Restatements Due to Understatement of Accounts Receivable Reserves
SPRING VALLEY, N.Y., July 5 /PRNewswire-FirstCall/ -- Par
Pharmaceutical Companies, Inc. (NYSE: PRX) today announced that an internal
review of its trade accounts receivable balances revealed accounting errors
that will result in the restatement of financial results for fiscal years
2004 and 2005 and the first quarter of 2006. This restatement will also
delay the filing of Par's second quarter Form 10-Q with the U.S. Securities
and Exchange Commission (SEC). The restatement is due to an understatement
of accounts receivable reserves which resulted primarily from delays in
recognizing customer credits and uncollectible customer deductions.
The company expects that the effect of the restatement adjustments to
its accounts receivable will be to reduce revenues by an amount up to $55
million over the applicable periods, prior to any potential recoveries.
Because Par has profit sharing arrangements with a number of its business
partners, the overstatement of revenues has resulted in Par overpaying its
business partners in some instances. Accordingly, the company will attempt
to recover from those business partners a share of profits from products
included in the overstated revenues. However, Par is unable to estimate at
this time the amount of the overstated revenues that may be recovered.
While the reduction in revenues will materially reduce reported earnings
from the affected periods, the impact on specific prior periods is yet to
be determined. In addition, Par will write-off inventory in an amount up to
$15 million. The company is in the process of determining whether any of
this amount should be recorded in prior period financial statements. The
write-off results from physical inventory procedures as well as a change in
inventory valuation methodology for slow- moving inventory.
The company does not expect the restatement to have an impact on the
ongoing strength of its sales and operations. Par currently has cash, cash
equivalents and available for sale securities on hand totaling $183 million
and there has been no increase in the company's borrowings during the
second quarter. The company expects to remain in full compliance with all
debt covenants throughout the restatement process.
On March 16, 2006, Par began strengthening its finance function with
the appointment of Gerard A. Martino to the position of executive vice
president and chief financial officer, and the hiring of other key finance
staff. The accounting errors were discovered by the company following these
appointments. Based on the company's investigation to date, nothing has
come to our attention to indicate that the errors are other than
inadvertent.
Par Financial Statements
Pending the filing by Par of its restated financial statements,
previously filed financial statements included in Forms 10-K for the fiscal
years ended December 31, 2005 and 2004, and Form 10-Q for the period ended
April 2, 2006, including Management's Report on Internal Controls on
Financial Reporting and the related reports of the company's independent
registered public accounting firm, should not be relied upon. Par expects
that full remediation of material weaknesses in its financial reporting
will require significant time and effort.
The Audit Committee of the Board of Directors of the company and Par's
management have discussed these matters with its independent registered
public accounting firm.
Due to the restatement of financial statements, Par's registration
statement on Form S-3 (File Number 333-111567), together with all exhibits
and amendments thereto, which was initially filed by the company on
December 24, 2003 (and subsequently amended), does not incorporate accurate
financial information and can no longer be used in connection with the sale
of the securities covered by the registration statement. Because the
company is no longer required to keep such registration statement
effective, Par expects to withdraw the registration statement.
The restatement impact discussed in this press release is preliminary,
unaudited and reflects restatement adjustments identified to date. This
estimate is subject to change as a result of any adjustments arising from
the restatement process and the completion of the company's investigation
and the audit of its restated financial statements by Par's independent
registered public accounting firm. The company cannot provide any assurance
that additional matters will not be identified that will require further
analysis relative to their impact on previously issued financial statements
or that the amounts involved and nature and extent of the accounting errors
may not ultimately differ materially from that described above.
Conference Call
Par has scheduled a conference call with investment analysts for
Thursday, July 6 at 8:30 am EDT to discuss today's announcement. Par
invites investors and general public to listen to a webcast of the
conference call. Access to the live webcast can be made via the company's
website at http://www.parpharm.com. A digital replay of the conference call
will be available for 30 days approximately one hour after the call. The
dial-in number for the replay is 888-286-8010 for domestic callers and
617-801-6888 for international callers. The access number is 49666708.
About Par
Par Pharmaceutical Companies, Inc. develops, manufactures and markets
generic drugs and innovative branded pharmaceuticals for specialty markets.
In 2005, Par received approval for and introduced the appetite stimulant
Megace(R) ES, its first branded pharmaceutical product. Par's Generic
Products Division is committed to providing high-quality pharmaceuticals
that are affordable and accessible to patients. Par manufactures, markets
or licenses more than 110 generic drugs. For press release and other
company information, visit http://www.parpharm.com.
Certain statements in this press release constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. To the extent any statements made in this news release contain
information that is not historical, these statements are essentially
forward- looking and are subject to risks and uncertainties, including the
extent and impact of the accounting issues, the difficulty of predicting
FDA filings and approvals, acceptance and demand for new pharmaceutical
products, the impact of competitive products and pricing, new product
development and launch, reliance on key strategic alliances, uncertainty of
patent litigation filed against us, availability of raw materials, the
regulatory environment, fluctuations in operating results and other risks
and uncertainties detailed from time to time in the Company's filings with
the Securities and Exchange Commission, such as the Company's Form 10-K,
Form 10-Q, and Form 8-K reports.
SOURCE Par Pharmaceutical Companies, Inc.
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Related links:
http://www.parpharm.com
CONTACT:
Stephen J. Mock, or Cecelia C. Heer, both of
Par Pharmaceutical Companies, Inc., +1-201-802-4000
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