13th Consecutive Year of Record Revenues Year-Over-Year Net Revenues Up 35.7% to $601.9 Million
ST. LOUIS, June 16 /PRNewswire-FirstCall/ -- KV Pharmaceutical Company
(NYSE: KVa/KVb), a fully integrated specialty pharmaceutical company that
develops, manufactures, acquires and markets technology distinguished branded
and generic/non-branded prescription pharmaceutical products, today reported
results for the fourth quarter and fiscal year ended March 31, 2008, marking
its 13th consecutive year of record revenues.
Fourth Quarter and Fiscal 2008 Financial Highlights (Unaudited)
USD in millions
Three Three
monthsmonthsYear Year
ended ended ended ended
March 31, March 31, March 31, March 31,
2008 2007Change2008 2007Change
Net Revenues $153.0$120.5 +27.0% $601.9$443.6 +35.7%
Net Income $9.3 $17.4 -46.6%$88.4 $58.1 +52.1%
Earnings per
diluted Class A
share $0.18 $0.31 -41.9%$1.57 $1.05 +49.5%
Earnings per
diluted Class A
share before
in-process
research and
development charge
(Non-GAAP
financial measure,
see the
accompanying
table and notes) $0.26 $0.31 -16.1%$1.77 $1.05 +68.6%
Marc S. Hermelin, Chairman of the Board and Chief Executive Officer stated,
"KV had a strong fiscal 2008 with each of the Company's principal business
units reporting record revenues and improved gross margins. We continued to
exhibit a robust generic and branded pipeline during fiscal 2008, evidenced by
our 16 ANDA's filed, five generic product approvals from the FDA, the launch
of Evamist(TM) and progress towards the pending approval for Gestiva(TM). Our
branded business, Ther-Rx, continued to benefit from our leading women's
health products. ETHEX's outstanding full year revenue growth of 56.1% was
achieved through the approval, launch and contribution of two first-to-file
strengths of Metoprolol Succinate Extended-Release Tablets.
"Overall, we believe KV is well positioned in both businesses for future
growth and profitability. We remain positive about the Company's overall
prospects from existing products as well as anticipated new product
introductions."
Update on Timing of Fiscal Form 10-K Filing
As a result of unanticipated observations regarding an internal control
deficiency, the Company now expects to file its Form 10-K and 10-Q's for
fiscal 2008 before June 27, 2008. Late in the week of June 9th, the Company
concluded that a previously noted deficiency in an internal control, related
to the accounting for some customer rebate programs, was a material weakness.
Accordingly, this has required additional work to complete the assessment of
internal control over financial reporting to be included in the fiscal 2008
Form 10-K. The Company expects there will be no impact from this material
weakness on the financial information reported herein.
Fourth Quarter Review
Revenues
Net revenues for the three months ended March 31, 2008 increased 27.0% to
$153.0 million compared to $120.5 million for the fourth quarter of fiscal
2007. Revenue growth during the quarter was primarily attributed to:
-- Ther-Rx revenue growth of 13.7% to $57.1 million and ETHEX revenue
growth of 38.3% to $90.6 million;
-- The continuing success across the product lines of the Company's
prescription prenatal vitamin line, which contributed $18.7 million in
net revenues;
-- Clindesse(R), the Company's bacterial vaginosis product, which
contributed $13.0 million in net revenues; and
-- The hematinic product line which reported net revenues of $15.9 million.
Net Income
-- Net income for the quarter was $9.3 million or $0.18 per diluted Class
A share.
-- Net income for the quarter included a write-off of $5.1 million (net of
tax) of in-process research and development costs related to the
previously reported acquisition of Gestiva(TM) (17-alpha
hydroxyprogesterone caporate) that is pending approval at the U.S. Food
and Drug Administration (FDA) for use in the prevention of pre-term
birth in certain categories of pregnant women.
-- Excluding this write-off, earnings (non-GAAP) for the fourth quarter
would have been $14.4 million or $0.26 per diluted Class A share. (See
the accompanying table and notes.)
ETHEX
ETHEX reported fourth quarter sales of $90.6 million, an increase of 38.3%,
or $25.1 million over the fourth quarter of fiscal 2007. ETHEX revenue growth
during the quarter was primarily due to:
-- The impact of the approval and launch of the 100 mg and 200 mg
strengths of Metoprolol Succinate Extended-Release Tablets and the
positive impact of $33.8 million in incremental sales of these two
strengths.
Excluding Metoprolol, sales of other ETHEX products decreased
approximately $9.7 million in the fourth quarter compared to the fourth
quarter of the prior year due to the following:
-- A $4.9 million reduction in sales of certain cough/cold products
containing extended-release guaifenesin that were removed from the
market at the direction of the FDA in the third quarter of fiscal 2008;
-- A $1.7 million decrease in sales of other cough/cold products due to
heavy buying in the third quarter of fiscal 2008, which increased
customer inventories and resulted in lower sales of these products in
the fourth quarter;
-- A $1.1 million decrease in sales due to price erosion associated with
sales of cough/cold products; and
-- A $2.0 million reduction in sales related to price erosion on certain
other products, net of volume increases.
For the first nine months of fiscal 2008, sales of the ETHEX cough/cold
product line increased by $3.8 million, compared with the first nine months of
fiscal 2007.
For the full year, ETHEX experienced a decrease in sales of its cough/cold
products of $4.1 million. The Company has decided to discontinue the
majority of these ETHEX cough/cold products due to the FDA hold initiated
during March 2008 and our decision not to seek ANDA approvals for these
products.
Ther-Rx
Ther-Rx reported fourth quarter sales of $57.1 million, an increase of
13.7%, or $6.9 million over the fourth quarter of fiscal 2007. Ther-Rx
revenue growth during the quarter was primarily due to:
-- An increase in sales of the prenatal product line of $5.4 million over
the fourth quarter of fiscal 2007 to $18.7 million;
-- An increase in sales of the anti-infective product line of $1.5 million
over the fourth quarter of fiscal 2007 to $17.2 million; and
-- A 12.3% increase in sales of Repliva 21/7(R) over the fourth quarter of
fiscal 2007 to $5.4 million.
Fiscal 2008 Year-End Review
Revenues
-- KV reported its 13th consecutive fiscal year of record net revenues;
-- Net revenues for fiscal 2008 increased $158.3 million, or 35.7% to
$601.9 million;
-- Revenue growth in fiscal 2008 was due primarily to a 56.1% sales growth
reported by the specialty generics/non-branded products segment, as
well as higher sales at Ther-Rx Corporation; and
-- The increase in specialty generic/non-branded net revenues resulted
primarily from the launch in July 2007 of the 100 mg and 200 mg
strengths of Metoprolol Succcinate Extended-Release Tablets, which
generated net revenues of $119.1 million in fiscal 2008. The increase
in sales was lower than management anticipated due to the delay in the
approval of the 50 mg strength of Metoprolol Succinate Extended-Release
Tablets, ultimately received in May 2008, which had been expected in
the fourth quarter.
Gross Profit
-- The increase in sales resulted in an increase in gross profit of $119.0
million, or 40.1% to $415.3 million; and
-- While the rate of increase in gross profit exceeded the rate of
increase in net revenues, gross profit was adversely impacted by a
write-off of $5.5 million of inventories of discontinued cough/cold
products as to which the Company does not plan to pursue approvals due
to other pipeline priorities. The increase in gross profit was also
offset by an increase of $76.8 million in operating expenses.
Operating Expenses
The $76.8 million increase in operating expenses was primarily due to:
-- Increase in research and development expense of $15.2 million;
-- Increase in personnel costs of $13.9 million;
-- Increase in branded marketing and promotion expense of $8.3 million;
-- Increase in amortization of intangible assets of $6.7 million;
-- Redistribution fees paid to major wholesalers and chains of $4.5
million;
-- Increase in expenses in the Ther-Rx branded products segment of $2.3
million; and
-- Increase in litigation costs of $4.0 million.
Operating expenses for fiscal 2008 also included purchased in-process
research and development expenses of $17.5 million recorded in connection with
product acquisitions, $7.5 million of which was recorded in the fourth quarter.
Net Income
-- Net income for fiscal 2008 increased $30.3 million, or 52.1% to $88.4
million; and
-- Fiscal 2008 net income, excluding in-process research and development
expense (non-GAAP) for the year would have been $100.1 million or $1.77
per diluted Class A share (see the table presented below and
accompanying notes).
Research and Development
-- The Company's strong revenue and profit performance supported
previously announced investments in research and development to grow
its new product pipeline;
-- Research and development expenses increased 48.2% to $46.6 million for
fiscal 2008, compared to $31.5 million for fiscal 2007;
-- The Company will continue to focus its research and development
activities on its current internal pipeline of products for both its
Ther-Rx and ETHEX businesses.
-- The Company expects to file 16 ANDA's with the FDA during fiscal 2009
for products representing current branded sales of approximately $9.1
billion; and
-- The Company expects research and development expenditures for fiscal
2009 to increase between 40% and 45% over research and development
expenditures for fiscal 2008 as a result of increased clinical trials
for new products moving through the development process.
Selling, General and Administrative Expenses
-- Selling, general and administrative expenses for fiscal 2008 increased
21.8% to $209.3 million, compared to $171.9 million for fiscal 2007;
-- This increase was due in part to the expansion of the branded sales
force and increased promotional expenses to support the Company's
existing brands and to support the introduction of our new branded
product, Evamist(TM), launched during fiscal 2008; and
-- The Company expects selling, general and administrative costs for
fiscal 2009 to increase by approximately 15% to 17% over selling,
general and administrative expenses for fiscal 2008 to support product
expansion and anticipated new product introductions, increased head
count, legal, facilities expense and marketing expenses.
Capital Expenditures
-- The Company reported capital expenditures for fiscal 2008 of $23.7
million, compared to $25.1 million for fiscal 2007, a decrease of 5.6%;
and
-- The Company expects fiscal 2009 capital expenditures to increase by
approximately 30% from the prior year as we continue to execute
additional long-term plans for the expansion of facilities and research
and manufacturing capabilities to support long-term growth.
Inventory and Related Charges
Net income for both the fiscal fourth quarter and full fiscal year 2008
included a write-down of $5.5 million related to inventories of certain
cough/cold products previously marketed by ETHEX and subject to the hold
initiated by the FDA in March 2008 for which the Company is not pursuing or
planning to pursue regulatory approvals due to other higher priority pipeline
opportunities. These products generated approximately $37.6 million in fiscal
2008 sales. In addition, the results include an accrual of $0.9 million for
both the fourth quarter and full year related to the Company's estimated costs
for a recall of certain lots of morphine sulfate 30 mg and 60 mg
extended-release tablets.
Ther-Rx Corporation - Outstanding Performance Highlighted by Women's
Health Franchise
Revenues
-- Ther-Rx Corporation's net revenues increased $26.2 million, or 13.9%,
to $214.9 million in fiscal 2008; and
-- Ther-Rx revenues contributed 35.7% of KV's consolidated revenues with
average gross margins of 89.7%.
Anti-Infective Products
-- Net sales of the Company's anti-infective product line increased 14.3%,
or $8.1 million, to $64.5 million in fiscal 2008 due to the continuing
success of Clindesse(R) and Gynazole-1(R); and
-- Clindesse(R) has gained 28.0% of the intra-vaginal bacterial vaginosis
market since its launch in January 2005 and contributed $40.5 million
in net sales during fiscal 2008.
PreCare(R) Products
-- For the sixth consecutive year, the PreCare(R) family of products
continued to be the number one branded line of prescription prenatal
nutritional supplements in the United States with a 43.4% share of the
branded prescription prenatal market according to IMS;
-- The PreCare(R) family of products reported net revenues for fiscal 2008
of $82.5 million, a 13.7% increase over the $72.5 million in net sales
reported for fiscal 2007;
-- Included in the PreCare(R) family of products are the leading
prescription prenatals containing essential fatty acids (EFA's),
PrimaCare(R) and PrimaCare ONE(R). PrimaCare ONE(R) is currently the
most widely prescribed prescription prenatal in the U.S.; and
-- PrimaCare(R) and PrimaCare ONE(R) combined ended fiscal 2008 with an
approximate 47.9% share of the prescription prenatal marketplace for
products containing essential fatty acids (EFA's) according to IMS.
Oral Iron Supplement Products
-- Sales of Ther-Rx's line of oral iron supplement products grew 11.6% in
fiscal 2008, an increase of $5.6 million, to $53.8 million, compared to
$48.2 million for fiscal 2007; and
-- In addition to volume growth and price increases to existing products,
also contributing to this increase was the strong performance of the
Company's internally developed oral iron supplement, Repliva 21/7(R),
which reported year-over-year net sales growth of 55.3%.
Evamist(TM)
-- In March 2008, Ther-Rx Corporation launched Evamist(TM), a patented
estradiol transdermal spray that offers a novel approach to the
treatment of moderate-to-severe vasomotor symptoms due to menopause;
and
-- The product targets an annual $1.4 billion estrogen replacement market
(source: IMS NSP Audit, January 2007-December 2007) where physicians
and patients are seeking an effective, low-dose estrogen product.
Since its launch, Evamist(TM), marketed by Ther-Rx's approximately 330
professional sales representatives, has continued to show increasing
prescription trends, on track with Company expectations and comparing
favorably to prior analogous product launches. Total prescriptions are
trending to more than 2,000 per month based on recent weekly data. In
addition, the product is receiving positive feedback from physicians and
patients alike. The Company believes that Evamist(TM) will be a positive
contributor to Ther-Rx net revenues during fiscal 2009.
Gestiva(TM)
-- During the fourth quarter of fiscal 2008, the Company entered into a
definitive purchase agreement to acquire Gestiva(TM) for $82.0 million
in cash; and
-- The Company paid $7.5 million for the product rights in fiscal 2008
with the remainder payable upon the attainment of future milestones.
This agreement gives KV full U.S. and worldwide marketing rights to
Gestiva(TM) (17-alpha hydroxyprogestrone caproate) upon approval of the
pending New Drug Application (NDA). The NDA for Gestiva(TM) is currently
before the FDA, pending approval for use in the prevention of preterm birth in
women with a history of at least one spontaneous preterm delivery (i.e., less
than 37 weeks), who are pregnant with a singleton pregnancy. The FDA issued
an "approvable" letter for Gestiva(TM) in October 2006, and the Company
expects a final approval in late 2008. The FDA has granted an Orphan Drug
designation for Gestiva(TM), which will provide seven years of marketing
exclusivity upon approval and launch.
The Company believes that Gestiva(TM) marks an exciting and important
extension to Ther-Rx's growing women's health franchise and expects the
product to be accretive to KV's earnings in the first 12 months following its
launch.
ETHEX Corporation - ANDA Approvals Result in Record Fiscal Year
Performance
Revenues
-- KV's specialty generic/non-branded unit, ETHEX Corporation, reported
fiscal 2008 net revenues of $367.9 million, an increase of $132.3
million, or 56.1%, compared to fiscal 2007 net revenues of $235.6
million; and
-- Results for fiscal 2008 were achieved primarily through the approval
and launch of the Company's two first-to-file strengths (100 mg and 200
mg) of Metoprolol Succinate Extended-Release Tablets, as well as growth
in existing product lines.
-- Excluding all Metoprolol sales, ETHEX fiscal 2008 revenues exceeded
revenues generated in fiscal 2007 by 5.2%.
-- ETHEX revenues contributed 61.1% of KV's consolidated revenues.
Gross Profit Margins
-- ETHEX's operating performance remained strong as measured by gross
profit margins of 63.1%, an increase of 7.5% over gross profit margins
of 58.7% for fiscal 2007; and
-- The Company believes ETHEX's gross margins remain significantly higher
than average gross margins of other companies in the generic drug
industry.
Product Launches
During fiscal 2008, ETHEX Corporation received FDA approval and launched
five new ANDA products including:
-- Ondansetron Orally Disintegrating Tablets 4 mg and 8 mg (Zofran ODT(R)
marketed by GlaxoSmithKline) indicated for the prevention of
postoperative nausea and vomiting, as well as nausea and vomiting
associated with emetogenic chemotherapy and radiotherapy;
-- Morphine Sulfate Extended Release Tablets 100 mg and 200 mg (MS
Contin(R) marketed by Purdue Pharma L.P.), which allows ETHEX to offer
a full line of all strengths of this product and since the launch of
these final two strengths in October 2007, ETHEX has captured 27.8% of
the total generic market; and
-- Metoprolol Succinate Extended-Release Tablets 25 mg (Toprol XL(R)
marketed by AstraZeneca) which since its launch in the final weeks of
fiscal 2008 contributed $0.9 million in incremental net sales.
Subsequent to fiscal 2008 year-end, the Company received its ANDA
approval on the final strength (50 mg) of Metoprolol Succinate
Extended-Release Tablets. While this last approval came later than
the Company had expected and delayed contribution of this final
strength to net sales until fiscal 2009, the approval of the two
additional strengths (25 mg and 50 mg) in addition to the Company's
originally first-to-file marketed strengths (100 mg and 200 mg) now
enables the Company to market all four strengths of this important
product. Through the end of fiscal 2008, net sales contribution from
the three marketed strengths of this product was $120.0 million. The
Company expects to see increased revenue contribution from these
products throughout fiscal 2009 with the benefit of marketing all four
strengths.
Despite the near-term impact of the removal of a substantial portion of
KV's cough/cold products from the ETHEX product line-up and the recent FDA
approval of a competitive product entry into the generic Micro-K(R)
marketplace, a substantial product currently marketed by ETHEX, the Company
believes ETHEX will continue to post revenue growth during fiscal 2009.
Factors which could contribute to fiscal 2009 performance include:
-- Continued revenue contribution from all four strengths of Metoprolol
Succinate Extended Release Tablets;
-- Seven ANDA approvals expected during fiscal 2009; and
-- An active product development pipeline of more than 50 generic and
branded products, which includes both internal development projects, as
well as co-development products.
Generic and Branded Product Pipeline
-- In fiscal 2008, the Company filed 16 ANDA's and when combined with
ANDA's previously filed, represent current branded sales opportunities
of $4.2 billion;
-- The Company received five generic product approvals from the FDA during
fiscal 2008;
-- Throughout fiscal 2009, the Company anticipates filing approximately 16
generic ANDA filings representing $9.1 billion in current branded sales
opportunities.
-- We anticipate approval of seven ANDA's by the FDA during fiscal 2009;
and
-- These approvals are expected to beneficially impact the overall
performance of the Company's generic/non-branded marketing business, in
addition to the continued contribution of all four strengths of
Metoprolol Succinate Extended-Release Tablets, for which the Company
believes there will continue to be limited competition during fiscal
2009.
Financial Condition
We believe the financial condition of the Company is solid:
-- The Company held cash and marketable securities of $126.9 million at
fiscal year-end;
-- The Company generated $122.4 million of cash flow from operating
activities during fiscal 2008, an increase of 114.2% compared with
$57.1 million during fiscal 2007; and
-- The Company is actively evaluating and pursuing acquisitions and other
commercial opportunities that are consistent with its strategic goals.
Additional highlights are as follows:
-- Debt-to-Equity ratio of .59-to-1 as of March 31, 2008;
-- Unsecured line of credit of $290.0 million;
-- Working capital of $88.8 million as of March 31, 2008; and
-- Return on beginning equity of 24.2%;
Acquisition and Licensing Updates
Fiscal 2008 was an outstanding year for the Company's commercial
development and licensing activities. For fiscal 2008, the Company:
-- Executed a purchase agreement that gives KV full U.S. and worldwide
rights to Gestiva(TM) (17-alpha hydroxyprogesterone caporate) upon
approval of the pending Gestiva(TM) New Drug Application. The Company
anticipates a final approval during fiscal 2009 and expects Gestiva(TM)
to be accretive to KV's earnings in the first 12 months following its
launch;
-- Executed an agreement with Beijing Med-Pharm Corporation (Nasdaq: BJGP)
for exclusive marketing and distribution rights to KV's proprietary
one-dose vaginal cream prescription treatment for bacterial vaginosis
(BV), Clindesse(R) (clindamycin phosphate vaginal cream 2%) in the
People's Republic of China. Clindesse(R), which features KV's
proprietary SITE RELEASE(R) technology, is expected to be the only
one-time treatment for bacterial vaginosis that will be available in
China following registration of Clindesse(R) with the Chinese State
Food and Drug Administration (SFDA); and
-- Acquired all the technologies, assets and related intellectual property
of Particle and Coating Technologies Inc. (PCT), a privately held St.
Louis-based company whose technologies include novel particle coatings,
controlled release, buccal release, fast dissolving tablets, taste
masking, inhalable particle delivery and PLGA (or
polylactic-co-glycolic acid) based depot type deliveries. This
acquisition is expected to augment development of KV's advanced drug
delivery product pipeline for both branded and generic products.
Auction Rate Securities
At March 31, 2008, we had invested $83.9 million in principal amount of
auction rate securities ("ARS"). Our investments in ARS represent interests
in collateralized debt obligations supported by pools of student loans, the
principal of which is guaranteed by the U.S. Government.
With the liquidity issues experienced in global credit and capital markets,
the ARS held by us at March 31, 2008 experienced failed auctions beginning in
February 2008 as the amount of securities submitted for sale exceeded the
amount of purchase orders. Given the failed auctions, our ARS are illiquid
until there is a successful auction. We cannot predict how long the current
imbalance in the auction rate market will continue. The estimated fair value
of our ARS holdings at March 31, 2008 was $81.5 million, which reflected a
$2.4 million difference from the principal value of $83.9 million. Although
the ARS continue to pay interest according to their stated terms, we have
recorded the unrealized loss of $1.6 million (net of tax) as a reduction to
shareholders' equity in accumulated other comprehensive loss, reflecting
adjustments to the ARS holdings that we have concluded represent a temporary
decline in value.
We historically have classified ARS as short-term marketable securities in
our consolidated balance sheet. Because our ARS are illiquid until a
successful auction for them occurs, we have reclassified the $81.5 million of
ARS from short-term marketable securities to non-current investment securities
as of March 31, 2008. We believe that as of March 31, 2008, based on our
current cash, cash equivalents and marketable securities balances of $126.9
million and our current borrowing capacity under our credit facility of $290.0
million, the current lack of liquidity in the auction rate market will not
have a material impact on our ability to fund our operations or interfere with
the our external growth plans.
Fiscal 2009 Potential Growth Factors
The Company expects that the operating and product pipeline momentum
experienced in fiscal 2008 will continue during fiscal 2009.
Marc S. Hermelin, Chairman of the Board and Chief Executive Officer,
stated: "We believe fiscal 2009 will be another dynamic year for KV. Our
revenue growth should be achieved through the continued benefits of all four
strengths of our Metoprolol product line as well as the expected launch of
between eight to ten new products from ETHEX and Ther-Rx combined. We also
expect to benefit from our diversified ANDA submission pipeline at ETHEX of 16
new filings, as well as seven ANDA approvals for ETHEX. The approval and
launch of Gestiva(TM) is also expected during fiscal 2009 which will further
broaden Ther-Rx's growing women's health franchise."
Update Concerning Settlement of Derivative Litigation
The Company has previously disclosed that it has reached an agreement in
principle to resolve the pending derivative litigation pending in U.S.
District Court for the Eastern District of Missouri. On June 3, 2008, Judge
Henry E. Autry issued an order granting preliminary approval to the settlement
as fair and reasonable subject to a final fairness determination after notice
of the settlement is provided to KV shareholders who may then object if they
wish to do so. Stockholders may file objections to the settlement no later
than July 25, 2008. The court will conduct a fairness hearing on August 26,
2008 and then will make a final decision whether to approve or not approve the
settlement as fair and reasonable.
Notice of the settlement, explaining its terms and conditions is being
mailed to all stockholders of record as of May 23, 2008. Any stockholder
requesting a copy of this Notice may contact KV Investor Relations, at 2503
South Hanley Road, St. Louis, Missouri 63144, or call 314/645-6600, ext. 2222
or via KV's website, www.kvpharmaceutical.com.
About KV Pharmaceutical Company
KV Pharmaceutical Company is a fully integrated specialty pharmaceutical
company that develops, manufactures and markets and acquires
technology-distinguished branded and generic/non-branded prescription
pharmaceutical products. The Company markets its technology-distinguished
products through ETHEX Corporation, a national leader in pharmaceuticals that
compete with branded products, and Ther-Rx Corporation, its emerging branded
drug subsidiary.
For further information about KV Pharmaceutical Company, please visit the
Company's corporate website at www.kvpharmaceutical.com.
Non-GAAP Disclosure
A reconciliation of GAAP (Generally Accepted Accounting Principles)
earnings per diluted Class A share to adjusted non-GAAP earnings per diluted
Class A share is presented below. We believe this information is useful for
understanding the changes in results between prior and current year periods,
because the write-off included in the reconciliation is a charge resulting
from the Company's investment in acquiring new products and does not directly
relate to the Company's underlying operations on an on-going basis. Earnings
and earnings per diluted share for the three months and year ended March 31,
2008, shown in the accompanying reconciliations are presented on a non-GAAP
basis. These reconciliations may not be comparable to other companies or more
useful than a GAAP presentation.
RECONCILIATION OF GAAP BASED EARNINGS AND
EARNINGS PER CLASS A COMMON SHARE TO ADJUSTED NON-GAAP EARNINGS AND EARNINGS
PER CLASS A COMMON SHARE
FOR THE THREE MONTHS ENDED MARCH 31, 2008
(UNAUDITED)
(Dollars in Thousands)
Income Effect
Per ShareAmount
Income as reported (GAAP) $0.18$9,319
After-tax effect of write-off of
acquired in-process research
and development $0.08$5,127
Earnings and earnings per
Class A Common share assuming
dilution, excluding effect of
acquired in-process research
and development write-off $0.26 $14,446
Note: The Company believes this information is useful for understanding
the changes in results between prior and current year periods because the
above noted write-off is a charge resulting from the Company's investment in
acquiring a new product and does not directly relate to the Company's
underlying operations on an on-going basis. The above reconciliation may not
be comparable to other companies or more useful than a GAAP presentation.
RECONCILIATION OF GAAP BASED EARNINGS AND
EARNINGS PER CLASS A COMMON SHARE TO ADJUSTED NON-GAAP EARNINGS AND EARNINGS
PER CLASS A COMMON SHARE
FOR THE YEAR ENDED MARCH 31, 2008
(UNAUDITED)
(Dollars in Thousands)
Income Effect
Per ShareAmount
Income as reported (GAAP) $1.57 $88,354
After-tax effect of write-off
of acquired in-process research
and development $0.20 $11,734
Earnings and earnings per Class A
Common share assuming dilution,
excluding effect of acquired
in-process research and
development write-off $1.77 $100,088
Note: The Company believes this information is useful for understanding
the changes in results between prior and current year periods because the
above noted write-off is a charge resulting from the Company's investment in
acquiring new products and does not directly relate to the Company's
underlying operations on an on-going basis. The above reconciliation may not
be comparable to other companies or more useful than a GAAP presentation.
Safe Harbor
The information in this release may contain various forward-looking
statements within the meaning of the United States Private Securities
Litigation Reform Act of 1995 ("PSLRA") and which may be based on or include
assumptions concerning KV's operations, future results and prospects. Such
statements may be identified by the use of words like "plans", "expect", "aim",
"believe", "projects", "anticipates", "commit", "intend", "estimate", "will",
"should", "could" and other expressions that indicate future events and trends.
All statements that address expectations or projections about the future,
including without limitation, statements about the Company's anticipated SEC
filings, strategy or expectations for growth or growth trends, product
development, product launches, regulatory filings or approvals, prescription
trends, market position, market share increases, acquisitions, existence and
duration of regulatory exclusivities, expected duration of ARS illiquidity,
revenues, expenditures, contributions, profitability and other financial
results, are forward-looking statements.
All forward-looking statements are based on current expectations and are
subject to risk and uncertainties. In connection with the "safe harbor"
provisions, KV provides the following cautionary statements identifying
important economic, competitive, political and technology factors, which among
others, could cause actual results or events to differ materially from those
set forth or implied by the forward-looking statements and related assumptions.
Such factors include (but are not limited to) the following: (1) changes
in the current and future business environment, including interest rates and
capital and consumer spending; (2) the difficulty of predicting FDA approvals,
including timing, and that any period of exclusivity may not be realized; (3)
acceptance and demand for new pharmaceutical products; (4) the impact of
competitive products and pricing, including as a result of so-called
authorized-generic drugs; (5) new product development and launch, including
the possibility that any product launch may be delayed or that product
acceptance may be less than anticipated; (6) reliance on key strategic
alliances; (7) the availability of raw materials and/or products manufactured
for the Company under contract manufacturing arrangements with third parties;
(8) the regulatory environment, including regulatory agency and judicial
actions and changes in applicable law or regulations; (9) fluctuations in
revenues; (10) the difficulty of predicting international regulatory approval,
including timing; (11) the difficulty of predicting the pattern of inventory
movements by the Company's customers; (12) the impact of competitive response
to the Company's sales, marketing and strategic efforts; (13) risks that the
Company may not ultimately prevail in litigation, including challenges to our
patents; (14) actions by the Securities and Exchange Commission and the
Internal Revenue Service with respect to the Company's stock option grants and
accounting practices; (15) actions by the NYSE Regulation, Inc. with respect
to the continued listing of the Company's stock on the New York Stock
Exchange; (16) risks that the Company may not ultimately prevail in litigation,
including challenges to our intellectual property rights by actual or
potential competitors or to our ability to market generic products due to
brand company patents; (17) completion of the Company's quarterly reports on
Form 10-Q for the first, second and third quarters of fiscal 2008 and annual
report on Form 10-K for the full fiscal year ended March 31, 2008; (18) the
possibility that KV's current estimate of the financial effect of the recall
described above could prove to be incorrect; (19) whether any of the product
recalls result in litigation, agency action or material damages; and (20) the
risks detailed from time-to-time in the Company's filings with the Securities
and Exchange Commission.
This discussion is by no means exhaustive, but is designed to highlight
important factors that may impact the Company's outlook. We are under no
obligation to update any of the forward-looking statements after the date of
this release.
SOURCE KV Pharmaceutical Company
