BRISTOL, Tenn., May 9 /PRNewswire-FirstCall/ -- King Pharmaceuticals, Inc. announced today that total revenues increased 31% to $484 million during the first quarter ended March 31, 2006, compared to $369 million in the first quarter of 2005. Including special items, which primarily consist of an $85 million, or $53 million net of tax, in-licensing charge related to Arrow International Limited discussed below, net earnings decreased 28% to $51 million and diluted earnings per share decreased 28% to $0.21 during the first quarter ended March 31, 2006, compared to net income of $70 million and diluted earnings per share of $0.29 in the same period of the prior year. Excluding special items, net earnings increased 40% to $106 million and diluted earnings per share increased 42% to $0.44 during the first quarter ended March 31, 2006, compared to net earnings of $76 million and diluted earnings per share of $0.31 in the first quarter of 2005.
Brian A. Markison, President and Chief Executive Officer of King, stated, “We are very pleased with the Company’s financial results for the first quarter of 2006. These results reflect the continued successful execution of our strategy, including the delivery of significant revenues from operations, the utilization of business development to enhance our cardiovascular franchise with the in-licensing of novel formulations of Altace(R) (ramipril), and the expansion of the number of late-stage clinical development programs that enhance our prospects for future growth.”
Net revenue from branded pharmaceuticals totaled $418 million for the first quarter of 2006, a 30% increase from $322 million during the first quarter of 2005. This increase was primarily due to the effect of last year’s wholesale inventory reductions of some of the Company’s branded pharmaceutical products.
Altace(R) net sales totaled $159 million during the first quarter of 2006, an increase of 85% from $86 million during the first quarter of 2005.
Net sales of Skelaxin(R) (metaxalone) totaled $99 million during the first quarter of 2006, an increase of 37% compared to $72 million during the same period of the prior year.
Thrombin-JMI(R) (thrombin, topical, bovine, USP) net sales totaled $58 million during the first quarter of 2006, an 8% decrease from $63 million during the first quarter of 2005.
Net sales of Sonata(R) (zaleplon) totaled $21 million during the first quarter of 2006, an increase of 9% compared to $20 million during the first quarter of the prior year.
Levoxyl(R) (levothyroxine sodium tablets, USP) net sales decreased to $31 million during the first quarter ended March 31, 2006 from $40 million during the first quarter of 2005.
King’s Meridian Medical Technologies business contributed revenue totaling $41 million during the first quarter of 2006, an increase of 78% from $23 million during the same period of the prior year.
Royalty revenues, derived primarily from Adenoscan(R) (adenosine), totaled $20 million during the first quarter ended March 31, 2006, compared to $18 million during the first quarter of 2005. During the first quarter ended March 31, 2006, net revenue from contract manufacturing equaled $6 million.
As of March 31, 2006, the Company’s cash and cash equivalents and investments in debt securities totaled approximately $814 million.
Conference Call Information
King will conduct a conference call today to discuss the Company’s first quarter 2006 results and other matters pertaining to its business. Interested persons may listen to the conference call on Tuesday, May 9, 2006, at 1:00 p.m., E.D.T. by one of the following means:
Internet Webcast
Click the following link to register and then join the live event with the same URL:
http://www.kingpharm.com/web_casts.asp Telephone Audio Conference Call in to the telephone conference up to 15 minutes early: Toll free in the United States 800-374-0113 Outside the US 706-758-9607 Can’t Make the Live Event? Listen “On-Demand”
If you are unable to participate during the live event, the call will be archived on King’s web site www.kingpharm.com/web_casts.asp for not less than 14 days following the call. A replay of the conference call will also be available for not less than five days following the call by dialing 800-642- 1687 (US only) or 706-645-9291 (international), passcode 8823517.
About Special Items
Under Generally Accepted Accounting Principles (“GAAP”), “net earnings” and “diluted earnings per share” include special items. In addition to the results determined in accordance with GAAP, King provides its net earnings and diluted earnings per share results for the first quarters ended March 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 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 the Company’s planned conference call to discuss its first-quarter 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 conduct its webcast as currently planned on May 9, 2006. 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, which is 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.
KING PHARMACEUTICALS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) March 31, December 31, 2006 2005 (Unaudited) ASSETS Current assets: Cash and cash equivalents $328,298 $30,014 Investments in debt securities 486,154 494,663 Restricted cash - 130,400 Accounts receivable, net 268,336 223,581 Inventories 217,256 228,063 Deferred income tax assets 75,570 81,777 Prepaid expenses and other current assets 82,041 59,291 Total current assets 1,457,655 1,247,789 Property, plant and equipment, net 302,162 302,474 Intangible assets, net 972,395 967,194 Goodwill 121,152 121,152 Deferred income tax assets 265,729 231,032 Marketable securities 15,494 18,502 Other assets 82,560 77,099 Total assets $3,217,147 $2,965,242 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $69,369 $84,539 Accrued expenses 440,512 519,620 Income taxes payable 74,959 22,301 Current portion of long-term debt 180,000 345,000 Total current liabilities 764,840 971,460 Long-term debt 400,000 - Other liabilities 19,857 20,360 Total liabilities 1,184,697 991,820 Commitments and contingencies Shareholders’ equity: Common shares no par value, 300,000,000 shares authorized, 242,197,054 and 241,802,724 shares issued and outstanding, respectively 1,224,095 1,213,482 Retained earnings 805,630 754,953 Accumulated other comprehensive income 2,725 4,987 Total shareholders’ equity 2,032,450 1,973,422 Total liabilities and shareholders’ equity $3,217,147 $2,965,242 KING PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (Unaudited) Three Months Ended March 31, 2006 2005 REVENUES: Total revenues $484,235 $368,625 OPERATING COSTS AND EXPENSES: Cost of revenues , exclusive of depreciation and amortization shown below 92,404 73,798 Excess purchase commitment - (1,582) Total cost of revenues 92,404 72,216 Selling, general and administrative, exclusive of co-promotion fees 102,075 89,198 Special legal and professional fees 2,979 3,652 Mylan transaction costs - 3,277 Co-promotion fees 65,289 34,655 Total selling, general, and administrative expense 170,343 130,782 Depreciation and amortization 34,365 41,426 Research and development 29,882 11,472 Research and development- In-process upon acquisition 85,000 - Restructuring charges - 2,023 Gain on sale of products - (847) Total operating costs and expenses 411,994 257,072 OPERATING INCOME 72,241 111,553 OTHER INCOME (EXPENSE): Interest expense (2,984) (2,701) Interest income 5,960 2,277 Loss on investment - (6,853) Gain on early extinguishment of debt 1,022 - Other, net (510) (249) Total other income (expense) 3,488 (7,526) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 75,729 104,027 Income tax expense 24,894 36,922 INCOME FROM CONTINUING OPERATIONS 50,835 67,105 DISCONTINUED OPERATIONS (Loss) income from discontinued operations (247) 4,682 Income tax (benefit) expense (89) 1,732 Total (loss) income from discontinued operations (158) 2,950 NET INCOME $50,677 $70,055 Basic net income per common share $0.21 $0.29 Diluted net income per common share $0.21 $0.29 Shares used in basic net income per share 242,022 241,724 Shares used in diluted net income per share 242,581 241,803 KING PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS EXCLUDING SPECIAL ITEMS - NON GAAP (in thousands, except per share data) (Unaudited) Three Months Ended March 31, 2006 2005 REVENUES: Total revenues $484,235 $368,625 OPERATING COSTS AND EXPENSES: Cost of revenues, exclusive of depreciation and amortization shown below 92,404 73,798 Selling, general and administrative, exclusive of co-promotion fees 102,075 89,198 Co-promotion fees 65,289 34,655 Total selling, general, and administrative expense 167,364 123,853 Depreciation and amortization 34,365 41,426 Research and development 29,882 11,472 Total operating costs and expenses 324,015 250,549 OPERATING INCOME 160,220 118,076 OTHER INCOME (EXPENSE): Interest expense (2,984) (2,701) Interest income 5,960 2,277 Other, net (510) (249) Total other income (expense) 2,466 (673) INCOME BEFORE INCOME TAXES 162,686 117,403 Income tax expense 56,457 41,326 NET INCOME $106,229 $76,077 Basic net income per common share $0.44 $0.31 Diluted net income per common share $0.44 $0.31 Shares used in basic net income per share 242,022 241,724 Shares used in diluted net income per share 242,581 241,803 KING PHARMACEUTICALS, INC. RECONCILIATION OF NON-GAAP MEASURES (in thousands, except per share data) The following tables reconcile Non-GAAP measures to amounts reported under GAAP: Three Months Ended March 31, 2006 (Unaudited) EPS Net income, excluding special items $106,229 Diluted income per common share, excluding special items $0.44 SPECIAL ITEMS: Special legal and professional fees (selling, general, and administrative) (2,979) (0.01) In-process research and development (other operating costs and expenses) (85,000) (0.35) Gain on early extinguishment of debt (other income (expense)) 1,022 0.00 (Loss) from discontinued operations (247) (0.00) Income tax benefit from special items 31,652 0.13 Net income $50,677 Diluted income per common share, as reported under GAAP $0.21 Three Months Ended March 31, 2005 (Unaudited) EPS Net income, excluding special items $76,077 Diluted income per common share, excluding special items $0.31 SPECIAL ITEMS: Excess purchase commitment (cost of goods sold) 1,582 0.01 Special legal and professional fees (selling, general, and administrative) (3,652) (0.01) Mylan transaction costs (selling, general, and administrative) (3,277) (0.01) Restructuring charges (other operating costs and expenses) (2,023) (0.01) Gain on sale of products (other operating costs and expenses) 847 0.00 Loss on investment (other income (expense)) (6,853) (0.03) Income from discontinued operations 4,682 0.02 Income tax benefit from special items 2,672 0.01 Net income $70,055 Diluted income per common share, as reported under GAAP $0.29 KING PHARMACEUTICALS, INC. Summary Reconciliation of Special Items for the FIRST quarter ended MARCH 31, 2006 and the FIRST quarter ended MARCH 31, 2005
King recorded special items during the first quarter ended March 31, 2006 resulting in a net charge of $87.2 million, or $55.6 million net of tax. More specifically, special items during the first quarter of 2006 include the following:
- an $85.0 million charge related to 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 Altace(R); - a $3.0 million charge primarily for professional fees associated with the OIG and SEC inquiries; - a $0.2 million charge related to discontinued operations; and - a $1.0 million gain associated with the Company’s repurchase of a portion of its $345 million of 2 3/4% Convertible Debentures due November 15, 2021.
During the three months ended March 31, 2005, King recorded special items resulting in a net charge of $8.7 million, or $6.0 million net of tax, primarily due to a charge to reflect a decline in the fair value of the Company’s equity investment in Novavax, Inc., which the Company has since divested.
King Pharmaceuticals, Inc.
CONTACT: James E. Green, Executive Vice President, Corporate Affairs,+1-423-989-8125, or David E. Robinson, Senior Director, Corporate Affairs,+1-423-989-7045, both of King Pharmaceuticals, Inc.
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