King Pharmaceuticals says that it has completed the review of its reserve for product returns, and will be restating its results for 2002, 2003 and the first six months of 2004 due to what it terms “methodological flaws concerning the timing of expense recognition for product returns.” King will not, however, be restating results for periods prior to 2002.
King first revealed the potential restatement last year [[09/12/04d]], [[29/10/04b]], which led to jitters amongst investors who grew fearful that the company’s proposed $4 billion dollar merger with generics company, Mylan Laboratories [[27/07/04d]], would be derailed. Mylan had the right to terminate the deal should King restate its previously announced financial results. And it remains to be seen whether the deal will in fact go ahead. King said that its board of directors has not yet decided whether to proceed with the merger, and cannot guarantee that a decision will be made by February 28. Either company has the right to terminate the deal on or after March 1.
As a result of the restatement, King’ previously reported net sales for the first six months of 2004 are boosted by some $1.3 million dollars, while net income will be increased by $7.6 million. For 2003, the restatement will decrease sales and income by $16.5 million and $13.9 million respectively, while 2002 net sales and income will dip by $0.5 million and $0.1 million, respectively.