966 (40,556) 71,233 85,143
NET INCOME $41,977 $(31,443) $105,856 $182,520
Basic income per
common share $0.17 $(0.13) $0.44 $0.75
Diluted income per
common share $0.17 $(0.13) $0.44 $0.74
Shares used in basic
net income per share 241,154 240,899 240,989 244,346
Shares used in
diluted net income
per share 241,608 241,755 241,527 245,699
KING PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF
OPERATIONS
EXCLUDING SPECIAL ITEMS
(in thousands, except per share data)
Three Months Ended Year Ended
December 31 December 31
2003 2002 2003 2002
(Unaudited) (Unaudited)
REVENUES:
Total revenues $382,631 $272,032 $1,521,388 $1,128,335
OPERATING COSTS AND
EXPENSES:
Cost of revenues 92,235 63,049 348,345 226,914
Selling, general and
administrative 84,273 48,412 273,000 180,266
Co-promotion fees 30,301 51,910 193,350 186,657
Total selling,
general, and
administrative 114,574 100,322 466,350 366,923
Depreciation and
amortization 41,252 15,554 124,575 59,297
Research and
development 14,591 9,405 44,078 28,184
Total operating costs
and expenses 262,652 188,330 983,348 681,318
OPERATING INCOME 119,979 83,702 538,040 447,017
OTHER (EXPENSES)
INCOME:
Interest expense (3,259) (3,391) (13,396) (12,419)
Interest income 1,120 4,985 6,849 22,395
Other income (expense) (495) 110 (629) (884)
Total other income
(expenses) (2,634) 1,704 (7,176) 9,092
INCOME BEFORE
INCOME TAXES 117,345 85,406 530,864 456,109
Income tax expense 40,634 18,162 191,568 155,089
NET INCOME $76,711 $67,244 $339,296 $301,020
Basic income per
common share $0.32 $0.28 $1.41 $1.23
Diluted income per
common share $0.32 $0.28 $1.40 $1.23
Shares used in basic
net income per share 241,154 240,899 240,989 244,346
Shares used in diluted
net income per share 241,608 241,755 241,527 245,699
KING PHARMACEUTICALS, INC.
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share data)
The following tables reconcile Non-GAAP measures to amounts reported
under GAAP:
Three Months Ending Three Months Ending
December 31, 2003 December 31, 2002
Pretax Amount EPS Pretax Amount EPS
Net income, excluding
special charges $76,711 $67,244
Diluted income per common
share, excluding special
items $0.32 $0.28
SPECIAL ITEMS:
Excess purchase commitment
(cost of goods sold) (29,959) (0.12) (49,877) (0.21)
Inventory contributions/
write-off (cost of
goods sold) -- -- (15,152) (0.06)
Special legal and
professional fees (selling,
general, and administrative) (3,778) (0.03) -- --
Legal settlement fees
(selling, general, and
administrative) (2,931) (0.01) -- --
In-process research and
development (other
operating expenses) (1,000) (0.00) (12,000) (0.05)
Intangible asset
impairment (other
operating expenses) (13,646) (0.06) (66,844) (0.28)
Merger and restructuring
costs (other operating
expenses) -- -- (5,281) (0.02)
Valuation charge -
convertible notes receivable
(other expenses) (6,801) (0.03) (8,251) (0.03)
Gain on sale of product lines
(other operating income) 1,713 0.01 -- --
Income tax benefit 21,668 0.09 58,718 0.24
Net income $41,977 $(31,443)
Diluted income per common
share, as reported under GAAP $0.17 $(0.13)
Twelve Months Ending Twelve Months Ending
December 31, 2003 December 31, 2002
Pretax Amount EPS Pretax Amount EPS
Net income, excluding
special charges $339,296 $301,020
Diluted income per common
share, excluding special
items $1.40 $1.23
SPECIAL ITEMS:
Excess purchase commitment
(cost of goods sold) (29,959) (0.12) (49,877) (0.20)
Inventory recall (cost of
goods sold) -- -- (15,152) (0.06)
Write off of acquisition
related inventory step-up/
recall (cost of goods sold) (6,459) (0.03) (3,033) (0.01)
Special legal and professional
fees (selling, general,
and administrative) (25,986) (0.11) -- --
Legal settlement fees
(selling, general, and
administrative) (2,931) (0.01) -- --
In-process research and
development (other operating
expenses) (194,000) (0.80) (12,000) (0.05)
Intangible asset impairment
(other operating expenses) (124,616) (0.52) (66,844) (0.27)
Merger and restructuring
costs (other operating
expenses) -- -- (5,911) (0.03)
Valuation charge -
convertible notes receivable
(other expenses) 18,151 0.08 (35,629) (0.15)
Gain on sale of product lines
(other operating income) 12,025 0.05 -- --
Income tax benefit 120,335 0.50 69,946 0.28
Net income $105,856 $182,520
Diluted income per common
share, as reported
under GAAP 0.44 $0.74
Three Months Ending Twelve Months Ending
December 31, 2003 December 31, 2003
Pretax Amount EPS Pretax Amount EPS
Net income, excluding
special charges and
Medicaid adjustment $78,889 $341,474
Diluted income per common share,
excluding special items
and Medicaid adjustment $0.33 $1.41
Medicaid adjustment (2,178) (0.01) (2,178) (0.01)
Net income, excluding
special charges $76,711 $0.32 $339,296 $1.40
SPECIAL ITEMS:
Excess purchase commitment
(cost of goods sold) (29,959) (0.12) (29,959) (0.12)
Write off of acquisition
related inventory step-up/
recall (cost of goods sold) -- -- (6,459) (0.03)
Special legal and professional
fees (selling, general,
and administrative) (3,778) (0.03) (25,986) (0.11)
Legal settlement fees
(selling, general, and
administrative) (2,931) (0.01) (2,931) (0.01)
In-process research and
development (other
operating expenses) (1,000) (0.00) (194,000) (0.80)
Intangible asset impairment
(other operating expenses) (13,646) (0.06) (124,616) (0.52)
Valuation charge - convertible
notes receivable
(other expenses) (6,801) (0.03) 18,151 0.08
Gain on sale of product lines
(other operating income) 1,713 0.01 12,025 0.05
Income tax benefit 21,668 0.09 120,335 0.50
Net income $41,977 $105,856
Diluted income per common share,
as reported under GAAP $0.17 $0.44
KING PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
December 31, December 31,
ASSETS 2003 2002
Current assets:
Cash, cash equivalents and
marketable securities $165,053 $815,488
Restricted cash 114,969 -
Accounts receivable, net 246,417 159,987
Inventory 264,898 167,153
Deferred income taxes 124,930 106,168
Prepaid expenses and other assets 30,036 12,906
Total current assets 946,303 1,261,702
Property, plant and equipment, net 257,659 217,114
Intangible assets, net 1,756,993 1,219,571
Goodwill 121,355 12,742
Other assets 76,117 39,531
Deferred income tax assets 19,307 --
Total assets $3,177,734 $2,750,660
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $97 $1,300
Accounts payable 83,078 49,889
Accrued expenses 506,033 297,528
Income taxes payable 79,641 21,247
Total current liabilities 668,849 369,964
Long-term debt:
Convertible Debentures 345,000 345,000
Senior Subordinated Notes -- 93
Other long-term liabilities 121,705 70,824
Deferred income tax liabilities -- 33,596
Total liabilities 1,135,554 819,477
Shareholders' equity:
Common shares no par value,
300,000,000 shares authorized,
241,190,852 and 240,624,751
shares issued and outstanding,
respectively 1,205,970 1,201,897
Retained earnings 835,097 729,241
Other comprehensive income 1,113 45
Total shareholders' equity 2,042,180 1,931,183
Total liabilities and
shareholders' equity $3,177,734 $2,750,660
SOURCE King Pharmaceuticals, Inc.
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Related links:
http://www.kingpharm.com
Company News On-Call:
http://www.prnewswire.com/comp/120319.html
CONTACT:
James E. Green, Vice President, Corporate
Affairs of King Pharmaceuticals, +1-423-989-8125
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