King Pharmaceuticals Reports Full Year and Fourth-Quarter 2009 Financial Results

BRISTOL, TN--(Marketwire - February 25, 2010) - King Pharmaceuticals, Inc. (NYSE: KG<http://www.marketwire.com/mw/stock.jsp?Ticker=KG>)

-- FULL YEAR 2009 REVENUE INCREASED 14% TO $1.78 BILLION -- 2009 CASH FLOW FROM OPERATIONS $431 MILLION, FOURTH QUARTER $169 MILLION -- FOURTH QUARTER 2009 ANIMAL HEALTH REVENUE OF $101 MILLION -- MERIDIAN AUTO-INJECTOR FULL YEAR 2009 REVENUE INCREASED 16% -- 100% OF ALPHARMA ACQUISITION DEBT REPAID

King Pharmaceuticals, Inc. (NYSE: KG<http://www.marketwire.com/mw/stock.jsp?Ticker=KG>) announced today that total revenues equaled $1.78 billion during the year ended December 31, 2009, compared to $1.57 billion for 2008. The Company reported net income of $92 million and diluted earnings per share of $0.37 during the year ended December 31, 2009, compared to a net loss of $342 million and a diluted loss per share of $1.40 during the prior year. During the fourth quarter and year ended December 31, 2008, King recorded a special item in the amount of $590 million for acquired in-process research and development in connection with the Alpharma, Inc. acquisition. Excluding certain special items and recurring non-GAAP adjustments, adjusted net earnings equaled $274 million and adjusted diluted earnings per share equaled $1.10 for the year ended December 31, 2009, compared to adjusted net earnings of $378 million and adjusted diluted earnings per share of $1.54 in 2008.

For the fourth quarter ended December 31, 2009, total revenues equaled $439 million compared to $348 million in the fourth quarter of 2008. The Company reported net income of $22 million and diluted earnings per share of $0.09 during the fourth quarter of 2009, compared to a net loss of $551 million and a diluted loss per share of $2.26 in the same period of the prior year. Excluding certain special items and recurring non-GAAP adjustments, adjusted net earnings equaled $58 million and adjusted diluted earnings per share equaled $0.23 during the fourth quarter ended December 31, 2009, compared to adjusted net earnings of $72 million and adjusted diluted earnings per share of $0.29 in the fourth quarter of 2008.

Brian A. Markison, Chairman, President and Chief Executive Officer of King, stated, "This past year was a transformational one for King Pharmaceuticals, beginning with the acquisition of Alpharma. We focused on executing the integration plan and did so quickly and without disruption to the business." He continued, "In August, we received FDA approval for EMBEDA® and launched the product at the end of the third quarter. During 2010, we plan to resubmit the New Drug Application for Remoxy® and work closely with the Food and Drug Administration on a path forward for Acurox®. We have become a stronger, more efficient and competitive company as a result of our licensing and acquisition activities, and we continue to believe that our diversified specialty pharmaceutical business model is well positioned to achieve long-term growth and deliver sustainable value to our shareholders," concluded Mr. Markison.

As of December 31, 2009, the Company's cash and cash equivalents totaled approximately $545 million. During the fourth quarter of 2009 and for the year ended December 31, 2009, the Company generated cash flow from operations of approximately $169 million and $431 million, respectively.

Joseph Squicciarino, King's Chief Financial Officer, commented, "King's fourth quarter and full year financial results were exceptional." He continued, "The Company generated significant cash flow from operations which to date has enabled us to repay all of the debt related to the Alpharma acquisition. Our cash position and balance sheet remain strong and we continue to look for business development opportunities to strengthen our portfolio."

Net revenue from branded pharmaceuticals totaled $277 million for the fourth quarter of 2009, compared to $277 million for the same period of the prior year, and equaled $1.11 billion for the year ended December 31, 2009, compared to $1.26 billion for the prior year.

Net sales of SKELAXIN® totaled $96 million during the fourth quarter and $401 million for the year ended December 31, 2009, compared to $113 million during the fourth quarter and $446 million during the year ended December 31, 2008.

THROMBIN-JMI® (thrombin, topical, bovine, USP) net sales totaled $44 million during the fourth quarter and $183 million for the year ended December 31, 2009, compared to $57 million during the fourth quarter and $255 million during the year ended December 31, 2008.

Net sales of AVINZA® (morphine sulfate extended release) totaled $33 million during the fourth quarter and $131 million for the year ended December 31, 2009, compared to $33 million during the fourth quarter and $135 million during the year ended December 31, 2008.

Net sales of FLECTOR® PATCH (diclofenac epolamine topical patch) 1.3% totaled $43 million during the fourth quarter of 2009 and $139 million for the year ended December 31, 2009. The Company obtained FLECTOR® PATCH as a result of its acquisition of Alpharma on December 29, 2008.

Net sales of EMBEDA® (morphine sulfate and naltrexone hydrochloride) Extended Release Capsules totaled $6 million during the fourth quarter of 2009 and $17 million for the year ended December 31, 2009. The Company announced the launch and commercial availability of EMBEDA® on September 21, 2009.

King's Meridian Auto-Injector business contributed revenue totaling $52 million during the fourth quarter of 2009 and $253 million for the year ended December 31, 2009, compared to $53 million during the fourth quarter and $218 million for the year ended December 31, 2008.

Net revenue from the Alpharma Animal Health business totaled $101 million during the fourth quarter of 2009 and $359 million for the year ended December 31, 2009. The Company added the Animal Health business as a result of its acquisition of Alpharma on December 29, 2008.

Royalty revenues, derived primarily from ADENOSCAN® (adenosine), totaled $9 million during the fourth quarter of 2009 and $51 million for the year ended December 31, 2009.

The Company completed its acquisition of Alpharma on December 29, 2008. Since Alpharma was acquired at the end of 2008, its financial results from operations are excluded from King's Consolidated Statement of Operations for the year ended December 31, 2008.

Conference Call and Web Cast Information

King management will conduct a conference call at 11:00 am ET today. This call may include discussion of the Company's marketed products, pipeline, strategy for growth, financial results and expectations, and other matters relating to its business. The call will be open to all interested parties and may be accessed by using the following information:

Conference Call Access Domestic Dial In: (888) 674-0224 International Dial In: (201) 604-0502

Interested parties may also listen to the web cast by clicking the following link to register and then joining the live event with the same URL:

http://www.kingpharm.com/Investors/Webcasts.cfm

If you are unable to participate during the live event, the replay number is 888-632-8973, or 201-499-0429 if you are calling from outside the USA. The replay code is 77910286, followed by the # sign. The web cast of our call on February 25th will be archived on King's web site, accessible through the link above, for not less than 14 days.

About Adjusted Financial Results

In addition to financial results determined in accordance with Generally Accepted Accounting Principles ("GAAP"), King provides adjusted net earnings and adjusted diluted earnings per share results. These non-GAAP financial measures exclude the effect of amortization of intangible assets and non-cash imputed interest expense associated with the Company's $400 million 1 1/4% Convertible Senior Notes, as well as special items. Special items 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, and 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 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 that providing adjusted financial results 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 exclude an item from adjusted financial results involves judgments by King's management. A reconciliation of adjusted financial results and King's reported financial results determined in accordance with GAAP is provided below.

About King Pharmaceuticals, Inc.

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 and technologies that complement the Company's focus in specialty-driven markets, particularly neuroscience and hospital. King's wholly owned subsidiary, Alpharma Inc., is also a leader in the development, registration, manufacture and marketing of pharmaceutical products for food producing animals.

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 plans to resubmit the New Drug Application ("NDA") for Remoxy® the Company's plans to work with the Food and Drug Administration ("FDA") with regard to its NDA for Acurox® the potential of the Company to achieve long-term growth and deliver sustainable value to shareholders; and statements pertaining to King's planned webcast to discuss its fourth-quarter and year-end 2009 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 products; dependence on King's ability to successfully market its products; dependence on King's ability to successfully integrate its acquisitions; dependence on King's dependence on the Company's ability to continue to advance the development of its pipeline products as planned; dependence on the high cost and uncertainty of research, clinical trials, and other development activities involving products in which King has an interest; dependence on the unpredictability of the duration and results of the FDA's review of Investigational New Drug Applications, NDAs, and Abbreviated New Drug Applications and/or the review of other regulatory agencies worldwide that relate to those projects; 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 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 February 25, 2010; 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, 2008 and Form 10-Q for the quarter ended September 30, 2009, which are on file with the U.S. Securities and Exchange Commission. 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.

 

EXECUTIVE OFFICES KING PHARMACEUTICALS, INC. 501 FIFTH STREET, BRISTOL, TENNESSEE 37620

 

KING PHARMACEUTICALS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data)

December 31, December 31, 2009 2008 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 545,312 $ 940,212 Investments in debt securities 29,258 6,441 Marketable securities 2,100 511 Accounts receivable, net 210,256 245,070 Inventories 182,291 258,303 Deferred income tax assets 83,675 89,513 Income tax receivable 16,091 - Prepaid expenses and other current assets 60,860 129,214 ------------ ------------ Total current assets 1,129,843 1,669,264 ------------ ------------ Property, plant and equipment, net 391,839 417,259 Intangible assets, net 794,139 934,219 Goodwill 467,613 450,548 Deferred income tax assets 264,162 269,116 Investments in debt securities 218,608 353,848 Other assets 56,496 122,826 Assets held for sale 5,890 11,500 ------------ ------------ Total assets $ 3,328,590 $ 4,228,580 ============ ============

LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 86,692 $ 140,908 Accrued expenses 320,992 411,488 Income taxes payable - 10,448 Short-term debt 3,662 5,230 Current portion of long-term debt 85,550 439,047 ------------ ------------ Total current liabilities 496,896 1,007,121 ------------ ------------

Long-term debt 339,016 877,638 Other liabilities 123,371 110,022 ------------ ------------ Total liabilities 959,283 1,994,781 ------------ ------------

Commitments and contingencies Shareholders' equity: Common shares no par value, 600,000,000 shares authorized, 248,444,711 and 246,487,232 shares issued and outstanding, respectively 1,421,489 1,391,065 Retained earnings 963,620 871,021 Accumulated other comprehensive (loss) income (15,802) (28,287) ------------ ------------ Total shareholders' equity 2,369,307 2,233,799 ------------ ------------ Total liabilities and shareholders' equity $ 3,328,590 $ 4,228,580 ============ ============

 

KING PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (Unaudited)

Three Months Ended Year Ended December 31, December 31, ------------------------ ------------------------ 2009 2008 2009 2008 ----------- ----------- ----------- ----------- REVENUES: Total revenues $ 439,106 $ 347,732 $ 1,776,500 $ 1,565,061 ----------- ----------- ----------- ----------- OPERATING COSTS AND EXPENSES: Cost of revenues, exclusive of depreciation, amortization, and impairments shown below 151,147 93,454 580,826 385,936 Excess purchase commitment - 5,435 - 8,064 Acquisition related inventory step-up 1,788 - 41,938 - Excess inventory reserve - 825 - 825 ----------- ----------- ----------- ----------- Total cost of revenues 152,935 99,714 622,764 394,825 ----------- ----------- ----------- ----------- Selling, general and administrative, exclusive of co-promotion fees 145,716 101,587 536,601 413,402 Special legal and professional fees - 266 - (4,447) Acquisiton related costs - 1,382 6,733 1,382 Co-promotion fees 1,204 3,058 5,226 37,065 ----------- ----------- ----------- ----------- Total selling, general, and administrative expense 146,920 106,293 548,560 447,402 ----------- ----------- ----------- ----------- Depreciation 14,174 8,831 58,133 36,434 Intangible amortization 41,062 20,235 155,400 112,446 Accelerated depreciation (303) 662 960 2,597 Research and development 26,554 31,648 97,652 116,823 Research and development - milestone payments 1,000 2,500 1,000 28,350 Research and development- In-process upon acquisition - 593,000 - 598,500 Asset impairments 4,510 1,566 4,510 40,995 Restructuring charges (11) 5,428 51,167 7,098 ----------- ----------- ----------- ----------- Total operating costs and expenses 386,841 869,877 1,540,146 1,785,470 ----------- ----------- ----------- -----------

OPERATING INCOME (LOSS) 52,265 (522,145) 236,354 (220,409) OTHER (EXPENSE) INCOME: Interest expense (10,718) (1,782) (70,334) (4,963) Noncash convertible debt interest expense (4,592) (4,278) (17,889) (16,668) Interest income 605 5,970 5,926 36,970 Loss on investment (5,058) (7,451) (5,884) (7,451) Other, net (443) (1,784) 2,416 (3,635) ----------- ----------- ----------- ----------- Total other (expense) income (20,206) (9,325) (85,765) 4,253 ----------- ----------- ----------- ----------- INCOME (LOSS) BEFORE INCOME TAXES 32,059 (531,470) 150,589 (216,156) Income tax expense 9,807 19,355 58,636 125,880 ----------- ----------- ----------- ----------- NET INCOME (LOSS) 22,252 (550,825) 91,953 (342,036) ----------- ----------- ----------- -----------

Basic net income (loss) per common share $ 0.09 $ (2.26) $ 0.38 $ (1.40) =========== =========== =========== ===========

Diluted net income (loss) per common share $ 0.09 $ (2.26) $ 0.37 $ (1.40) =========== =========== =========== ===========

Shares used in basic net income per share 245,033 243,731 244,645 243,539 Shares used in diluted net income per share 249,178 243,731 247,822 243,539

 

KING PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS EXCLUDING NON-GAAP ITEMS (in thousands, except per share data) (Unaudited)

Three Months Ended Year Ended December 31, December 31, ------------------------ ------------------------ 2009 2008 2009 2008 ----------- ----------- ----------- ----------- REVENUES: Total revenues $ 439,106 $ 347,732 $ 1,776,500 $ 1,565,061 ----------- ----------- ----------- ----------- OPERATING COSTS AND EXPENSES: Cost of revenues, exclusive of depreciation shown below 151,147 93,454 580,826 385,936 ----------- ----------- ----------- ----------- Selling, general and administrative, exclusive of co-promotion fees 145,716 101,587 536,601 413,402 Co-promotion fees 1,204 3,058 5,226 37,065 ----------- ----------- ----------- ----------- Total selling, general, and administrative expense 146,920 104,645 541,827 450,467 ----------- ----------- ----------- ----------- Depreciation 14,174 8,831 58,133 36,434 Research and development 26,554 31,648 97,652 116,823 Research and development - milestone payments 1,000 2,500 1,000 28,350 ----------- ----------- ----------- ----------- Total operating costs and expenses 339,795 241,078 1,279,438 1,018,010 ----------- ----------- ----------- -----------

OPERATING INCOME 99,311 106,654 497,062 547,051 OTHER (EXPENSE) INCOME: Interest expense (10,718) (1,782) (70,334) (4,963) Interest income 605 5,970 5,926 36,970 Other, net (443) (1,784) 2,416 (3,635) ----------- ----------- ----------- ----------- Total other(expense) income (10,556) 2,404 (61,992) 28,372 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES 88,755 109,058 435,070 575,423 Income tax expense 30,349 36,853 161,458 197,290 ----------- ----------- ----------- ----------- NET INCOME $ 58,406 $ 72,205 $ 273,612 $ 378,133 =========== =========== =========== ===========

Basic net income per common share $ 0.24 $ 0.30 $ 1.12 $ 1.55 =========== =========== =========== ===========

Diluted net income per common share $ 0.23 $ 0.29 $ 1.10 $ 1.54 =========== =========== =========== ===========

Shares used in basic net income per share 245,033 243,731 244,645 243,539 Shares used in diluted net income per share 249,178 246,026 247,822 245,394

 

KING PHARMACEUTICALS, INC. RECONCILIATION OF NON-GAAP ITEMS (in thousands, except per share data) (Unaudited)

 

The following tables reconcile Non-GAAP items to amounts reported under GAAP: Three Months Ended Year Ended December December 31, 31, -------------------- -------------------- 2009 2008 2009 2008 --------- --------- --------- --------- Diluted income per common share, as reported under GAAP $ 0.09 $ (2.26) $ 0.37 $ (1.40) Effect of non-GAAP items 0.14 2.53 0.73 2.93 Effect of dilution on net loss per common share - 0.02 - 0.01 --------- --------- --------- --------- Diluted income per common share, excluding non-GAAP items $ 0.23 $ 0.29 $ 1.10 $ 1.54 ========= ========= ========= =========

NON-GAAP ITEMS: Excess purchase commitment (cost of revenues) $ - $ 5,435 $ - $ 8,064 Acquisition related inventory step-up (cost of revenues) 1,788 - 41,938 - Excess inventory reserve (cost of revenues) - 825 - 825 Special legal and professional fees (selling, general, and administrative) - 266 - (4,447) Acquisition related costs (selling, general, and administrative) - 1,382 6,733 1,382 Intangible amortization (other operating costs and expenses) 41,062 20,235 155,400 112,446 Accelerated depreciation (other operating costs and expenses) (303) 662 960 2,597 Research and development-In-process upon acquisition (other operating costs and expenses) - 593,000 - 598,500 Asset impairments (other operating costs and expenses) 4,510 1,566 4,510 40,995 Restructuring charges (other operating costs and expenses) (11) 5,428 51,167 7,098 Noncash convertible debt interest expense (other (expense) income) 4,592 4,278 17,889 16,668 Loss on investment (other (expense) income) 5,058 7,451 5,884 7,451 --------- --------- --------- --------- Total non-GAAP items before income taxes 56,696 640,528 284,481 791,579 Income tax benefit from non-GAAP items (20,542) (17,498) (102,822) (71,410) --------- --------- --------- --------- Increase in net income $ 36,154 $ 623,030 $ 181,659 $ 720,169 --------- --------- --------- --------- Effect of non-GAAP items on diluted income per common share $ 0.14 $ 2.53 $ 0.73 $ 2.93 ========= ========= ========= =========

 

Contact: Jack Howarth Vice President, Investor Relations 908-429-8350

 

 

 

Posted: February 2010


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