King Pharmaceuticals®, Inc. Reports First-Quarter 2010 Financial Results

BRISTOL, TN--(Marketwire - May 05, 2010) - King Pharmaceuticals, Inc. (NYSE: KG)

-- CONTINUED GROWTH OF EMBEDA® PRESCRIPTIONS -- REMOXY® NDA REMAINS ON TRACK FOR A FOURTH QUARTER 2010 RESUBMISSION -- ACUROX® TABLETS (WITHOUT NIACIN) NDA EXPECTED TO BE FILED IN EARLY 2011 -- ANIMAL HEALTH REVIEW PROCESS CONCLUDED - BUSINESS TO BE RETAINED 

King Pharmaceuticals, Inc. (NYSE: KG) announced today that total revenue for the first quarter ended March 31, 2010 equaled $381 million compared to $429 million in the first quarter of 2009. The Company reported net income of $4.5 million and diluted earnings per share of $0.02 during the first quarter of 2010, compared to a net loss of $10.7 million and a diluted loss per share of $0.04 in the same period of the prior year. Excluding certain special items and recurring non-GAAP adjustments, adjusted net earnings equaled $35.7 million and adjusted diluted earnings per share equaled $0.14 during the first quarter ended March 31, 2010, compared to adjusted net earnings of $64 million and adjusted diluted earnings per share of $0.26 in the first quarter of 2009.

Brian A. Markison, Chairman, President and Chief Executive Officer of King, stated, “We continue to see steady growth in EMBEDA® prescriptions during this initial launch period. During the first quarter, we made significant progress in pharmacy stocking and managed care coverage, highlighted by the recent addition of EMBEDA® to two large formularies that cover approximately 70 million commercial lives”. He continued, “Our pipeline continues to progress with the fourth quarter resubmission of Remoxy® on track and, despite the outcome of the Acurox® Advisory Panel meeting, we remain committed to the Aversion Technology platform and plan to submit an Acurox® Tablets (without niacin) NDA during the first quarter of 2011".

Joseph Squicciarino, King’s Chief Financial Officer, commented, “The Company did not generate positive cash flows from operations in the first quarter of 2010, primarily due to the Department of Justice payment of approximately $43 million for the definitive settlement relating to improper sales and marketing practices of Kadian® by Alpharma prior to our acquisition. Excluding this payment, we would have generated approximately $40 million in cash for the quarter.” He continued, “Given our current revenue projections for the remainder of the year, we believe our cash flow from operations for 2010 will be at the low end of our previously stated range of $300 to $350 million. With respect to our strategic review of the Alpharma Animal Health business, we have completed the review process and decided to retain the business as we believe it will continue to provide positive cash flows and diversification.”

Net revenue from branded pharmaceuticals totaled $242 million for the first quarter of 2010, compared to $278 million for the same period of the prior year.

Net sales of SKELAXIN® (metaxalone) totaled $91 million during the first quarter of 2010, compared to $101 million for the same period of the prior year. Early in the second quarter of 2010, two generic forms of SKELAXIN® were launched into the trade.

THROMBIN-JMI® (thrombin, topical, bovine, USP) net sales totaled $37 million during the first quarter of 2010, compared to $47 million in the first quarter of 2009.

Net sales of AVINZA® (morphine sulfate extended release) totaled $23 million during the first quarter of 2010, compared to $39 million in the first quarter of 2009.

Net sales of FLECTOR® PATCH (diclofenac epolamine topical patch) 1.3% totaled $34 million during the first quarter of 2010, compared to $17 million in the first quarter of 2009.

Net sales of EMBEDA® (morphine sulfate and naltrexone hydrochloride) Extended Release Capsules totaled $9 million during the first quarter of 2010, which included a reduction in wholesale inventory levels of EMBEDA® to maintain compliance with the Company’s inventory management agreements.

King’s Meridian Auto-Injector business contributed revenue totaling $50 million during the first quarter of 2010, compared to $57 million in the first quarter of 2009. As expected, lower government orders contributed to the decline.

Net revenue from the Alpharma Animal Health business totaled $81 million during the first quarter of 2010, compared to $80 million in the first quarter of 2009.

As of March 31, 2010, the Company’s cash and cash equivalents totaled approximately $472 million.

Conference Call and Web Cast Information

King management will conduct a conference call at 8:30 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 20648171, followed by the # sign. The web cast of our call on May 5th 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 Company’s plans to resubmit to the Food and Drug Administration (“FDA”) the New Drug Application (“NDA”) for Remoxy®; the Company’s plans to submit to the FDA an NDA for Acurox® Tablets (without niacin); the Company’s forecast 2010 cash flow from operations; the expectations concerning the performance of the Alpharma Animal Health business; and statements pertaining to King’s planned webcast to discuss its first-quarter 2010 results. These forward-looking statements involve certain significant risks and uncertainties, and actual results may differ materially from the forward-looking statements. Some important factors which may cause actual results to differ materially from the forward-looking statements include: the future net sales of King’s products; King’s ability to market its products successfully; King’s ability to advance the development of products as planned; the high cost and uncertainty of research, clinical trials, and other development activities involving products in which King has an interest; the unpredictability of the FDA’s review and approval processes, including the unpredictability of the duration and results of the FDA’s review of Investigational New Drug Applications, NDAs, and Abbreviated New Drug Applications, as well as reviews by other regulatory agencies worldwide; the availability and cost of raw materials; any material interruptions in supply by contract manufacturers of King’s products or suppliers or raw materials; the potential effects on sales of the Company’s products as a result of the availability of competing products; the potential effects of future acquisitions and other transactions pursuant to the Company’s growth strategy, and the integration of any acquisitions; King’s compliance with FDA and other government regulations that relate to the Company’s business; King’s ability to conduct its webcast as currently planned on May 5, 2010; changes in general economic and business conditions; changes in current pricing levels; changes in federal and state laws and regulations; changes in competition; unexpected changes in technologies and technological advances; and manufacturing capacity constraints. Other important factors that may cause actual results to differ materially from the forward-looking statements are discussed in the “Risk Factors” section and other sections of King’s Form 10-K for the year ended December 31, 2009 , which is 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) March 31, December 31, 2010 2009 -------------- -------------- ASSETS Current assets: Cash and cash equivalents $ 471,763 $ 545,312 Investments in debt securities 27,127 29,258 Marketable securities 1,476 2,100 Accounts receivable, net 207,062 210,256 Inventories 188,644 182,291 Deferred income tax assets 79,196 83,675 Income tax receivable 18,258 16,091 Prepaid expenses and other current assets 49,903 60,860 -------------- -------------- Total current assets 1,043,429 1,129,843 -------------- -------------- Property, plant and equipment, net 381,370 391,839 Intangible assets, net 755,261 794,139 Goodwill 467,613 467,613 Deferred income tax assets 256,828 264,162 Investments in debt securities 204,785 218,608 Other assets 59,584 56,496 Assets held for sale 5,890 5,890 -------------- -------------- Total assets $ 3,174,760 $ 3,328,590 ============== ============== LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 89,794 $ 86,692 Accrued expenses 244,853 320,992 Short-term debt 3,369 3,662 Current portion of long-term debt - 85,550 -------------- -------------- Total current liabilities 338,016 496,896 -------------- -------------- Long-term debt 336,978 339,016 Other liabilities 128,238 123,371 -------------- -------------- Total liabilities 803,232 959,283 -------------- -------------- Commitments and contingencies Shareholders’ equity: Common shares no par value, 600,000,000 shares authorized, 249,603,115 and 248,444,711 shares issued and outstanding, respectively 1,424,697 1,421,489 Retained earnings 968,089 963,620 Accumulated other comprehensive loss (21,258) (15,802) -------------- -------------- Total shareholders’ equity 2,371,528 2,369,307 -------------- -------------- Total liabilities and shareholders’ equity $ 3,174,760 $ 3,328,590 ============== ============== KING PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (Unaudited) Three Months Ended March 31, ------------------------------ 2010 2009 -------------- -------------- REVENUES: Total revenues $ 380,855 $ 429,057 -------------- -------------- OPERATING COSTS AND EXPENSES: Cost of revenues, exclusive of depreciation and amortization shown below 127,054 129,414 Acquisition related inventory step-up - 21,525 -------------- -------------- Total cost of revenues 127,054 150,939 -------------- -------------- Selling, general and administrative 138,825 138,534 Litigation settlement 1,650 - Acquisiton related costs - 3,789 -------------- -------------- Total selling, general, and administrative expense 140,475 142,323 -------------- -------------- Depreciation 15,838 14,199 Intangible amortization 41,437 38,178 Accelerated depreciation - 972 Research and development 28,324 27,256 Restructuring charges 262 48,050 -------------- -------------- Total operating costs and expenses 353,390 421,917 -------------- -------------- OPERATING INCOME 27,465 7,140 OTHER EXPENSE: Interest expense (4,063) (18,749) Noncash convertible debt interest expense (4,673) (4,354) Interest income 409 2,788 Loss on investment (872) (823) Other, net (203) (2,779) -------------- -------------- Total other expense (9,402) (23,917) -------------- -------------- INCOME (LOSS) BEFORE INCOME TAXES 18,063 (16,777) Income tax expense (benefit) 13,594 (6,055) -------------- -------------- NET INCOME (LOSS) 4,469 (10,722) -------------- -------------- Basic net income (loss) per common share $ 0.02 $ (0.04) ============== ============== Diluted net income (loss) per common share $ 0.02 $ (0.04) ============== ============== Shares used in basic net income (loss) per share 245,206 243,889 Shares used in diluted net income (loss) per share 249,867 243,889 KING PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS EXCLUDING NON-GAAP ITEMS (in thousands, except per share data) (Unaudited) Three Months Ended March 31, ------------------------------ 2010 2009 -------------- -------------- REVENUES: Total revenues $ 380,855 $ 429,057 -------------- -------------- OPERATING COSTS AND EXPENSES: Cost of revenues, exclusive of depreciation shown below 127,054 129,414 Selling, general and administrative 138,825 138,534 Depreciation 15,838 14,199 Research and development 28,324 27,256 -------------- -------------- Total operating costs and expenses 310,041 309,403 -------------- -------------- OPERATING INCOME 70,814 119,654 OTHER EXPENSE: Interest expense (4,063) (18,749) Interest income 409 2,788 Other, net (203) (2,779) -------------- -------------- Total other expense (3,857) (18,740) -------------- -------------- INCOME BEFORE INCOME TAXES 66,957 100,914 Income tax expense 31,279 36,902 -------------- -------------- NET INCOME $ 35,678 $ 64,012 ============== ============== Basic net income per common share $ 0.15 $ 0.26 ============== ============== Diluted net income per common share $ 0.14 $ 0.26 ============== ============== Shares used in basic net income per share 245,206 243,889 Shares used in diluted net income per share 249,867 246,637 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 March 31, ---------------------------- 2010 2009 ------------- ------------- Diluted income (loss) per common share, as reported under GAAP $ 0.02 $ (0.04) Effect of non-GAAP items 0.12 0.30 ------------- ------------- Diluted income per common share, excluding non-GAAP items $ 0.14 $ 0.26 ============= ============= NON-GAAP ITEMS: Acquisition related inventory step-up (cost of revenues) $ - $ 21,525 Litigation settlement (selling, general, and administrative) 1,650 - Acquisition related costs (selling, general, and administrative) - 3,789 Intangible amortization (other operating costs and expenses) 41,437 38,178 Accelerated depreciation (other operating costs and expenses) - 972 Restructuring charges (other operating costs and expenses) 262 48,050 Noncash convertible debt interest expense (other (expense) income) 4,673 4,354 Loss on investment (other (expense) income) 872 823 ------------- ------------- Total non-GAAP items before income taxes 48,894 117,691 Income tax benefit from non-GAAP items (17,685) (42,957) ------------- ------------- Increase in net income (loss) $ 31,209 $ 74,734 ------------- ------------- Effect of non-GAAP items on diluted income (loss) per common share $ 0.12 $ 0.30 ============= =============