SOURCE: King Pharmaceuticals, Inc.

King Pharmaceuticals, Inc.

February 25, 2010 07:00 ET

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

BRISTOL, TN--(Marketwire - February 25, 2010) - King Pharmaceuticals, Inc. (NYSE: 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) 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 Information

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