<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
(Mark one):
[X] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996)
For the fiscal year ended December 31, 1999.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _____ to _____.
Commission file number 0-24425
---------------
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
King Pharmaceuticals, Inc. 401(k) Retirement Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
King Pharmaceuticals, Inc., 501 Fifth Street, Bristol,
Tennessee 37620
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KING PHARMACEUTICALS, INC. 401(K) PLAN
INDEX TO FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Financial Statements and Exhibits
(a) Financial Statements
Report of Independent Accountants 2-3
Statement of Net Assets Available for Benefits
at December 31, 1999 and 1998 4
Statement of Changes in Net Assets Available for
Benefits for the Years Ended December 31, 1999, 1998 and 1997 5
Notes to Financial Statements 6-11
Supplemental Schedules *:
Schedule of Assets Held for
Investment Purposes 12
* - Other schedules required by Section 2520.103-10 of
the Department of Labor Rules and Regulations for
Reporting and Disclosure under ERISA have been
omitted because they are not applicable
(b) Exhibits
Exhibit 23 - Consent of Independent Accountants E1
</TABLE>
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
To the Plan Administrator of the King Pharmaceuticals,
Inc. 401(k) Plan:
We have audited the accompanying statements of net assets available for benefits
of the King Pharmaceuticals, Inc. 401(k) Plan (the "Plan") as of December 31,
1999 and 1998 and the related statements of changes in net assets available for
benefits for the year ended December 31, 1999. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
Except as explained in the following paragraph, we conducted our audits in
accordance with generally accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As permitted by 29 CFR 2520.103-8 of the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974, the plan administrator instructed us not to perform, and
we did not perform, any auditing procedures with respect to the information
discussed in Note 6, which was certified by First Tennessee Bank N.A., (the
"Trustee"), except for comparing such information with the related information
included in the financial statements and schedule. We have been informed by the
plan administrator that the Trustee holds the Plan's investment assets and
execute investment transactions. The plan administrator has obtained a
certification from the Trustee for the years ended December 31, 1998 and 1997
that the information provided to the plan administrator by the Trustee is
complete and accurate.
Because of the significance of the information that we did not audit, we are
unable to, and do not, express an opinion on the Plan's financial statements for
the years ended December 31, 1998 and 1997. The form and content of the
information included in the 1998 and 1997 financial statements, other than that
derived from the information certified by the trustee, have been audited by us
and, in our opinion, are presented in compliance with the Department of Labor's
Rules and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974.
In our opinion, the financial statements referred to above, of King
Pharmaceuticals, Inc. 401(k) Plan for 1999, present fairly, in all material
respects, the net assets available for benefits of King Pharmaceuticals, Inc.
401(k) Plan as of December 31, 1999 and 1998 and changes in net assets available
for benefits for the year ended December 31, 1999 in conformity with generally
accepted accounting principles.
2
<PAGE> 4
Our audit of the Plan's financial statements as of and for the year ended
December 31, 1999 was conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental schedule -
Schedule of Assets Held for Investment Purposes as of December 31, 1999 is
presented for the purpose of additional analysis and is not a required part of
the basic financial statements but is supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. This supplemental schedule
is the responsibility of the Plan's management. The supplemental schedule has
been subjected to the auditing procedures applied in the audit of the basic
financial statements as of and for the year ended December 31, 1999, and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
April 28, 2000
3
<PAGE> 5
KING PHARMACEUTICALS, INC.
401(k) PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
December 31,
1999 1998
----------- ----------
<S> <C> <C>
Investments, at fair value $19,429,513 $8,727,053
Receivables:
Participants' contributions 650,673 87,575
Employer contribution 6,517 34,449
Accrued Income 8,293 6,540
Cash 112,608 18,686
----------- ----------
Net assets available for benefits $20,207,604 $8,874,303
=========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 6
KING PHARMACEUTICALS, INC.
401(k) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
----------- ---------- ----------
<S> <C> <C> <C>
Additions to net assets attributed to:
Net appreciation
in fair value of investments $ 5,160,030 $1,087,510 $ 451,252
Interest and dividend income 5,179 4,618 35,108
Contributions:
Participants 5,193,433 2,948,748 853,265
Employer 1,358,687 961,017 310,447
----------- ---------- ----------
Total additions 11,717,329 5,001,893 1,650,072
----------- ---------- ----------
Deductions from net assets attributed to:
Distributions to participants 381,264 50,011 71,417
Transfer to Benevolent Fund -- 74,343 --
Other 2,764 117 74
----------- ---------- ----------
Total deductions 384,028 124,471 71,491
----------- ---------- ----------
Net increase 11,333,301 4,877,422 1,578,581
Net assets available for benefits:
Beginning of year 8,874,303 3,996,881 2,418,300
----------- ---------- ----------
End of year $20,207,604 $8,874,303 $3,996,881
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS
1. Description of Plan:
The following description of the King Pharmaceuticals, Inc. 401(k) Plan
(the "Plan") provides only general information. Participants should
refer to the plan agreement for a more complete description of the
Plan's provisions.
GENERAL - The Plan is a defined contribution plan established by King
Pharmaceuticals, Inc. (the "Company") as of January 1, 1994. All
employees with a minimum of one hour of service who are at least 21
years of age are eligible to participate in the Plan. The Plan is
subject to the provisions of the Employee Retirement Income Security Act
of 1974 ("ERISA"). Effective May, 1997 the Plan changed its trustee from
First Union National Bank of North Carolina to First Tennessee Bank,
N.A. Effective January 1, 1998 the assets related to the employees of
the King Pharmaceuticals Benevolent Fund, Inc. were transferred to the
King Pharmaceuticals Benevolent Fund, Inc. 401(k) Retirement Savings
Plan. Effective January 1, 1999, each participant was given the option
of having their salary deferral contribution invested in the Company's
common stock.
CONTRIBUTIONS - Participants may elect to contribute to the Plan by
deferring 1% to 17% of their annual compensation, not to exceed $10,000,
adjusted for cost of living increases annually in accordance with
Internal Revenue Code Section 402(g). The Company contributes a
discretionary matching percentage of the participant's eligible
contributions for the Plan year. Participant rollovers are reported as
participant contributions.
INVESTMENT OF CONTRIBUTIONS - Beginning May 3, 1999, each participant
has the option of having their respective salary deferral contribution
invested in 12 funds.
King Pharmaceuticals, Inc. Common Stock Fund - Monies are
invested in common stock of the Company purchased at prevailing
prices on the New York Stock Exchange on the date of purchase.
Fidelity Advisor Intermediate Bond Fund - The fund objective is
to provide a high rate of income through investment primarily in
investment grade fixed income obligations.
Fidelity U.S. Government Money Market Fund - The fund invests
only in U.S. Government Securities and repurchase agreements for
these securities. The fund also may enter into reverse repurchase
agreements. The fund objective is to obtain a high level of
current income while preserving the principal and liquidity of
the fund.
Fidelity Puritan Fund - The fund invests in a broadly diversified
portfolio of high-yielding equity and debt securities. The fund
objective is high income with preservation of capital.
Vanguard Index 500 Fund - The fund objective is to track the
performance of the Standard & Poor's 500 Stock Index, which
emphasizes stocks of large U.S. companies.
6
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS, Continued
1. Description of Plan, continued:
Janus Worldwide Fund - The fund objective is long-term growth of
capital in a manner consistent with the preservation of capital.
It invests primarily in common stocks of foreign and domestic
issuers.
Vanguard Intermediate Bond Index Fund - The fund invests in U.S.
Treasury and agency securities and investment-grade corporate
bonds with maturities between 5 and 10 years.
Fidelity Institutional Domestic Money Market Fund - The fund
objective is capital preservation through investment primarily
in money market instruments that have maturities of one year or
less or shares of money market mutual funds.
Vanguard Equity Income Fund - The fund seeks a high level of
dividend income and long-term growth of income and capital. The
fund primarily invests in dividend-paying equity securities.
Vanguard Growth Index Fund - The fund seeks long-term growth of
capital through investment primarily in large capitalization
U.S. stocks.
FAM Value Fund - The fund invests primarily in common stocks and
securities convertible into common stocks of small to mid-size
U.S. companies.
Lazard International Equity Portfolio Fund - The fund primarily
invests in equity securities issued by companies located in at
least three foreign countries.
Prior to May 3, 1999, each participant has the option of having their
respective salary deferral contributions invested in six funds.
Fidelity Advisor Intermediate Bond Fund - The fund objective is
to provide a high rate of income through investment primarily in
investment grade fixed income obligations.
Fidelity U.S. Government Money Market Fund - The fund invests
only in U.S. Government Securities and repurchase agreements for
these securities. The fund also may enter into reverse
repurchase agreements. The fund objective is to obtain a high
level of current income while preserving the principal and
liquidity of the fund.
Fidelity Puritan Fund - The fund invests in a broadly
diversified portfolio of high-yielding equity and debt
securities. The fund objective is high income with preservation
of capital.
7
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS, Continued
1. Description of Plan, continued:
Vanguard Index 500 Fund - The fund objective is to track the
performance of the Standard & Poor's 500 Stock Index, which
emphasizes stocks of large U.S. companies.
T. Rowe Price Equity Fund - The fund objective is to match the
investment performance of the U.S. equity markets as represented
by the Standard & Poor's 500 Stock Index. The fund will invest
in all 500 stocks composing the Standard & Poor's 500 Stock
Index, which includes companies operating across a broad
spectrum of the U.S. economy.
Janus Worldwide Fund - The fund objective is long-term growth
of capital in a manner consistent with the preservation of
capital. It invests primarily in common stocks of foreign and
domestic issuers.
PARTICIPANT ACCOUNTS - Each participant's account is credited with the
participant's contribution, the participant's share of the Company's
matching contribution and allocation of the Plan's earnings as defined
in the Plan document. Accounts are considered to be participant
directed. The benefit to which a participant is entitled is limited to
the benefit which can be provided from the participant's vested account.
VESTING - Participants are immediately vested in their contributions
plus actual earnings thereon. Vesting in the Company's matching
contribution portion of their accounts plus actual earnings thereon is
based on years of continuous service. A participant becomes 100% vested
after three years of credited service.
PARTICIPANT LOANS RECEIVABLE - Participants may borrow from their fund
accounts a minimum of $1,000 and to a maximum equal to the lesser of
$50,000 or 50% percent of their vested account balance. The loan
repayment term is for a period not to exceed 5 years or up to 10 years
if the purpose of the loan is the acquire a primary residence. The loans
are secured by the balance in the participants account and bear interest
at a rate commensurate with local prevailing rates as determined by the
Plan Committee. Interest rates on outstanding loans range from 9.00% to
10.00% as of December 31, 1999. Interest earned on participant loans
receivable is allocated directly to a participant directed fund.
Principal and interest are paid through payroll deductions.
DISTRIBUTION OF BENEFITS - Upon termination of service or retirement, a
participant with an account balance exceeding $3,500, may elect to
receive either a lump-sum amount equal to the value of his or her
account, or monthly, quarterly or annual installments over a fixed
period of time. Participant accounts under $3,500 are paid in a lump-sum
upon termination of service or retirement. If a participant dies before
the commencement of benefit payments, their vested account is paid to
the beneficiary. The Plan also allows for participant withdrawals under
certain financial hardship conditions. Participants should refer to the
plan agreement for a more detailed description of the benefit payment
options available.
8
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS, Continued
1. Description of Plan, continued:
FORFEITURES - Total forfeitures in 1999 and 1998 were $26,589 and
$10,105, respectively. Forfeitures of Company matching contributions
reduce the Company's matching contributions for the Plan year.
2. Summary of Significant Accounting Policies:
INVESTMENTS - The Plan's investments in mutual funds and common stocks
are recorded at fair value. Shares are valued at quoted market prices
which represent the net asset value of shares held by the Plan at
year-end. Participant notes receivable are valued at cost which
approximates fair value.
The Plan presents in the Statements of Changes in Net Assets Available
for Benefits the net appreciation in the fair value of its investments
which consists of the realized gains or losses and the unrealized
appreciation (depreciation) on those investments.
Investment income and the net appreciation (depreciation) for each
investment fund are allocated to each participant in the same ratio that
the participant's account balance in that fund has to the total account
balances for all participants in that fund.
Realized gains and losses are recognized, as reported by the trustee,
when units of the funds are sold. The average cost method is used in
determining the costs of the units sold.
ADMINISTRATIVE EXPENSES - Administrative expenses for the Plan, except
for normal transaction costs, are paid by the Company. Additionally,
personnel and facilities of the Plan sponsor have been used by the Plan
for its administrative activities at no cost to the Plan.
USE OF ESTIMATES - The preparation of the financial statements requires
management to make estimates and assumptions that affect the reported
amount of assets available for benefits and the disclosure of changes in
net assets at the date of the financial statements and for the period
then ended. Actual results could differ from those reported.
RISKS AND UNCERTAINTIES - The Plan provides for various investment
options in mutual funds and other investment securities. Investment
securities are exposed to various risks, such as interest rate, market
and credit. Due to the level of risk associated with certain investment
securities and the level of uncertainty related to changes in the value
of investment securities, it is at least reasonably possible that
changes in risks in the near term would materially affect participants'
account balances and the amounts reported in the statement of net assets
available for benefits and the statement of changes in net assets
available for benefits.
9
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS, Continued
2. Summary of Significant Accounting Policies, continued:
NEW ACCOUNTING STANDARD - The Company has adopted the provisions of SOP
99-3, "Accounting for and Reporting of Certain Employee Benefit Plan
Investments and Other Disclosure Matters." The statement states that a
defined contribution pension plan that provides participant-directed
investment programs is no longer required to disclose amounts relating
to those individual programs as a separate fund in the financial
statements in columnar form, or in the related disclosures, or by
separate financial statements for each program required by Practice
Bulletin 12, "Reporting Separate Investment Fund Option Information of
Defined Contribution Pension Plans." Additionally, defined contribution
pension plans are no longer required to present participant-directed
plan investments in the statement of net assets available for benefits
by general type.
RECLASSIFICATION - Certain amounts from the prior period financial
statements have been reclassified to conform to the current
presentation.
3. Investments
The following is a summary of investments that represent 5% or more of
the Plan's net assets at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
Fair Value Fair Value
---------- ---------
<S> <C> <C>
Fidelity U.S. Government Money Market Fund $1,408,447 $ 894,539
Fidelity Puritan Fund 2,073,192 1,580,612
Vanguard Index 500 Fund 4,291,701 2,463,495
T. Rowe Price Equity Fund -- 1,927,297
Janus Worldwide Fund 3,383,119 1,616,189
King Pharmaceuticals, Inc. Common Stock Fund 4,889,591 --
Vanguard Equity Income Fund 2,592,962 --
</TABLE>
The Plan's investment (including gains and losses on investments bought
and sold, as well as held during the year) appreciated in value as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- --------
<S> <C> <C> <C>
King Pharmaceuticals, Inc. Common Stock $3,011,882 $ -- $ --
Mutual Funds 2,148,148 1,087,510 451,252
---------- ---------- --------
$5,160,030 $1,087,510 $451,252
========== ========== ========
</TABLE>
4. Plan Termination:
Although the Company has not expressed any intent to discontinue the
Plan, the Company has the right under the Plan to discontinue its
contributions at any time and to terminate the Plan subject to the
provisions of ERISA. In the event of plan termination, participants will
become one hundred percent vested in their accounts.
10
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS, Continued
5. Income Tax Status:
The Plan obtained its latest determination letter on November 12, 1996,
in which the Internal Revenue Service stated that the Plan, as then
designed, was in compliance with the applicable requirements of the
Internal Revenue Code. The Plan has been amended since receiving the
determination letter. However, the Plan administrator and the Plan's tax
counsel believe that the Plan is currently designed and being operated
in compliance with the applicable requirements of the Internal Revenue
Code. Therefore, no provision for income taxes has been included in the
Plan's financial statements.
6. Certified Information:
All of the financial information disclosed in the accompanying financial
statements and supplemental schedules pertaining to investments and
investment-related activity was supplied and certified as complete and
accurate to the best of their knowledge and belief by First Tennessee
Bank, N.A. for the years ended December 31, 1998 and 1997.
7. Reconciliation of Financial Statements to Form 5500:
The following is a reconciliation of net assets available for benefits
per the financial statements to the Form 5500:
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Net assets available for benefits per the
financial statements $20,207,604 $8,874,303
Difference in contribution receivables -- (19,693)
Difference in benefits payable (1,093) --
Difference in accrued income and expenses (2,898) (7,061)
----------- ----------
Net assets available for benefits per the
Form 5500 $20,203,613 $8,847,549
=========== ==========
</TABLE>
The following is a reconciliation of contributions received per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Contributions received per the
financial statements $6,555,120 $3,909,765
Difference in prior year contributions receivable 19,693 36,259
Difference in current year contributions receivable -- (19,693)
---------- ----------
Contributions received per the
Form 5500 $6,571,813 $3,926,331
========== ==========
</TABLE>
11
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SUPPLEMENTAL SCHEDULE
<PAGE> 14
KING PHARMACEUTICALS, INC.
401(k) PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1999
<TABLE>
<CAPTION>
Units Cost Fair Value
--------- ----------- -----------
<S> <C> <C> <C>
Fidelity Advisor Intermediate Bond Fund 26,466 $ 277,975 $ 270,749
Vanguard Intermediate Bond Index Fund 7,086 68,418 67,391
Fidelity U.S. Government Money Market Fund 1,408,447 1,408,447 1,408,447
Fidelity Institutional Domestic Money Market Fund 94,574 94,574 94,574
Fidelity Puritan Fund 108,943 2,124,468 2,073,192
Vanguard Index 500 Fund 32,025 3,428,764 4,291,701
Janus Worldwide Fund 44,264 2,116,950 3,383,119
King Pharmaceuticals, Inc. Common Stock Fund 87,216 1,979,140 4,889,591
Vanguard Equity Income Fund 111,910 2,882,886 2,592,962
Vanguard Growth Index Fund 6,258 220,872 246,743
FAM Value Fund 591 19,487 18,521
Lazard International Equity Portfolio Fund 511 8,499 8,836
----------- -----------
14,630,480 19,345,826
Participant Loans (with interest
rates from 9.00% to 10.00%) N/A 83,687 83,687
----------- -----------
$14,714,167 $19,429,513
=========== ===========
</TABLE>
12
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
KING PHARMACEUTICALS, INC. 401(K)
RETIREMENT SAVINGS PLAN
Date June 28, 2000
-------------------
/s/ Brian G. Shrader
----------------------------------------
Brian G. Shrader
Chief Financial Officer
