BRISTOL, Tenn., Nov. 9 /PRNewswire-FirstCall/ -- King Pharmaceuticals,
Inc. (NYSE: KG) announced today that total revenues increased 31% to $518.0
million during the third quarter ended September 30, 2005 compared to $394.7
million during the third quarter of 2004. During the third quarter ended
September 30, 2005, including special items, King reported net income of
$121.9 million and diluted earnings per share of $0.50, compared to a net loss
of $8.0 million and a diluted loss per share of $0.03 in the same period of
the prior year. Excluding special items, net earnings increased 52% to $125.4
million and diluted earnings per share increased 53% to $0.52 during the third
quarter ended September 30, 2005 from net earnings of $82.6 million and
diluted earnings per share of $0.34 during the third quarter of 2004.
For the nine months ended September 30, 2005, total revenues increased 40%
to $1.35 billion from $961.7 million during the first nine months of 2004.
During the nine months ended September 30, 2005, including special items, King
reported net income of $212.4 million and diluted earnings per share of $0.88,
compared to a net loss of $175.0 million and a loss of $0.72 per diluted share
in the same period of the prior year. Excluding special items, net earnings
and diluted earnings per share increased 149% to $308.2 million and $1.27,
respectively, during the nine months ended September 30, 2005 from net
earnings of $123.8 million and diluted earnings per share of $0.51 during the
first nine months of 2004.
King recorded special items during the third quarter ended September 30,
2005 that resulted in a net charge of $5.6 million, or $3.5 million net of
tax. More specific information regarding special items is provided below.
Brian A. Markison, President and Chief Executive Officer of King, stated,
"For the second consecutive quarter, we are pleased to report record high
revenues which totaled $518.0 million during the third quarter of 2005. As
announced last week, we are also pleased to have entered into definitive
agreements that virtually resolve all of the Company's Medicaid issues. With
these accomplishments, we are focused even more intently on the successful
execution of our strategy for growth."
Net revenue from branded pharmaceuticals totaled $454.5 million during the
third quarter of 2005, a 36% increase from the third quarter of 2004. This
increase was primarily due to higher unit sales of the Company's branded
pharmaceutical products during the third quarter ended September 30, 2005 as a
result of wholesale channel inventory reductions of some of these products
during the same quarter of 2004, and a decrease in the amount of actual
returns and the accrual for future returns of the Company's branded products
in the third quarter of 2005 compared to the third quarter of 2004. This
increase was also attributable to changes in estimates resulting in a
reduction in the reserve for returns associated with branded products of
approximately $15.0 million, and a reduction in the reserve for estimated
Medicaid obligations of approximately $21.0 million. These changes in
estimates primarily benefited reported net sales of the Company's largest
selling product, Altace(R) (ramipril). The average wholesale inventory level
of the Company's key products was less than one month as of September 30, 2005
according to data obtained from King's major customers.
Altace(R) net sales equaled $174.2 million during the third quarter ended
September 30, 2005, a 38% increase from $125.9 million during the third
quarter of 2004. The changes in estimates discussed above accounted for
approximately $27.0 million of this increase and approximately $11.0 million
of the Company's co-promotion expense related to net sales of Altace(R).
Net sales of Skelaxin(R) (metaxalone) increased 92% to $115.9 million
during the third quarter of 2005 from $60.4 million during the same period of
the prior year.
Thrombin-JMI(R) (thrombin, topical, bovine, USP) net sales totaled $53.8
million during the third quarter ended September 30, 2005, compared to $52.8
million during the third quarter of 2004.
Net sales of Sonata(R) (zaleplon) equaled $19.6 million during the third
quarter of 2005, a decrease of 23% compared to $25.6 million during the same
period of the prior year.
Levoxyl(R) (levothyroxine sodium tablets, USP) net sales equaled $36.1
million during the third quarter ended September 30, 2005 compared to $23.2
million during the third quarter of 2004.
Meridian Medical Technologies, King's wholly owned subsidiary, contributed
$38.4 million of net revenue in the third quarter of 2005 compared to $33.9
million during the same period of the prior year.
Royalty revenues, derived primarily from Adenoscan(R) (adenosine), totaled
$22.3 million in the third quarter of 2005 compared to $20.3 million during
the same period of the prior year. Revenue from contract manufacturing during
the third quarter of 2005 decreased to $2.8 million from $5.7 million during
the third quarter ended September 30, 2004.
King generated cash flow from operations of $88.1 million during the third
quarter of 2005. For the nine-month period ended September 30, 2005, cash
flow from operations totaled $404.8 million.
Conference Call Information
King will conduct a conference call today to discuss the Company's
third-quarter results and other matters pertaining to its business. Interested
persons may listen to the conference call on Wednesday, November 9, 2005, at
11:00 a.m., E.S.T. by one of the following means:
Internet Webcast
Click the following link to register and then join the live event with the
same URL: http://hpbroadband.com/program.cfm?key=KingPharmaEarnings
Telephone Audio Conference
Call in to the telephone conference up to 15 minutes early:
Toll free in the United States 800-987-6057
Outside the US 785-830-1920
Passcode: HP589
Can't Make the Live Event? Listen "On-Demand"
If you are unable to participate during the live event, the call will be
archived on King's web site http://www.kingpharm.com for not less than 14 days
following the call.
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 third quarter and nine months ended
September 30, 2005 and September 30, 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 the analysis of the Company's
ongoing, underlying business and the 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.
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 successful execution of the Company's
strategy for growth; and statements pertaining to the Company's anticipated
conference call to discuss its third-quarter results. 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 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 of King's products, including, but not limited to,
Altace(R), Thrombin-JMI(R), Sonata(R), Skelaxin(R) and Levoxyl(R); dependence
on the future effect of generic substitution for Levoxyl(R); dependence on
royalty revenues from AdenoscanR; dependence on management of King's growth
and integration of its acquisitions; dependence on the execution and terms of
any additional agreements necessary to fully resolve the federal and state
Medicaid inquiries; dependence on the Company's compliance with the five-year
corporate integrity agreement with the Office of the Inspector General ("OIG")
of the Department of Health and Human Services; dependence on the final
results of any ongoing government investigations of the Company or any related
individuals; dependence on whether King is able to prevail in pending private
plaintiff securities litigation; dependence on King's ability to continue to
acquire branded products, including products in development; 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, PT-141,
and an Altace(R)/diuretic combination product; dependence on the
unpredictability of the duration and results of the U. S. Food and Drug
Administration's ("FDA") review of Investigational 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,
Skelaxin(R), Sonata(R) and Adenoscan(R) and successfully defend against any
challenge with respect to the enforceability of patents relating to the
products; dependence on whether Skelaxin(R) continues as an exclusive product;
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 on 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 strategy 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 strategy; dependence on King's
compliance with FDA and other government regulations that relate to the
Company's business; dependence on King's ability to conduct its webcast as
currently planned on November 9, 2005; 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 ended
December 31, 2004 and Form 10-Q for the second quarter ended June 30, 2005,
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 BALANCE SHEETS
(in thousands, except share data)
September 30,
2005 December 31,
ASSETS (Unaudited) 2004
Current assets:
Cash and cash equivalents $80,230 $192,656
Investments in debt securities 557,937 149,430
Restricted cash 130,400 97,730
Marketable securities 13,054 16,498
Accounts receivable, net 251,985 180,963
Inventories 218,739 274,412
Deferred income tax assets 125,335 153,979
Prepaid expenses and other current assets 67,427 61,395
Total current assets 1,445,107 1,127,063
Property, plant and equipment, net 288,740 280,731
Intangible assets, net 1,068,539 1,285,961
Goodwill 121,152 121,152
Deferred income tax assets 144,744 92,931
Other assets 29,053 16,318
Total assets $3,097,335 $2,924,156
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $58,088 $92,920
Accrued expenses 542,332 596,010
Income taxes payable 64,802 -
Total current liabilities 665,222 688,930
Long-term debt 345,000 345,000
Other liabilities 25,236 41,436
Total liabilities 1,035,458 1,075,366
Commitments and contingencies
Shareholders' equity:
Common shares no par value, 300,000,000
shares authorized, 241,785,982 and
241,706,583 shares issued and
outstanding, respectively 1,211,329 1,210,647
Retained earnings 849,529 637,120
Accumulated other comprehensive income 1,019 1,023
Total shareholders' equity 2,061,877 1,848,790
Total liabilities and
shareholders' equity $3,097,335 $2,924,156
KING PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
(Unaudited) (Unaudited)
REVENUES:
Total revenues $518,032 $394,684 $1,349,596 $961,745
OPERATING COSTS AND EXPENSES:
Cost of revenues ,
exclusive of depreciation,
amortization and
impairments shown below 92,257 88,696 257,259 252,599
Excess purchase commitment - 8,726 (1,582) 8,902
Writeoff of acquisition
related inventory step-
up/recall - - - 4,586
Total cost of revenues 92,257 97,422 255,677 266,087
Selling, general and
administrative, exclusive
of co-promotion fees 1 07,232 94,331 292,643 275,372
Special legal and
professional fees 4,406 3,479 13,268 14,165
Medicaid related charge - - - 65,000
Mylan transaction costs 466 2,787 3,898 5,913
Co-promotion fees 70,346 39,301 162,588 82,247
Total selling, general,
and administrative
expense 182,450 139,898 472,397 442,697
Depreciation and
amortization 31,352 38,843 112,698 116,627
Research and development 24,049 16,280 53,021 49,780
Research and development-
In-process upon
acquisition - 17,145 - 17,145
Intangible asset impairment - 97,320 126,923 132,257
Restructuring charges 597 4,674 2,603 10,828
Gain on sale of products (20) (5,245) (1,458) (9,524)
Total operating costs
and expenses 330,685 406,337 1,021,861 1,025,897
OPERATING INCOME 187,347 (11,653) 327,735 (64,152)
OTHER (EXPENSE) INCOME:
Interest expense (3,136) (3,147) (8,876) (9,518)
Interest income 5,253 1,124 11,463 3,259
Valuation charge -
convertible notes receivable - - - (2,887)
Gain (loss) on investment 1,040 (6,520) (6,182) (6,520)
Other, net (751) (640) (2,047) (175)
Total other income
(expense) 2,406 (9,183) (5,642) (15,841)
INCOME (LOSS) FROM
CONTINUING OPERATIONS
BEFORE INCOME TAXES 189,753 (20,836) 322,093 (79,993)
Income tax expense (benefit) 67,109 (17,197) 111,302 (14,372)
INCOME (LOSS) FROM
CONTINUING OPERATIONS 122,644 (3,639) 210,791 (65,621)
DISCONTINUED OPERATIONS
(Loss) income from
discontinued operations,
including loss on
impairment (1,226) (6,996) 2,607 (172,310)
Income tax (benefit) expense (439) (2,621) 989 (62,915)
Total (loss) income
from discontinued
operations (787) (4,375) 1,618 (109,395)
NET INCOME (LOSS) $121,857 $(8,014) $212,409 $(175,016)
Basic income (loss) per
common share $0.50 $(0.03) $0.88 $(0.72)
Diluted income (loss) per
common share $0.50 $(0.03) $0.88 $(0.72)
Shares used in basic net
income (loss) per share 241,755 241,551 241,737 241,411
Shares used in diluted net
income (loss) per share 241,907 241,551 241,831 241,411
KING PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
EXCLUDING SPECIAL ITEMS - NON GAAP
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
(Unaudited) (Unaudited)
REVENUES:
Total revenues $518,032 $394,684 $1,349,596 $961,745
OPERATING COSTS AND EXPENSES:
Cost of revenues , exclusive
of depreciation, amortization
and impairments shown below 92,257 88,696 257,259 252,599
Selling, general and
administrative, exclusive of
co-promotion fees 107,232 94,331 292,643 275,372
Co-promotion fees 70,346 39,301 162,588 82,247
Total selling, general, and
administrative expense 177,578 133,632 455,231 357,619
Depreciation and amortization 31,352 38,843 112,698 116,627
Research and development 24,049 16,280 53,021 49,780
Total operating costs and
expenses 325,236 277,451 878,209 776,625
OPERATING INCOME 192,796 117,233 471,387 185,120
OTHER (EXPENSE) INCOME:
Interest expense (3,136) (3,147) (8,876) (9,518)
Interest income 5,253 1,124 11,463 3,259
Other, net (751) (640) (2,047) (175)
Total other income (expense) 1,366 (2,663) 540 (6,434)
INCOME BEFORE INCOME TAXES 194,162 114,570 471,927 178,686
Income tax expense 68,797 31,966 163,767 54,897
NET INCOME $125,365 $82,604 $308,160 $123,789
Basic income per common share $0.52 $0.34 $1.27 $0.51
Diluted income per common share $0.52 $0.34 $1.27 $0.51
Shares used in basic net income
per share 241,755 241,551 241,737 241,411
Shares used in diluted net
income per share 241,907 241,759 241,831 241,756
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 Nine Months Ending
September 30, 2005 September 30, 2005
(Unaudited) EPS (Unaudited) EPS
Net income, excluding special
items $125,365 $308,160
Diluted income per common share,
excluding special items $0.52 $1.27
SPECIAL ITEMS:
Excess purchase commitment
(cost of goods sold) - - 1,582 0.01
Special legal and professional
fees (selling, general, and
administrative) (4,406) (0.02) (13,268) (0.05)
Mylan transaction costs
(selling, general, and
administrative) (466) (0.00) (3,898) (0.02)
Intangible asset impairment
(other operating costs and
expenses) - - (126,923) (0.52)
Restructuring charges (other
operating costs and expenses) (597) (0.00) (2,603) (0.01)
Gain on sale of products (other
operating costs and expenses) 20 0.00 1,458 0.01
Gain (loss) of investment
(other income (expense) 1,040 0.00 (6,182) (0.03)
(Loss) income from discontinued
operations (1,226) (0.01) 2,607 0.01
Income tax benefit 2,127 0.01 51,476 0.21
Net income $121,857 $212,409
Diluted income per common share,
as reported under GAAP $0.50 $0.88
Three Months Ending Nine Months Ending
September 30, 2004 September 30, 2004
(Unaudited) EPS (Unaudited) EPS
Net income, excluding special
items $82,604 $123,789
Diluted income per common share,
excluding special items $0.34 $0.51
SPECIAL ITEMS:
Excess purchase commitment
(cost of goods sold) (8,726) (0.04) (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) (3,479) (0.01) (14,165) (0.06)
Medicaid related charge
(selling, general, and
administrative) - - (65,000) (0.27)
Mylan transaction costs
(selling, general, and
administrative) (2,787) (0.01) (5,913) (0.02)
In-process research and
development (other operating
costs and expenses) (17,145) (0.07) (17,145) (0.07)
Intangible asset impairment
(other operating costs and
expenses) (97,320) (0.40) (132,257) (0.55)
Restructuring charges (other
operating costs and expenses) (4,674) (0.02) (10,828) (0.04)
Gain on sale of products (other
operating costs and expenses) 5,245 0.02 9,524 0.04
Valuation charge - convertible
notes receivable (other income
(expense) - - (2,887) (0.01)
(Loss) on investment (6,520) (0.03) (6,520) (0.03)
(Loss) from discontinued
operations (6,996) (0.03) (172,310) (0.71)
Income tax benefit 51,784 0.22 132,184 0.55
Net loss $(8,014) $(175,016)
Diluted loss per common share, as
reported under GAAP $(0.03) $(0.72)
KING PHARMACEUTICALS, INC.
Summary Reconciliation of Special Items
For the Third Quarter Ended September 30, 2005
And the Third Quarter Ended September 30, 2004
King recorded special items during the third quarter ended September 30,
2005, the net of which resulted in a charge totaling $5.6 million, or $3.5
million net of tax. More specifically, special items during the third quarter
of 2005 include:
* a $4.4 million charge primarily for professional fees associated with
the SEC and OIG inquiries;
* a charge of $1.2 million resulting from discontinued operations;
* a $0.6 million restructuring charge primarily due to the Company's
decision to discontinue some relatively insignificant products
associated with its Meridian business;
* a charge of $0.5 million for professional fees and expenses associated
with the Company's terminated merger agreement with Mylan; and
* income of $1.0 million from a gain on disposition of the Company's
equity investment in Novavax, Inc.
During the third quarter ended September 30, 2004, King recorded special
items resulting in a net charge of $142.4 million, or $90.6 million net of
tax, primarily due to a $97.3 million charge related to the Company's decision
to discontinue the Sonata(R) MR clinical development program and a charge of
$17.1 million for in-process research and development associated with the
Company's entry into a strategic alliance with Palatin Technologies, Inc. for
the development and commercialization of PT-141.
KING PHARMACEUTICALS, INC.
Summary Reconciliation of Special Items
For the Nine Months Ended September 30, 2005
And the Nine Months Ended September 30, 2004
King recorded special items during the nine months ended September 30,
2005, the net of which resulted in a charge totaling $147.2 million, or $95.8
million net of tax, primarily due to an intangible asset impairment charge
totaling $126.9 million related to Sonata(R).
During the nine month period ended September 30, 2004, King recorded
special items resulting in a net charge of $431.0 million, or $298.8 million
net of tax, primarily due to a $172.3 million charge from discontinued
operations resulting from the Company's decision to divest many of its women's
health products, a $132.3 million intangible asset impairment charge primarily
related to the Company's decision to discontinue the Sonata(R) MR clinical
development program, and a $65.0 million charge representing the Company's
then best estimate of the interest, costs, penalties and all other amounts in
excess of the previously accrued $65.4 million for purposes of resolving the
SEC and OIG inquiries.
SOURCE King Pharmaceuticals, Inc.
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Company News On-Call:
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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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