<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT FOR ISSUERS SUBJECT TO THE
1934 REPORTING REQUIREMENTS
FORM 8-K/A
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 7, 2000
-------------------------------
KING PHARMACEUTICALS, INC.
-------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Tennessee 000--24425 54-1684963
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
501 Fifth Street, Bristol, Tennessee 37620
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (423) 989-8000
-----------------------------
Not Applicable
-------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
<PAGE> 2
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 7, 2000, King Pharmaceuticals, Inc. ("King") acquired from
American Home Products Corporation ("AHP") AHP's rights in the United States
and Puerto Rico to the pharmaceutical products Nordette(R), Bicillin and
Wycillin. This acquisition was pursuant to an Asset Purchase Agreement dated
June 22, 2000 between King and AHP.
This transaction was prospectively reported on a Current Report on Form
8-K filed June 30, 2000. This Amendment is being filed to provide the financial
information required by Item 7(a) and Item 7(b) of Form 8-K within the timeframe
specified by Item 7 of Form 8-K following the closing of the acquisition on
July 7, 2000.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
WYETH-AYERST LABORATORIES DIVISION - NORDETTE, BICILLIN AND WYCILLIN
PRODUCT LINES OF AMERICAN HOME PRODUCTS CORPORATION
<TABLE>
<S> <C> <C>
(a) Financial Statements of Businesses Acquired.
Report of Independent Public Accountants....................................................... F-1
Statement of Assets Acquired and Liabilities Assumed (See Note 1)................................F-2
Statements of Net Revenues in Excess of Direct Expenses (See Note 1)........................... F-3
Notes to Statements............................................................................ F-4
(b) Unaudited Pro Forma Consolidated Financial Information.
Unaudited Pro Forma Consolidated Financial Statements................................................... F-8
King Pharmaceuticals, Inc. Unaudited Pro Forma Consolidated Balance Sheet
as of June 30, 2000............................................................................ F-9
Notes to Unaudited Pro Forma Consolidated Balance Sheet................................................. F-10
King Pharmaceuticals, Inc. Pro Forma Consolidated Statement of Operations
for the Year Ended December 31, 1999........................................................... F-12
King Pharmaceuticals, Inc. Pro Forma Consolidated Statement of Operations
for the Six Months Ended June 30, 2000......................................................... F-13
Notes To Unaudited Pro Forma Consolidated Statements of Operations...................................... F-14
</TABLE>
<PAGE> 3
(a) Financial Statements of Business Acquired
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To American Home Products Corporation:
We have audited the accompanying statements of assets acquired and liabilities
assumed of American Home Products Corporation's Wyeth-Ayerst Laboratories
Division - Nordette(R), Bicillin(R), and Wycillin(R) product lines (the Wyeth
Brands) as of December 31, 1999 and the related statements of net revenues in
excess of direct expenses for the year then ended. These statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
These statements have been prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission for inclusion
in the Form 8-K/A of King Pharmaceuticals, Inc., as described in Note 1, and
are not intended to be a complete presentation of the Wyeth Brands assets and
liabilities and revenues and expenses.
In our opinion, the statements referred to above present fairly, in all material
respects, the assets acquired and liabilities assumed as of December 31, 1999,
and net revenues in excess of direct expenses of the Wyeth Brands for the year
then ended in conformity with accounting principles generally accepted in the
United States.
Arthur Andersen LLP
Roseland, New Jersey
July 31, 2000
F-1
<PAGE> 4
AMERICAN HOME PRODUCTS CORPORATION'S WYETH-AYERST LABORATORIES DIVISION -
NORDETTE(R), BICILLIN(R), AND WYCILLIN(R) PRODUCT LINES (SEE NOTE 1)
STATEMENTS OF ASSETS ACQUIRED AND LIABILITIES ASSUMED (NOTE 1) AS OF DECEMBER
31, 1999 AND JUNE 30, 2000 (UNAUDITED) (in thousands of U.S. dollars)
<TABLE>
<CAPTION>
2000
1999 (unaudited)
-------- -----------
<S> <C> <C>
INTANGIBLE ASSETS -- --
-------- -------
Assets acquired -- --
-------- -------
MANAGED CARE LIABILITIES -- $ 1,208
MEDICAID/MEDICARE REBATE LIABILITIES -- 167
CHARGEBACK LIABILITIES -- 457
-------- -------
Liabilities assumed -- $ 1,832
-------- -------
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE> 5
AMERICAN HOME PRODUCTS CORPORATION'S WYETH-AYERST LABORATORIES DIVISION -
NORDETTE(R), BICILLIN(R), AND WYCILLIN(R) PRODUCT LINES (SEE NOTE 1)
STATEMENTS OF NET REVENUES IN EXCESS OF DIRECT EXPENSES (NOTE 1) FOR THE YEAR
ENDED DECEMBER 31, 1999 AND THE SIX MONTHS ENDED JUNE 30, 1999 AND 2000
(UNAUDITED) (in thousands of U.S. dollars)
<TABLE>
<CAPTION>
June 30, June 30,
December 31, 1999 2000
1999 (unaudited) (unaudited)
-------- ----------- -----------
<S> <C> <C> <C>
NET REVENUES $ 57,369 $ 31,431 $ 31,676
--------- -------- --------
DIRECT COSTS AND EXPENSES:
Cost of sales 12,091 4,200 4,704
Direct marketing expenses 1,594 859 212
Direct selling expenses 3,253 1,537 2,076
-------- -------- --------
Net revenues in excess of direct
expenses $ 40,431 $ 24,835 $ 24,684
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 6
AMERICAN HOME PRODUCTS CORPORATION'S WYETH-AYERST LABORATORIES DIVISION -
NORDETTE(R), BICILLIN(R), AND WYCILLIN(R) PRODUCT LINES (SEE NOTE 1)
NOTES TO STATEMENTS
(in thousands of U.S. dollars)
1. BASIS OF PRESENTATION AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying statements were prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission for inclusion in
the Form 8-K/A of King Pharmaceutical, Inc., and are not intended to be a
complete presentation of the American Home Products Corporation's Wyeth-Ayerst
Laboratories Division - Nordette(R), Bicillin(R), and Wycillin(R) product lines
(the Wyeth Brands) financial position and results of operations. Wyeth-Ayerst
Laboratories Division does not prepare financial statements of the Wyeth Brands,
which would be intended to report a complete presentation of financial position,
results of operations and cash flows in accordance with generally accepted
accounting principles. Accordingly, the accompanying statements do not purport
to present the financial position or results of operations of the Wyeth Brands
that would have resulted if the Wyeth-Ayerst Laboratories Division had operated
its Wyeth Brands as an independent company.
An Asset Purchase Agreement was entered into between American Home Products
Corporation (the Seller), acting through its wholly-owned Wyeth-Ayerst
Laboratories Division (the Division) and King Pharmaceuticals, Inc. (the Buyer)
on June 22, 2000. The Buyer acquired certain assets and assumed certain
liabilities as of July 7, 2000 (the Closing Date) for two hundred million
dollars ($200,000), as defined in the Asset Purchase Agreement. The assumed
liabilities as of June 30, 2000 represent future obligations relating to the
Wyeth Brands that are required to be performed and fulfilled after the Closing
Date under the terms of customer contracts, as defined in the Asset Purchase
Agreement between the Seller and certain third parties. These certain third
parties can purchase or use any of the Wyeth Brands sold by the Seller in the
United States of America, District of Columbia, and the Commonwealth of Puerto
Rico (the Territory). The future obligations relate to managed care rebates,
Federal and State Medicaid/Medicare rebates, and administrative fees, as well
as chargebacks in connection with the Wyeth Brands sold in the Territory.
The assets acquired as of June 30, 2000 represent certain intangible assets as
defined in the Asset Purchase Agreement. These assets include intellectual
property, rights and obligations under the License Agreement, books and records,
historical sales data, marketing and promotional materials and plans, all
transferable licenses, permits or other Governmental Authority authorizations
exclusively relating the Wyeth Brands. This includes the assignment of all of
the Regulatory Approvals of the Wyeth Brands, the rights and future obligations
of the Seller relating exclusively to the Wyeth Brands under the customer
contracts, as well as all goodwill related exclusively to the Wyeth Brands. The
Buyer also acquired two Bicillin trademarks, as defined in the Asset Purchase
Agreement, as well as service marks, trade names (excluding the names of the
Seller, Wyeth-Ayerst, Lederle, Safer Sex Initiative, and Pilpak), trade dress,
labels, logos and all other names and slogans owned by the Seller and
exclusively associated with the Wyeth Brands. All intangible assets recorded in
the books, if any, and records of the Division specifically related to the Wyeth
Brands have been fully amortized as of December 31, 1999.
A Manufacturing and Supply Agreement (the Agreement) was also entered into
between the Seller acting through the Division and the Buyer on July 7, 2000
(the Effective Date). Pursuant to the Agreement, the Seller will manufacture
and supply the Brands to the Buyer for sale solely in the Territory, and the
Buyer shall exclusively purchase the Brands from the Seller for sale solely in
the Territory. The Agreement is for a period of three (3) years for Bicillin(R)
and Wycillin(R), and four (4) years for Nordette(R) from the Effective Date.
All other assets and liabilities, if any, of the Wyeth Brands have been
excluded in accordance with the Asset Purchase Agreement.
F-4
<PAGE> 7
AMERICAN HOME PRODUCTS CORPORATION'S WYETH-AYERST LABORATORIES DIVISION -
NORDETTE(R), BICILLIN(R), AND WYCILLIN(R) PRODUCT LINES (SEE NOTE 1)
NOTES TO STATEMENTS
(in thousands of U.S. dollars)
The statements of assets acquired and liabilities assumed have been derived
from the financial statements of the Division.
The statements of net revenues in excess of direct expenses include sales made
in the Territory. This statement excludes charges, which are allocated to the
Wyeth Brands by the Division or the Seller. These allocations include, among
other things, support services such as research and development, legal,
finance, treasury, tax, pension and group insurance, insurance, environmental
safety, public relations, audit and executive management advisory functions, as
well as quality control, warehousing and administrative costs. Interest income
or expense attributable to borrowings required to finance the Wyeth Brands
operations has also been excluded.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Net Revenues
Net revenues include certain sales deductions. Sales deductions are presented
on an accrual basis and include deductions specifically attributable to the
Wyeth Brands and deductions allocated to the Wyeth Brands by management. The
types of deductions included in the calculation of net sales are as follows:
- Sales Returns - Sales returns are directly attributable to identifiable
products based on actual sales returns.
- Cash Discounts - Cash discounts are allocated to the Wyeth Brands monthly,
based upon the Division's sales terms.
- Price Adjustments - HMO/PBM and Medicaid/Medicare rebates, and Chargebacks
are allocated to the Wyeth Brands on an accrual basis.
<TABLE>
<CAPTION>
June 30, June 30,
December 31, 1999 2000
1999 (unaudited) (unaudited)
------------ ----------- -----------
<S> <C> <C> <C>
Gross revenue $67,746 $36,101 $37,697
Less:
Sales returns 2,086 964 1,679
Cash discounts 1,445 788 807
Price adjustments 6,846 2,918 3,535
------- ------- -------
Net Revenues $57,369 $31,431 $31,676
======= ======= =======
</TABLE>
F-5
<PAGE> 8
AMERICAN HOME PRODUCTS CORPORATION'S WYETH-AYERST LABORATORIES DIVISION -
NORDETTE(R), BICILLIN(R), AND WYCILLIN(R) PRODUCT LINES (SEE NOTE 1)
NOTES TO STATEMENTS
(in thousands of U.S. dollars)
2. COMMITMENTS AND CONTINGENCIES
Managed Care
The Buyer will reimburse the Seller for managed care rebates paid by the Seller
on Current Product sales having Report Dates after June 22, 2000.
Federal and State Medicaid/Medicare Rebates
The Buyer will be responsible for all Federal and State Medicaid/Medicare
rebate program price reporting, as well as the processing of payments
associated with the Wyeth Brands sold under the Buyer's new NDC. After June 22,
2000, the Division will continue to be fully responsible for all Federal and
State Medicaid/Medicare rebate program price reporting and processing/payments
associated with the Wyeth Brands sold under the Division's NDC. The Buyer will
reimburse the Seller for all qualified Federal and State Medicaid/Medicare
rebates paid by the Seller on Current Product sales having Report Dates after
June 22, 2000.
Chargebacks
For a period of six (6) months from the Closing Date, the Seller shall
reimburse the Buyer for all qualified customer chargebacks for the Wyeth Brands
having an activity date (the date that the wholesaler ships the Wyeth Brands to
a customer) prior to June 22, 2000. The Buyer shall pay all qualified
chargeback requests, submitted by the wholesalers to the Buyer, for the Wyeth
Brands sold in the Territory having an activity date prior to June 22, 2000. On
a monthly basis, the Buyer will submit to the Seller, a request for
reimbursement of chargebacks paid by the Buyer on the Sellers behalf. The
Buyer shall be responsible for all qualified chargeback requests for the Wyeth
Brands submitted by the wholesalers having an activity date after June 22, 2000.
Sales Returns
The Buyer is responsible for all returns of the Wyeth Brands sold in the
Territory by the Buyer, except for a period of six (6) months following the
Closing Date. During this period, the Seller, will reimburse the Buyer in an
amount not to exceed one million dollars ($1,000) for all qualified sales
returns of the Wyeth Brands bearing the Seller's label sold by or on the behalf
of the Seller and its subsidiaries and divisions prior to the Closing Date
F-6
<PAGE> 9
AMERICAN HOME PRODUCTS CORPORATION'S WYETH-AYERST LABORATORIES DIVISION -
NORDETTE(R), BICILLIN(R), AND WYCILLIN(R) PRODUCT LINES (SEE NOTE 1)
NOTES TO STATEMENTS
(in thousands of U.S. dollars)
3. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following tables summarize the Wyeth Brands statement of net revenues in
excess of direct expenses for the periods indicated:
<TABLE>
<CAPTION>
For the year ended December 31, 1999
---------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
---------------------------------------
<S> <C> <C> <C> <C>
NET REVENUES $15,924 $15,507 $9,381 $16,557
---------------------------------------
DIRECT COSTS AND EXPENSES:
Cost of sales 1,156 3,044 1,662 6,229
Direct marketing expenses 560 299 426 309
Direct selling expenses 627 910 603 1,113
---------------------------------------
Net revenues in excess of direct expenses $13,581 $11,254 $6,690 $ 8,906
---------------------------------------
<CAPTION>
For the two quarters ended June 30, 2000
----------------------------------------
1st 2nd
Quarter Quarter
------------------
<S> <C> <C>
NET REVENUES $15,704 $15,972
------------------
DIRECT COSTS AND EXPENSES:
Cost of sales 680 4,024
Direct marketing expenses 114 98
Direct selling expenses 1,153 923
------------------
Net revenues in excess of direct expenses $13,757 $10,927
------------------
</TABLE>
F-7
<PAGE> 10
(b) Pro Forma Financial Information
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated financial information of King
Pharmaceuticals, Inc. (the "Company") is based on the historical financial
statements of the Company, adjusted to give pro forma effect to the acquisition
of the Nordette(R), Bicillin(R) and Wycillin(R) product lines from American Home
Products Corporations's Wyeth-Ayerst Laboratories Division (the "Acquisition").
The unaudited pro forma consolidated balance sheet as of June 30, 2000 gives
effect to the Acquisition as if it occurred on June 30, 2000. The unaudited pro
forma consolidated statements of operations for the six months ended June 30,
2000 and for the year ended December 31, 1999 give effect to the Acquisition as
if it had occurred at the beginning of the periods presented. The unaudited pro
forma adjustments are based upon available information and certain assumptions
that the Company believes are reasonable under the circumstances. The unaudited
pro forma consolidated financial statements do not purport to represent what the
Company's results of operations or financial condition would actually have been
had the Transactions in fact occurred on such dates, nor do they purport to
project the Company's results of operations or financial condition for any
future period or date. The information set forth below should be read in
conjunction with the special purpose statements of net revenues in excess of
direct expenses (contained herein) for the six months ended June 30, 2000 and
1999 and the year ended December 31, 1999, the Company's unaudited consolidated
financial statements and notes thereto as of and for the six months ended June
30, 2000 (which are contained in the Company's Form 10-Q for the six months
ended June 30, 2000, and the audited consolidated financial statements and notes
thereto as of December 31, 1999 and for the three years then ended (which are
included in the Company's Form 10-K).
The Acquisition has been accounted for as a purchase. Under purchase accounting,
the total purchase price and fair value of the liabilities assumed are allocated
to the tangible assets of the Company based upon their respective fair values as
of the purchase date in accordance with Accounting Principles Board Opinion No.
16. A preliminary allocation of the purchase price of the Acquisition has been
made in the accompanying unaudited pro forma consolidated financial statements
based on Company estimates. The actual allocation of purchase cost and the
resulting effect on income from operations may differ from the pro forma amounts
included therein; however, the Company does not expect the final allocations to
differ materially from the preliminary allocations.
F-8
<PAGE> 11
KING PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
PROFORMA
ACTUAL ADJUSTMENTS PRO FORMA
-------- ----------------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 73,554 $ (73,554) (1) $ --
Accounts receivable, net.................................. 89,535 89,535
Inventories............................................... 60,101 60,101
Deferred income taxes..................................... 14,522 14,522
Prepaid expenses and other assets......................... 8,455 8,455
-------- --------- ----------
Total current assets.............................. 246,167 (73,554) 172,613
Property, plant and equipment, net.......................... 98,794 98,794
Intangible assets........................................... 545,939 201,832 (2) 747,771
Other assets................................................ 11,319 411 (3) 11,730
-------- --------- ----------
Total assets...................................... $902,219 $ 128,689 $1,030,908
======== ========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt:
Term loans............................................. $ 1,411 $ $ 1,411
Other.................................................. 1,501 1,501
Accounts payable.......................................... 36,564 36,564
Accrued expenses.......................................... 54,420 1,832 (4) 56,252
Notes payable............................................. -- 35,000 (5) 35,000
Income taxes payable...................................... 1,228 1,228
-------- --------- ----------
Total current liabilities......................... 95,124 36,832 131,956
-------- --------- ----------
Long-term debt:
Revolving credit facility................................. -- 91,857 (6) 91,857
Term loans................................................ 137,540 137,540
Senior subordinated notes................................. 150,000 150,000
Other..................................................... 3,932 3,932
Other long-term liabilities............................... 26,500 26,500
Deferred income taxes....................................... 12,516 12,516
-------- --------- ----------
Total liabilities................................. 425,612 91,857 554,301
-------- --------- ----------
Shareholders' equity........................................ 476,607 476,607
-------- --------- ----------
Total liabilities and shareholders' equity........ $902,219 $ 128,689 $1,030,908
======== ========= ==========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Balance Sheet.
F-9
<PAGE> 12
KING PHARMACEUTICALS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(1) Reflects the use of excess cash to finance a portion the
Acquisition (in thousands)............................. $ (73,554)
=========
(2) Reflects the acquisition of the branded pharmaceutical products Nordette,
Bicillin and Wycillin from Wyeth-Ayerst Pharmaceuticals, a division of
American Home Products Corporation ("AHP") for a purchase price of $200.0
million plus assumed liabilities of approximately $1.8 million.
(3) Other assets -- to reflect adjustments to record the following (in
thousands):
<TABLE>
<S> <C>
To record deferred financing costs paid related to the
bridge loan............................................ $ 411
=========
</TABLE>
(4) Accrued expenses -- to reflect adjustments to record the following (in
thousands):
<TABLE>
<S> <C>
To record liabilities assumed in the Acquisition.......... $ 1,832
=========
</TABLE>
(5) Notes payable -- to reflect the additional borrowings used to finance
the Acquisition (in thousands):
<TABLE>
<S> <C>
Record the issuance of a note payable to AHP........... $ 25,000
Record the borrowings from the bridge loan with Credit
Suisse First Boston.................................... 10,000
---------
$ 35,000
=========
</TABLE>
(6) Revolving credit facility -- to reflect adjustments to record the following
(in thousands):
<TABLE>
<S> <C>
Proceeds from the Senior Credit Facility
used to finance the Acquisition ....................... $ 91,857
=========
</TABLE>
F-10
<PAGE> 13
KING PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THE
COMPANY THE PRO FORMA
ACTUAL(1) ACQUISITION ADJUSTMENTS PRO FORMA
-------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Total net revenues.................... $379,921 $ 57,369 $ -- $437,290
-------- -------- -------- --------
Operating costs and Expenses:
Cost of revenue....................... 118,865 12,091 -- 130,956
Selling, general and administrative... 80,213 4,847 85,060
Depreciation and amortization......... 27,734 -- 8,073 (2) 35,807
Research and development.............. 16,316 -- -- 16,316
-------- -------- -------- --------
Operating income...................... 136,793 40,431 (8,073) 169,151
Interest expense...................... (55,371) -- (12,905)(3) (68,276)
Interest income....................... 3,314 -- -- 3,314
Other expense, net.................... (3,052) -- -- (3,052)
-------- -------- -------- --------
Income before income taxes............ 81,684 40,431 (20,978) 101,137
Income tax expense.................... (29,986) -- (7,139)(4) (37,125)
-------- -------- -------- --------
Net income............................ $ 51,698 $ 40,431 $(28,117) $ 64,012
======== ======== ======== ========
Per share income from continuing
operations:
Basic............................... $ 0.63 $ 0.77
======== ========
Diluted............................. $ 0.62 $ 0.77
======== ========
Weighted average common shares used in
computing income per common share:
Basic............................... 82,795 82,795
======== ========
Diluted............................. 83,663 83,663
======== ========
</TABLE>
F-11
<PAGE> 14
KING PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THE
COMPANY THE PRO FORMA
ACTUAL(1) ACQUISITION ADJUSTMENTS PRO FORMA
-------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Total revenues........................ $194,585 $ 31,676 $ -- $226,016
-------- -------- -------- --------
Operating costs and expenses:
Cost of revenue....................... 52,838 4,704 -- 57,542
Selling, general and administrative... 49,379 2,288 -- 51,667
Depreciation and amortization......... 15,773 -- 4,037 (2) 19,810
Research and development expense...... 9,033 -- -- 9,033
Merger and restructuring.............. 20,789 -- -- 20,789
-------- -------- -------- --------
Operating income...................... 46,773 24,684 (4,037) 67,420
Interest expense...................... (24,156) -- (6,659)(3) (30,815)
Interest income....................... 1,268 -- -- 1,268
Other income, net..................... (179) -- -- (179)
-------- -------- -------- --------
Income before income taxes and
extraordinary item.................. 23,706 24,684 (10,696) 37,694
Income tax expense.................... (15,706) -- (5,134)(4) (20,840)
-------- -------- -------- --------
Income before extraordinary item..... $ 8,000 $ 24,684 $(15,830) $ 16,854
======== ======== ======== ========
Income per common share before
extraordinary item
Basic............................... $ 0.09 $ 0.20
-------- --------
Diluted............................. $ 0.09 $ 0.19
======== ========
Weighted average common shares used in
computing income per common share:
Basic............................... 85,707 85,707
======== ========
Diluted............................. 86,748 86,748
======== ========
</TABLE>
F-12
<PAGE> 15
KING PHARMACEUTICALS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(1) The following consolidated financial information includes historical
financial statements of the Company and of Medco Research, Inc. On
February 25, 2000, the Company completed a merger, accounted for as a
pooling-of-interests, with Medco.
(2) Represents amortization of intangible assets over the estimated average
preliminary life of 25 years for the Acquisition.
(3) Adjustment to reflect the increase in interest expense as a result of the
Financing (in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE SIX
ENDED MONTHS ENDED
DECEMBER 31, JUNE 30,
1999 2000
------------- ------------
<S> <C> <C>
Revolving credit facility ($91.9 million at
9.71%)(a)................................... $ 8,919 $ 4,460
AHP note ($25.0 million at 10.0%)............. 2,500 1,250
Bridge loan ($10.0 million at 10.75%)......... 1,075 538
Amortization of finance costs on above debt... 411 411
-------- --------
$ 12,905 $ 6,659
======== ========
(a) The interest rate is the rate that was in effect immediately following the
Acquisition. A change in the interest rate of one-eighth of one percent
(0.125%) would change interest expense, income before income taxes and
extraordinary item, income before extraordinary item and net income by $115
and $57 for the year ended December 31, 1999 and the six months ended June
30, 2000, respectively.
</TABLE>
(4) Adjustment to reflect a 36.7% effective tax rate applied to the incremental
pro forma net income before income taxes. A reconciliation of the statutory
tax rate to the assumed pro forma tax rate is provided below:
<TABLE>
<S> <C>
Federal statutory rate...................................... 35.0%
State taxes, net of federal benefit......................... 3.0
Other....................................................... (1.3)
----
36.7%
====
</TABLE>
F-13
<PAGE> 16
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit Number Exhibit
-------------- -------
<S> <C>
23.1 Consent of Arthur Andersen LLP
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KING PHARMACEUTICALS, INC.
Date: September 21, 2000
By: /s/ John A. A. Bellamy
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Executive Vice President, Legal Affairs
and General Counsel
