King Pharmaceuticals Reports Second-Quarter 2010 Financial Results

BRISTOL, TN--(Marketwire - August 09, 2010) - King Pharmaceuticals, Inc. (NYSE: KG)

 

-- REMOXY® ON TRACK FOR FOURTH QUARTER 2010 RESUBMISSION
-- EMBEDA® PRESCRIPTIONS CONTINUE TO GROW
-- FLECTOR® PATCH PRESCRIPTIONS REBOUND IN JUNE, HIGHEST MONTHLY TOTAL
   SINCE DECEMBER
-- CASH FLOW FROM OPERATIONS $51 MILLION, FULL YEAR CASH FLOW  FORECAST OF
   $300 MILLION

King Pharmaceuticals, Inc. (NYSE: KG) announced today that total revenue for the second quarter ended June 30, 2010 equaled $371 million compared to $445 million in the second quarter of 2009. The Company reported net income of $18.0 million and diluted earnings per share of $0.07 during the second quarter of 2010, compared to a net income of $37.9 million and diluted earnings per share of $0.15 in the same period of the prior year. Excluding certain special items and recurring non-GAAP adjustments, adjusted net earnings equaled $43.1 million and adjusted diluted earnings per share equaled $0.17 during the second quarter ended June 30, 2010, compared to adjusted net earnings of $79.9 million and adjusted diluted earnings per share of $0.32 in the second quarter of 2009.

Brian A. Markison, Chairman, President and Chief Executive Officer of King, stated, "I'm pleased to report that in the second quarter Embeda® prescriptions showed continued growth while Flector® Patch prescriptions showed improvement. In June, Flector® recorded its highest number of total prescriptions since December 2009, and it grew five percent sequentially over the first quarter of this year." He continued, "In addition to the progress we are making on the commercial side of the business, our products in development continue to track well against our previously stated timelines. Both Remoxy® and Acurox® remain on track for FDA submission, with Remoxy® scheduled for the end of this year and Acurox® scheduled for the first quarter of 2011. Finally, later this year we expect to begin enrollment in the phase three safety and efficacy studies for Oxycodone NT, a product specifically designed to resist certain common methods of misuse and abuse. We are very optimistic about the potential for success of our development programs, and look forward to working closely with the Food and Drug Administration toward approval of these novel and important formulations."

Joseph Squicciarino, King's Chief Financial Officer, commented, "Second quarter financial results were in line with our revised expectations. The Company reported cash flow from operations of $51 million, and we continue to believe that we will be able to generate approximately $300 million for the full year." He continued, "King's overall liquidity profile remains strong as evidenced by the recent establishment of a new $500 million dollar, five year revolving credit facility. In addition, we remain confident in our ability to deliver against our previously stated financial guidance for 2010."

Net revenue from branded pharmaceuticals totaled $162 million for the second quarter of 2010, compared to $275 million for the same period of the prior year. Branded pharmaceuticals revenue for the quarter did not include approximately $26 million in royalties recorded for the sales of an authorized SKELAXIN® generic.

Net sales of SKELAXIN® (metaxalone) totaled $5 million during the second quarter of 2010, compared to $102 million for the same period of the prior year. Early in the second quarter of 2010, two generic forms of SKELAXIN® were launched.

THROMBIN-JMI® (thrombin, topical, bovine, USP) net sales totaled $37 million during the second quarter of 2010, compared to $49 million in the second quarter of 2009.

Net sales of AVINZA® (morphine sulfate extended release) totaled $25 million during the second quarter of 2010, compared to $29 million in the second quarter of 2009.

Net sales of FLECTOR® PATCH (diclofenac epolamine topical patch) 1.3% totaled $35 million during the second quarter of 2010, compared to $39 million in the second quarter of 2009.

Net sales of EMBEDA® (morphine sulfate and naltrexone hydrochloride) Extended Release Capsules totaled $15 million during the second quarter of 2010, up $6 million sequentially from the first quarter of 2010. Wholesaler inventory levels now stand at approximately 3 weeks.

King's Meridian Auto-Injector business contributed revenue totaling $83 million during the second quarter of 2010, compared to $72 million in the second quarter of 2009. The increase was primarily due to price increases, higher unit sales and royalties from the next generation EpiPen® auto-injector partially offset by lower sales to government agencies.

Net revenue from the Alpharma Animal Health business totaled $85 million during the second quarter of 2010, compared to $83 million in the second quarter of 2009.

As of June 30, 2010, the Company's cash and cash equivalents totaled approximately $573 million.

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:          (866) 393-6640
              International Dial In:     (706) 643-2643

Participants will be required to provide a passcode before being joined to the conference. The event passcode is 89476496. 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 800-642-1687, or 706-645-9291 if you are calling from outside the USA. The replay code is 89476496. The web cast of our call on August 9th 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 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, LLC, 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 to the Food and Drug Administration ("FDA") the New Drug Application ("NDA") for Remoxy®; the Company's plans to submit to the FDA an NDA for Acurox® ; the Company's forecast for 2010 cash flow from operations and the accomplishment of other financial goals; the timing of clinical studies and the potential outcomes of product development programs; the Company's plans for interaction with the FDA; and statements pertaining to King's planned webcast to discuss its second quarter 2010 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: the future net sales of King's products; King's ability to market its products successfully; King's ability to advance the development of products as planned; the high cost and uncertainty of research, clinical trials, and other development activities involving products in which King has an interest; the unpredictability of the FDA's review and approval processes, including the unpredictability of the duration and results of the FDA's review of Investigational New Drug Applications, NDAs, and Abbreviated New Drug Applications, as well as reviews by other regulatory agencies worldwide; the availability and cost of raw materials; any material interruptions in supply by contract manufacturers of King's products or suppliers or raw materials; the potential effects on sales of the Company's products as a result of the availability of competing products; the potential effects of future acquisitions and other transactions pursuant to the Company's growth strategy, and the integration of any acquisitions; King's compliance with FDA and other government regulations that relate to the Company's business; King's ability to conduct its webcast as currently planned on August 9, 2010; 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, 2009, and the Company's form 10-Q for the quarter ended March 31, 2010, 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)                      


                                                  June 30,    December 31,
                                                    2010          2009
                                                ------------  ------------

ASSETS
Current assets:
   Cash and cash equivalents                    $    573,062  $    545,312
   Investments in debt securities                     16,346        29,258
   Marketable securities                               1,022         2,100
   Accounts receivable, net                          209,585       210,256
   Inventories                                       195,614       182,291
   Deferred income tax assets                         72,494        83,675
   Income taxes receivable                            13,341        16,091
   Prepaid expenses and other current assets          29,323        60,860
                                                ------------  ------------
         Total current assets                      1,110,787     1,129,843
                                                ------------  ------------
Property, plant and equipment, net                   377,298       391,839
Intangible assets, net                               719,862       794,139
Goodwill                                             466,283       467,613
Deferred income tax assets                           259,579       264,162
Investments in debt securities                       169,777       218,608
Other assets                                          58,748        56,496
Assets held for sale                                   5,890         5,890
                                                ------------  ------------
         Total assets                           $  3,168,224  $  3,328,590
                                                ============  ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                             $     74,176  $     86,692
   Accrued expenses                                  228,747       320,992
   Short-term debt                                     3,506         3,662
   Current portion of long-term debt                       -        85,550
                                                ------------  ------------
         Total current liabilities                   306,429       496,896
                                                ------------  ------------

Long-term debt                                       341,735       339,016
Other liabilities                                    126,604       123,371
                                                ------------  ------------
         Total liabilities                           774,768       959,283
                                                ------------  ------------

Commitments and contingencies
Shareholders' equity:
      Common shares no par value, 600,000,000
       shares authorized, 249,664,513 and
       248,444,711 shares issued and
       outstanding, respectively                   1,433,533     1,421,489
      Retained earnings                              986,077       963,620
      Accumulated other comprehensive loss           (26,154)      (15,802)
                                                ------------  ------------
         Total shareholders' equity                2,393,456     2,369,307
                                                ------------  ------------
         Total liabilities and shareholders'
          equity                                $  3,168,224  $  3,328,590
                                                ============  ============





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


                                 Three Months Ended     Six Months Ended
                                      June 30,              June 30,
                                --------------------  --------------------
                                  2010       2009       2010       2009
                                ---------  ---------  ---------  ---------
REVENUES:
  Total revenues                $ 370,903  $ 444,988  $ 751,758  $ 874,045
                                ---------  ---------  ---------  ---------
OPERATING COSTS AND EXPENSES:
  Cost of revenues, exclusive
   of depreciation and
   amortization shown below       119,027    140,034    246,081    269,448
  Acquisition related inventory
   step-up                              -     16,059          -     37,584
                                ---------  ---------  ---------  ---------
      Total cost of revenues      119,027    156,093    246,081    307,032
                                ---------  ---------  ---------  ---------
  Selling, general and
   administrative                 129,979    120,631    268,804    259,165
  Litigation settlement             1,850          -      3,500          -
  Acquisiton related costs              -      2,944          -      6,733
                                ---------  ---------  ---------  ---------
      Total selling, general,
       and administrative
       expenses                   131,829    123,575    272,304    265,898
                                ---------  ---------  ---------  ---------
  Depreciation                     15,690     14,422     31,528     28,621
  Intangible amortization          38,213     38,149     79,650     76,327
  Accelerated depreciation              -        291          -      1,263
  Research and development         33,174     21,202     61,498     48,458
  Restructuring charges             4,852      1,475      5,114     49,525
                                ---------  ---------  ---------  ---------
      Total operating costs and
       expenses                   342,785    355,207    696,175    777,124
                                ---------  ---------  ---------  ---------

OPERATING INCOME                   28,118     89,781     55,583     96,921
OTHER INCOME (EXPENSE):
  Interest expense                 (2,722)   (23,160)    (6,785)   (41,909)
  Noncash convertible debt
   interest expense                (4,757)    (4,432)    (9,430)    (8,786)
  Interest income                     487      1,506        896      4,294
  Gain on Kadian                   12,500          -     12,500          -
  Gain (loss) on investment           249       (524)      (623)    (1,347)
  Loss on early extinguishment
   of debt                         (2,252)         -     (2,252)         -
  Other, net                       (1,753)     4,112     (1,956)     1,333
                                ---------  ---------  ---------  ---------
      Total other income
       (expense)                    1,752    (22,498)    (7,650)   (46,415)
                                ---------  ---------  ---------  ---------
INCOME BEFORE INCOME TAXES         29,870     67,283     47,933     50,506
    Income tax expense             11,882     29,348     25,476     23,293
                                ---------  ---------  ---------  ---------
NET INCOME                      $  17,988  $  37,935  $  22,457  $  27,213
                                =========  =========  =========  =========

Basic net income per common
 share                          $    0.07  $    0.16  $    0.09  $    0.11
                                =========  =========  =========  =========

Diluted net income per common
 share                          $    0.07  $    0.15  $    0.09  $    0.11
                                =========  =========  =========  =========

Shares used in basic net income
 per share                        245,787    244,693    245,496    244,291
Shares used in diluted net
 income per share                 249,375    247,207    249,621    246,922




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


                                 Three Months Ended     Six Months Ended
                                      June 30,              June 30,
                                --------------------  --------------------
                                  2010       2009       2010       2009
                                ---------  ---------  ---------  ---------
REVENUES:
  Total revenues                $ 370,903  $ 444,988  $ 751,758  $ 874,045
                                ---------  ---------  ---------  ---------
OPERATING COSTS AND EXPENSES:
  Cost of revenues, exclusive
   of depreciation shown below    119,027    140,034    246,081    269,448
  Selling, general and
   administrative                 129,979    120,631    268,804    259,165
  Depreciation                     15,690     14,422     31,528     28,621
  Research and development         33,174     21,202     61,498     48,458
                                ---------  ---------  ---------  ---------
      Total operating costs and
       expenses                   297,870    296,289    607,911    605,692
                                ---------  ---------  ---------  ---------

OPERATING INCOME                   73,033    148,699    143,847    268,353
OTHER EXPENSE:
  Interest expense                 (2,722)   (23,160)    (6,785)   (41,909)
  Interest income                     487      1,506        896      4,294
  Other, net                       (1,753)     4,112     (1,956)     1,333
                                ---------  ---------  ---------  ---------
      Total other expense          (3,988)   (17,542)    (7,845)   (36,282)
                                ---------  ---------  ---------  ---------
INCOME BEFORE INCOME TAXES         69,045    131,157    136,002    232,071
    Income tax expense             25,995     51,284     57,274     88,186
                                ---------  ---------  ---------  ---------
NET INCOME                      $  43,050  $  79,873  $  78,728  $ 143,885
                                =========  =========  =========  =========


Basic net income per common
 share                          $    0.18  $    0.33  $    0.32  $    0.59
                                =========  =========  =========  =========

Diluted net income per common
 share                          $    0.17  $    0.32  $    0.32  $    0.58
                                =========  =========  =========  =========

Shares used in basic net income
 per share                        245,787    244,693    245,496    244,291
Shares used in diluted net
 income per share                 249,375    247,207    249,621    246,922





                        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     Six Months Ended
                                      June 30,              June 30,
                                --------------------  --------------------
                                  2010       2009       2010       2009
                                ---------  ---------  ---------  ---------
Diluted income per common
 share, as reported under GAAP  $    0.07  $    0.15  $    0.09  $    0.11
Effect of non-GAAP items             0.10       0.17       0.23       0.47
                                ---------  ---------  ---------  ---------
Diluted income per common
 share, excluding non-GAAP
 items                          $    0.17  $    0.32  $    0.32  $    0.58
                                =========  =========  =========  =========


NON-GAAP ITEMS:
  Acquisition related inventory
   step-up (cost of revenues)   $       -  $  16,059  $       -  $  37,584
  Litigation settlement
   (selling, general, and
   administrative)                  1,850          -      3,500          -
  Acquisition related costs
   (selling, general, and
   administrative)                      -      2,944          -      6,733
  Intangible amortization
   (other operating costs and
   expenses)                       38,213     38,149     79,650     76,327
  Accelerated depreciation
   (other operating costs and
   expenses)                            -        291          -      1,263
  Restructuring charges (other
   operating costs and
   expenses)                        4,852      1,475      5,114     49,525
  Noncash convertible debt
   interest expense (other
   income (expense))                4,757      4,432      9,430      8,786
  Gain on Kadian (other income
   (expense))                     (12,500)         -    (12,500)         -
  Gain (loss) on investment
   (other income (expense))          (249)       524        623      1,347
  Loss on early extinguishment
   of debt (other income
   (expense))                       2,252          -      2,252          -
                                ---------  ---------  ---------  ---------
Total non-GAAP items before
 income taxes                      39,175     63,874     88,069    181,565
Income tax benefit from
 non-GAAP items                   (14,113)   (21,936)   (31,798)   (64,893)
                                ---------  ---------  ---------  ---------
Increase in net income          $  25,062  $  41,938  $  56,271  $ 116,672
                                ---------  ---------  ---------  ---------
Effect of non-GAAP items on
 diluted income per common
 share                          $    0.10  $    0.17  $    0.23  $    0.47
                                =========  =========  =========  =========

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

Posted: August 2010


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