King Pharmaceuticals’ restructuring costs show up as losses in third-quarter earnings figures

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King Pharmaceuticals, Inc.
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BRISTOL, Tenn. – It’s safe to say that King Pharmaceuticals’ third quarter numbers aren’t what company officials wanted to see.

The Bristol-based drug maker reported Thursday that its third quarter revenue rose 11 percent to $545 million, but income for the quarter which ended Sept. 30 fell dramatically from $90.4 million this time last year to $40.5 million this quarter. Likewise, the company’s earnings per share fell from 37 cents to 17 cents this quarter, failing to meet Wall Street analysts’ average estimate by 28 cents.

Financial documents show that the quarter’s loss was because of $264 million in costs to scale down production, future sales and development of its best-selling drug Altace.

"It’s all related to Altace," King spokesman James Green said of the quarter’s downturn. "But next quarter we won’t have that big of an expense."

The company decided last month to lay off 20 percent of its work force – 50 in Bristol – due to an appeals court judgment on Altace.

Ever since that ruling, King officials have decided to scale down the Altace sales force and its raw materials and focus more on products in the neuroscience and hospital/acute care division.

"We moved quickly to restructure the organization, particularly the size and focus of the sales force to better support our priorities," King CEO and President Brian A. Markison said in a conference call to analysts and investors.

The cost of reducing the work force will be spread over two quarters – $20 million for the third quarter and $50 million in the fourth.

For the third quarter, King’s total assets grew to $3.37 billion while its liabilities fell to $919 million.

"We’re taking a number of steps so our company is positioned for future growth," explained company spokesman David Robinson.

Founded in January 1994 and with headquarters on Fifth Street in Bristol, Tenn., King produces and sells drug treatments to hospitals and private doctors. The company employs thousands in manufacturing plants, research and development labs and sales operations in Bristol, Wisconsin, Missouri, Michigan, North Carolina and Maryland.

The company’s top three products are blood pressure medication Altace, muscle relaxant Skelaxin, and Thrombin-JMI, a liquid used to control bleeding during surgery.

Altace sales grew to $169 million for the third quarter compared to $159 million during the same period last year. Meanwhile, Skelaxin maintained its $106 million sales from the third quarter of 2006.

Thrombin-JMI sales, however, fell a bit to $69 million compared to $70 million during the same period last year.

"Although we made difficult decisions with respect to reducing our sales work force, we believe we succeeded in retaining the best people to address the needs of our customers in our target markets," Markison said.

King’s stock rose $1.37 to close at $11.42 in trading Thursday.

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