Third Quarter 2004 Financial Results Schedules also Provided
BRISTOL, Tenn., March 17 /PRNewswire-FirstCall/ -- King Pharmaceuticals,
Inc. (NYSE: KG) announced today that total revenues decreased 6% to $342.6
million during the fourth quarter ending December 31, 2004, compared to $366.0
million in the fourth quarter of 2003. Including special items, net earnings
equaled $14.7 million and diluted earnings per share equaled $0.06 during the
fourth quarter of 2004, each decreasing 50% compared to net earnings of $29.3
million and diluted earnings per share of $0.12 in the same period of the
prior year. Net earnings, excluding special items, equaled $33.8 million and
diluted earnings per share equaled $0.14 during the fourth quarter ending
December 31, 2004, each decreasing 50% compared to net earnings of $67.8
million and diluted earnings per share of $0.28 in the fourth quarter of 2003.
For the year ending December 31, 2004, total revenues decreased 13% to
$1.30 billion compared to $1.49 billion for 2003. Net loss, including special
items, equaled $160.3 million, a diluted loss per share of $0.66, compared to
net earnings of $91.9 million and diluted earnings per share of $0.38 during
the prior year. Excluding special items, net earnings equaled $157.6 million
and diluted earnings per share equaled $0.65 for the twelve months ending
December 31, 2004, each decreasing 53% compared to net earnings of $333.1
million and diluted earnings per share of $1.38 in 2003.
Brian A. Markison, President and Chief Executive Officer of King, stated,
"Our Company was required to address two major challenges during 2004. First,
we needed to aggressively reduce wholesale inventory levels of our products to
appropriate levels. The decrease in our net sales during 2004 compared to
prior year is evidence of our success in this regard. More importantly, we
believe that wholesale inventory reductions of our products should be
substantially complete by the end of the first quarter of 2005."
King's estimate of the effect of wholesale inventory reductions on its
nets sales for three of its key products is portrayed in the table below (U.S.
Dollars in Millions):
Estimated
Approximate Net Sales
Value of 2004
Product 2003 Net 2004 Net Wholesale Inventory
Sales Sales Reductions
Altace(R) (ramipril) $536.9 $347.3 $180.0
Skelaxin(R) (metaxalone)(1) $175.2 $238.6 $40.0
Sonata(R) (zaleplon)(1) $71.6 $60.4 $30.0
(1) Skelaxin and Sonata acquired in June 2003
Mr. Markison continued, "Second, we needed to rebase our operations, which
included a review of our intangible assets and the disposition of some non-
strategic assets, such as our women's healthcare products. As a result of
this process, we necessarily incurred significant charges for special items
during 2004." Information regarding special items is provided below.
"In addition, we have made other important strides that significantly
contribute toward our goal of re-establishing a firm foundation on which to
build the Company's future success," added Mr. Markison. "These other
significant accomplishments include relocating our commercial operations
organization to New Jersey, expanding our business development group,
reprioritizing our research and development portfolio, right-sizing our sales
force, and implementing new processes and policies to enhance financial
controls, institutionalize cost control and improve production planning."
Mr. Markison emphasized, "While taking these actions to financially rebase
the Company, it is important to note that we continued to generate strong cash
flow. Although King's total revenues decreased 13% in 2004, cash and cash
equivalents, not including restricted cash, grew to $342.1 million as of
December 31, 2004, an increase of 134% from $146.1 million at the end of
2003."
In conclusion, Mr. Markison said, "With our significantly enhanced
commercial operations capability, we plan to maximize the potential of the
Company's currently marketed products as a revenue-generating platform to fund
product development and business development. By adding strategic assets,
developing new partnerships, and divesting underperforming assets, we expect
to improve the Company's long-term prospects and build value for our
shareholders. With our excellent cash flow, strong balance sheet and enhanced
core capabilities, we believe that we have turned the Company in the right
direction and are poised for growth in 2005."
The Company intends to host a conference call and webcast on Tuesday,
April 12, 2005 to present and discuss the Company's strategic plan for renewed
growth and future expectations. Conference call and webcast information will
be provided when available via a subsequent press release.
The decreases in King's revenues during the fourth quarter and the twelve
months ending December 31, 2004 in comparison to the same periods of the prior
year are attributable primarily to aggressive wholesale inventory reductions
of the Company's branded pharmaceutical products. These reductions are due to
the Company's implementation of wholesale inventory management agreements in
early 2004. Based on the Company's belief that these reductions will not be
substantially complete until the end of the first quarter of 2005, the Company
anticipates that its net sales in the current quarter could be similar to its
results in the fourth quarter of 2004.
Net revenue from branded pharmaceuticals, including royalty income,
totaled $308.0 million for the fourth quarter of 2004, a 7% decrease from the
fourth quarter of 2003, and equaled $1.15 billion for the year ending December
31, 2004, a 14% decrease from the prior year. Meridian, King's wholly-owned
subsidiary, contributed $27.2 million to the Company's net revenue in the
fourth quarter of 2004 and $123.3 million during the year ending December 31,
2004. During the fourth quarter and year ending December 31, 2004, net
revenue from contract manufacturing and other equaled $7.5 million and $26.0
million, respectively.
Altace(R) net sales equaled $91.7 million in the fourth quarter of 2004,
compared to $116.4 million during the fourth quarter of 2003. As of year-end
2004, the Company estimates that wholesale inventory levels of Altace(R)
equaled approximately 1.7 months of end-user demand. Although the Company
anticipates some continued wholesale inventory reductions of Altace(R) during
the first quarter of 2005 at a level similar to that observed during the
fourth quarter of 2004, it believes that net sales of this product during the
following three quarters of 2005 should more closely reflect demand-based
sales.
Based on the unique indication, positive clinical data and prescription
trends for Altace(R), King anticipates continued prescription growth for this
product during 2005. The differentiating indication for Altace(R) is based on
evidence from the heart outcome prevention evaluation ("HOPE") clinical trial,
which proved that Altace(R) 10mg reduced the risk of cardiovascular events
such as heart attack, stroke and cardiovascular death in high risk patients,
55 years of age or older.
Net sales of Skelaxin(R) totaled $81.1 million during the fourth quarter
ending December 31, 2004 compared to $55.9 million in the fourth quarter of
2003. As of year-end 2004, the Company estimates that wholesale inventory
levels of Skelaxin(R) equaled approximately 1.1 months of end-user demand.
The Company believes that net sales of this product during 2005 should more
closely reflect demand-based sales.
Net sales of Thrombin-JMI(R) (thrombin, topical, bovine, USP) totaled
$50.5 million during the fourth quarter of 2004, compared to $32.8 million
during the same period of the prior year. Thrombin-JMI(R) net sales increased
24% to $174.6 million for the twelve months ending December 31, 2004, compared
to $140.4 million during 2003. King has filed a Prior Approval Supplemental
Application with the U.S. Food and Drug Administration seeking approval for
filling, finishing, and testing Thrombin-JMI at its Rochester, Michigan
facility. Accordingly, the Company anticipates expanded fill and finish
capacity for Thrombin-JMI(R) later this year.
Sonata(R) net sales equaled $11.0 million during the fourth quarter ending
December 31, 2004 compared to $35.3 million during the same period of the
prior year. As of year-end 2004, the Company estimates that wholesale
inventory levels of Sonata(R) equaled approximately 1.7 months of end-user
demand. Although the Company anticipates some continued wholesale inventory
reductions during the first quarter of 2005, it believes that net sales of the
product during the final three quarters of 2005 should more closely reflect
demand-based sales.
Levoxyl(R) (levothyroxine sodium tablets, USP) net sales totaled $21.3
million during the fourth quarter of 2004, a 45% decrease from $38.6 million
during the fourth quarter of 2003. Net sales of Levoxyl(R) decreased 16% to
$104.8 million for the twelve months ending December 31, 2004, compared to
$125.1 million for the same period of the prior year. The decrease was
primarily due to the entry of multiple generic competitors in June 2004. As
of year-end 2004 the Company estimates that wholesale inventory levels of
Levoxyl(R) equaled approximately 1.8 months of current end-user demand.
A full seven months after the entry of generic competition, Levoxyl(R) has
maintained approximately 65% of its prescription base prior to the onset of
generic competition, which is well-ahead of the percentage most branded
pharmaceutical products typically retain. The Company believes that this is
because Levoxyl(R) is recognized to have a narrow therapeutic index with
significant clinical consequences of excessive or inadequate treatment,
combined with an aggressive program of discounts and rebates. In a joint
statement, The American Thyroid Association, The Endocrine Society, and the
American Association of Clinical Endocrinologists raised concerns regarding
patients being switched among a number of levothyroxine sodium preparations.
Accordingly, these organizations advised physicians caring for patients on
levothyroxine sodium therapy to encourage their patients to ask to remain on
their current levothyroxine sodium preparation. This joint statement is
available at http://www.endo-society.org .
Royalty revenues, derived primarily from Adenoscan(R) (adenosine), totaled
$20.3 million during the fourth quarter ending December 31, 2004, compared to
$20.5 million during the fourth quarter of 2003. During the twelve months
ending December 31, 2004, royalty revenues increased 15% to $78.5 million,
compared to $68.4 million during the prior year.
King recently decided to discontinue its program to develop a modified
release formulation of Sonata(R) ("Sonata(R) MR"). Pursuant to an agreement
between the Company and Elan Corporation, plc, Elan commenced a Phase II
clinical trial program for the purpose of developing Sonata(R) MR in March
2004. However, the Phase II clinical trial results showed that the Sonata(R)
MR formulations Elan developed did not meet contractually required
specifications. After several months of review, the Company concluded that it
was not possible for Elan to develop a Sonata(R) MR formulation meeting the
contractually required specifications. Accordingly, the Company decided to
discontinue the Sonata(R) MR clinical program and intends to terminate the
agreement with Elan. Although the Company believes it is entitled to terminate
the agreement, it can provide no assurance that it will effectively terminate
the agreement and, if it does, under what terms.
Based on the Company's previously announced decision to restate its
financial results for 2002, 2003 and the first two quarters of 2004, all
amounts referenced herein for 2003 reflect the relevant amounts on a restated
basis. Since the Company has not previously provided its final financial
results for the third quarter and nine-months ending September 30, 2004,
schedules setting for such results are provided below.
As a result of the loss of certain finance personnel, the challenges of
hiring new personnel while a merger was pending and the resource requirements
to address the restatement of King's financial statements described above, the
Company has concluded that as of December 31, 2004, it did not maintain
effective controls over the period-end financial reporting process because the
Company did not have a sufficient number of finance and accounting resources
performing supervisory review and monitoring activities.
Although this deficiency resulted in certain errors during 2004 that were
not detected by the period-end monitoring activities, it did not result in any
audit adjustments or material misstatements of the Company's financial
statements as of year-end. However, the significance of a deficiency in
internal control over financial reporting depends on the potential for a
misstatement, not on whether a misstatement actually occurred. A material
weakness is defined as a significant deficiency or combination of significant
deficiencies, that results in "more than a remote likelihood" that a material
misstatement of the annual or interim financial statements will not be
prevented or detected. Considering the above, management has concluded that
as of December 31, 2004 the finance and accounting resource constraints
constituted a material weakness in supervisory review and monitoring
activities in connection with the period-end financial reporting process.
Because of this material weakness, management has concluded that the Company's
internal control over financial reporting was not effective as of December 31,
2004.
The Company is in the process of increasing the number of finance and
accounting resources performing supervisory review and monitoring activities
during the period-end financial reporting process by actively recruiting
additional managerial level finance and accounting resources.
About Altace(R)
Prescription Altace(R) is not for everyone. Altace(R) may cause swelling
of the mouth, tongue, or throat, which could cause extremely serious risk and
requires immediate medical care. There have been rare reports of low blood
sugar in patients taking Altace(R) with medicine for diabetes. Please contact
your doctor if you have symptoms of low blood sugar such as sweating or
shakiness. Common side effects include persistent dry cough, dizziness, and
light-headedness due to low blood pressure. Do not take Altace(R) during
pregnancy, as death or injury to your unborn child may result, or if you've
experienced serious side effects related to previous ACE inhibitors.
About Skelaxin(R)
Skelaxin(R) is indicated as an adjunct to rest, physical therapy, and
other measures for the relief of discomforts associated with acute, painful
musculoskeletal conditions. Skelaxin(R) does not directly relax tense skeletal
muscles in man. The most frequent reactions to Skelaxin(R) include nausea,
vomiting, gastrointestinal upset, drowsiness, dizziness, headache, and
nervousness or "irritability".
About Levoxyl(R)
Levoxyl(R) is indicated for thyroid hormone replacement or supplemental
therapy for hypothyroidism. Levoxyl(R) is contraindicated in patients with
untreated thyrotoxicosis, uncorrected adrenal insufficiency, or
hypersensitivity to any of its inactive ingredients. Adverse reactions are
primarily those of hyperthyroidism due to overdose. Use with caution in
patients with cardiovascular disease. Thyroid hormones, including Levoxyl(R),
either alone or together with other therapeutic agents, should not be used for
the treatment of obesity. In euthyroid patients, doses within the range of
daily hormonal requirements are ineffective for weight reduction. Larger doses
may produce serious or even life-threatening manifestations of toxicity,
particularly when given in association with sympathomimetic amines such as
those used for anorectic effects.
About Special Items
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, 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.
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 Forward-looking Statements
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 Company's prospects for growth;
statements pertaining to re-establishing a foundation for the Company's future
success; statements pertaining to the Company's potential development,
acquisition, and promotional activities; statements pertaining to the
Company's expectations regarding future wholesale inventory levels of its
products and reductions in such levels; statements pertaining to future
revenues generated by the Company's products; statements pertaining to the
Company's intent to better leverage its cash flow, balance sheet, and core
capabilities; statements pertaining to the Company's intent to terminate its
contract with Elan; statements pertaining to the Company's planned expansion
of production capacity for Thrombin-JMI(R); and statements pertaining to the
Company's anticipated conference call and webcast to discuss its strategic
plan. 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 actual results to
differ materially from the forward-looking statements include: dependence on
King's and Wyeth Pharmaceuticals' ability to successfully market AltaceR 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 the future level of demand for and net sales
of King's branded pharmaceutical products, in particular, Altace(R), Thrombin-
JMI(R), Sonata(R), Skelaxin(R) and Levoxyl(R); dependence on the successful
marketing and sales of King's products, including, but not limited to,
Altace(R), Thrombin-JMI(R), Sonata(R), Skelaxin(R) and Levoxyl(R); dependence
of the future effect of generic substitution for Levoxyl(R); dependence on
royalty revenues from Adenoscan(R); dependence on management of King's growth
and integration of its acquisitions; dependence on the extent to which the
Office of the Inspector General ("OIG") of the Department of Health and Human
Services 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 the actual outcome of the ongoing investigations
of the Company by the U.S. Securities and Exchange Commission ("SEC") and OIG;
dependence on whether King is able to prevail in pending private plaintiff
securities litigation; dependence on the extent to which any governmental
sanctions are imposed due to King's underpayment of amounts due under Medicaid
and other governmental pricing programs; dependence on King's ability to
continue to acquire branded products, including products in development;
dependence on the Company's ability to terminate its development contract with
Elan and, if so, on what terms; 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; dependence on the successful
development and commercial acceptance of PT-141; dependence on King's ability
to successfully market PT-141 once approved; dependence on the
unpredictability of the duration and results of the U. S. Food and Drug
Administration's ("FDA") review of Investigation New Drug applications
("IND"), New Drug Applications ("NDA"), and Abbreviated New Drug Applications
("ANDA") and/or the review of other regulatory agencies worldwide; dependence
on King's ability to maintain effective patent protection for AltaceR 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 attempt to challenge the
enforceability of patents related to Skelaxin(R); dependence on whether
Skelaxin(R) continues as an exclusive product; dependence on King's ability to
successfully defend against any attempt to challenge the enforceability of
patents relating to its 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 King's customers order
pharmaceutical products in excess of normal quantities during any quarter
which could cause the Company's sales of branded pharmaceutical products to be
lower in a subsequent quarter than they would otherwise have been; dependence
of the accuracy of King's estimate of wholesale inventory levels of its
products; dependence on the extent to which Inventory Management Agreements
facilitate effective management of wholesale channel inventories of the
Company's products and the accuracy of information provided to the Company
pursuant to such agreements and by other third parties; 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 the Company's 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 the Company's growth
strategies on King's financial and other projections; dependence on King's
compliance with FDA and other government regulations that relate to the
Company's business; dependence on the Company's ability to host its conference
call and webcast discussing its strategic plan as currently scheduled; and
dependence on changes in general economic and business conditions; changes in
current pricing levels; changes in federal and state laws and regulations;
changes in competition; unexpected changes in technologies and technological
advances; 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 ending December 31, 2004 which is 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 BALANCE SHEET
(in thousands, except share data)
December 31, September 30, December 31,
2004 2004 2003 *
ASSETS
Current assets:
Cash, cash equivalents and
marketable securities $342,086 $248,151 $146,053
Restricted cash 97,730 113,685 133,969
Marketable Securities 16,498 16,217 -
Accounts receivable, net 180,963 245,982 246,417
Inventory 274,412 244,371 260,886
Deferred income taxes 153,979 179,911 148,479
Prepaid expenses and other assets 61,395 52,582 30,036
Assets related to discontinued
operations - 717 4,012
Total current assets 1,127,063 1,101,616 969,852
Property, plant and equipment, net 280,731 279,223 257,659
Intangible assets, net 1,285,961 1,318,616 1,552,492
Goodwill 121,152 121,355 121,355
Deferred income tax assets 92,931 91,116 19,154
Other assets 16,318 13,725 76,517
Assets related to discontinued
operations - 25,400 204,501
Total assets $2,924,156 $2,951,051 $3,201,530
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $92,920 $58,345 $81,648
Accrued expenses 596,010 644,402 566,704
Income taxes payable - 20,270 79,641
Current portion of long term debt - - 97
Total current liabilities 688,930 723,017 728,090
Long-term debt:
Convertible Debentures 345,000 345,000 345,000
Other long-term liabilities 41,436 49,602 123,949
Total liabilities 1,075,366 1,117,619 1,197,039
Shareholders' equity:
Common shares no par value,
300,000,000 shares authorized,
241,645,606 and 241,1908,852
shares issued and outstanding,
respectively 1,210,647 1,210,190 1,205,970
Retained earnings 637,120 622,392 797,408
Other comprehensive income 1,023 850 1,113
Total shareholders' equity 1,848,790 1,833,432 2,004,491
Total liabilities and
shareholders' equity $2,924,156 $2,951,051 $3,201,530
* Restated
KING PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2004 2003 * 2004 2003 *
(Unaudited) (Unaudited)
REVENUES:
Total revenues $342,619 $365,985 $1,304,364 $1,492,789
OPERATING COSTS AND
EXPENSES:
Cost of revenues 86,850 90,840 339,450 345,423
Excess purchase
commitment - 33,959 8,902 33,959
Writeoff of acquisition
related inventory
step- up/recall - - 4,586 6,459
Total cost of
revenues 86,850 124,799 352,938 385,841
Selling, general and
administrative 109,629 81,978 385,002 263,167
Special legal and
professional fees 5,609 3,778 19,773 25,986
Legal settlement 5,000 2,931 5,000 2,931
Transaction costs 3,149 - 9,062 -
Medicaid related charge - - 65,000 -
Co-promotion fees 29,357 34,577 111,604 198,498
Total selling,
general, and
administrative 152,744 123,264 595,441 490,582
Depreciation and
amortization 45,488 38,544 162,115 113,745
Research and development 18,158 14,591 67,939 44,078
Research and development
- In-process upon
acquisition (845) 1,000 16,300 194,000
Intangible asset
impairment 17,336 13,646 149,592 124,616
Restructuring charges - - 10,827 -
Special gains on
disposition - (1,713) (9,524) (12,025)
Total operating
costs and expenses 319,731 314,131 1,345,628 1,340,837
OPERATING INCOME (LOSS) 22,888 51,854 (41,264) 151,952
OTHER (EXPENSES) INCOME:
Interest expense (3,070) (3,259) (12,588) (13,396)
Interest income 2,715 1,120 5,974 6,849
Valuation benefit
(charge) - convertible
notes receivable - (6,401) (2,887) 18,551
Loss on Novavax
investment - - (6,520) -
Other expenses (574) (495) (749) (629)
Total other
(expenses) income (929) (9,035) (16,770) 11,375
INCOME(LOSS) FROM
CONTINUING OPERATIONS
BEFORE INCOME TAXES 21,959 42,819 (58,034) 163,327
Income tax expense
(benefit) 6,961 11,999 (7,412) 65,884
INCOME (LOSS) FROM
CONTINUING OPERATIONS 14,998 30,820 (50,622) 97,443
DISCONTINUED OPERATIONS
Loss from discontinued
operations, including
expected loss on
disposal (441) (2,399) (172,750) (8,771)
Income tax benefit (170) (893) (63,084) (3,282)
Total loss from
discontinued
operations (271) (1,506) (109,666) (5,489)
NET INCOME (LOSS) $14,727 $29,314 $(160,288) $91,954
Basic income (loss) per
common share $0.06 $0.12 $(0.66) $0.38
Diluted income (loss) per
common share $0.06 $0.12 $(0.66) $0.38
Shares used in basic net
income (loss) per share 241,666 241,154 241,475 240,989
Shares used in diluted net
income (loss) per share 241,808 241,608 241,475 241,527
* Restated
KING PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
EXCLUDING SPECIAL ITEMS
(in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2004 2003 * 2004 2003 *
(Unaudited) (Unaudited)
REVENUES:
Total revenues $342,619 $365,985 $1,304,364 $1,492,789
OPERATING COSTS AND
EXPENSES:
Cost of revenues 86,850 90,840 339,450 345,423
Selling, general and
administrative 109,629 81,978 385,002 263,167
Co-promotion fees 29,357 34,577 111,604 198,498
Total selling,
general, and
administrative 138,986 116,555 496,606 461,665
Depreciation and
amortization 45,488 38,544 162,115 113,745
Research and development 18,158 14,591 67,939 44,078
Total operating
costs and expenses 289,482 260,530 1,066,110 964,911
OPERATING INCOME 53,137 105,455 238,254 527,878
OTHER (EXPENSES) INCOME:
Interest expense (3,070) (3,259) (12,588) (13,396)
Interest income 2,715 1,120 5,974 6,849
Other expenses (574) (495) (749) (629)
Total other
expenses (929) (2,634) (7,363) (7,176)
INCOME BEFORE INCOME TAXES 52,208 102,821 230,891 520,702
Income tax expense 18,426 35,046 73,323 187,598
NET INCOME $33,782 $67,775 $157,568 $333,104
Basic income per common
share $0.14 $0.28 $0.65 $1.38
Diluted income per common
share $0.14 $0.28 $0.65 $1.38
Shares used in basic net
income per share 241,666 241,154 241,475 240,989
Shares used in diluted net
income per share 241,808 241,608 241,475 241,527
* Restated
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 December 31, 2004
EPS
Net income, excluding special charges $33,782
Diluted income per common share,
excluding special items $0.14
SPECIAL ITEMS:
Excess purchase commitment (cost of
goods sold) - -
Writeoff of acquisition related
inventory step-up/recall (cost of
goods sold) - -
Special legal and professional
fees (selling, general, and
administrative) (5,609) (0.02)
Legal Settlement (5,000) (0.02)
In-process research and
development (other operating
costs and expenses) 845 0.00
Medicaid related charge(other
operating costs and expenses) - -
Merger related costs (other
operating costs and expenses) (3,149) (0.01)
Intangible asset impairment (other
operating costs and expenses) (17,336) (0.07)
Restructuring charges (other
operating costs and expenses) - -
Special gains on disposition
(other operating costs and expenses) - -
Valuation charge - convertible
notes receivable (other expenses) - -
Loss on Novavax investment - -
Loss from discontinued operations (441) (0.00)
Income tax benefit 11,635 0.04
Net income (loss) $14,727
Diluted income (loss) per common
share, as reported under GAAP $0.06
Three Months Ending December 31, 2003
EPS
Net income, excluding special charges $67,775
Diluted income per common share,
excluding special items $0.28
SPECIAL ITEMS:
Excess purchase commitment (cost of
goods sold) (33,959) (0.14)
Writeoff of acquisition related
inventory step-up/recall (cost of
goods sold) - -
Special legal and professional
fees (selling, general, and
administrative) (3,778) (0.02)
Legal Settlement (2,931) (0.01)
In-process research and
development (other operating
costs and expenses) (1,000) (0.00)
Intangible asset impairment (other
operating costs and expenses) (13,646) (0.06)
Special gains on disposition
(other operating costs and expenses) 1,713 0.01
Valuation benefit - convertible
notes receivable (other income) (6,401) (0.03)
Loss from discontinued operations (2,399) (0.01)
Income tax (expense) benefit 23,940 0.10
Net income $29,314 *
Diluted income per common share, as
reported under GAAP $0.12 *
* Restated
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:
Twelve Months Ending December 31, 2004
EPS
Net income, excluding special charges $157,568
Diluted income per common share,
excluding special items $0.65
SPECIAL ITEMS:
Excess purchase commitment (cost of
goods sold) (8,902) (0.04)
Writeoff of acquisition related
inventory step-up/recall (cost of
goods sold) (4,586) (0.02)
Special legal and professional fees
(selling, general, and
administrative) (19,773) (0.08)
Legal Settlement (5,000) (0.02)
In-process research and development
(other operating costs and
expenses) (16,300) (0.07)
Medicaid related charge(other
operating costs and expenses) (65,000) (0.27)
Merger related costs (other
operating costs and expenses) (9,062) (0.04)
Intangible asset impairment (other
operating costs and expenses) (149,592) (0.62)
Restructuring charges (other
operating costs and expenses) (10,827) (0.04)
Special gains on disposition (other
operating costs and expenses) 9,524 0.04
Valuation charge - convertible notes
receivable (other expenses) (2,887) (0.01)
Loss on Novavax investment (6,520) (0.03)
Loss from discontinued operations (172,750) (0.72)
Income tax benefit 143,819 0.61
Net income (loss) $(160,288)
Diluted income (loss) per common
share, as reported under GAAP $(0.66)
Twelve Months Ending December 31, 2003
EPS
Net income, excluding special charges $333,104
Diluted income per common share,
excluding special items $1.38
SPECIAL ITEMS:
Excess purchase commitment (cost of
goods sold) (33,959) (0.14)
Writeoff of acquisition related
inventory step-up/recall (cost of
goods sold) (6,459) (0.03)
Special legal and professional fees
(selling, general, and
administrative) (25,986) (0.11)
Legal Settlement (2,931) (0.01)
In-process research and development
(other operating costs and
expenses) (194,000) (0.80)
Intangible asset impairment (other
operating costs and expenses) (124,616) (0.52)
Special gains on disposition (other
operating costs and expenses) 12,025 0.05
Valuation benefit - convertible
notes receivable (other income) 18,551 0.08
Loss from discontinued operations (8,771) (0.04)
Income tax (expense) benefit 124,996 0.52
Net income $91,954 *
Diluted income per common
share, as reported under GAAP * $0.38 *
* Restated
KING PHARMACEUTICALS, INC.
SUMMARY RECONCILIATION OF SPECIAL ITEMS
FOR THE FOURTH QUARTER ENDED DECEMBER 31, 2004
AND FOURTH QUARTER ENDED DECEMBER 31, 2003
King recorded special items during the fourth quarter ending December 31,
2004 which resulted in a net charge of $30.6 million, or $19.1 million net of
tax. More specifically, special items during the fourth quarter of 2004
include the following:
- a $17.3 million charge primarily related to the Company's decision to
discontinue the Sonata(R) MR clinical development program;
- a $5.6 million charge due to professional fees associated with the
previously announced ongoing investigations of the Company by the SEC
and OIG;
- a $5.0 million charge as estimated settlement costs for the Company's
plan to terminate the Sonata(R) MR development agreement;
- a $3.1 million charge for professional fees and expenses associated
with the Company's terminated merger agreement with Mylan Laboratories
Inc.;
- a $0.4 million charge reflecting a loss from discontinued operations;
and
- income in the amount of $0.8 million primarily due to miscellaneous in-
process research and development credit.
During the quarter ending December 31, 2003, King recorded special items
resulting in a net charge of $62.4 million, or $38.5 million net of tax,
primarily due to an increase in the accrual for Lorabid(R) (loracarbef)
purchase commitments in excess of expected demand, the write-off of certain
unutilized intangible assets, and an increase in the valuation allowance for
Novavax, Inc. convertible notes which were then held by the Company.
KING PHARMACEUTICALS, INC.
SUMMARY RECONCILIATION OF SPECIAL ITEMS
FOR TWELVE MONTHS ENDED DECEMBER 31, 2004
AND TWELVE MONTHS ENDED DECEMBER 31, 2003
King recorded special items during the twelve months ending December 31,
2004 which resulted in a net charge of $461.8 million, or $317.9 million net
of tax. More specifically, special items during 2004 consisted of the
following:
- a $172.8 million charge to reflect the loss from discontinued
operations;
- intangible asset impairment charges totaling $149.6 million primarily
related to the Company's decision to discontinue the Sonata(R) MR
clinical development program;
- a $70.0 million charge primarily related to the Company's estimate of
the interest, costs, fines, penalties and all other amounts in excess
of the $65.4 million King previously accrued for purposes of resolving
the ongoing investigations of the Company by the SEC and OIG;
- a charge of $19.8 million primarily related to professional fees
associated with ongoing investigations involving the SEC and OIG;
- a $16.3 million charge related to in-process research and development
associated with King's entry into a strategic alliance with Palatin
Technologies, Inc. to jointly develop and commercialize PT-141;
- a $10.8 million charge primarily due to the relocation of the Company's
sales and marketing operations from Bristol, Tennessee to Princeton,
New Jersey and separation agreements with several executives;
- a $9.1 million charge for professional fees and expenses primarily
associated with the Company's terminated merger agreement with Mylan;
an $8.9 million charge primarily related to excess purchase commitments
associated with Lorabid(R);
- a $6.5 million charge to reflect a decline in the fair value, which is
other than temporary, of the Company's equity investment in Novavax;
- a $4.6 million charge primarily related to the recall of certain lots
of Levoxyl(R);
- a charge of $2.9 million due to an increase in the valuation allowance
for Novavax convertible notes previously held by the Company; and
- income in the amount of $9.5 million due to gains resulting from the
sale of all rights to Estrasorb(R) and some of the Company's smaller
products.
During the twelve months ending December 31, 2003, King recorded special
items resulting in a net charge of $366.1 million, or $241.2 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 on June 12, 2003 and Meridian on January 8,
2003, and an intangible asset impairment charge for Florinef(R)
(fludrocortisone acetate).
KING PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 * 2004 2003 *
(Unaudited) (Unaudited)
REVENUES:
Total revenues $394,684 $424,813 $961,745 $1,126,804
OPERATING COSTS AND
EXPENSES:
Cost of revenues 88,696 89,327 252,599 254,583
Excess purchase
commitment 8,726 - 8,902 -
Writeoff of acquisition
related inventory step-
up/recall - 663 4,586 6,460
Total cost of
revenues 97,422 89,990 266,087 261,043
Selling, general and
administrative 94,331 78,920 275,372 181,188
Special legal and
professional fees 3,479 7,912 14,165 22,208
Medicaid related charge - - 65,000 -
Transaction costs 2,787 - 5,913 -
Co-promotion fees 39,301 46,741 82,247 163,922
Total selling,
general, and
administrative 139,898 133,573 442,697 367,318
Depreciation and
amortization 38,843 36,926 116,627 75,200
Research and development 16,280 8,758 49,780 29,487
Research and development
- - In-process upon
acquisition 17,145 - 17,145 193,000
Intangible asset
impairment 97,320 - 132,257 110,970
Restructuring charges 4,674 - 10,828 -
Special gains on
disposition (5,245) (10,312) (9,524) (10,312)
Total operating
costs and expenses 406,337 258,935 1,025,897 1,026,706
OPERATING INCOME (LOSS) (11,653) 165,878 (64,152) 100,098
OTHER (EXPENSES) INCOME:
Interest expense (3,147) (3,669) (9,518) (10,138)
Interest income 1,124 1,037 3,259 5,730
Valuation (charge)
benefit - convertible
notes receivable - 9,338 (2,887) 24,952
Write down of investment (6,520) - (6,520) -
Other expenses (640) (36) (175) (134)
Total other
(expenses) income (9,183) 6,670 (15,841) 20,410
INCOME(LOSS) FROM
CONTINUING OPERATIONS
BEFORE INCOME TAXES (20,836) 172,548 (79,993) 120,508
Income tax expense (17,197) 63,070 (14,372) 53,884
INCOME (LOSS) FROM
CONTINUING OPERATIONS (3,639) 109,478 (65,621) 66,624
DISCONTINUED OPERATIONS
Loss from discontinued
operations, including
expected loss on
disposal (6,996) (5,021) (172,310) (6,373)
Income tax benefit (2,621) (1,908) (62,915) (2,389)
Total loss from
discontinued
operations (4,375) (3,113) (109,395) (3,984)
NET INCOME (LOSS) $(8,014) $106,365 $(175,016) $62,640
Basic income (loss) per
common share $(0.03) $0.44 $(0.72) $0.26
Diluted income (loss) per
common share $(0.03) $0.44 $(0.72) $0.26
Shares used in basic net
income (loss) per share 241,551 241,066 241,411 240,932
Shares used in diluted net
income (loss) per share 241,551 241,583 241,411 241,499
* Restated
KING PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
EXCLUDING SPECIAL ITEMS
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 * 2004 2003 *
(Unaudited) (Unaudited)
REVENUES:
Total revenues $394,684 $424,813 $961,745 $1,126,804
OPERATING COSTS AND EXPENSES:
Cost of revenues 88,696 89,327 252,599 254,583
Selling, general and
administrative 94,331 78,920 275,372 181,188
Co-promotion fees 39,301 46,741 82,247 163,922
Total selling, general,
and administrative 133,632 125,661 357,619 345,110
Depreciation and amortization 38,843 36,926 116,627 75,200
Research and development 16,280 8,758 49,780 29,487
Total operating costs
and expenses 277,451 260,672 776,625 704,380
OPERATING INCOME 117,233 164,141 185,120 422,424
OTHER (EXPENSES) INCOME:
Interest expense (3,147) (3,669) (9,518) (10,138)
Interest income 1,124 1,037 3,259 5,730
Other expenses (640) (36) (175) (134)
Total other expenses (2,663) (2,668) (6,434) (4,542)
INCOME BEFORE INCOME TAXES 114,570 161,473 178,686 417,882
Income tax expense 31,966 59,021 54,897 152,552
NET INCOME $82,604 $102,452 $123,789 $265,330
Basic income per common share $0.34 $0.42 $0.51 $1.10
Diluted income per common share $0.34 $0.42 $0.51 $1.10
Shares used in basic net income
per share 241,551 241,066 241,411 240,932
Shares used in diluted net
income per share 241,759 241,583 241,756 241,499
* Restated
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 September 30,
2004
EPS
Net income, excluding special charges $82,604
Diluted income per common share,
excluding special items $0.34
SPECIAL ITEMS:
Excess purchase commitment (cost of
goods sold) (8,726) (0.04)
Writeoff of acquisition related
inventory step-up/recall (cost of
goods sold) - -
Special legal and professional fees
(selling, general, and
administrative) (3,479) (0.01)
In-process research and development
(other operating costs and
expenses) (17,145) (0.07)
Medicaid related charge(other
operating costs and expenses) - -
Transaction costs (other operating
costs and expenses) (2,787) (0.01)
Intangible asset impairment (other
operating costs and expenses) (97,320) (0.40)
Restructuring charges (other
operating costs and expenses) (4,674) (0.02)
Special gains on disposition (other
operating costs and expenses) 5,245 0.02
Valuation charge - convertible
notes receivable (other expenses) - -
Write down of investment (6,520) (0.03)
Loss from discontinued operations (6,996) (0.03)
Income tax benefit 51,784 0.22
Net income (loss) $(8,014)
Diluted loss per common share, as
reported under GAAP $(0.03)
Three Months Ending September 30,
2003
EPS
Net income, excluding special charges $102,452
Diluted income per common share,
excluding special items $0.42
SPECIAL ITEMS:
Writeoff of acquisition related
inventory step-up/recall (cost of
goods sold) (663) (0.00)
Special legal and professional fees
(selling, general, and
administrative) (7,912) (0.03)
In-process research and development
(other operating costs and
expenses) - -
Intangible asset impairment (other
operating costs and expenses) - -
Special gains on disposition (other
operating costs and expenses) 10,312 0.04
Valuation benefit - convertible
notes receivable (other income) 9,338 0.04
Loss from discontinued operations (5,021) (0.02)
Income tax (expense) benefit (2,141) (0.01)
Net income $106,365 *
Diluted income per common share, as
reported under GAAP $0.44
* Restated
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:
Nine Months Ending September 30,
2004
EPS
Net income, excluding special charges $123,789
Diluted income per common share,
excluding special items $0.51
SPECIAL ITEMS:
Excess purchase commitment (cost of
goods sold) (8,902) (0.04)
Writeoff of acquisition related
inventory step-up/recall (cost of
goods sold) (4,586) (0.02)
Special legal and professional
fees (selling, general, and
administrative) (14,165) (0.06)
In-process research and
development (other operating
costs and expenses) (17,145) (0.07)
Medicaid related charge(other
operating costs and expenses) (65,000) (0.27)
Transaction costs (other operating
costs and expenses) (5,913) (0.02)
Intangible asset impairment (other
operating costs and expenses) (132,257) (0.55)
Restructuring charges (other
operating costs and expenses) (10,828) (0.04)
Special gains on disposition
(other operating costs and
expenses) 9,524 0.04
Valuation charge - convertible
notes receivable (other expenses) (2,887) (0.01)
Write down of investment (6,520) (0.03)
Loss from discontinued operations (172,310) (0.71)
Income tax benefit 132,184 0.55
Net income (loss) $(175,016)
Diluted loss per common share, as
reported under GAAP $(0.72)
Nine Months Ending September 30,
2003
EPS
Net income, excluding special charges $265,330
Diluted income per common share,
excluding special items $1.10
SPECIAL ITEMS:
Writeoff of acquisition related
inventory step-up/recall (cost of
goods sold) (6,460) (0.03)
Special legal and professional
fees (selling, general, and
administrative) (22,208) (0.09)
In-process research and
development (other operating
costs and expenses) (193,000) (0.80)
Intangible asset impairment (other
operating costs and expenses) (110,970) (0.46)
Special gains on disposition
(other operating costs and
expenses) 10,312 0.04
Valuation benefit - convertible
notes receivable (other income) 24,952 0.10
Loss from discontinued operations (6,373) (0.02)
Income tax (expense) benefit 101,057 0.42
Net income $62,640 *
Diluted income per common share, as
reported under GAAP $0.26
* Restated
KING PHARMACEUTICALS, INC.
SUMMARY RECONCILIATION OF SPECIAL ITEMS
FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 2004
AND THE THIRD QUARTER ENDED SEPTEMBER 30, 2003
King recorded special items during the third quarter ending September 30,
2004, the net of which resulted in a charge totaling $142.4 million, or $90.6
million net of tax. More specifically, special items during the third quarter
of 2004 include:
- a $97.3 million charge primarily related to the Company's decision to
discontinue the Sonata(R) MR clinical development program;
- a charge of $17.1 million for in-process research and development
associated with King's entry into a strategic alliance with Palatin;
- an $8.7 million charge primarily related to excess purchase commitments
for Lorabid(R);
- a charge of $7.0 million resulting from discontinued operations;
- a $6.5 million charge to reflect a decline in the fair value, which is
other than temporary, of its equity investment in Novavax;
- a charge of $4.7 million primarily associated with the Company's
decision to discontinue some relatively insignificant products
associated with the Company's Meridian business;
- a charge of $2.8 million for professional fees and expenses associated
with the Company's terminated merger agreement with Mylan;
- a $3.5 million charge primarily for professional fees associated with
ongoing investigations of the Company by the SEC and OIG; and
- income in the amount of $5.2 million primarily due to a gain on the
sale of all rights to Estrasorb(R) and all convertible notes of Novavax
previously held by the Company.
During the quarter ending September 30, 2003, King recorded special items
resulting in net revenue of $6.1 million, or $3.9 million net of tax,
primarily due to a gain on the sale of the Company's animal health products,
income resulting from a decrease in the valuation allowance for Novavax
convertible notes then held by the Company, and a charge for professional fees
associated with ongoing investigations of the Company by the SEC and OIG.
KING PHARMACEUTICALS, INC.
SUMMARY RECONCILIATION OF SPECIAL ITEMS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
AND THE NINE MONTHS ENDED SEPTEMBER 30, 2003
King recorded special items during the nine months ending September 30,
2004, the net of which resulted in a charge totaling $431.0 million, or $298.8
million net of tax. More specifically, special items during the nine months
of 2004 include:
- a $172.3 million charge to reflect the loss from discontinued
operations;
- a $132.3 million intangible asset impairment primarily related to the
Company's decision to discontinue the Sonata(R) MR clinical development
program;
- a $65.0 million charge primarily related to the Company's estimate of
the interest, costs, fines, penalties and all other amounts in excess
of the $65.4 million King previously accrued for purposes of resolving
the ongoing investigations of the Company by the SEC and OIG;
- a $17.1 million charge related to in-process research and development
associated with King's entry into a strategic alliance with Palatin to
jointly develop and commercialize PT-141;
- a $14.2 million charge primarily related to professional fees
associated with ongoing investigations involving the SEC and OIG;
- a $10.8 million charge primarily due to the relocation of the Company's
sales and marketing operations from Bristol, Tennessee to Princeton,
New Jersey and separation agreements with several executives;
- an $8.9 million charge primarily related to excess purchase commitments
for Lorabid(R);
- a $6.5 million charge to reflect a decline in the fair value, which is
other than temporary, of its equity investment in Novavax;
- a charge of $5.9 million for professional fees and expenses associated
with the Company's terminated merger agreement with Mylan;
- a $4.6 million charge primarily related to the recall of certain lots
of Levoxyl(R);
- a charge of $2.9 million due to an increase in the valuation allowance
for Novavax convertible notes previously held by the Company; and
- income in the amount of $9.5 million due to gains resulting from the
sale of all rights to Estrasorb(R) and some of the Company's smaller
products.
During the nine month period ending September 30, 2003, King recorded
special items resulting in a net charge of $303.7 million, or $202.7 million
net of tax, primarily due to charges for acquired in-process research and
development, professional fees associated with ongoing government
investigations of the Company, a product recall, a decrease in the valuation
allowance for Novavax convertible notes then held by the Company, and an
intangible asset impairment charge.
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, Executive Vice President,
Corporate Affairs, +1-423-989-8125, or David E. Robinson, Senior
Director, Corporate Affairs, +1-423-989-7045, both of King
Pharmaceuticals, Inc.
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