King Pharmaceuticals Reports Strong Third Quarter 2009 Financial Results
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-- EMBEDA(TM) Approval and Launch
-- Total Company Revenue of $463 Million
-- Cash Flow from Operations of $145 Million
-- Debt Repayment of $124 Million
-- Third Quarter Animal Health Revenue of $96 Million
BRISTOL, Tenn.--(BUSINESS WIRE)-- King Pharmaceuticals, Inc. (NYSE: KG) announced today that total revenues were $463 million during the third quarter ended September 30, 2009, compared to $388 million in the third quarter of 2008. The Company reported net income of $42 million and diluted earnings per share of $0.17 during the third quarter of 2009, compared to net income of $82 million and diluted earnings per share of $0.34 in the third quarter of the prior year. Excluding certain special items and recurring non-GAAP adjustments, adjusted net income equaled $71 million and adjusted diluted earnings per share equaled $0.29 during the third quarter ended September 30, 2009, compared to adjusted net income of $95 million and adjusted diluted earnings per share of $0.39 in the third quarter of 2008.
Similar to its financial reporting in prior years, King reports financial results determined in accordance with Generally Accepted Accounting Principles ("GAAP") and also adjusted financial results. However, beginning with the first quarter of 2009, King's adjusted financial results exclude the amortization of intangible assets and non-cash imputed interest expense associated with the Company's $400 million 11/4% Convertible Senior Notes, as well as special items. For more information, see the "About Adjusted Financial Results" paragraph below.
Brian A. Markison, Chairman, President and Chief Executive Officer of King, stated "The transformation of King to a fully integrated specialty pharmaceutical company was further supported by strong third quarter performances reported by each of our business segments." Mr. Markison continued, "The highlights included the approval, launch and successful wholesaler stocking of EMBEDA(TM), record third quarter Animal Health revenues and the shipment of Meridian's next generation EpiPen(R) Auto-Injector. We believe that the combination of all three businesses will continue to contribute to our long-term growth strategy."
Joseph Squicciarino, King's Chief Financial Officer, stated, "Through measured financial progress against our previously stated goals, we continue to execute on our strategic plan to transform King into a leader in the specialty pharmaceutical sector." He continued, "The Company's reported third quarter results reflect strong cash flow from operations as well as a significant repayment of debt associated with the Alpharma acquisition, including complete repayment of the $200 million term loan in October. We remain committed to enhancing shareholder value through prudent financial management."
As of September 30, 2009, the Company's cash and cash equivalents totaled approximately $480 million.
Total Company revenue increased 19% to $463 million in the third quarter of 2009 compared to the third quarter of 2008 primarily due to branded pharmaceutical and Animal Health sales recorded as a result of the Alpharma acquisition and an increase in sales of Auto-Injectors in the Meridian business.
Net revenue from branded pharmaceuticals totaled $283 million for the third quarter of 2009, compared to $302 million during the third quarter of 2008. The decrease in revenues was primarily due to the sales declines of our THROMBIN-JMI(R) product and the market entry of generic substitutes for ALTACE(R) (ramipril) beginning in December 2007, offset by the addition of revenues from sales of FLECTOR(R) PATCH and EMBEDA(TM).
Net sales of SKELAXIN(R) (metaxalone) totaled $102 million during the third quarter of 2009, compared to $110 million during the same period of the prior year.
Net sales of our THROMBIN-JMI(R) (thrombin, topical, bovine, USP) product totaled $43 million during the third quarter of 2009, compared to $67 million during the third quarter of 2008.
Net sales of AVINZA(R) (morphine sulfate extended release) totaled $31 million during the third quarter of 2009, compared to $36 million during the third quarter of 2008.
Net sales of FLECTOR(R) PATCH (diclofenac epolamine topical patch) 1.3% totaled $40 million during the third quarter of 2009. The Company obtained FLECTOR(R) PATCH as a result of its acquisition of Alpharma on December 29, 2008.
Net sales of EMBEDA(TM) totaled $11 million during the third quarter of 2009. The Company announced the launch and commercial availability of EMBEDA(TM) on September 21, 2009.
Revenues from the Animal Health business were $96 million for the third quarter ended September 30, 2009. The Company added the Animal Health business as a result of its acquisition of Alpharma.
King's Meridian Auto-Injector business contributed revenue totaling $72 million during the third quarter of 2009, compared to $68 million during the third quarter of 2008. During the third quarter of 2009, the next generation EpiPen(R) Auto-Injector was shipped to Dey L. P. in preparation for a fourth quarter 2009 launch.
Royalty revenues, derived primarily from ADENOSCAN(R) (adenosine), totaled $12 million during the third quarter of 2009 compared to $18 million during the third quarter of 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 88910347 followed by the # sign. The web cast of today's call 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 11/4% 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 potential future financial performance and results of King or its business units or subsidiaries; the execution of King's long-term growth strategy; and King's planned webcast to discuss its third-quarter 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: the future levels of demand for, and net sales of, King's products; King's ability to successfully market its products; King's ability to successfully complete and integrate acquisitions; King's ability to advance the development of its pipeline 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 duration and results of the FDA's review of Investigational New Drug applications, New Drug Applications, and Abbreviated New Drug Applications and/or similar 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; the potential effect on sales of King's existing products of the development and approval of generic substitutes for any of King's branded pharmaceutical products or other new competitive products; the potential effect of future acquisitions and other transactions pursuant to the Company's growth strategy; King's compliance with FDA and other government regulations that relate to its business; King's ability to conduct its webcast as currently planned on November 5, 2009; changes in general economic and business conditions; changes in current pricing levels; changes in federal and state laws and regulations; changes in competition; 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 June 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)
September 30, December 31,
2009 2008
ASSETS
Current assets:
Cash and cash equivalents $ 479,968 $ 940,212
Investments in debt securities 39,624 6,441
Marketable securities 1,930 511
Accounts receivable, net 227,030 245,070
Inventories 207,650 258,303
Deferred income tax assets 100,577 89,513
Income tax receivable 12,051 -
Prepaid expenses and other current assets 99,374 129,214
Total current assets 1,168,204 1,669,264
Property, plant and equipment, net 401,162 417,259
Intangible assets, net 822,589 934,219
Goodwill 453,008 450,548
Deferred income tax assets 250,017 267,749
Investments in debt securities 292,034 353,848
Other assets 75,379 122,826
Assets held for sale 7,900 11,500
Total assets $ 3,470,293 $ 4,227,213
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 87,111 $ 140,908
Accrued expenses 309,962 411,488
Income taxes payable - 10,448
Short-term debt 4,101 5,230
Current portion of long-term debt 122,449 439,047
Total current liabilities 523,623 1,007,121
Long-term debt 505,904 877,638
Other liabilities 105,358 110,022
Total liabilities 1,134,885 1,994,781
Commitments and contingencies
Shareholders' equity:
Common shares no par value, 600,000,000
shares authorized, 248,226,583 and 1,412,509 1,389,698
246,487,232 shares issued and outstanding,
respectively
Retained earnings 941,368 871,021
Accumulated other comprehensive loss (18,469 ) (28,287 )
Total shareholders' equity 2,335,408 2,232,432
Total liabilities and shareholders' $ 3,470,293 $ 4,227,213
equity
(more)
KING PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
REVENUES:
Total revenues $ 463,349 $ 388,445 $ 1,337,394 $ 1,217,329
OPERATING COSTS AND
EXPENSES:
Cost of revenues ,
exclusive of
depreciation, 160,231 101,465 429,679 292,482
amortization, and
impairments shown below
Excess purchase - - - 2,629
commitment
Acquisition related 2,566 - 40,150 -
inventory step-up
Total cost of 162,797 101,465 469,829 295,111
revenues
Selling, general and
administrative, 134,315 100,039 390,885 311,815
exclusive of
co-promotion fees
Special legal and - (6,748 ) - (4,713 )
professional fees
Acquisiton related - - 6,733 -
costs
Co-promotion fees 1,427 5,987 4,022 34,007
Total selling,
general, and 135,742 99,278 401,640 341,109
administrative
expense
Depreciation 15,338 8,992 43,959 27,603
Intangible amortization 38,011 20,241 114,338 92,211
Accelerated - 661 1,263 1,935
depreciation
Research and 22,640 28,755 71,098 85,175
development
Research and
development milestone - 5,100 - 25,850
payments
Research and
development-In-process - - - 5,500
upon acquisition
Asset impairments - - - 39,429
Restructuring charges 1,653 1,153 51,178 1,670
Total operating costs 376,181 265,645 1,153,305 915,593
and expenses
OPERATING INCOME 87,168 122,800 184,089 301,736
OTHER (EXPENSE) INCOME:
Interest expense (17,707 ) (1,097 ) (59,616 ) (3,181 )
Noncash convertible (4,511 ) (4,203 ) (13,297 ) (12,390 )
debt interest expense
Interest income 1,027 8,110 5,321 31,000
Gain (loss) on 521 - (826 ) -
investment
Other, net 1,526 (1,024 ) 2,859 (1,851 )
Total other (expense) (19,144 ) 1,786 (65,559 ) 13,578
income
INCOME BEFORE INCOME 68,024 124,586 118,530 315,314
TAXES
Income tax expense 25,536 42,114 48,829 106,525
NET INCOME $ 42,488 $ 82,472 $ 69,701 $ 208,789
Basic net income per $ 0.17 $ 0.34 $ 0.29 $ 0.86
common share
Diluted net income per $ 0.17 $ 0.34 $ 0.28 $ 0.85
common share
Shares used in basic net 244,964 243,696 244,515 243,475
income per share
Shares used in diluted 248,266 245,834 247,370 245,184
net income per share
(more)
KING PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
EXCLUDING NON-GAAP ITEMS
(in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
REVENUES:
Total revenues $ 463,349 $ 388,445 $ 1,337,394 $ 1,217,329
OPERATING COSTS AND
EXPENSES:
Cost of revenues ,
exclusive of 160,231 101,465 429,679 292,482
depreciation shown
below
Selling, general and
administrative, 134,315 100,039 390,885 311,815
exclusive of
co-promotion fees
Co-promotion fees 1,427 5,987 4,022 34,007
Total selling,
general, and 135,742 106,026 394,907 345,822
administrative
expense
Depreciation 15,338 8,992 43,959 27,603
Research and 22,640 28,755 71,098 85,175
development
Research and
development milestone - 5,100 - 25,850
payments
Total operating costs 333,951 250,338 939,643 776,932
and expenses
OPERATING INCOME 129,398 138,107 397,751 440,397
OTHER (EXPENSE) INCOME:
Interest expense (17,707 ) (1,097 ) (59,616 ) (3,181 )
Interest income 1,027 8,110 5,321 31,000
Other, net 1,526 (1,024 ) 2,859 (1,851 )
Total other (expense) (15,154 ) 5,989 (51,436 ) 25,968
income
INCOME BEFORE INCOME 114,244 144,096 346,315 466,365
TAXES
Income tax expense 42,923 48,666 131,109 160,437
NET INCOME $ 71,321 $ 95,430 $ 215,206 $ 305,928
Basic net income per $ 0.29 $ 0.39 $ 0.88 $ 1.26
common share
Diluted net income per $ 0.29 $ 0.39 $ 0.87 $ 1.25
common share
Shares used in basic net 244,964 243,696 244,515 243,475
income per share
Shares used in diluted 248,266 245,834 247,370 245,184
net income per share
(more)
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 Nine Months Ended September
September 30, 30,
2009 2008 2009 2008
Diluted income per
common share, as $ 0.17 $ 0.34 $ 0.28 $ 0.85
reported under GAAP
Effect of non-GAAP 0.12 0.05 0.59 0.40
items
Diluted income per
common share, excluding $ 0.29 $ 0.39 $ 0.87 $ 1.25
non-GAAP items
NON-GAAP ITEMS:
Excess purchase
commitment (cost of - - - 2,629
revenues)
Acquisition related
inventory step-up 2,566 - 40,150 -
(cost of revenues)
Special legal and
professional fees - (6,748 ) - (4,713 )
(selling, general, and
administrative)
Acquisition related
costs (selling, - - 6,733 -
general, and
administrative)
Intangible
amortization (other 38,011 20,241 114,338 92,211
operating costs and
expenses)
Accelerated
depreciation (other - 661 1,263 1,935
operating costs and
expenses)
Research and
development-In-process
upon acquisition - - - 5,500
(other operating costs
and expenses)
Asset impairments
(other operating costs - - - 39,429
and expenses)
Restructuring charges
(other operating costs 1,653 1,153 51,178 1,670
and expenses)
Noncash convertible
debt interest expense 4,511 4,203 13,297 12,390
(other (expense)
income)
Gain/loss on
investment (other (521 ) - 826 -
(expense) income)
Total non-GAAP items 46,220 19,510 227,785 151,051
before income taxes
Income tax benefit from (17,387 ) (6,552 ) (82,280 ) (53,912 )
non-GAAP items
Increase in net income $ 28,833 $ 12,958 $ 145,505 $ 97,139
Effect of non-GAAP
items on diluted income $ 0.12 $ 0.05 $ 0.59 $ 0.40
per common share
Source: King Pharmaceuticals, Inc.
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