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King Pharmaceuticals Reports Year-End and Fourth-Quarter 2006 Financial Results

BRISTOL, Tenn.--(BUSINESS WIRE)--Feb 28, 2007 - King Pharmaceuticals, Inc. (NYSE:KG) announced today that total revenues increased 12% to a record high $1.99 billion during the year ended December 31, 2006, compared to $1.77 billion for 2005. Reported net income equaled $289 million and diluted earnings per share equaled $1.19 during the year ended December 31, 2006, compared to net income of $118 million and diluted earnings per share of $0.49 during the prior year. Excluding special items, net earnings increased to $423 million and diluted earnings per share increased to $1.74 for the twelve months ended December 31, 2006, from net earnings of $400 million and diluted earnings per share of $1.66 in 2005. Net income and diluted earnings per share, as reported and excluding special items, also achieved record highs in 2006.

For the fourth quarter ended December 31, 2006, total revenues increased 21% to $513 million compared to $423 million in the fourth quarter of 2005. Reported net income equaled $37 million and diluted income per share equaled $0.15 during the fourth quarter of 2006, compared to a net loss of $95 million and diluted loss per share of $0.39 in the same period of the prior year. Excluding special items, net earnings equaled $99 million and diluted earnings per share equaled $0.41 during the fourth quarter ended December 31, 2006, compared to net earnings of $92 million and diluted earnings per share of $0.38 in the fourth quarter of 2005.

Brian A. Markison, President and Chief Executive Officer of King, stated, "During 2006, King Pharmaceuticals achieved many important accomplishments which we believe are representative of the successful execution of our strategy for growth. Most notably, we continued to maximize the value of our existing products as evidenced by our record high total revenues of $1.99 billion. We also successfully focused our resources and talents on strengthening our product portfolio, particularly through our acquisition of AVINZA(R) (morphine sulfate extended release), a true once-a-day formulation of morphine." Mr. Markison continued, "More recently, we expanded our THROMBIN-JMI(R) (thrombin, topical, bovine, USP) franchise with our acquisition of an exclusive license to Vascular Solutions' hemostatic products, enabling King to offer physicians an even wider array of means to administer our topical hemostatic agent."

Mr. Markison added, "2006 was a productive year for our R&D organization. As previously announced, Dr. Eric Carter joined the Company as Chief Science Officer and we look forward to his leadership as we continue to advance our portfolio of compounds in development."

King's Phase III products are led by REMOXY(TM), an abuse-deterrent formulation of long-acting oxycodone, which the Company is developing with Pain Therapeutics, Inc. Other Phase III products include our ramipril/hydrochlorothiazide combination product, VANQUIX(R), a diazepam-filled auto-injector for breakthrough epileptic seizures, and binodenoson, the Company's second generation cardiac stress imaging agent. King's Phase II compounds include bremelanotide, a treatment for sexual dysfunction in both men and women, which is the subject of the Company's collaboration with Palatin Technologies, Inc. and MRE-0094, a wound healing agent for the treatment of diabetic foot ulcers. The Company is also developing T-62, a potential major advance in the treatment of neuropathic pain, which is expected to enter Phase II clinical trials during the first half of this year.

As of December 31, 2006, the Company's cash and cash equivalents and investments in debt securities totaled approximately $1.0 billion. During the fourth quarter of 2006 and for the year ended December 31, 2006, the Company generated cash flow from operations of approximately $168 million and $466 million, respectively.

Joseph Squicciarino, King's Chief Financial Officer, stated, "Our 2006 accomplishments provide us with a solid foundation for the coming year. In 2007, we will continue to prudently invest in research and development and focus our business development initiatives on expanding our development pipeline, as we work to add value for our shareholders. Accordingly, we plan to invest more in research and development this year than we did in 2006."

Net revenue from branded pharmaceuticals totaled $455 million for the fourth quarter of 2006, a 25% increase from the fourth quarter of 2005, and equaled $1.7 billion for the year ended December 31, 2006, a 12% increase from $1.5 billion during the prior year.

ALTACE(R) (ramipril) net sales totaled $181 million during the fourth quarter and $653 million for the year ended December 31, 2006, compared to $150 million during the fourth quarter and $554 million during the twelve months ended December 31, 2005.

Net sales of SKELAXIN(R) (metaxalone) totaled $113 million during the fourth quarter and $415 million for the year ended December 31, 2006, compared to $70 million during the fourth quarter and $345 million during the twelve months ended December 31, 2005.

THROMBIN-JMI(R) net sales totaled $56 million during the fourth quarter and $247 million for the year ended December 31, 2006, compared to $51 million during the fourth quarter and $221 million during the twelve months ended December 31, 2005.

Net sales of SONATA(R) (zaleplon) totaled $22 million during the fourth quarter and $86 million for the year ended December 31, 2006, compared to $25 million during the fourth quarter and $83 million during the twelve months ended December 31, 2005.

LEVOXYL(R) (levothyroxine sodium tablets, USP) net sales totaled $27 million during the fourth quarter and $112 million for the year ended December 31, 2006, compared to $22 million during the fourth quarter and $140 million during the twelve months ended December 31, 2005.

Wholesale inventories of King's key branded products were all below one month as of December 31, 2006.

King's Meridian Medical Technologies business contributed revenue totaling $32 million during the fourth quarter of 2006 and $165 million for the twelve months ended December 31, 2006, compared to $32 million during the fourth quarter and $129 million during the twelve months ended December 31, 2005.

Royalty revenues, derived primarily from ADENOSCAN(R) (adenosine), totaled $20 million during the fourth quarter of 2006 and $80 million for the year ended December 31, 2006. For the fourth quarter and twelve months ended December 31, 2006, net revenue from contract manufacturing equaled $3 million and $17 million, respectively.

Webcast Information

King will conduct a webcast today which may include discussion of the Company's marketed products, pipeline, strategy for growth, financial results and expectations, and other matters relating to its business. Interested persons may listen to the webcast on Wednesday, February 28, 2007, at 11:00 a.m., E.S.T. by clicking the following link to register and then joining the live event with the same URL:

http://www.kingpharm.com/web_casts.asp

If you are unable to participate during the live event, the webcast will be archived on King's web site at the same link for not less than 14 days after the webcast.

About Special Items

Under Generally Accepted Accounting Principles ("GAAP"), reported "net earnings" and "diluted earnings per share" include special items. In addition to the reported results determined in accordance with GAAP, King provides its net earnings and diluted earnings per share results for the quarters and twelve months ended December 31, 2006 and 2005, 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 reported 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 expected advances in the Company's development pipeline, including advances with respect to the development of T-62; statements pertaining to the Company's expected investment in research and development for 2007; statements pertaining to the Company's business development initiatives; statements pertaining to the Company's planned use of cash; and statements pertaining to the Company's planned webcast to discuss its fourth quarter and year-end 2006 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 King's ability to continue to acquire branded products, including products in development; 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 King's ability to successfully integrate its acquisitions; 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 pharmaceutical products in which King has an interest; 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 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 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 whether King incurs research and development expenses as planned; 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 28, 2007; 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, 2005 and Form 10-Q for the quarter ended September 30, 2006, which are on file with the U.S. Securities and Exchange Commission ("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. -0-

                      KING PHARMACEUTICALS, INC.

                     CONSOLIDATED BALANCE SHEETS

                  (in thousands, except share data)




                                             December 31, December 31,

                                                2006         2005

                                             ------------ ------------


ASSETS

Current assets:

 Cash and cash equivalents                      $113,777      $30,014

 Investments in debt securities                  890,185      494,663

 Restricted cash                                       -      130,400

 Accounts receivable, net                        265,467      223,581

 Inventories                                     215,458      228,063

 Deferred income tax assets                       81,991       81,777

 Prepaid expenses and other current assets       106,595       59,291

                                             ------------ ------------

            Total current assets               1,673,473    1,247,789

                                             ------------ ------------

Property, plant and equipment, net               307,036      302,474

Intangible assets, net                           851,391      967,194

Goodwill                                         121,152      121,152

Deferred income tax assets                       271,554      231,032

Marketable securities                             11,578       18,502

Other assets                                      93,347       77,099

                                             ------------ ------------

            Total assets                      $3,329,531   $2,965,242

                                             ============ ============


LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

 Accounts payable                                $77,158      $84,539

 Accrued expenses                                510,137      519,620

 Income taxes payable                             30,501       22,301

 Current portion of long-term debt                     -      345,000

                                             ------------ ------------

            Total current liabilities            617,796      971,460

                                             ------------ ------------


Long-term debt                                   400,000            -

Other liabilities                                 23,129       20,360

                                             ------------ ------------

            Total liabilities                  1,040,925      991,820

                                             ------------ ------------


Commitments and contingencies

Shareholders' equity:

  Common shares no par value, 600,000,000

   shares authorized, 243,151,223 and

   242,493,416 shares issued and

   outstanding, respectively                   1,244,986    1,213,482

  Retained earnings                            1,043,902      754,953

  Accumulated other comprehensive income            (282)       4,987

                                             ------------ ------------

            Total shareholders' equity         2,288,606    1,973,422

                                             ------------ ------------

            Total liabilities and

             shareholders' equity             $3,329,531   $2,965,242

                                             ============ ============

-0-
                      KING PHARMACEUTICALS, INC.

               CONSOLIDATED STATEMENTS OF INCOME (LOSS)

                (in thousands, except per share data)




                            Three Months Ended   Twelve Months Ended

                               December 31,         December 31,

                             2006      2005       2006        2005

                           ------------------- -----------------------

REVENUES:

 Total revenues            $512,914  $423,285  $1,988,500  $1,772,881

                           --------- --------- ----------- -----------

OPERATING COSTS AND

 EXPENSES:

 Cost of revenues,

  exclusive of

  depreciation,

  amortization and

  impairments shown below   113,883    74,305     419,808     331,564

 Excess purchase

  commitment                      -    (4,527)          -      (6,109)

 Writeoff of acquisition

  related inventory step-

  up/recall                       -    (2,470)          -      (2,470)

                           --------- --------- ----------- -----------

   Total cost of revenues   113,883    67,308     419,808     322,985

                           --------- --------- ----------- -----------

 Selling, general and

  administrative,

  exclusive of co-

  promotion fees            130,465    97,029     450,982     389,672

 Special legal and

  professional fees           1,142     6,511         105      19,779

 Arbitration settlement      45,128         -      45,128           -

 Mylan transaction costs          -         -           -       3,898

 Co-promotion fees           55,135    60,546     217,750     223,134

                           --------- --------- ----------- -----------

   Total selling,

    general, and

    administrative

    expense                 231,870   164,086     713,965     636,483

                           --------- --------- ----------- -----------

 Depreciation and

  amortization               35,318    34,351     144,591     147,049

 Accelerated depreciation     1,486         -       2,958           -

 Research and development    40,665    20,994     143,596      74,015

 Research and

  development-In-process

  upon acquisition                -   188,711     110,000     188,711

 Intangible asset

  impairment                 47,563    94,131      47,842     221,054

 Restructuring charges            -     1,577       3,194       4,180

 Gain on sale of products         -      (217)          -      (1,675)

                           --------- --------- ----------- -----------

   Total operating costs

    and expenses            470,785   570,941   1,585,954   1,592,802

                           --------- --------- ----------- -----------


OPERATING INCOME (LOSS)      42,129  (147,656)    402,546     180,079

OTHER INCOME (EXPENSE):

 Interest expense            (1,932)   (3,055)     (9,857)    (11,931)

 Interest income              9,310     6,712      32,152      18,175

 Loss on investment               -         -           -      (6,182)

 (Loss) gain on early

  extinguishment of debt        (70)        -         628           -

 Other, net                    (544)       21      (1,157)     (2,026)

                           --------- --------- ----------- -----------

   Total other income

    (expense)                 6,764     3,678      21,766      (1,964)

                           --------- --------- ----------- -----------

INCOME (LOSS) FROM

 CONTINUING OPERATIONS

 BEFORE INCOME TAXES         48,893  (143,978)    424,312     178,115

  Income tax expense

   (benefit)                 11,799   (49,817)    135,730      61,485

                           --------- --------- ----------- -----------

INCOME (LOSS) FROM

 CONTINUING OPERATIONS       37,094   (94,161)    288,582     116,630

                           --------- --------- ----------- -----------

DISCONTINUED OPERATIONS:

 (Loss) income from

  discontinued operations      (203)     (731)        572       1,876

 Income tax (benefit)

  expense                       (73)     (316)        205         673

                           --------- --------- ----------- -----------

   Total (loss) income

    from discontinued

    operations                 (130)     (415)        367       1,203

                           --------- --------- ----------- -----------

NET INCOME (LOSS)           $36,964  $(94,576)   $288,949    $117,833

                           ========= ========= =========== ===========


Basic net income (loss)

 per common share             $0.15    $(0.39)      $1.19       $0.49

                           ========= ========= =========== ===========


Diluted net income (loss)

 per common share             $0.15    $(0.39)      $1.19       $0.49

                           ========= ========= =========== ===========


Shares used in basic net

 income (loss) per share    242,298   241,794     242,196     241,751

Shares used in diluted

 net income (loss) per

 share                      243,062   241,794     242,799     241,903

-0-
                      KING PHARMACEUTICALS, INC.

                  CONSOLIDATED STATEMENTS OF INCOME

                  EXCLUDING SPECIAL ITEMS - NON GAAP

                (in thousands, except per share data)

                             (Unaudited)



                           Three Months Ended    Twelve Months Ended

                              December 31,          December 31,

                             2006      2005       2006        2005

                           ------------------- -----------------------

REVENUES:

 Total revenues            $512,914  $423,285  $1,988,500  $1,772,881

                           --------- --------- ----------- -----------

OPERATING COSTS AND

 EXPENSES:

 Cost of revenues,

  exclusive of depreciation

  and amortization shown

  below                     113,883    74,305     419,808     331,564

                           --------- --------- ----------- -----------

 Selling, general and

  administrative, exclusive

  of co-promotion fees      130,465    97,029     450,982     389,672

 Co-promotion fees           55,135    60,546     217,750     223,134

                           --------- --------- ----------- -----------

   Total selling, general,

    and administrative

    expense                 185,600   157,575     668,732     612,806

                           --------- --------- ----------- -----------

 Depreciation and

  amortization               35,318    34,351     144,591     147,049

 Research and development    40,665    20,994     143,596      74,015

                           --------- --------- ----------- -----------

   Total operating costs

    and expenses            375,466   287,225   1,376,727   1,165,434

                           --------- --------- ----------- -----------


OPERATING INCOME            137,448   136,060     611,773     607,447

OTHER INCOME (EXPENSE):

 Interest expense            (1,932)   (3,055)     (9,857)    (11,931)

 Interest income              9,310     6,712      32,152      18,175

 Other, net                    (544)       21      (1,157)     (2,026)

                           --------- --------- ----------- -----------

   Total other income         6,834     3,678      21,138       4,218

                           --------- --------- ----------- -----------

INCOME BEFORE INCOME TAXES  144,282   139,738     632,911     611,665

  Income tax expense         45,532    47,419     210,222     211,186

                           --------- --------- ----------- -----------

NET INCOME                  $98,750   $92,319    $422,689    $400,479

                           ========= ========= =========== ===========



Basic net income per

 common share                 $0.41     $0.38       $1.75       $1.66

                           ========= ========= =========== ===========


Diluted net income per

 common share                 $0.41     $0.38       $1.74       $1.66

                           ========= ========= =========== ===========


Shares used in basic net

 income per share           242,298   241,794     242,196     241,751

Shares used in diluted net

 income per share           243,062   242,121     242,799     241,903

-0-
                      KING PHARMACEUTICALS, INC.

                 RECONCILIATION OF NON-GAAP MEASURES

                (in thousands, except per share data)

                             (Unaudited)



The following tables reconcile Non-GAAP measures

 to amounts reported under GAAP:




                                   Three Months       Twelve Months

                                       Ended              Ending

                                 December 31, 2006  December 31, 2006

                                 ------------------ ------------------

                                             EPS                 EPS

                                           -------              ------


Net income, excluding special

 items                            $98,750           $422,689

Diluted income per common share,

 excluding special items                    $0.41               $1.74

SPECIAL ITEMS:

 Special legal and professional

  fees (selling, general, and

  administrative)                  (1,142)  (0.00)      (105)   (0.00)

 Arbitration settlement

  (selling, general, and

  administrative)                 (45,128)  (0.19)   (45,128)   (0.19)

 Accelerated depreciation (other

  operating costs and expenses)    (1,486)  (0.01)    (2,958)   (0.01)

 Research and development -In

  -process upon acquisition

  (other operating costs and

  expenses)                             -       -   (110,000)   (0.45)

 Intangible asset impairment

  (other operating costs and

  expenses)                       (47,563)  (0.20)   (47,842)   (0.20)

 Restructuring charges (other

  operating costs and expenses)         -       -     (3,194)   (0.01)

 (Loss) gain on early

  extinguishment of debt (other

  income (expense))                   (70)  (0.00)       628     0.00

 (Loss) income from discontinued

  operations                         (203)  (0.00)       572     0.00

                                 --------- -------  ---------   ------

Total special items before

 income taxes                     (95,592)  (0.40)  (208,027)   (0.86)

Income tax benefit from special

 items                             33,806    0.14     74,287     0.31

                                 ---------          ---------

Net income                        $36,964           $288,949

                                 ========= -------  =========   ------

Diluted income per common share,

 as reported under GAAP                     $0.15               $1.19

                                           =======              ======






                                   Three Months       Twelve Months

                                       Ended              Ending

                                 December 31, 2005  December 31, 2005

                                 ------------------ ------------------

                                             EPS                 EPS

                                           -------              ------


Net income, excluding special

 items                            $92,319           $400,479

Diluted income per common share,

 excluding special items                    $0.38               $1.66

SPECIAL ITEMS:

 Excess purchase commitment

  (cost of goods sold)              4,527    0.02      6,109     0.03

 Writeoff of acquisition related

  inventory step-up/recall (cost

  of goods sold)                    2,470    0.01      2,470     0.01

 Special legal and professional

  fees (selling, general, and

  administrative)                  (6,511)  (0.03)   (19,779)   (0.08)

 Mylan transaction costs

  (selling, general, and

  administrative)                       -       -     (3,898)   (0.02)

 Research and development -In

  -process upon acquisition

  (other operating costs and

  expenses)                      (188,711)  (0.78)  (188,711)   (0.78)

 Intangible asset impairment

  (other operating costs and

  expenses)                       (94,131)  (0.39)  (221,054)   (0.91)

 Restructuring charges (other

  operating costs and expenses)    (1,577)  (0.00)    (4,180)   (0.02)

 Gain on sale of products (other

  operating costs and expenses)       217    0.00      1,675     0.01

 Loss on investment (other

  income (expense))                     -       -     (6,182)   (0.03)

 (Loss) income from discontinued

  operations                         (731)  (0.00)     1,876     0.01

                                 --------- -------  ---------   ------

Total special items before

 income taxes                    (284,447)  (1.17)  (431,674)   (1.78)

Income tax benefit from special

 items                             97,552    0.40    149,028     0.61

                                 ---------          ---------

Net (loss) income                $(94,576)          $117,833

                                 ========= -------  =========   ------

Diluted (loss) income per common

 share, as reported under GAAP             $(0.39)              $0.49

                                           =======              ======

-0-
                      KING PHARMACEUTICALS, INC.

               SUMMARY RECONCILIATION OF SPECIAL ITEMS

       FOR THE FOURTH QUARTERS ENDED DECEMBER 31, 2006 AND 2005


King recorded special items during the fourth quarter ended December

 31, 2006, resulting in a net charge of $96 million, or $62 million

 net of tax, primarily due to (i) an intangible asset impairment

 charge totaling $48 million related to Intal(R) and Tilade(R), and

 (ii) a $45 million charge for an arbitration award liability arising

 from the Company's termination of a Sonata(R) development agreement.


During the fourth quarter ended December 31, 2005, King recorded

 special items resulting in a net charge of $284 million, or $187

 million net of tax, primarily due to (i) a $189 million charge for

 acquired in-process research and development associated with King's

 entry into a strategic collaboration with Pain Therapeutics, Inc.

 regarding Remoxy(TM) and up to three additional abuse-deterrent

 opioid painkillers, and (ii) intangible asset impairment charges

 totaling $94 million primarily related to Sonata(R) and Corzide(R).

-0-
                      KING PHARMACEUTICALS, INC.

               SUMMARY RECONCILIATION OF SPECIAL ITEMS

            FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005


King recorded special items during the year ended December 31, 2006,

 resulting in a net charge of $208 million, or $134 million net of

 tax, primarily due to (i) a $110 million charge for acquired in-

 process research and development associated with King's entry into a

 strategic collaboration with Arrow and certain of its affiliates to

 commercialize novel formulations of ramipril, (ii) an intangible

 asset impairment charge totaling $48 million related to Intal(R) and

 Tilade(R), and (iii) a $45 million charge for an arbitration award

 liability arising from the Company's termination of a Sonata(R)

 development agreement.


During the year ended December 31, 2005, King recorded special items

 resulting in a net charge of $432 million, or $283 million net of

 tax, primarily due to (i) intangible asset impairment charges

 totaling $221 million primarily related to Sonata(R) and Corzide(R),

 (ii) a $189 million charge for acquired in-process research and

 development associated with King's entry into a strategic

 collaboration with Pain Therapeutics, Inc. regarding Remoxy(TM) and

 up to three additional abuse-deterrent opioid painkillers, and (iii)

 a charge of $20 million primarily related to professional fees

 associated with government inquiries and private plaintiff securities

 litigation.

Contact

King Pharmaceuticals, Inc., Bristol
James E. Green, 423-989-8125
Executive Vice President, Corporate Affairs
or
David E. Robinson, 423-989-7045
Senior Director, Corporate Affairs

Posted: February 2007


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