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

BRISTOL, TN--(Marketwire - August 09, 2010) - King Pharmaceuticals, Inc. (NYSE: KG)

-- REMOXY® ON TRACK FOR FOURTH QUARTER 2010 RESUBMISSION -- EMBEDA® PRESCRIPTIONS CONTINUE TO GROW -- FLECTOR® PATCH PRESCRIPTIONS REBOUND IN JUNE, HIGHEST MONTHLY TOTAL SINCE DECEMBER -- CASH FLOW FROM OPERATIONS $51 MILLION, FULL YEAR CASH FLOW FORECAST OF $300 MILLION 

King Pharmaceuticals, Inc. (NYSE: KG) announced today that total revenue for the second quarter ended June 30, 2010 equaled $371 million compared to $445 million in the second quarter of 2009. The Company reported net income of $18.0 million and diluted earnings per share of $0.07 during the second quarter of 2010, compared to a net income of $37.9 million and diluted earnings per share of $0.15 in the same period of the prior year. Excluding certain special items and recurring non-GAAP adjustments, adjusted net earnings equaled $43.1 million and adjusted diluted earnings per share equaled $0.17 during the second quarter ended June 30, 2010, compared to adjusted net earnings of $79.9 million and adjusted diluted earnings per share of $0.32 in the second quarter of 2009.

Brian A. Markison, Chairman, President and Chief Executive Officer of King, stated, “I’m pleased to report that in the second quarter Embeda® prescriptions showed continued growth while Flector® Patch prescriptions showed improvement. In June, Flector® recorded its highest number of total prescriptions since December 2009, and it grew five percent sequentially over the first quarter of this year.” He continued, “In addition to the progress we are making on the commercial side of the business, our products in development continue to track well against our previously stated timelines. Both Remoxy® and Acurox® remain on track for FDA submission, with Remoxy® scheduled for the end of this year and Acurox® scheduled for the first quarter of 2011. Finally, later this year we expect to begin enrollment in the phase three safety and efficacy studies for Oxycodone NT, a product specifically designed to resist certain common methods of misuse and abuse. We are very optimistic about the potential for success of our development programs, and look forward to working closely with the Food and Drug Administration toward approval of these novel and important formulations.”

Joseph Squicciarino, King’s Chief Financial Officer, commented, “Second quarter financial results were in line with our revised expectations. The Company reported cash flow from operations of $51 million, and we continue to believe that we will be able to generate approximately $300 million for the full year.” He continued, “King’s overall liquidity profile remains strong as evidenced by the recent establishment of a new $500 million dollar, five year revolving credit facility. In addition, we remain confident in our ability to deliver against our previously stated financial guidance for 2010.”

Net revenue from branded pharmaceuticals totaled $162 million for the second quarter of 2010, compared to $275 million for the same period of the prior year. Branded pharmaceuticals revenue for the quarter did not include approximately $26 million in royalties recorded for the sales of an authorized SKELAXIN® generic.

Net sales of SKELAXIN® (metaxalone) totaled $5 million during the second quarter of 2010, compared to $102 million for the same period of the prior year. Early in the second quarter of 2010, two generic forms of SKELAXIN® were launched.

THROMBIN-JMI® (thrombin, topical, bovine, USP) net sales totaled $37 million during the second quarter of 2010, compared to $49 million in the second quarter of 2009.

Net sales of AVINZA® (morphine sulfate extended release) totaled $25 million during the second quarter of 2010, compared to $29 million in the second quarter of 2009.

Net sales of FLECTOR® PATCH (diclofenac epolamine topical patch) 1.3% totaled $35 million during the second quarter of 2010, compared to $39 million in the second quarter of 2009.

Net sales of EMBEDA® (morphine sulfate and naltrexone hydrochloride) Extended Release Capsules totaled $15 million during the second quarter of 2010, up $6 million sequentially from the first quarter of 2010. Wholesaler inventory levels now stand at approximately 3 weeks.

King’s Meridian Auto-Injector business contributed revenue totaling $83 million during the second quarter of 2010, compared to $72 million in the second quarter of 2009. The increase was primarily due to price increases, higher unit sales and royalties from the next generation EpiPen® auto-injector partially offset by lower sales to government agencies.

Net revenue from the Alpharma Animal Health business totaled $85 million during the second quarter of 2010, compared to $83 million in the second quarter of 2009.

As of June 30, 2010, the Company’s cash and cash equivalents totaled approximately $573 million.

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: (866) 393-6640 International Dial In: (706) 643-2643 

Participants will be required to provide a passcode before being joined to the conference. The event passcode is 89476496. 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 800-642-1687, or 706-645-9291 if you are calling from outside the USA. The replay code is 89476496. The web cast of our call on August 9th 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 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, LLC, 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® ; the Company’s forecast for 2010 cash flow from operations and the accomplishment of other financial goals; the timing of clinical studies and the potential outcomes of product development programs; the Company’s plans for interaction with the FDA; and statements pertaining to King’s planned webcast to discuss its second 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 August 9, 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, and the Company’s form 10-Q for the quarter ended March 31, 2010, 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) June 30, December 31, 2010 2009 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 573,062 $ 545,312 Investments in debt securities 16,346 29,258 Marketable securities 1,022 2,100 Accounts receivable, net 209,585 210,256 Inventories 195,614 182,291 Deferred income tax assets 72,494 83,675 Income taxes receivable 13,341 16,091 Prepaid expenses and other current assets 29,323 60,860 ------------ ------------ Total current assets 1,110,787 1,129,843 ------------ ------------ Property, plant and equipment, net 377,298 391,839 Intangible assets, net 719,862 794,139 Goodwill 466,283 467,613 Deferred income tax assets 259,579 264,162 Investments in debt securities 169,777 218,608 Other assets 58,748 56,496 Assets held for sale 5,890 5,890 ------------ ------------ Total assets $ 3,168,224 $ 3,328,590 ============ ============ LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 74,176 $ 86,692 Accrued expenses 228,747 320,992 Short-term debt 3,506 3,662 Current portion of long-term debt - 85,550 ------------ ------------ Total current liabilities 306,429 496,896 ------------ ------------ Long-term debt 341,735 339,016 Other liabilities 126,604 123,371 ------------ ------------ Total liabilities 774,768 959,283 ------------ ------------ Commitments and contingencies Shareholders’ equity: Common shares no par value, 600,000,000 shares authorized, 249,664,513 and 248,444,711 shares issued and outstanding, respectively 1,433,533 1,421,489 Retained earnings 986,077 963,620 Accumulated other comprehensive loss (26,154) (15,802) ------------ ------------ Total shareholders’ equity 2,393,456 2,369,307 ------------ ------------ Total liabilities and shareholders’ equity $ 3,168,224 $ 3,328,590 ============ ============ KING PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, -------------------- -------------------- 2010 2009 2010 2009 --------- --------- --------- --------- REVENUES: Total revenues $ 370,903 $ 444,988 $ 751,758 $ 874,045 --------- --------- --------- --------- OPERATING COSTS AND EXPENSES: Cost of revenues, exclusive of depreciation and amortization shown below 119,027 140,034 246,081 269,448 Acquisition related inventory step-up - 16,059 - 37,584 --------- --------- --------- --------- Total cost of revenues 119,027 156,093 246,081 307,032 --------- --------- --------- --------- Selling, general and administrative 129,979 120,631 268,804 259,165 Litigation settlement 1,850 - 3,500 - Acquisiton related costs - 2,944 - 6,733 --------- --------- --------- --------- Total selling, general, and administrative expenses 131,829 123,575 272,304 265,898 --------- --------- --------- --------- Depreciation 15,690 14,422 31,528 28,621 Intangible amortization 38,213 38,149 79,650 76,327 Accelerated depreciation - 291 - 1,263 Research and development 33,174 21,202 61,498 48,458 Restructuring charges 4,852 1,475 5,114 49,525 --------- --------- --------- --------- Total operating costs and expenses 342,785 355,207 696,175 777,124 --------- --------- --------- --------- OPERATING INCOME 28,118 89,781 55,583 96,921 OTHER INCOME (EXPENSE): Interest expense (2,722) (23,160) (6,785) (41,909) Noncash convertible debt interest expense (4,757) (4,432) (9,430) (8,786) Interest income 487 1,506 896 4,294 Gain on Kadian 12,500 - 12,500 - Gain (loss) on investment 249 (524) (623) (1,347) Loss on early extinguishment of debt (2,252) - (2,252) - Other, net (1,753) 4,112 (1,956) 1,333 --------- --------- --------- --------- Total other income (expense) 1,752 (22,498) (7,650) (46,415) --------- --------- --------- --------- INCOME BEFORE INCOME TAXES 29,870 67,283 47,933 50,506 Income tax expense 11,882 29,348 25,476 23,293 --------- --------- --------- --------- NET INCOME $ 17,988 $ 37,935 $ 22,457 $ 27,213 ========= ========= ========= ========= Basic net income per common share $ 0.07 $ 0.16 $ 0.09 $ 0.11 ========= ========= ========= ========= Diluted net income per common share $ 0.07 $ 0.15 $ 0.09 $ 0.11 ========= ========= ========= ========= Shares used in basic net income per share 245,787 244,693 245,496 244,291 Shares used in diluted net income per share 249,375 247,207 249,621 246,922 KING PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS EXCLUDING NON-GAAP ITEMS (in thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, -------------------- -------------------- 2010 2009 2010 2009 --------- --------- --------- --------- REVENUES: Total revenues $ 370,903 $ 444,988 $ 751,758 $ 874,045 --------- --------- --------- --------- OPERATING COSTS AND EXPENSES: Cost of revenues, exclusive of depreciation shown below 119,027 140,034 246,081 269,448 Selling, general and administrative 129,979 120,631 268,804 259,165 Depreciation 15,690 14,422 31,528 28,621 Research and development 33,174 21,202 61,498 48,458 --------- --------- --------- --------- Total operating costs and expenses 297,870 296,289 607,911 605,692 --------- --------- --------- --------- OPERATING INCOME 73,033 148,699 143,847 268,353 OTHER EXPENSE: Interest expense (2,722) (23,160) (6,785) (41,909) Interest income 487 1,506 896 4,294 Other, net (1,753) 4,112 (1,956) 1,333 --------- --------- --------- --------- Total other expense (3,988) (17,542) (7,845) (36,282) --------- --------- --------- --------- INCOME BEFORE INCOME TAXES 69,045 131,157 136,002 232,071 Income tax expense 25,995 51,284 57,274 88,186 --------- --------- --------- --------- NET INCOME $ 43,050 $ 79,873 $ 78,728 $ 143,885 ========= ========= ========= ========= Basic net income per common share $ 0.18 $ 0.33 $ 0.32 $ 0.59 ========= ========= ========= ========= Diluted net income per common share $ 0.17 $ 0.32 $ 0.32 $ 0.58 ========= ========= ========= ========= Shares used in basic net income per share 245,787 244,693 245,496 244,291 Shares used in diluted net income per share 249,375 247,207 249,621 246,922 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 Six Months Ended June 30, June 30, -------------------- -------------------- 2010 2009 2010 2009 --------- --------- --------- --------- Diluted income per common share, as reported under GAAP $ 0.07 $ 0.15 $ 0.09 $ 0.11 Effect of non-GAAP items 0.10 0.17 0.23 0.47 --------- --------- --------- --------- Diluted income per common share, excluding non-GAAP items $ 0.17 $ 0.32 $ 0.32 $ 0.58 ========= ========= ========= ========= NON-GAAP ITEMS: Acquisition related inventory step-up (cost of revenues) $ - $ 16,059 $ - $ 37,584 Litigation settlement (selling, general, and administrative) 1,850 - 3,500 - Acquisition related costs (selling, general, and administrative) - 2,944 - 6,733 Intangible amortization (other operating costs and expenses) 38,213 38,149 79,650 76,327 Accelerated depreciation (other operating costs and expenses) - 291 - 1,263 Restructuring charges (other operating costs and expenses) 4,852 1,475 5,114 49,525 Noncash convertible debt interest expense (other income (expense)) 4,757 4,432 9,430 8,786 Gain on Kadian (other income (expense)) (12,500) - (12,500) - Gain (loss) on investment (other income (expense)) (249) 524 623 1,347 Loss on early extinguishment of debt (other income (expense)) 2,252 - 2,252 - --------- --------- --------- --------- Total non-GAAP items before income taxes 39,175 63,874 88,069 181,565 Income tax benefit from non-GAAP items (14,113) (21,936) (31,798) (64,893) --------- --------- --------- --------- Increase in net income $ 25,062 $ 41,938 $ 56,271 $ 116,672 --------- --------- --------- --------- Effect of non-GAAP items on diluted income per common share $ 0.10 $ 0.17 $ 0.23 $ 0.47 ========= ========= ========= =========